The Learning Initiative at Electro Components
(Only the first chapter is available on-line. To order the complete version of the paper,see Ordering Information)
Researched and written by JoAnne Wyer and George Roth
Edited by Virginia O'Brien
Table of Contents
How to Read a Learning HistoryNoticeable Results
Introduction
A Tug of War Starts
- The Birth of a Company: Acquisition and Consolidation
- The Bloodbath: Stopping the Flow of Red
- The Tension Between Autonomy and Control
- New Location of Headquarters Stretches Relationship
- The Desired Factory Adds Tension
- Developing Leadership and the "Human Side" of Business
- The Big Question
- Beginning Transformation: The Project Engagement Clinic
- Building Capacity; Searching for a Project
- Initiating Dialogue and the "Fab Five"
- A Quick Fix Tendency
- The Dialogue Process: Lessons and Dilemmas
- Dialogue and Business Results
- The Tug of War Between Management and Labor
- An Unexpected Loss
- Developing a Pull for Learning
- A Surprising Survey
- A Wake-Up Strike
- The Weekend Work Force: A Healing Solution
- European Management Pulled to the US
- The Relationship between Leadership, Learning and Change
- The President's Style Changes
- Divided Leadership : A Fractured Management Team
- Pushing for Change
- The New Division President: Pulling in a Different Direction
- Conflicts in Communication
- An Issue of Quality
- From Quality to Process Management: Process Recreation
- Beyond Re-engineering
- Creating Shared Vision through Reflection
- Developing Models and Applying Tools
- Process Management Doubters
- The European Perspective: Increasing the Pull
- The End of Autonomy: Moving toward a New Structure
- The President's Concerns Grow
How to Read a Learning History
Learning from the Learning History
This document is designed to spark conversations that will lead to collective learning. As you read this history notice your reactions and write them in the empty spaces and the margins. These notations will serve as "markers" for later conversations.
A learning history describes what happens in the voice of participants. It not only documents the "hard" facts and events, but it also focuses on what people thought about the event and how they perceived their own actions, as well as the actions of others. The learning history unveils the differences in people's perceptions. By "hearing" all the voices and recreating the experience of "being there," the learning history helps you understand what happened in a way that enables you to make more effective judgments.
The objective of a learning history is to transfer and diffuse participants' learning. Therefore, when you read this document we ask you to do two things:
1. Use it as a tool for better conversations. Read the document simultaneously with other members of your team. Plan at least a two-hour meeting to talk about what happened in the story, and why and how it applies to your own organizational improvement efforts.
2. Take on the mindset of a beginner. "Listen" to what people said in the document. Try to suspend your judgment and "hear" why they did what they did. Don't automatically condemn the people who made mistakes, or assume you know why the mistakes occurred. Yet notice how you react. Write your reactions in the white space. Think about how this story is similar to, and different from, the issues that face your team. Be prepared to talk to your team members about your reactions and thoughts. Be prepared to learn from one another about the implications this history has for the efforts of your own group.
Titles and Subtitles Cue You to Shifts in the Story
Several different styles of text exist in this "jointly-told" tale and there are no set "rules" for reading it. People vary in their approach to reading a learning history. Some readers skip back and forth between the right-hand and left-hand columns; others read one entire column before switching to the other. Text running across the width of the full page provides the context and background for each part of the story and leads into the narrative in the two-column format.
| In the left-hand column, you will see critical observations and key quesions from the "learning historians." These comments show why the right-hand text was chosen, and help you apply it to your own situation. |
The right-hand column contains the primary narrative.
You will see each paragraph in the right-hand column
credited to a particular individual, who tells his or
her part of the story, like this:
Management Team Member: I struggle a bit with the evaluation that the These management team was dysfunctional. [The president] seems to believe it, and maybe [the division president] believes it too. I don't. I see us as terribly inefficient. |
Sidebar: Occasional boxed passages in sidebars contain digressions and explanations that would otherwise slow down the narrative. For instance, sidebar passages might describe a particular consulting technique, or an aspect of the business model that turned out to be significant. Refer to sidebars for answers to questions about details in the main text.
