Master thesis
Executive Program in Management Studies Strategy track
Make participation work!
Using a framework to make participation work in a strategy change process
Mariëlle Wijnen Peeters 0303550
March, 2018
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Statement of Originality
This document is written by Student, Mariëlle Wijnen Peeters, who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
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Table of content
Summary ... 6
Introduction ... 9
What is successful strategy generation – implementation? ... 10
Using participation positively influences the success rate of the process ... 11
The downside of participation ... 11
Gap in the literature ... 12
Research question ... 13
Literary overview ... 15
The definition of participation ... 15
Participation and strategy; a historical overview ... 16
Using participation is not a guaranteed success ... 18
Participation is not a vote for everyone ... 19
Upsides and downsides of using participation ... 20
Upsides of using participation ... 20
Downsides of using participation ... 22
Conclusion ... 23
How can participation work? ... 25
The strategy change needs to make sense ... 25
Three domains that can influence participation ... 26
Three elements that build the theoretical framework ... 27
Organizational design ... 27
Centralization vs decentralization ... 29
Dynamic vs stable environment ... 29
Bottom up vs top down communication ... 30
The (middle) manager has the authority to intervene vs edict... 30
Conclusions ... 31
Management style... 32
Type of leadership: transformational vs autocratic ... 32
Procedural justice vs self interest ... 33
Way of communicating: self – actualization or mystification ... 34
Conclusion ... 35
The method of participation ... 35
Which form will fit? ... 35
Forms of participation ... 36
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Conclusion ... 42
Interrelations: the role of middle managers? ... 43
The theoretical framework ... 43
The hypotheses ... 45
Research methods ... 47
A qualitative and interpretative research ... 47
Design science research ... 47
The 7 guidelines to get started with design science research ... 48
The three design science research cycles ... 49
Reliability, validity and generalizability ... 50
The interviews ... 53
Applying the overview on strategy programs of NS ... 53
Results ... 55
Overall result ... 55
Within case analysis ... 57
Conclusion within case analysis ... 71
Cross-case analysis ... 73
The degree of success of the change process ... 73
Organizational design ... 74
Conclusion ... 82
Management style ... 82
The success of participation in the strategy change process ... 89
Interrelations ... 91
Conclusion ... 93
Using the framework on a strategy change process of NS ... 95
The strategy change processes... 95
Organizational design of NS ... 96
Implementing the KPI structure in the logistics department ... 98
The degree of participation ... 99
Organizational design ... 100
Management style ... 100
Form of participation ... 102
Conclusion ... 102
Changing the team product development into a matrix organization ... 103
The degree of success ... 104
5 Organizational design ... 106 Management style ... 107 Form of participation ... 108 Conclusion ... 109 Advice ... 110
The strategy needs to make sense! ... 110
Create a transparent and fast decision making process! ... 111
Support the manager ... 111
Stakeholder analysis to choose the participation form ... 112
Customize every change process to make participation work! ... 112
Conclusion ... 113
Conclusion ... 115
Answer to the research question ... 115
Clear communication and procedural justice are important elements ... 116
Making participation work requires customization ... 116
The answer to the 4 sub research questions ... 116
Scientific relevance ... 118 Organizational relevance ... 119 Discussion ... 120 Further research ... 120 Literature ... 122 Appendix ... 130
1 List of definitions of the elements of the theoretical framework... 131
2. Questionnaire... 133
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Summary
Participation in a strategy process can have a positive effect on the success rate of the strategy change process according to the literature. The stakeholders can become more committed to the new strategy because of a better understanding of the new strategy. However, even when participation is used in the change process, this process does not always end in success. Participation in such a process does not lead to the result that was expected.
Does this mean that there are conditions under which participation can work and conditions under which participation does not work? In this thesis those conditions are researched. What are the elements that have an effect on participation, positive or negative? How can an organization make participation work in a strategy change process to eventually have a positive result in this process?
The elements that can have an influence on participation are researched and processed in a theoretical framework. That framework is analyzed and validated via interviews; 10 organizations that had a strategy change process were interviewed. The output of these interviews led to an altered framework; new elements that were frequently mentioned in the interviews were included. At the end of the thesis, the altered framework is used on the cases of the Nederlandse Spoorwegen.
The framework contains 18 elements that have an effect on the success rate of
participation in the strategy change process. These elements are divided in the domains of (1) organizational design, (2) management style and (3) form of participation. Positive and negative elements within these domains can have an influence on the effectiveness of
participation. The assumption is that when an organization (a) has a decentralized design, (b) works in a dynamic environment, (c) has bottom up interaction, (d) the manger can intervene, and (e) the decision making process is transparent and velocity, the organization design can positively affect the success of participation in a strategy change process.
