(2) Org Change New Vistas: Section 2 @2orgchangenewvistas - Tumblr Blog

Creating Change through the Economic Competitiveness of Saudi Arabia

Smile Only If You Mean It

Submitted by Kourtney M. Simons

Notoriously known for its back-stabbing and miscommunication, the Entertainment industry, specifically within film and television, runs rampant with selfish and career-climbing personalities, as well as seethes with an embedded culture of kill or be killed. After reading DisneyWar by James B. Stewart, it is very apparent that people in the entertainment business are cutthroat; people smile to your face, but stab you in the back a second later.

“DisneyWar now stands as the best of the fast-growing subgenre of business books about the selfishness and ineptitude that ended the era of the Imperial CEO. While most focus on scandal-ridden Internet bubble icons, all show how complacent institutional investors and corporate directors enabled CEOs to wield autocratic power. They used it to entrench and enrich themselves, with disastrous results for shareholders and others.” - By David Lieberman, USA TODAY

Disney is the perfect example of change management gone wrong after regime changes, Board of Director complacency and bribery, uninvited acquisitions (ABC/ESPN, Family Channel, Pixar), hostile takeover attempts (Comcast), global cultural breakdowns (Disney Paris), executive liars (Michael Eisner, Jeffrey Katzenberg, Michael Ovitz), and more. From implementing governance teams to regular off-site executive meetings, Disney’s CEO Michael Eisner maintained this Disney facade that everything was magical and that the company easily managed change. Although the company endeavored to create seamless organizational transformations, implementing structural changes and conducting frequent meetings to communicate the vision are not enough – Disney was never “change capable.” At its core, Disney’s culture hindered internal and independent growth by underutilizing the brain power and creative prowess within its lower ranks, causing the downfall of Disney for over a decade. Although not mentioned in the book, Disney should have implemented anonymous change evaluation tools to determine if employees agreed with the direction of the company. This information is necessary for the Board of Directors to evaluate the success and future of the CEO.

What I know/learned: I know that a career in entertainment will not be easy due to the endless cycle of leadership changes and long-lived relationships built on intangible on-the-job training that teaches you to schmooze and fend for yourself. However, I think the key to anyone’s success is arming one with the right relationships, the right moral compass, the right plan of action to move up the ranks, and the right information. Sticking to a moral compass can break the ruthless cycle and help to change the culture from the bottom up. While this method may seem cheesy and somewhat unfeasible, I believe that using some form of the golden rule will create a trigger effect, setting precedence for those below you to develop nicer professional habits. Since entertainment executives usually swing their mighty fists at the helm and do not listen to opinions of those below, the best approach is to empower middle-management and below so that a moral compass is integrated in day-to-day operations in which the executives do not manage. The main takeaway is to stay open-minded to the existing culture, but not conform to fit an incorrect mold. In the entertainment business, you need to stick to your guns and align yourself to people who show a level of integrity that you respect.

#cross-cultural

Aligning Incentives using the Foundation Model - Southern California Healthcare Systems

Submitted by Noor Ahmed

In the beginning of 2010, a national medical center located in Southern California was in the midst of negotiations with the leading medical group in the area to establish a health system model known as a foundation model. A foundation model is a health maintenance organization or other health system that is legally established as a tax-exempt, not-for-profit corporation organized to operate as a charitable institution. Most hospitals and medical groups in California are migrating to this model as a means to work around current regulations.

California has one of the strictest laws against the Corporate Practice of Medicine (CPM). Under current law, hospitals are generally barred from hiring physicians as employees. This law was created to prevent corporations, other entities or non-professionals from unduly influencing the professional judgment and practice of medicine by licenses physicians. However, this law makes it difficult for hospitals to ensure physician loyalty, and consequently, to ensure that admission rates and bed days are maintained – this is critical since hospitals continue to face extremely slim and declining operating margins (Note: Average operating margin for hospitals: 4.0%). Without being able to hire physicians, hospitals must rely on the good faith and the ‘gentleman’s agreement’ between themselves and medical group executives to ensure that a group’s physicians will continue referring patients to said hospital. Thus, a foundation model provides a solution to the hospital’s dilemma. Additionally, it ensures a medical group privileges at a hospital, no threat of competition, administrative support and job security.

Though the benefits of a foundation model seem apparent, incentives between the hospital executives and the medical group executives are not always aligned, as was the case at the medical center referenced above. The existing relationship between the hospital and medical group executives was contentious and had been for years. The CEO of the medical center wanted to expand the hospital’s presence in Southern California and start competing with the power house health systems. His hospital had attained national recognition and was the leading cancer center in Southern California. However, he knew that he needed to guarantee the best cancer specialists and physicians were working with his hospital in order to stay competitive in the market. Following the lead of his competitors, he decided to pursue a foundation model with the leading medical group in the area; the hospital had a long history with the group, which was comprised of the leading cancer specialists who often referred patients to the medical center and were given the best admitting privileges. In return, the group changed its name to match that of the medical center so that consumers could identify the medical group with the hospital and vice versa.

The relationship began to dissolve after the medical group executives opened up an outpatient cancer treatment facility very near to the hospital, using the same moniker, though the hospital was not in any way aligned to the outpatient facility. The hospital executives were furious as this would eat at their business and dissuade the medical group physicians from making in-patient referrals since their profits were now directly aligned to the outpatient facility. The CEO of the hospital felt betrayed by the CEO of the medical group, for the hospital had been very good to the group. Thus, the desire for a foundation model became even more urgent. In pursuing the foundation model, the CEO of the hospital approached the doctors in the group individually and listened to their concerns, hopes and ideas. He wanted to involve them in the development of a foundation model that would meet all their needs as they were the key component. It was now the CEO of the group’s turn to be furious; he took to filing a lawsuit against the hospital for trying to usurp his medical group employees. Arbitrators tried to initiate conversations between the two executives to work through a term-sheet, however, the CEO of the hospital made it quite clear that he would be replacing the executive leadership team of the medical group once the foundation was established. And so, the CEO of the medical group was not only fighting for his right to retain his doctors, but also for his own livelihood. The communication breakdown between these two men spurred a very costly battle that is still persisting today.

Importance of Leadership

Submitted by Anna Baghdasaryan

I was assigned to work as the finance lead for a large industrial company that was considering investing close to ~$150 million in a new IT ERP project. This project involved a major overhaul of all the processes of the company and could potentially result in hundreds of layoffs, as some processes would be automated or near automated. I had to work closely with all the senior IT leaders of the company to understand the costs and expected benefits of the project, the, and map out a potential implementation scenario. The ERP system would encompass various geographies and touch upon most of the functions of the Company. It was a great way to learn about company and team dynamics. The project took off after I had already left the company, because in the meantime, leadership of the company changed, and the new leaders wanted to analyze everything anew.

My takeaway: What I learned from this experience was the importance of a strong leader, who champions the change. Equally important are these strong operational leaders that I call “mini CEOs,” because they are really the people that intimately know the company and run most of the operating functions of the company, such as sales, supply chain and such. Without getting the buy-in from these operational leaders, no project will really take off and no new processes will take hold, because people will tend to go back to the old way of doing things that they are comfortable with. A lot of times, IT or Finance functions will come up with new projects and new programs that they want the sales force to use, and given that the sales-force is under constant pressure to meet sales targets, they have little incentive to obey by these changes, which in their mind are often not essential for day-to-day operations. Otherwise, all these major expenditures in installing new systems will go to waste and will really not pay for themselves. Only by getting the active buy-in and resource allocation from the operational leaders of the company, can one hope to really make the changes stick and the investment to pay off.

#change tools

Expanding Without Sufficient Infrastructure – How PWM LatAm Tried to Grow

Submitted by Cristina Benitez

During my first year at Morgan Stanley, the Private Wealth Management department expanded the Latin America division, which I was part of. Within 4 months, it basically doubled in terms of broker teams recruited and total headcount. The expansion was part of a new growth strategy for PWM to take advantage of an emerging ultra high net worth population in Latin America. This strategy involved opening a new office in Miami which would eventually become the division’s new headquarters (instead of New York) and the secretive hiring of broker teams from different firms. I was part of the group of people requested to help open the new office, when it became apparent that the expansion was not progressing as planned and help was needed.

One of the biggest challenges of expanding in this industry is that it has to be done quickly and secretly. Broker teams leave their firms on a same day notice; leaving all records and their client’s assets at the former bank. The main goal during the first weeks of any broker transition is to transfer most their accounts into the new bank. It requires an intensive administrative and operational effort to do so. Morgan Stanley had promised the new teams better service and support than the former bank as well as a speedy transition. However, when the teams arrived it was clear that no operational planning had been done. The new office lease had not even been signed yet, and the interim facilities were small, crowded, and lacked in service infrastructure. For example, there were not enough computers, printers, faxes, copiers, or even internet capacity for them. In addition, only a 1-person team had been assigned to help more than 30 people transition. There were also no local operations or IT personnel to help with their requests, and the managers in the office were all new and foreign to the Morgan Stanley systems and processes.

Needless to say, the new teams were very disappointed to have none of their expectations met and were growing increasingly frustrated at the firm and its people. In addition, the new teams were creating tremendous pressure on existing broker teams and the department’s support divisions, who all felt like the organization was too lean for such a scaled expansion. Top junior members from the NY teams were sent to help in Miami, as was NY management, and many members of the divisions that supported us. Thus NY brokers and clients were growing frustrated because the firm was providing terrible service to its legacy employees and clients. Slowly, the department realized that it had not planned accordingly and could not keep expanding until it had the capacity to do so. However, it took a while to restore the similar service and timeliness that teams and clients were used to. Eventually, the new teams got to work efficiently and transferred all their clients into the firm; however, during those first 6 months it certainly felt like a failure to all of us – new and legacy employees. It left a sour taste in the NY teams’ mouths and it also disappointed current clients. To this day, teams feel deeply threatened by any word of expansion.

Main lesson: No matter how great the opportunity to expand or grow, it is important to first have the capabilities and resources to do so. Objectives and visions are great on paper, but without the proper operational planning to accommodate the expansion and change, you can jeopardize your current business, its culture, and any potential success thereafter.

#finance #change tools

Bringing an Outside Partner into a Proprietorship

Submitted by Minkun Zhang

When my father decided to start a side HVAC business outside his day job, he had no idea that it was going to grow so fast and large that it consumed all of his free time. Before long, he was contemplating hiring help and transforming his side personal business into a legitimate small business.

After years of working at a large HVAC company in Connecticut, my father saw an untapped market in local Chinese restaurants and started offering his services after hours. Business quickly spread, and in a few months restaurants from out of state were soliciting him for this services. Unable to cope with the added demand, he pondered the advantages and disadvantages of turning his proprietorship into a multi-employee business. As his informal consultant & business strategist, helping my father through the process of this change was a great learning process. The transformation out of a private proprietorship was much more difficult than expected. In addition to the additional red tape that had to be completed, previously unwritten practices and rules had to be formalized. Hiring the first employee was significantly harder than hiring the second or fifth employee, immense amount of trust had to be placed with a stranger in hoping that he will help grow the brand and the company in a professional manner. Perhaps most importantly, relationships with existing restaurants needed to be carefully managed during this transition. On more than one occasion, the restaurant turned away the help and specifically requested my father. As time went on, clients became more familiar with the partner and accepted the new company structure. Eventually the company grew to a 4 person team and the incremental efforts required to grow the company became less and less.

One of the main lessons that I’ve learned is that growth is both gratifying and challenging. Given the significant challenges of balancing existing relationships and pursuing new opportunities, planning ahead is key make sure that both strategies are carried out successfully. Growth and change affects all stakeholders of the company and ignoring any one of the stakeholders will be detrimental to the business.

#family business

Training the Afghan Border Police

Submitted by James Hendon

Organization: Military cross-functional team operating in a combat zone.

Topic: A leadership failure in monitoring change.

Essay:

During the fall of 2008, my job as the Senior Advisor to the Afghan Border Police took on an entirely new meaning. After months of lobbying senior state and military officials, the Commander of the Border Police and I convinced the U.S. government to fund Focused Border Development, a multi-million dollar program to staff, train, and equip the Afghan Border Police. Initially, we focused all of our efforts towards getting the first 85 million dollars worth of training approved. Upon convincing the U.S. to fund the program in its sector, the Border Police Commander and I turned our attention to Britain, Canada, France, Italy, and Germany for support in their sectors. The Border Police Commander and I focused on securing training money, but we did not pay close attention to other key issues, namely monitoring the additional 60 million dollars worth of equipment that is ultimately issued to border police units.

Our lack of attention to detail came back to haunt us on one cold November evening. The Border Development Team consisted of me, the Afghan Border Police Commander, and international training and logistics mentors. It was agreed that our logistics and training teammates would focus on day-to-day issues that occurred. Meanwhile, the Border Police Commander and I would endeavor to expand the entire program. For daily issues, the Border Police Commander and I relayed information that we received to mentors and units near Afghanistan’s border with Pakistan.

For our first major supply shipment, our logistics teammate ordered cranes to load six million dollars worth of equipment on trucks headed from Afghanistan’s capital to the city of Jalalabad. However, the teammate did not arrange for cranes to be present at the drop-off site. As a result, we could not unload any of the equipment until the next morning. Forced to stay in Jalalabad overnight, the Afghan truck drivers we utilized had no place to eat and sleep. The contractor who provided trucks charged us an additional fifty thousand dollars for another day of service. The crane contractor charged us an extra fifty cents on the dollar for submitting a last-minute request for help. More importantly, we could not drive a single truck onto the destination facility until cranes appeared. Hence, Afghan Border Policemen in Jalalabad had to feed and house drivers. Also, they had to safeguard 57 trucks containing radios, vehicles, ammunition, and weapons throughout the evening. Two nights earlier, the Taliban executed three local policemen just blocks away.

Fortunately, nothing tragic happened after this incident. Our team lost money paying overtime to contractors. However, we did not lose any lives. During our next team meeting, we agreed to conduct a second rehearsal before all future supply movements in order to better identify potential problems. The Border Police Commander and I developed contingency plans to prevent this from happening again. Furthermore, the Commander and I agreed that we would have developed contingency plans from the beginning if we had a chance to repeat history. Moreover, we would have questioned our teammates beforehand to confirm that all aspects of the supply shipment were accounted for. I learned from this incident that teams can function best when all members take the initiative to check each other.

Key Takeaway:

Apply the same level of tenacity while implementing a change program as you applied at the beginning of the program. In an instant, you risk losing all of the gains that you have made should you become complacent.

Start-Ups and Change Management

Submitted by Christin Davis

Start-ups are built upon the vision, innovation, entrepreneurialism, and drive of its founders and early employees. A unique organizational culture develops among the initial small team. At some point, successful start-ups will need to transition into mid-market and then large scale businesses and the effectiveness of this change can be instrumental in long term success.

I have learned about the start-up experience by working with local entrepreneurs as an InSITE fellow and through dinner conversations with my roommate as she pushes to launch her business. At this nascent stage, entrepreneurs work together like a close knit family. A talented and highly committed team is needed to deliver on their business objectives while maintaining the flexibility to pivot quickly and adjust to new information the get from the marketplace.

As the company starts to scale, there is urgency for the business to evolve and grow and it can be tempting to transition into a more bureaucratic model that makes it easier to manage large firms. In Delivering Happiness, Zappos.com founder Tony Hsieh speaks to his firm’s values of creating fun and a little weirdness, building a positive team and family spirit, and focusing on fantastic customer service. Hsieh strove to maintain this culture as the firm grew; one symbolic measure is that he sits in a cube among all the other employees. Later, when start-up was acquired by Amazon and Tony’s speech to employees stressed that Zappo’s unique entrepreneurial culture would remain intact.

A key to maintaining some consistency while the organization undergoes constant change is keeping the founder’s original blueprint for employee relations. Stanford Professor Michael Hannan and collaborators tracked the success of 150 start-up firms since 1994 and found that altering the system for managing employees hampered success and that these firms had long-term stock valuations that were nearly six times lower. Start-ups often switched from a looser employee framework to one with greater controls under pressure from investors. However, this new framework for the organization imposed by outsiders can create long term problems for employee morale and retention.

I learned that the start-up experience is one in which the organization is continuously changing, and a key to maintaining employee support may be to focus on what is not changing: the organizational culture and the way in which employees work and are compensated. I thought this story was interesting given our in class discussions on implementing change and the importance of gaining employee support in the Global Tech simulation. I was also struck by the many similarities between Tony Hsieh’s announcement to his employees about the Amazon acquisition and the Alpha Omega speeches (including even ending with a pre-prepared Q&A on employees key concerns).

#technology

Evaluation and measurement of change success at Sony Music

Submitted by Megan Green

When I joined Sony Music in 2007, the company had undergone a merger of two separate entities, the Sony and Bertelsmann music groups, and was in the process of Sony (Columbia/Epic Records) buying out the BMG (RCA/Jive) side of the business. The merger was an attempt to combine two similar companies despite different cultures. Both companies were trying to catch the market leader and they felt that as one company they could overtake Universal’s market share. However, the merged entity operated as two distinctly different business units failing to recognize synergies years after merging. They were only bound through corporate functions such as finance, digital business, and some executive management.

I first worked with the accounting and finance team that rolled up the financials from each business unit into a consolidated P&L. From the corporate vantage points, the BMG side of the business had better processes and was more efficient in reporting. I later went to work for the BMG side of the business. Their processes were completely different from the ex-Sony side of the business and there was little incentive to merge systems.

I helped begin a project to streamline our methods for talent accounting in the way that they were channeled up to the corporate partners. Talent accounting involved customized SAP reports detailing artist balances (the net result of investment and recoupment) that were run monthly in order to have a snapshot of Sony’s balance sheet.

I was one of the participants on this change team to integrate this process. The change leader was an IT programmer who was trying to suit the needs of all the parties. However, the longer the consultant free lance IT team took to build the new model, the longer they were retained by Sony. In addition, there was resistance from the Sony side because they were attached to their bulky process and were tense about a more automated form of reviewing information. The integration process was slow because of a lack of commitment from both parties. Both sides were becoming irritated because of the long duration of the project and also because of the distinct viewpoints on best practices.

There were clear challenges in integrating systems and ensuring that both parties were satisfied. First, I believe that the need for these changes should have been clearly defined and discussed. There were clear advantages in terms of new available data resources and increased flexibility in programming for both parties. In retrospect, two project leads should have been appointed to fuel the project.

My takeaways included that we could have been more effective by minimizing uncertainty and creating a sense of urgency. We needed to foster adaptation and motivate the change with stricter deadlines and more incentives. There were many levels of trial amongst the higher ranking employees but not amongst the others who used these systems. Giving them a chance to experiment may have helped generate more leadership in the organization. Also our executives could have been more involved in the process. It would have been beneficial for them to enforce the time line and also to recognize the shortcomings of the effort. By the time I left, one iteration of the new system went live but the team was still making tweaks and trying to accommodate both parties.

#finance #project management

Education Reform

Submitted by Kimberly Frye

Currently, there is a widespread discussion about the state of public education in the U.S. There are protests regarding Teacher’s Unions; there is a push from President Obama for states to enhance their programming with “Race to the Top”; Millionaires are donating private funding to increase opportunities for low income cities; and there are a number of successful Charter School platforms that many researchers and educators are claiming provide tools to reduce the education gap. These are all concurrent examples of why the nation has been widely talking about the need for education reform (ie “change” in our public education systems. Many researchers have pooled models from communication and change to provide insight on how to successfully implement change in the US education model.

Change models in education are extremely complex as there are a diverse set of stakeholders with competing interests. The key stakeholder in terms of outcome, the student, has an understated voice in the matter, especially in urban environments where the parents are less involved and have a less heavily weighted tax payer voice.

Researcher, Michael Fullen, dedicated his work to educational change and identified 4 main phases: 1. Initiation 2. Implementation 3. Continuation 4. Outcome. There are a range of characteristics that all greatly affect the implementation of change within education including the many stakeholders (district, principal, teacher, student, parent/community, and government).

Successful implementation of this educational change model can only be found when the characteristics and their interrelatedness are researched, identified, and addressed not only as a whole system, but also as individual entities. The communication of change must be implemented via delivering a consistent message through multiple platforms to multiple audiences.

The processes in which teachers are fired are a major catalyst for the needed reform. The most common “Resistors” to change in education reform are the Teacher Unions that as an entity hold large voting blocks. The unions by nature are in place to protect the rights and privileges of the teachers –not the students. Some US States are currently leveraging the economic crisis to reduce the power of the unions through bill that ended tenure for new teachers, instituted merit pay and removed discussions of workload and class size from contract negotiations.

#government

Lessons in Change Management to be Learned From the Recent Changes to the CBS Grading Policy

Submitted by Karen Turner

1. Industry/Context: If your organization is deviating from industry norm (most top US b-schools do not use an A/B/C scale, and do not disclose grades), there may be two reasons:

a. Your idea is groundbreaking (your idea is better than your peers’)

b. Your peers may have valid reasons behind their policies, they likely work well for them, and they have a proven history (your peers’ idea is better than yours)

Therefore, while implementing change, stop, take a look at other similar organizations, and gain insight into what they are doing. Understand why their policies may or may not work for them, and how you can apply their policies to your own (and even potentially improve upon them). Consider alternative options for your own organization that can be crafted out of knowledge of other industry players’ practices.

2. Impact of the change: Who might be affected, and how?

a. Identify potential resistors--in a school of high-achievers who aren’t accustomed to receiving a C, it is unlikely that they would easily adapt to doing so now.

b. Consider the response to follow and weigh it in relation to the potential benefits of the change. In the avoidance of receiving a C (and in turn having to disclose that C), how might students adjust behaviors? It seems that this year students’ incentives shifted towards being more grade-focused, they studied more, perhaps participated less in social activities, and it has been speculated that involvement in on-campus clubs has declined. Are these negative results worth it for whatever gain the change may have provided?

c. How might change recipients react to the change, and even try to reverse the change? In this case, the student response to the grading scale change was the grade non-disclosure policy, which for the most part renders the grading scale change useless, given that regardless of whether we receive an H or an A, no one will know about it.

3. Change for change’s sake: It is important to also consider the “why” behind the intended change. What benefits does the change provide to the organization? In this case, how was changing to the A/B/C scale an improvement to the H/HP/P scale? And again, even if there is a marginal benefit, does that outweigh the cost?

4. Resources: In making a change, particularly one at this level of impact, utilize your resources. Columbia Business School is a population full of experienced managers, consultants, a diverse range of thought-leaders—they could have been utilized to flesh out the idea and to enable the organization to structure and implement the idea soundly.

5. Educate change recipients: It seems that much of the resistance came from the lack of information provided to and the powerlessness felt by the change recipients. If students had been aware of the proposed grading scale change and the reasoning behind it, understood potential benefits, and had the opportunity to become involved in the decision-making process, there may have been more acceptance of the change.

Sales Force Effectiveness

Submitted by Federico Squeri

During my experience as a consultant, I was involved in a project to increase the sales force effectiveness of a pharmaceutical firm. Our goal was to design a tool, an account plan, for the sales representatives. It was aimed at maximizing the effectiveness of the sales calls to physicians.

After designing the tool, we presented it to the sales force in a meeting, explain them how to use it. We then incorporated the changes they required and planned a one-on-one meeting for all the 20 sales reps of the company to compile the first account plan together. Everything seemed to go smoothly.

When I met them individually, they started realizing that their sales activity, and consequently their approach to work, would completely change: they were supposed to switch from a sort of “I visit the hospital closest to where I am”, or “let’s see what surgeon is available”, to a more structured approach in terms of planning and executing. They were not very pleased, as they saw the new approach as a loss of time, taken away from the actual promotion of the product, and a loss of autonomy. When I came back to my office, I told the project leader that we needed a lot of changes in the tool in order to simplify it, but also that I was not sure they would have ever adopted it. The project leader said they all the sales reps had agreed during the first meeting and now the sales director expected them to act accordingly.

Since only a few sales reps had started compiling their account plans after a couple of weeks, I proposed to have a further individual meeting with them. My approach, this time, was based more on making them understand the benefits for the company and for them. We focused more on why to use it, instead of only explaining them how to use it. We also decided to start with just a few centers and then expand it in case of success. So it was. They started spread the usage and they were satisfied at the end.

Takeaways:

- Make sure everyone involved is onboard before the actual change. Easier to do when talking directly to people than during formal presentation in front of large audience.

- Be sure to incorporate some feedbacks from the people that are object the change, elements they consider important, even though it does not make too much sense to you (obviously only if it does not interfere with your goals). This allows them to feel part of the change and not only the target.

- Very useful to use a pilot to test the idea, create an easy win and create enthusiasm.

- Make sure there is commitment across the organization and a project manager able to exploit the momentum and carry on the change when you leave. Find also the time to get back to the people, even informally, and show your interest in the development of change. Next time you work with them, it’ll be easier.

#consulting

Change at a Family owned company to set-up a junior financial modeling outsourcing team

Submitted by Pallav Gupta

I joined a new group at a large family owned Investment Management Company in summer of 2008 after finishing my Investment Banking Analyst program at JPMorgan. My group consisted of 5 diversified portfolio managers, 6 Sector PMs, and me. I would work with 4 Sector PMs mainly and also with diversified PM. The other sector specialist supported only two sector PMs and me. Compared to traditional company which focused on covering and rating stocks buy and sell for investment purposes, my group focused mostly on cherry picking the best ideas in sector and doing more detailed and fundamental research compare to original Fidelity model. Goal was to own a concentrated portfolio of stock, built conviction by looking at fewer stocks and by discussing with the whole team to gather perspective of many people and by doing longer-term investing. Since one can only go long on stocks in mutual funds this model allowed efficient use of time by not covering stocks that one could not buy if they don’t look attractive. But since there were only 6 analysts, this model needed a lot of maintenance work to update quarterly model for all the major companies in the market and I was overwhelmed with modeling (Updating about 90 models per quarter) and other maintenance work. Since research was my main focus soon I realized that we needed a different structure to support this work otherwise this model won’t be feasible.

Meeting with Manager about new structure and takeaways: Coming from one of the most efficient and well run company JPMorgan, which was my first job in life, I was really frustrated that my company didn’t have a financial outsourcing model. I proposed the new model to my manager first and also talked to other analyst in my team about this. Under this structure we could assign the maintenance work to an outsourcing team in India (Fidelity already had a team in India, so setting up infrastructure won’t be a problem). Since they were 12 hours ahead of us, it meant together we could work 24 hours during an earning season. The work will be saved at a shared drive so that it would be a seamless execution. I would guide them on best practices in terms of making models. This would give me 40% more time at my job and allow me to do more effective and value added research. It would also give my team an edge in terms of fast processing of work and make trades more quickly after models were updated. I met with my manager to talk about setting this team but he was really concerned about quality of work. Thus I assured him that at the end of day it will be my responsibility and I will check their work to make sure the quarterly numbers are right. But since we were in recession I found it even harder to convince him as we were under tight constrains to hire. Although performance of my group was good, this resource scarcity affected our real performance, which could have peaked with sufficient resources. I also sat down with other senior analyst and they were with me except one analyst. The main issue was trusting the outsourcing work, as there was lack of ownership attitude in India as incentives were not aligned. But they didn’t understand with a good execution it can be done as I did at JPMorgan. Trust is an important issue in business and an important lesson to learn.

Main takeaway for all of us about Organizational Change: I quickly learned that I won’t be able to change my manger and 1 analyst views on an outsourcing team in India because of trust and their biases. So I proposed to bring a junior person to do modeling work. My idea succeeded and I learned that sometime one has to change their strategy constantly to get the max out of it. You can’t always get you want but can use it as a leverage to achieve something else if you put a rational argument. One has to constantly meet people one to one in order to implement your strategy and show them personally how it can be an affective tool. People are reluctant to change thus showing this to them periodically helps. Also one should not give up trying because as a junior person it takes time to implement things.

#family business

If only people were machines...

Submitted by Cristiano Amoruso

People are not machines. For how self-evident this statement may be, I have been mesmerized by the number of times I have witnessed, first hand or just as a spectator, corporate change situations in which this simple tenet was spectacularly violated, unsurprisingly obtaining less than spectacular results.

A specific instance left a specific mark on me.

In 2005 I had just joined the then Prudential Plc Investment management arm, M&G, which had two main divisions: M&G International and M&G UK. In a company supposed to do the same things – i.e. manage money – there could not be more disparate cultures and backgrounds. In the UK division there were 99% of English Mother tongue speakers in UK, 0% in the International division. The UK division worked in a big, corporate office while European divisions worked in team of four-six in smaller offices around Europe. The two divisions had worked phenomenally well as long as they had not gotten into each other’s way. M&G International in particularly was seen as the hip part of the company. It had grown at the fastest pace in the entire corporate history. All was set to go perfectly and in harmony within each department until, on a early morning of May 2006, we all received a memo from the CEO of M&G International.

The relaxed buzz of a mid-week breakfast was broken by this email subject: ‘M&G International and UK to Merge’. Wow. Although I was not going to be directly impacted by the change, I had to re-read the email a few times to really understand what was going on and overcome the surprise. I could not imagine how people directly impacted could have felt. Some of those had been at the company for decades and their best farewell was a fairly cold, detailed email with changes of structure effective as of that morning, including various ‘decision to pursue other opportunities’.

I was really by struck how swiftly and surgically this surprise strike had been carried out and obviously planned. What however did also seem clear is that the plan would have found a few bumps along the way. None of the people who carry executive tasks like head of Marketing, Operations etc had been briefed in advance. Neither had been the many employees that have the company hum along every day. It was those people who were the most anxious about the announced merger and would have to buy in the merger to have it become effective. How could they do so if their job and years of precious experience had become just a plan detail?

As implementation started to take shape, the following months became a frenzy of corporate political activity in which some people tried to make themselves precious by showing they were indespensbale solving fake problems they had created. Others tried to fill the incognitos about their future by winning the respect of (read lobbying) change agents. Only problem: there were no change Champions. On the basis of belief that people can automatically do well what they have been instructed to do, the integration was looked after by a ‘Change Team’ – a group of mid-low level employees that had shared desks and coffee points with those who they had to say to: ‘your job doesn’t exist anymore’.

Who was the winner in all of this? Nobody. The imposition of a top down change had not been preceded by buy in, reassurance and creation of urgency. As at today, I struggle to remember why that merger happened…and with what results? Almost half of the international team left in the three following years and The CEO who was once seen as a friend spearheading the growth of M&G International had now become a classic CEO, distant and only nominally accessible.

Through this experience I have learned that there is only one way to have people do what you want: to have them want it too. No top down change will ever work without preparation and clear explanation and buy in of change subjects. Change is not a plan on paper, it is a process that involves people, which makes it a beautifully complex and unrepeatable task to master. Change also changes as it is implemented, and almost never goes according to plan because people react differently to same stimuli. For me, flexibility in bridging plan with outcome through changes en route is indeed the key for successful change management.

#finance #cross-cultural #course readings

Change in a globalized (and flat) world

Submitted by Ignacio De Ramon

Topic: Cross cultural challenges and/or techniques of global change management

What I know: There is an excellent study that should be read by anyone that is interested in helping implement change in a global organization. It’s called the Global Leadership and Organizational Effectiveness Research Program (GLOBE). Its goal is to develop an empirically based theory to describe, understand, and predict the impact of cultural variables on leadership and organizational processes and the effectiveness of these processes. Using a vast survey to upper and middle management they were able to catalog cultures in 9 dimensions that should be taken into account when dealing with cross-cultural change.

These are 1) performance orientation (the degree to which a collective encourages and rewards improvement) 2) assertiveness 3) future orientation (how some cultures are able to delay gratification) 4) humane orientation (how a culture rewards being fair or altruistic) 5) institutional collectivism (how cultures promotes group performance over individual performance) 6) In-group collectivism (the degree to which individuals are encouraged to show loyalty, pride and cohesiveness towards the group) 7) power distance (power distribution) 8) uncertainty avoidance and 9) gender egalitarism.

As a consultant, I once worked in a reorganization of a leading company in the modular space sector. The company had units all over Europe and America each with its own psyche (the company had primarily grown through acquisitions). Each consultant managed a different country. Two months into the project all the company managers (and us) met in a summit in Baltimore to discuss organizational ideas. Cultural differences were clear from the first day. But the debate was obvious to everyone when discussing the organizational structure of a branch: we wanted to homogenize it and introduce a more pronounced separation between sales and operations that would better protect the margin of the projects we sold. We soon discovered that homogenizing branches entirely would be an extremely hard task. For example, the dimensions of power distance and performance orientation are critical in order to implement changes such as delayering: it was very hard to reduce management in less individualistic cultures. Neither we could implement change in the same way everywhere (some countries proved to need a stronger than usual initiative sponsor) nor change milestones could be tied to bonuses as appraisal systems differed. We soon discovered that change needed to be tailored to each culture.

Useful takeaways:

· Do not renounce to the goal of homogenizing an organization across cultures, just remember to adapt change to each culture. Use tools as GLOBE to prepare.

· Global strategies for change need to take at least into account how collectivist or individualist cultures are. If not they will be doomed to fail.

· Cultural values do matter! Give people reasons to change according to their cultures. Sometimes monetary bonuses won’t be enough.

· There are a few traits in a leader implementing change that are universally liked: being trust-worthy, having foresight and being positive, dynamic, motivating and a builder of confidence, the rest is debatable. For example, in Confucian-influenced Asia the natural American assertiveness does not suit well. It could easily generate a backlash that freezes change.

#cross-cultural #change tools #project management #globalization

Cultural Adaptation for Private Equity in China

Submitted by Rick Carew

During class we discussed the business model of private equity in the US and how these private equity firms take over firms, overhaul management, and create organizational change focused around paying off a debt burden that forces firms to become lean and efficient.

In my six years as a reporter covering the private equity industry in China, I’ve noticed some sharp differences between the “buy-out” model used by private equity firms in the US and a “buy-in” model used by the same Western private equity firms in China. Whereas private equity firms typically take majority or full control in US deal, many fast growing Chinese companies are reluctant to sell their entire company. These Chinese entrepreneurs are looking for capital to accelerate the growth of their business rather than hoping to cash out. Western private equity firms also face a Chinese government that is unwilling to have private equity firms, with their absolute duty to generate investor returns own control of large, important companies in China. The experience of Carlyle Group, which spent over 3 years seeking approval for the takeover of China’s largest construction machinery maker, Xugong Group, is testament for many private equity practitioners in China to the difficulty and futility of seeking full control of large Chinese companies.

Instead, Western private equity firms like TPG and Goldman Sachs Private Equity focus on helping Chinese entrepreneurs bring in international advisers to prepare their companies for an IPO in the international capital markets. Typically, the PE firm will purchase a 20% stake in new shares of an unlisted Chinese company, providing capital for the business to grow. The private equity firm will then guide the company through its choice of international advisers, helping it bring in global accounting standards, McKinsey consultants and their global industry best practices, and investment bankers to restructure the business and market the company to international investors. These developments tend to take place over a 2-3 year period and result in a stock exchange listing in Hong Kong or New York.

The presence of these private equity firms tend to comfort the Chinese CEOs that they have extra bargaining power with international firms and provides a valuable service for many Chinese entrepreneurs who tend to lack the international exposure and financial market sophistication of their Western counterparts. The private equity firms lend a stamp of global credibility to their attempts to make difficult changes to their company’s organizational structure and financing.

For their part, many US private equity firms view China as a new model where they can have a less hands-on approach to managing change within an organization and generate strong returns without the use of extensive leverage. Whereas many US private equity deals have been driven by the desire to pay down debt, Chinese private equity deals are driven by the desire to seize growth opportunities. Many of these practitioners view growth in China as operating leverage that allows them to achieve the same outsized returns as debt in the US.

In summary, private equity firms are adapting their model of organizational change used in the US market to new markets such as China as they seek to incorporate a different business cultural and seize new growth opportunities.

#finance #private equity #cross-cultural #globalization

Change in a Consulting Firm

Submitted by Vik Vishnubhakta

Prior to starting at Columbia, I worked at APS Healthcare, a boutique management consultancy centered on providing health care solutions to state and local governments. APS’ consulting efforts could be divided into two segments: internal consulting in which consultants would evaluate the disease management programs that APS developed and external consulting in which consultants would help design and evaluate health care programs requested by government agencies.

This two-part organizational design quickly changed in July 2009 when APS concurrently lost one of its major external consulting contracts and the firm’s management made internal consulting the sole focus of the firm. This change adversely impacted external consulting staff members, including me. First, the lead external consulting manager was forced to resign and external consulting procurement work was cut. Moreover, all external consulting staff members were to assist on various internal consulting projects in addition to our existing external consulting obligations. This created a clash in cultures as external consultants tended to have an academic mindset and enjoyed working autonomously whereas internal consulting staff had computer-programming backgrounds and tended to work in groups.

With this abrupt change, my fellow external consultants and I voiced our opposition but with little response from upper management. Based on these circumstances, several of us ultimately left APS and created our own consultancy, Forward Consultants. APS was shocked: besides the departure of staff members, existing external consulting clients told APS that they would terminate or not extend their contracts with APS and switch business to Forward Consultants if contractually possible. Immediately, APS management contacted several of us to see what could be done to bring APS and Forward Consultants together. In the end, we, as Forward Consultants, worked out various subcontracting agreements with APS that have proven to be mutually beneficial to both firms.

With this experience, I learned that changing the strategy of an organization requires input from those members who will experience the change firsthand. Upper management cannot simply wait for subordinates to leave the firm and then reflect back on changes made; indeed, upper management should have anticipated that we would voice our opposition to these changes given that we were not even previously informed of them. Furthermore, despite the fact that the composition of the staff at APS changed markedly, it may be possible for reconciliation to occur – even if it means work being contractually performed between two firms rather than one. Looking retrospectively, if APS had introduced the change to staff members early on and kept the communication channels open, perhaps my fellow external consultants and I may not have left APS. Being forthright and responsive may have kept us – arguably, a group of stubborn consultants – at our prior firm.

#consulting

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