Learning is not always an easy process. It involves taking on the mindset of a
beginner, letting go of the known, and being willing to try something new. When
people try new behaviors mistakes are inevitable. A major problem in business,
however, is that mistakes are often covered up and undiscussable. The people
who tell their story in this learning history are no exception. They
experienced business success and they made mistakes. By reading their story you
will have an opportunity to learn from their experiences.
A noticeable result is a significant and measurable event, described in an observable and tangible way, that answers the question: "What evidence do we have that something noteworthy happened?"
A learning history investigates both the "happenings" that result from learning
efforts as well as the other factors that contributed to those events. The
noticeable results for EC extend back through the president's nine-year change
effort.
* An acquired company
* Construction for a state-of-the-art second factory was
halted
* Quality initiatives were rewarded. EC received ISO 9000
certification
(an industry standard) in 1994 and an EQA-90 award (an Electro
standard) in 1995. These certifications required considerable documentation and
attention. EC passed these quality audits successfully in a short period of
time while increasing production volumes.
* Electro's world-wide employee motivation
* A strike occurred for the first time in 25 years
* A process management
* A "Weekend Work Force" was ratified by a 4:1 margin.
After four years of efforts to increase the flexibility of work-force
production scheduling, the union approved working conditions for a
seven-day-a-week operation. The overwhelming support for this labor pact was
particularly dramatic given the earlier strike.
* A major reorganization took place.
* A process management initiative for the world-wide business group
was launched. The process management and organizational learning efforts
controversial within EC were considered for implementation on a world-wide
basis by the European parent. The former President and two staff vice
presidents are asked to help in establishing the initiative.
* The president and two vice presidents left the organization. The
restructuring decisions and changes that were implemented prompted two vice
presidents and the president to resign
These noticeable results are the observable evidence of significant occurrences that have taken place at EC over the last several years. In addition, there are some less tangible, more subtle changes that proponents of the learning effort claim are significant.
* Dialogue sessions were initiated. Dialogue - a type of conversation that includes specific rituals which require openness and honesty to promote the development of shared meaning - was being practiced in the organization.
* Reflection became a practice. An understanding of the value of reflecting and developing a capacity for reflecting on actions (such as project post-mortems) and suspending preconceived notions became more widespread.
* Communication was strengthened. Governing values of the organization were articulated and used in making decisions related to project activities.
* System thinking was incorporated into problem solving. Tools, such as causal loop diagrams and system dynamics modeling, were used to examine complex decisions from multiple perspectives and to consider the possibilities of longer time consequences.
None of these behavioral changes in isolation suggest a major improvement in
capability, and even when taken together they represent only subtle changes.
However, proponents of the learning effort claim these capabilities are the
foundation upon which future major operational improvements can be based.
Introduction
What is the relationship between learning, leadership and change? This
learning history of Electro Components Division describes the efforts of its
president and her management team to lead a learning approach that would build
the capabilities of the people in the organization.
In one sense the following learning history is an American success story - a manufacturing operation on the brink of bankruptcy not only survived while competing in an industry that suffers from chronic swings between over-capacity and short supply, but it also achieved profitability. In another sense it is the story of a transformational change strategy that resulted in a major reorganization and a change in leadership. In the end, the transformational strategy had a questionable impact on the organization.
This learning history reports on personal and organizational transformation, and the costs associated with promoting new approaches within the subsidiary organization of a large multinational corporation. In the summer of 1995, the president of Electro Components (EC),[1] a US subsidiary of the European-headquartered Electro company, announced both a new organizational structure and her resignation from EC. Her departure came after a nine-year effort to improve the performance and capability of EC. The president, who had succeeded earlier in her career at turning profitability at EC around, was less successful later in her tenure at producing results while integrating learning concepts into the organization. During the last three years of her term, along with Peter Senge and his colleagues at the Center for Organizational Learning (OLC) at MIT, she had involved EC in an effort to transform the existing culture into a "learning organization" - one that would develop capabilities to cope with unrelenting business pressures more effectively. As organizational learning tools were introduced and utilized at EC, a series of events, changes in management, and bottom-line figures unacceptable to the parent company complicated these efforts.
This document records the events of that learning effort. It was written by a team of researchers from the MIT/OLC who gathered information from interviews conducted with approximately 50 key people. The sample of interviewees range from union workers on the factory floor to senior management in the European parent organization. A variety of perspectives and attitudes was captured in order to present a full spectrum of views. Transcripts of meetings, field notes by OLC researchers, interim learning history documents, reports made to the organization, and speeches given by key participants were also reviewed. All the materials and quotes were reviewed and approved by those who were quoted and by relevant EC and MIT people who reviewed this document.
Back to the Table of Contents
A
Tug of War Starts
The
Birth of a Company: Acquisition and Consolidation
In the late 1970s, competition in the electronic components industry was
fierce. Compo Inc., a manufacturer of electronic "widgets" for consumer
products, could no longer profitably compete with the lower-cost Asian
companies. Caught in a competitive squeeze, Compo sold its North American
widget manufacturing facilities to Electro of North America, a company
partially owned by a European corporation. Allegations of dumping and predatory
pricing practices, as well as restrictions imposed by the Department of
Justice, complicated and prolonged the sale. The acquisition, which was finally
completed in 1981, gave birth to Electro Components (EC), a subsidiary of
Electro of North America.
The birth of EC marked the beginning of numerous changes for employees and management. A short time after EC was acquired, its president died suddenly, and his replacement quickly began to restructure and rationalize. Within a year of the acquisition, three of the factories that manufactured products other than widgets were sold. The remaining widget factories, whose competitive capabilities had eroded, were set up to compete with one another in an attempt to stimulate performance. The replacement also brought in a colleague from Apex Inc., his previous employer, and made her vice president of engineering. The vice president was known for her technical expertise and knowledge of the widget business, and she was assigned the task of integrating Electro's technology into the outdated technical structure of EC's facilities.
Despite restructuring efforts, EC continued to lose money throughout the early `80s. In 1985, in an attempt to cut costs further, EC closed down manufacturing in its Southern facility, consolidating and moving manufacturing operations to its factory in the Midwest. The following year, another transition occurred when the vice president of engineering, who had succeeded in upgrading the outdated technical infrastructure of the manufacturing facilities, was named president. She held the presidency at EC for nine years, and led the series of changes around which this learning history is focused.
All these changes had a dramatic impact on EC's employees. Their original company had been sold off and they had experienced changes in leadership. Then, the company had been consolidated and downsized. The new president (hereafter identified as "president") and the management team recognized the difficulties EC employees were experiencing.
|
President: EC was an acquired company.
Sort
of like second-hand clothes or abandoned
children. People in a company that is sold
don't feel good about themselves. After the
first joy of knowing that the "doors will
not close" comes the realization that the
new owners are bringing change and new
culture. And all of this is not welcomed. Management Team Member: Compo Inc. did not invest in the business for a number of years - neither in the capitalization of the business, nor in the people. There was no training; skills were awful. In [the Midwest] at that time, as well in [the South], we had an accounting department that had one or two college graduates and the rest were clerks. | |
| What is the impact on an organization when it not only lacks skilled people, but also the means to upgrade skills? |
There were no computer
systems, and in [the Midwest] we had
secretaries that had never seen word
processing. |
|
When [Electro in Europe] bought [Compo Inc.]
there were five factories. The two remaining
factories were the main producers of
electronic widgets: one was located in [the
South] and the other in [the Midwest].
Located out in the farmlands where you could
get a good labor supply, the factories were
set up to compete against another. Using a
cost center management approach, one factory
was played off against the other. A proposal was made to have one factory location, not two competing with each other. So the two | |
| What happens when competition, rather than collaboration, is the primary approach used to deal with difficult issues? |
major widget factories became
involved in a competitive kind of sparring
off, knowing it was a fight to the death. |
| There were difficult negotiations for the people in the union back in 1982, before either [the president] or I came on the scene. She inherited that competitive situation. The union in [the Midwest] | |
| The Midwest factory "won" by making more concessions and remaining open. What effect might this "victory" have in the future? | made the most concessions; therefore, the decision was made to locate the plant there - that sticks in the craw of a lot of union people. Then, in 1985, the announcement came to lay off 1,400 people. Except for a handful of maintenance and salaried people, we closed the plant in [the South]. |
Back to the Table of Contents
The
Bloodbath: Stopping the Flow of Red
The president, who had come from a "street-fighting" culture at Apex, used traditional command-and-control tactics to improve EC's operations. From a bottom-line business perspective, she achieved good results in a short time. But in the process she had numerous confrontational interactions with the unions at the factories. Completing the downsizing, which had been initiated before her presidency, left scars on the organization that others often attributed to her.
| What impact does a legacy from the past have on a new leader? | Engineer: There was a time in this
organization when business conditions were
difficult and [the president] was a pretty
tough lady. Many people were summarily
fired. Much bloodletting occurred in the
early days of the acquisition, which were
also [the president's] early days here.
She's an important person remaining from the
power elite of those days... Starting around
1985-86, those were the bloodbath years. Management Team Member: There was no question when we did competitive benchmarking that we had too many people. The cost structure was out of whack. It was set in motion by her predecessor, and the "powers that be" within [Electro in Europe] agreed. |
|
The so-called "bloodbath years" were really
a result of a need to have the right
competitive organizational size and cost
structure, and they had been set in place,
but she was the one who executed the plan. | |
| What are the implications for later improvement efforts when the organization's previous changes are described as "bloodletting" and a "blood bath?" | Within a year of 1986, right after that
major "bloodbath" -- she ended up exceeding
her business targets in 1987, and in 1989,
you are making a profit and have a
relocation -- not just the people but the
equipment and everything else -- it's
unheard of to be able to do that not only
without glitches, but also without missing
your business objectives. |
| The division president, who was located in Europe, was responsible for the world-wide widget business. |
Division President: She fulfilled my idea
of the American management style: Tough.
Sometimes maybe she overcompensated a little
because of being a woman - she's one of a
few in this business. As far as women in
these ranks are concerned, she's pretty
unique. |
| Although the president achieved a long-sought business goal, it was not without controversy. What perceptions could have been reinforced by her heroic efforts? |
[The president] took over the company in a
difficult period. She came out of the ranks,
so she had to establish her authority very
quickly. She had the guts to attack the mess
that she found all over the place in EC. And
she started moving; everyone saw that she
was moving wisely with support of Europe.
She won the confidence of the operation very
quickly. [The president's] style was tough.
When [the president] took over, the company was losing a lot. In three years, she brought it basically to a reasonable position. |
| What implications does "being scared" have on creating openness and trust, and on establishing conditions that will be conductive to learning? | I had the impression that in that beginning period quite a few people in EC were really scared of her. And you are scared when you are not secure in your job and when you don't know what you're talking about. |
The president's decisiveness and her ability to make effective and speedy changes in order to meet business objectives earned her the admiration of European management. She developed a close working relationship with the division president in Europe, which enabled her to import the technology and expertise that EC needed. Under her leadership sales volume nearly doubled and the company became profitable.
During that time, the ownership and reporting relationship of EC shifted from being one of several autonomous operations in North America to becoming part of a more integrated, centrally controlled, world-wide product division headquartered in Europe. Because the EC president and the division president in Europe had developed a good relationship, changes in the ownership structure initially had little impact.
|
Management Team Member: Once the power
shift
was accomplished from the national
organizations to the product divisions, the
president had a fairly stable relationship in
terms of her most significant reporting
relationship. [The division president] was
there for a number of years. Division President: It was March 1986 that we first met. She had spent a lifetime in electronic widgets and I also knew the business well. We quickly came to a kind of understanding. She said, "I need you for central technology support." We quickly came to the agreement that I would support her in the US. And, when I say, "Yes, I will support you," then, indeed, I will support you. So, not a "yes" today, and tomorrow, "The hell with the US." However, to some extent that was EC's previous experience. I made a deal with [the president] during that breakfast. In the end, having [Electro] own 58% of the shares will benefit all the shareholders. Soon afterwards, in May or June of that same year, came the first test. [The president] and a few of her engineering people came to Europe to discuss taking some processes and related equipment into the US manufacturing. Equipment had to be transferred from the Central Technology Department to that "independent" company in the US. People started to talk about lawyers and making contracts. When I joined the meeting, [the president] looked at me and said: "Are we going to talk about lawyers? Or we going to talk about projects? We are a business, we need decisions, not lawyers!" This was the test. After a short deliberation I said, "Order the equipment; it will be delivered, period, no lawyers." |
The Tension Between Autonomy and Control
The stability of the reporting relationship between the president and European management, however, did not continue. EC was a subsidiary of Electro of North America, which had been established as a legally separate holding company from Electro in Europe before World War II. Electro of North America had been operating autonomously, even though it had been partly owned by its multinational parent. About two years into the EC presidents' tenure, Electro in Europe bought back Electro of North America's outstanding stock, and EC became wholly and directly owned by Electro. Yet, even though Electro in Europe gained ownership, EC management retained its autonomy. But after the buy back, the European parent company started sending signals to the president about EC's independent behavior.These signals, which were at times mixed, marked the beginnings of a tug of war that EC would experience as Europe pulled for control and the president pulled for autonomy. Over time the tension created by the pull between these conflicting desires strained the relationship between the organizations, which were already separated by history, culture and geography.
| The reporting relationship of the subsidiary organizations shifted from North America to Europe. What impact might these governance changes have had? | Management Team Member: In the late
1980s,
the trust was dissolved when [Electro in
Europe] took over the control of the
operations in the US. What was controlled by
the national organization was controlled by
the product divisions, controlling product
portfolios around the world. Previously, the
national organizations were little kingdoms in
which the kings would allow the product groups
to play at their will. The president has had
to weather a number of different bosses and
influences, bosses out of New York and bosses
out of Europe. She's always had a bunch of
bosses to take care of. |
| EC's relationship with the European parent was a historical anomaly. |
EC's relationship with Division President: Until 1988 as a
chairman
of the division I had support responsibility
for the US, but no bottom line responsibility.
The distant relationship with the US had to do
with a different history, with only 58% of the
shares in Electro hands and also with the
different "style of doing business" between
North American and Europe. The management
relationship changed somewhere at the
beginning of 1988, when the 42% third party
shares were bought. EC in the US always had been independent with its own technology, its own designs, its own marketplace and its own sales team. The US business was run as a company, while the rest of the division the management was centralized, with central design and central process |
| What are the implicit implications for an organization when it accepts technological support for business strategy and decision-making? | development - all kinds of key components out of central sources. The division outside the US and EC in the US were completely different animals. |
New Location of Headquarters Stretches Relationship
Three years into her presidency, a key point of contention arose between the president and European management. The restructuring of EC included moving headquarters and R&D facilities from down South closer to the factory in the Midwest. Rather than locating headquarters at the Midwest factory, however, the president moved headquarters to Des Moines, a larger city in a neighboring state. Thus, headquarters and manufacturing remained geographically separated.This decision raised questions. Division management had been seeking to consolidate managerial decision making for production facilities in Europe and had been trying to influence, rather than command, operating decisions at EC. Widget division managers made overtures to the EC president trying to bring her more in line with corporate decision making practices. The EC president and division president, based in Europe, had developed a close and collaborative working relationship -- one which they both described as based on mutual respect and support. In an effort to work in a collegial manner, European management never mandated its real desires, nor did it interfere, but some of the other European managers treated EC's decision not to move headquarters next to the factory with misgiving.
EC hired the relocation consultants proposed by Electro of North America to assess alternative possibilities. Their data showed that Des Moines was the preferable location for a variety of reasons.
EC had based its relocation decision on the rationale that Des Moines would have a better chance of attracting people with strategic and technical expertise than the rural town in which the Midwest factory was located. But the decision, and the reaction it triggered from some European division managers, increased tension in the relationship - management in the US and Europe had different perspectives about actions and strategies for EC and its role in the worldwide business.
| President: We needed to develop our
long
term strategy. As part of developing that
strategy it became obvious that we would not
be able to grow the business by keeping our
headquarters, which included R&D, in [the
South], while all of our manufacturing was
in [the Midwest]. As a result of a
year-and-a-half study involving external
relocation experts, we decided to move
nearer to the plant. | |
| Although the president had justifications for the move, people in Europe and the factory had their own perceptions about those justifications. | This issue of relocation is not going away. We hear criticisms: "Our engineers here don't know anything about manufacturing, and they can't learn because they're not at the factory. It's collocation. It's the cost. We could save money if only we didn't have [Des Moines]. We'd be successful." |
| Some on the division management team had reservations about the relocation, but the Division President accepted the decision. European experts supported the relocation choice on its technical merits. | Division Manager: The discussion about the relocation of headquarters was very much one between the business group boss and our American organization. There were surveys done by an outside consultant who researched alternative locations, which gave some objectivity and credibility to the choice. |
| If this approach is seen as "cooperation," what was its price? | Maybe [Electro in Europe] did not take as strong a position as it should have. Again, this was a price that was paid for the cooperation. |
Although the move to Des Moines remained controversial, the relocation did enable the company to attract managerial and technical expertise. The relocation was successful - predetermined cutbacks were made and corporate financial objectives were met.
The
Desired Factory
Adds Tension
By the late 1980's market conditions had improved. The construction of a fully
automated factory was planned and approved. But once more the relationship
between management in EC and Europe experienced pulls and tugs.
A new factory was crucial to the president's vision for EC. The factory would provide an opportunity to deploy new technology and to build larger, more profitable widgets. It would be located close to the Des Moines headquarters and enable EC to take advantage of technological advancements through the development of innovative managerial processes. These new management approaches would, in turn, serve as a model for the Midwest factory. In addition, a new factory would make EC less dependent upon the Midwest factory, its single supply source, and upon its major customer, Voxo, Inc., an independent, wholly-owned Electro subsidiary that integrated and assembled widgets into systems for the North American consumer market.
A new factory was also critical to EC's strategy for escaping from the "wine press" of its supply chain. This "wine press" resulted from the upstream market power of Voxo, EC's major customer, and the downstream supply power of its dominant supplier. EC was "squeezed" from two directions. Over 80 percent of EC's widgets were sold to Voxo for use in the systems it sold to consumers. Profit opportunities that stemmed from demand in the consumer market had shifted to systems based on larger widgets. In addition, a key component in EC's widgets, which EC bought from a single supplier and which made up the majority of EC's widget costs, was in short supply and high demand.
EC's Midwest factory could not produce the larger size widgets. The consumer market for the systems that used EC's widgets had become a highly competitive, commodity-type business with low profit margins. Voxo had to purchase its larger widgets from non-Electro suppliers - other widget suppliers whose corporate parents competed with Voxo in consumer markets. This limited and interdependent supply chain constrained EC's abilities to maneuver strategically and position itself in more profitable market segments.
|
Management Team Member: We started to
ramp
up for a new factory during that period. We
did fairly extensive benchmarking. We did
some work trying to look at how to build a
prototype organization that would have the
people, the technology, and the practices
developed in a way that was holistic.
| |
| Getting into the larger widget market strategically desirable for the vertically integrated business in systems. | Division President: The new plant was planned for the larger, "jumbo" widgets because the better margins were there. [Major companies] in the US have a position in that jumbo widgets market segment. Electro has a minor position in widgets and systems. For example, [Voxo Inc.] has a need for big widgets and that demand needs to be filled. But [Voxo Inc.] has been prevented from taking a major position because with such limited capacity the jumbo widgets are kept for in-house supply first. With limited supply, suppliers tell you which widgets you can have, if you can get big widgets at all. Basically, you have no way to maneuver. |
| A reorganization of work would be the foundation of the new operation. Both people and technical considerations weighed in for a "greenfield" site. | President: I wanted to give us an opportunity to build a future based on new technology. We could not change all the technology at the Midwest factory and continue running. When we started looking at that plant, we asked ourselves what should be done next. In order to justify the investment, we needed to do something about changing the way we work. We have to remove non-value-added activities from our work. This was the ideal opportunity to start something new. With a factory that used the latest technology and equipment, fully |
| The new factory was also seen as the embodiment of a vision that combined technology and human resources. | automated, with empowered human resources that linked processes, equipment, and product, we would be able to apply all the lessons we have learned about employee involvement and change, but that we have had difficulty in achieving. |
| Was it easier to envision a new factory than to find ways of dealing with old issues and problems? |
Things were looking very upbeat. We started
to build the factory in the summer of 1990,
and we were sure we were on the road to
success. Then things happened that we didn't
plan for. Electro in Europe ran into enormous financial problems and our project was stopped. For about a year we were hoping that things would change, but to no avail. |
Justifying a new factory, however, was a challenge: There was, at the time, an over-capacity of world-wide widget suppliers relative to consumer demand for systems. Electro companies had been able to source all the larger widgets they needed for the consumer markets, but if the supply and demand equilibrium changed, Voxo would be left without supply sources that Electro controlled directly. The widget business was an inherently cyclical business, one which vacillated between conditions of widget oversupply and shortages.
The capital needed for a new factory required Electro's corporate support and approval. When Electro's recently appointed CEO gave the initial approval to proceed, the EC president moved forward, purchasing land and breaking ground in the summer of 1990.
Toward the end of 1990, however, corporate leadership reconsidered Electro's overall financial position and its investment priorities. Other divisions proposed alternative investments, requiring a more careful examination of corporate spending. Many of Electro's investment decisions were revisited. Contending investment priorities won out over EC's factory -- in part because managers from divisions who needed funds for their projects convinced corporate management to use Electro's size to squeeze commodity widget suppliers rather than manufacture widgets itself. The factory's construction was halted. The ample supply of widgets relative to demand increased the investment risk in building a new factory. In August of 1991, EC's new widget factory was canceled and Electro wrote off its existing investment in it.
| EC thought it had turned a corner in its ability to be strategically important. |
Division President: A very important
event
had to do with the new plant that was being
planned. The new factory was projected, the
land bought, and the groundwork started. The
decision to go ahead, the final decision by
[the CEO of Electro] was made at the
beginning of July of 1990. |
| The factory was "off the list" of the European parent, but not "off the mind" of EC management. | The decision not to go ahead with the new plant had to do with financial uncertainty within [Electro]. Initially [the CEO of Electro] agreed with the project, but given the financial situation of the company the project was discontinued three months later. It was a tough decision, but a decision - so, end of discussion. It cost money, and we took the write-off. And it was off the list. Of course, it was a big frustration for EC. |
A shift in the product sourcing strategy for the widget division took place. The shift meant EC would have to operate less autonomously and instead integrate itself more closely with other Electro widget factories around the world. As decisions made in Europe altered the reporting structure between EC and Electro, tension increased the contending pulls on the relationship, reducing overall flexibility.
| Had EC's vision
exceeded the support Electro in
Europe was willing to give? What impact might this "harvesting" scenario have on an aspiration-driven, vision-based approach to organizational learning and improvement? In what ways could these differences have been resolved? | Management Team Member: If we were building a new plant it could all change. I don't think it's just a people issue. I don't think it's just a vision issue. I don't think it's just because of negotiations. It's the overall way that we are dealing with this business. And right now it really is a maintenance business and I would say that one could argue that Electro is wanting to harvest it -- take whatever profits EC can to support other growth areas. I don't mean close it down next year. But not to invest. That is not a pretty scenario. That's not a stimulating place to work. |
The president had viewed a new factory as a means to combine innovative social processes and new technology, and she proposed trying new approaches to managing in her own professional development. With a responsibility for leading the company into the `90s, and with the benefits she had already derived from consolidation and downsizing, she became attracted to developing the "human side" of business and improving leadership capabilities.
|
Senior leaders are brought in and given
positions of power to change cultures,
but behavior accepted in one culture is
not always appreciated in another. What is an appropriate balance between supporting the elements of an existing culture and changing the elements to create a new culture? |
Management Team Member: In preparing
for
the presidency, she wanted to get some
training. I offered her feedback, telling
her I thought she was very strong, but she
had a reputation for running up one side of
somebody and down the other even in the
middle of the hall. In an organization that
never had conflict, it was very visible. She
did things like walk out of staff meetings
if she was frustrated. I recommended a
leadership development program at the Center
for Creative Leadership (CCL), because I had
had success with other technical people
there. President: Three years after taking over the company, it was quite clear to me that we needed to get a strong infusion of capital, both physical and human. We needed to upgrade our equipment, our processes, our product and our people. I had come out of the Apex culture, which was a culture of the survival of a spider. A free for all. If you had the opportunity to grab something, you did it, because that's the only way you can make something happen. Ah, there was a lot of courage in the people from Apex. But I also had idealistic expectations for EC. My belief was that individual competence and strength of technology were the strong motivating factors that would make the organization move forward. I did not give much thought to what I call integrating the social technology into the process. I didn't have a good understanding of how to put people, machines and technology together in a whole process. |
The president hired a consultant affiliated with the Center for Creative Leadership (CCL), an institution renowned for its leadership development abilities. Over the years he provided her with personal coaching and EC with consulting advice as well as team-building workshops. As a result of these professional development efforts, the president became convinced of the value of a high-performance, participatory organization.
|
Consultant: My first involvement with
EC
was in 1986 through mid-1988, shortly after
she came into her presidency. [The
president] and [the VP of HR] came together,
with a lot of dedication to starting
cultural change--cultural change primarily
at [the president's] staff level. [The VP of
HR] called and said, "There's a new
president who wants to make a cultural
change. Previous senior management has been
autocratic, and the new president wants a
participatory climate. Can you help us?" Management Team Member: I have heard her say that two efforts -- the Center for Creative Leadership and the team-building we did with our external consultant--represented turning points for her because it sensitized her to the human side of things. They caused her, as an engineer, to use the same kind of engineering discipline - scientific methodology - to the people side of the business.
President: Any effective change
process
starts with "I." It is the most important
and most difficult and never-ending process.
In my own case I needed to accept that many
of the things that made me successful in
life are things I will have to re-evaluate
and change. As I looked back I knew what I
believed to be most important: competence;
knowing what to do; independence; strength
of conviction; and commitment to one's
goals. | |
| What does it mean when people say, or imply, that organizational transformation begins with personal transformation? | Being a technologist by training, I had a lot to learn about human behavior. Our biggest challenges come from our lack of understanding others, our lack of tolerance to and sensitivity to those whose needs are different from ours. Organizations can change only if individual members change, and that is why I say that every transformation starts with the individual. |
Over the course of these leadership programs, and through interactions with other executives, the president developed a long-term vision for EC. She wanted to improve processes and people and framed her primary challenge as "cultural change." She emphasized developing team capabilities, believing that long-term prosperity would require changes in the way work was done. Her vision included building "shop floor work teams" as well as a strong management team. However, championing non-technical, cultural change was a new realm for the president.
|
President: Bringing a number of people
from
Europe who had technical expertise,
experience, and management talent was the
first step; hiring competent individuals
away from competition the next. All of these
steps are what I call "traditional" or
"proven," and they usually work. But the
fact is that this "infusion" is only of a
temporary nature: To achieve long-term
prosperity, things need to be done
differently. Building a strong management team is a never-ending process. Most of us were trained to develop individual skills, but most of us had no training in how to make better teams. | |
| The task of developing teams was a significant challenge. What would be needed so that teamwork could unlock the potential of people in the organization? | It was equally important to accept the fact that traditionally as an organization we have not effectively used the ingenuity of all our people. We had to break with the tradition of "You are told what to do, and that's all you do" or "Check your brains at the gate." This sounds like a simple and clear thing to change, but it's fraught with many difficulties that come from past history, individual expectations, fears of being discovered for not knowing something, lack of trust -- you name it. |
In 1991, the president received a copy of The Fifth Discipline: The Art and Practice of the Learning Organization, by Peter Senge, the director of MIT's Center for Organizational Learning (commonly known as OLC). Intrigued by the concepts of systems thinking and organizational learning it presented, and looking for help in transforming her organization and her own leadership, she contacted the OLC to see if it could help her create a more open culture that would support people and improve processes.