In the domain of management style, the assumption is that if (f) the manager shows transformational leadership, (g) there is a form of procedural justice in the process, (h) the form of communication is self-actualization – dialogization – concretization and (i) there is communication about the strategy process itself, participation can work in a strategy change process to eventually lead to a success.
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There is also a negative variant of these elements within the framework, elements that can have a negative effect on the success rate of participation in the domain of organizational design and management style. Here the assumption is that when (a) an organization is
centralized, (b) works in a stable environment, (c) has top down interaction, (d) the manager only has to authority to edict and (e) the decision making process is foggy and slow, the organization design can negatively affect the success of participation.
In the domain of management style, the assumption is that if (f) the manager shows autocratic leadership, (g) the manager is self-interested, (h) the form of communication has elements of mystification, disciplining and technologization and (i) there is only
communication about the content of the daily work, there is a big chance that participation does not work in the strategy change process.
The outcome of the 10 interviews that led to the altered framework, confirmation that the 18 elements of the framework indeed have an effect on the usefulness of participation. The domain ‘management style’ contained the most mentioned elements that had an influence on making participation work in a strategy change process. The domain ‘organizational design’ is important to make participation work, but the way the managers handle participation is decisive in making participation work.
The advice for the Nederlandse Spoorwegen is based on two cases of a change process. Using the framework in analyzing how to make participation work within this organization, five advises are given: (1) the strategy needs to make sense – make an elevator pith of max 2 minutes, (3) create a transparent and fast decision making process, (3) support the manager guiding the change process (4) make a stakeholder analysis to choose the best fitted participation form and (5) customize every change process to make participation work.
The theoretical framework that is created, based on the literature and interviews, can be used by managers in organizations that are starting a strategy change process. If these managers want to make participation work in the strategy change, this framework can be useful to give an inside in the conditions under which participation can work in a change process. Especially because using participation in a strategy change process requires customization. The elements of the framework all have an effect on making participation work within an organization, but that for every organization and for every change process different elements are important in making strategy work. It is important for an organization when starting a strategy change process to analyze the organization and the management style
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of the manager responsible for the strategy process and realizing that this process requires special attention to end in success.
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Introduction
The Nederlandse Spoorwegen (NS) is the organization that drives trains on the Dutch railway tracks, commissioned by the Ministry of Infrastructure and Environment. In the ‘Hoofdrailnet Concessie’, an agreement between the NS and the Ministry, several performance indicators are determined. This makes NS an operational driven organization; every day the goal is to drive the trains on time and the trains need to have enough capacity for all the travelers. Since 2015 NS has a new agreement with the Ministry on the performance of NS, which led to more focus on the daily operation of driving trains. NS is a large organization with over 23.000 employees. Because of the operational focus and the new performance indicators, NS has become more centralized and hierarchical over the last years, so the focus can be kept on the daily operation and to perform well.
NS has gone through several strategy change programs in the last years. Some of these change programs were externally driven (because of changing agreements with the Ministry of Infrastructure and Environment or with ProRail) or internally driven (change of higher management or financially driven). The results of these strategy change programs have an impact in the entire organization. For instance a different business structure or a different form of output measured by KPI’s requires a different way of working for a large part of the organization. These strategy change programs often start with a strategy formulation phase, the ‘why’ of the organization and what needs to be the outcome. This is initiated by higher management.
In the years that I have worked for NS, I have seen and experienced several strategy changing programs. The motivation for this thesis is based on what I have observed in the two recent change programs. One of the two change programs was initiated because of the new concession. This meant a new way of working for the logistics department, in different teams and with another way of reporting The other program was initiated by the manager of the
Product Development team, because her span of control was too big and she wanted to change
the design of the team to be more in control. Both these change programs have been initiated by higher management.
What was interesting is that one program with little participation ended successfully, the other program with a high degree of participation, but did not end in success. How is it possible that in one case, the strategy change process ended in success and in one case, the strategy change process failed?
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In the literature a lot of research has been done on using participation in strategy generation and implementation processes and the effect of participation on the success rate of that process (Ackermann & Eden, 2011; Kaplan & Norton, 2008; Kotter, 1995; Kraaijenbrink, 2018; Mantere & Vaare, 2008; Mintzberg, 1978; Quick & Feldman, 2011; Sagie, 1997). This made me wonder; how can participation have a positive influence on the outcome of the strategy? Which elements can make participation work? What are the conditions under which participation can work in a strategy change process in order to have a positive effect on the success rate of the strategy generation – and implementation process?
What is successful strategy generation – implementation?
Creating a strategy means creating an ‘unique way of sustainable value creation’ for the organization (Kraaijenbrink, 2015). Creating and having a strategy is essential for a company (Neilson et al, 2008). An organization needs a strategy, a story that makes clear why the company exists, what the company is about and why it operates in the way that it operates.
Even though everyone knows the importance of having a strategy, the process of making this strategy and implementing the strategy in the organization is not always a success. Some say that making the strategy work is more difficult than coming up with the new strategy (Hrebiniak, 2006). Someone can think of the strategy, but actually working according to the strategy and letting the strategy be leading in the policy of the organization, is not easy. A well though through strategy does not mean the strategy will work in the everyday business and that this will lead to an ‘unique way of sustainable value creation’.
The failure rate of a strategy generation and implementation process that includes a strategy change is assumed to be high. The numbers differentiate from 7 to 90%. Failure is formulated by Candido and Santos (2013, p. 237) as ‘either a new strategy was formulated
but not implemented or it was implemented but with poor results’. Note that Candido and
Santos (2013) state that this failure rate is controversial and that the true success rate of implementation remains to be determined. But it can be stated that not all the strategy processes (either generation or implementation) end in success.
So, when is the strategy process a success? According to Miller (1997), a successful strategy implementation is: (1) completion of everything intended to be implemented within the expected time period; (2) achievement of the performance intended; and (3) acceptability of the method of implementation and outcomes within the organization. This definition is chosen because it contains something about the timeline (1), about the ambition level of the organization (2) and about the acceptability of the new strategy (3). Acceptability says
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something about the way that the process is organized within the organization and about the cooperation and / or participation of the involved stakeholders in this new strategy.
Using participation positively influences the success rate of the process
From the process of strategy generation – and implementation in a top down approach (meaning that the strategy change is initiated from higher management), research has shown that strategy generation and implementation has become a social process and that involving stakeholders can positively influence the outcome of the process (Mintzberg, 1978).
Others studies show that to lower the failure rate of a strategy generation and
implementation process, participation can help (Kotter, 1995; Kaplan & Norton, 2008; King et al, 1998; Lelieveldt 2004, Mack, 2017; Nutt, 1989; Piercy, 1991). And on how to use participation in a process, several design option are described to help managers in the process on how to effectively design the process of strategy change in order to lower the failure rate (Kotter, 1995; Kaplan & Norton, 2008; Kraaijenbrink, 2018, Micheli & Manzoni, 2010; Neely et al, 2001).
When using participation, stakeholders feel in control of the process, they have the feeling that they can contribute and that they are included. This feeling of ‘being included’ and ‘having an influence’ is one of the benefits of participation (Neilson et al, 2008). Also, employees feel a higher level of perceived control. This can lead to an increased feeling of satisfaction with the job, more commitment, involvement, performance and motivation (Spector, 1986).
Research shows that participation can work positively for job satisfaction and employee involvement and can help by making sense of the new strategy (Eden et al, 2011; Spector, 1986; Collier et al, 2004). Building on that thought, other studies have been more focused on how to successfully generate and implement a strategy by using participation as a work form. Research also has the theme on how to use participation in a strategy change process and what the conditions are that need to be met to use participation as a successful work form (Kotter, 1995; Kraaijenbrink, 2015; Kraaijenbrink, 2018; Neely et al, 2001; Bracht & Tsouros, 1990).
The downside of participation
Even though there are benefits to use participation, participation is not always used in the strategy generation – or implementation processes (Floyd and Wooldridge 2000).
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structure (Mack & Szulanski, 2016; Mantere & Vaare, 2008). This is because the organization is not used to work together with middle management or employees, because of this
hierarchical structure. Participation can be seen as a ‘waste of time’, including others in the process and perhaps even asking for their opinions can feel like a delay in the process (Mantere & Vaare, 2008). It can happen that managers are only assigned for the strategy making process and that they don’t have the responsibility of the process after the
implementation of the new strategy. So participation can delay their process, even though in the end it might lead to a better work environment.
It can be concluded that the downside of participation are surmountable; these are relatively small. The downsides are linked to the organization structure and the attitude of the (higher) management. The upsides of participation in a strategy change process are clear and proven by research to contribute to a successful strategy generation – and implementation process which leads to the conclusion that using participation would make sense in a strategy change process.
Gap in the literature
A lot of research has been done on the importance of participation in strategy generation and implementation processes. The researches all have interesting conclusions that contribute to the theory of the usefulness and the necessity of participation as a means to higher the success rate of strategy generation and implementation processes.
But, if someone wanted to use participation in order to higher the success rate, what needs to be done to make participation in such a process to a success? What determines the success rate and what kind of method of participation fits the organization best to end the strategy change process with success? Are there characteristics of the organization that need to be taken in account when using participation in the change process? Is there a certain management style that makes participation work more effectively?
In the current literature, there is no theoretical overview or framework yet that brings antecedent factors or characteristics of an organization together that have an effect on the success rate of participation and methods of participation. In this thesis, a framework will be generated from previous research and will bring fragmented parts of research together.
This framework will complement the existing literature, because it brings the factors and characteristics of participation together in a framework. Looking at the high failure rates of strategy generation - implementation processes (Candido & Santos, 2013), this framework
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will help organizations to use participation in a way that will fit their organization and make participation more usable in order to higher the success rate of the strategy change.
The framework will be validated by organizations that have dealt with strategy generation and implementation processes. This way it is possible to alter the framework with the experience of other companies in these processes and it won’t be just a theoretical
framework. The (perhaps adjusted) model will then be used on cases of strategy generation - and implementation at the Nederlandse Spoorwegen. Using this model will lead to an advise for the company on how to use participation in strategy generation and implementation processes, to get a higher success rate of that process.
Research question
As shown in previous mentioned research, participation in a strategy generation and
implementation process can have a positive effect on the success rate of the process. But not all methods of participation might lead to a successful process, this can depend on the circumstances as mentioned before. With the overview that will be presented, an advice can be giving to the NS organization on how to use participation in such a process. So, taking in account the literature, the gap in the literature and the casualty that is available for this research, the following research question is formulated:
Which elements of an organizational design and managerial style can make participation work, in order to have an positive effect on the success rate of a strategy generation – and implementation process?
The goal is to create a theoretical framework that is validated, and perhaps altered, via interviews. The (altered) framework is then used to advise the NS on how to make participation work in that organization in a strategy change process.
In order to answer this question, several sub questions have been formulated that will be answered in this thesis:
Q: Why does participation within strategy generation – implementation processes lead to a successful process?
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Q: What are the elements of an organizational design and the management style to make participation work, in order to contribute to the success rate of the strategy generation and strategy participation process?
Q: How are these elements used in several companies and what were the results? Q: What is the advice that can be given to the NS, regarding the different elements of participation?
This thesis starts with a literary overview, where the definition and up - and downsides of using participation in a strategy change process are discussed. Next is a section that
describes how participation can work in a strategy change process. In this section the elements with an effect on participation are explained. At the end of that section the framework is presented. After the explanation of the research method, the interviews are analyzed. This is done per interview and by a cross-case analysis. This is the section where the theoretical framework is altered. At the end of the thesis, the altered framework is used on the cases of NS.
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Literary overview
In this chapter of the thesis, it will become clear what the definition of participation is, which definition will be used, what the positive and negative outcomes are for including
participation in a strategy change program and what kind of methods of participation have a positive influence on the success rate of strategy processes.
The definition of participation
Participation is an ambiguous term; it is a term that is explained in many different ways. Dachler and Wilpert (1978) start by saying that participation is a multidimensional, social phenomenon. To create a multidimensional and dynamic view of participation in an
organization, they refer to social theories that underlie participation that represent (…)‘the
basis for the values and assumptions of the designers and implementers of participatory social arrangements in organizations as well as the goals and objectives in participation’ (p.
3). This means that participation can differ per organization, because it is a social construct. It is formed on what someone thinks participation means and – or entails. And it can also be used to serve different goals.
Because of the ambiguity and the social context of the term and the social context, it is important to work with one definition of participation. There are many definitions that
describe participation, such as the ‘...inclusive involvement of organizational actors in
decision making’ (Mack & Szulanski, 2016, p. 357). Sagie (1997) defines employee
participation as: ‘...a process in which influence is shared between superior and teams or sole
subordinates’ (Sagie, 1997, p. 388). These definitions show that participation has something
to do with including others (stakeholders; for instance employees) and that is about getting influence. These are elements of participation.
Quick and Feldman (2011) have a broader definition for participation, they define participation as: ‘the practice oriented towards increasing input for decisions and for
organizing highly participatory processes encompass inviting many people to participate, making the process broadly accessible to and representative of the public at large and collecting community input and using it to influence policy decisions’ (p. 274). This is the
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This definition says something about including stakeholders in the process and by this making that process broadly accessible for many people. It brings together the ‘involvement’ of the definition of Mack and Szulanski (2016) and the definition given by Sagie (1997).
The definition of Quick and Feldman also links to the definition of a successful
strategy process of Miller (1997). Miller describes a successful strategy implementation as (1) completion of everything intended to be implemented within the expected time period; (2) achievement of the performance intended; and (3) acceptability of the method of
implementation and outcomes within the organization. By using participation in the way described by Quick and Feldman can lead to a higher acceptability of the new strategy, because of the accessibility and the representativeness of the process, due to participation.
What is also interesting in the definition of participation is that it states that policy decisions can be influenced. Even though that this is not always the case (see next part), this is what can be seen as the core of the strategy participation; the decision can be altered so that the outcome of the process is actually representative for the organization.
Participation and strategy; a historical overview
The word ‘strategy’ is an old word. It originated from the Greek word ‘strategeos’ which means military leader or general. Strategy was then seen as ‘the art of the general’. Literally strategy means ‘to plan the destruction of the enemy by effective using means’ (Bracker, 1980). Further in time, the general Carl von Clausewitz described, in 1780 – 1831, strategy as the war plan and aligns different activities that will lead to the goal’
(https://www.marketingonline.nl/blog/strategisch-denken-deel-1).
Strategy was something from the generals to have a plan on the battle field. That top down approach is something that is also described in the early work of classical strategic literature. Strategy formulation is seen as one of the primary tasks of top management (Mintzberg, 1978; Mintzberg et al, 1998). The strategy of the organization was made by the highest management. Other stakeholders, like middle management and employees were only sometimes involved in the implementation process. Participation was treated as a non-issue, the processes of generation and strategy implementation were not seen as a social process yet. The people on the work floor needed to work. Strategy was something that needed to be done and could only be thought of by people who knew what the business was about and who were in the end responsible for the success of the organization. Mintzberg states in his research (1978) that participation was tried in several organization, but that the bureaucratic
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organization design took over when the process of strategy generation – implementation with a form of participation failed. In this research, the employees wanted a clear strategy and just wanted to work, instead of thinking with the management about the new strategy or how to implement the new strategy. The stakeholders were happy to have a clear strategy that they never had to question. Note that the organizations that were researched were operational organizations, Volkswagen (in the period 934-1974) and the US government in Vietnam (in the period of 1950-1973). So this was a different time, more focus on production and less on the employees.
In the period 1950 – 1980, more research has been done on the culture of the organizations and the effect that it has on participation (Tannenbaum & Massarik, 1950; Burke, 1968; Arnstein, 1969; Hesseling & Köonnen, 1969; Reynolds, 1969; Jackson, 1983). In this period, there were less operational organizations and more organizations that were not operational focused. These organizations were getting bigger and more businesses emerged. This shifted the focus of the studies in that period from operational oriented organizations to not operational oriented organizations (Arnstein, 1969). Participation is then seen as a method from management to get more output from the employees (Tannenbaum & Massarik, 1950). The authors stated that participation was something that was needed to improve the
commitment amongst the employees and because of that better understanding of the strategy the output of the employees will go up. Participation then was more output related than it is about the role of the employees.
From approximately 1980, the socialization of employees and the role of employees in the organization was a topic in social science. The socialization part of the strategy generation – and implementation processes started to appear in researches when the social process
became more important. For instance, job satisfaction became more important and the research showed that participation could lead to more job satisfaction (Fisher, 1989; Spector, 1986; Miller & Monge, 1986). It is about empowering the employees and middle managers to make them feel good about their work environment, their work and their jobs (Spreitzer et al, 1997). Kim (2002) concluded from the research that employees who believe that managers who use participative management style are more likely to express higher levels of
satisfactions with their jobs (Kim 2002, p. 232). Several researchers state that strategies formulated bottom up or generated in an emergent way, are not less important tor successful than planned or already formulated strategies. Strategies should not only be developed by top management, but also by other actors that play an important role (Mintzberg, 1994).
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Participation facilitated by (higher) management for employees makes strategy execution a social process between people. Making a strategy that makes sense and that making the strategy is a social process became the leading principle on this research topic (Mantere & