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Long Range Planning

38/5 October 2005

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Charles Baden-Fuller Editorial

Much is said in the literature about how firms need to improve their positioning and increase their capabilities, but far too little about how managers – and senior managers in particular – can act to achieve better results. This issue seeks to bridge some of that gap. We have four excellent papers that examine different dimensions of the management agenda, each providing interesting argument and novel evidence that should help executives to become more effective leaders.

Michael Goold looks at how BP made Peer Groups effective. Peer groups are a device for fostering communication and synergies between business units, and can apply within a large divisional firm in any line of business, as well as networked organisations. Using primary data collected over a period of time, Goold explores how Peer Groups can be effective, and why BP abandoned the idea after it seemed to be successful.

Michael Beer, Sven Voelpel, Marius Leibold and Eden Tekie examine how organisations must achieve ‘fitness’ if they are to attain a successful ‘fit’ with changing environments. Organisational change is difficult and often fails; the authors look at the ‘silent killers’ of change programmes and strategies to overcome these hurdles. Using a case study from Hewlett Packard, they illustrate how a disciplined Strategic Fitness Process can guide change.

Christian Stadler and Hans Hinterhuber examine the challenge of leading change in companies with strong values. Such values are associated with success because they often incorporate strong routines that provide a source of competitive advantage. But they can also be resilient to any alteration, and thus an obstacle to change. These authors look at how three corporations with strong values attempted to change their ways and by comparing successes with failures come up with useful hints and suggestions.

In the final piece, Dennis Tourish examines how difficult it is for leaders to stay in touch with their organisations. He argues that critical upward communication is a vital part of the agenda for successful firms, and that the cultural and psychological barriers which inhibit it can seriously hinder firms' strategic decision-making abilities. Using examples from a wide variety of sources, he comes up with Ten Commandments for managers keen to gain more value from the experience and opinions of those further down the ladder.

 

Michael Goold Making Peer Groups Effective: Lessons from BP's Experiences Michael.Goold@ashridge.org.uk

Many companies are attracted by the idea of ‘peer groups’, which cut across the formal line reporting structure and bring together managers from different units for knowledge sharing and mutual learning. Yet despite their appeal and prevalence, peer groups in most companies deliver only modest benefits rather than helping to transform performance. One company that does claim to have derived major benefits from its peer group processes is BP. The author studied these processes and their impact and this article attempts to draw lessons from BP’s experience. It identifies 10 key features of BP’s peer processes, which made them especially effective for the company in the period up to 2001. After that date BP introduced great changes to its peer processes, and the article discusses the rationale for these changes. This reveals how changing circumstances can expose the conditions under which peer groups can be most as well as least effective. Among the lessons learned are the importance of the composition of peer groups, the need for a performance culture with clear deliverables, the value of self-management processes, and the role of top management support. Peer groups are a suitable means of encouraging collaboration in companies that wish to preserve business unit autonomy and avoid strong corporate functions. But peer groups are less suitable for performance optimisation than for performance improvement, and are less able to bring about some types of collaboration. It is therefore evident that different sorts of peer processes may be needed by different companies and at different stages in their development. Managers should expect continuing change and refinement in their peer processes if they are to remain abreast of the challenges facing their companies.

 

Michael Beer, Sven C. Voelpel, Marius Leibold and Eden B. Tekie Strategic Management as Organizational Learning: Developing Fit and Alignment Through a Disciplined Process svoelpel@fas.harvard.edu

This article draws the distinction between organisational ‘fit’ and ‘fitness’. ‘Fit’ encompasses the two elements of alignment of firm strategies with environment, and of effectively interlocking internal design, culture and leadership capabilities. ‘Fitness’ e more the subject of this article e involves the organisation’s flexibility in learning and adapting to promote successful strategy alignment. The record is not good. Numerous failed change initiatives show managerial inability to lead fundamental systemic change in face of design, cultural and leadership issues that block organisational effectiveness. Quick-fix externally-led change programmes disguise such poor co-ordination, as well as obscuring the need for learning to be a continuous rather than oneoff matter, while the ensuing failures lead to cynicism and lack of faith in future attempts.The authors refer to Beer and Eisenstat’s six ‘Silent Killers’ e the underlying organisational and managerial barriers which prevent successful organisational alignment with strategy. They introduce the same authors’ Strategic Fitness Process to enable ‘truth to speak to power’ in an integrated and disciplined platform to develop open conversation about strategy/environment fit and leadership issues. They describe how an (internal) Task Force is recruited to collect data which is then reported back in a ‘fish-bowl’ environment designed to promote honest interchange, illustrating the progress of one such process in a Hewlett Packard business unit. The Organisational Fitness model identifies 7C’s (Co-ordination, Competence, Commitment, Communication, Conflict Management, Creativity and Capacity Management) as fundamental capabilities to enhancing organisational fitness, thus promoting optimal alignment between an organisation and its strategy.

 

Christian Stadler and Hans H. Hinterhuber Shell, Siemens and DaimlerChrysler: Leading Change in Companies with Strong Values Christian.Stadler@uibk.ac.at

In a turbulent world with increasing competition, leaders are expected to continually initiate and adjust to change. However, change causes disruption and can lead to chaos. Cynical employees, unsatisfied customers and disappointed shareholders often find themselves at the receiving end. The authors of this paper set out to search for a formula that allows organisations to adapt without drowning in chaos, taking as their case studies, attained through archives and interviews, three companies that underwent great changes in the 1980s and 1990s e Shell, Siemens and DaimlerChrysler. They discovered that where leaders took the company’s core values into account and engaged their employees, many of the negative aspects of change were avoided. This in turn requires a collective leadership style, and in particular the success of Shell and Siemens in implementing their changes reflects the stance taken by their respective leaders. At DaimlerChrysler change was at first initiated by a charismatic leader but his vision of a diversified conglomerate was not successful and his successor took account of the company’s core values and traditions to implement a focused single-company strategy. Based on these studies, the authors have developed a model to help companies with strong core values to change. It advocates that in such situations collective bodies are more likely to guarantee long-term success than initiatives from the personal agenda of a charismatic leader. Leaders also have to be culturally sensitive to the company’s core values, and the fact that the case study leaders came from within their organisations was noteworthy. However, promoting an insider to the top position will only work if the company has a large talent pool.

 

Dennis Tourish Critical Upward Communication: Ten Commandments for Improving Strategy and Decision Making D.J.Tourish@rgu.ac.uk

Stemming from his wide experience of assessing firms’ communication practices, the author reports that the tendency for leaders to be out of touch with what ‘their people’ think of topdown strategies is disturbingly widespread. This lively paper quotes Churchill and Swift to show these problems are as old as time. But can organisations afford to ignore the views of those in the know, no matter where they are in the heap? And can strategy be successfully implemented if those who are to action it don’t believe in it? This author thinks not. His fundamental stance is that, properly handled, critical upward communication must improve decision making in organisations. He covers a variety of ‘human nature’ barriers against free-flowing communication e how the desire for approval leads to defensiveness against criticism and susceptibility to flattery, self-censorship on the part of potential critics anxious about their jobs, the dangers of top-team narcissism and groupthink e as well as cultural factors such as over-awareness of power differentials and autocratic management styles. He examples NASA’s originally-successful Monday notes regime, designed to ensure important feedback reached important ears. Having rehearsed its advantages, he offers Ten Commandments for companies desirous of encouraging honest two-way communication, highlighting the need for senior managers to understand how employee ingratiation and managers’ susceptibility to flattery can produce over-positive feedback, and to learn how to use regular informal shop-floor contact and personification to gain value for the firm from dissenting views.

 

 

This issue is available in full on-line at www.sciencedirect.com

 
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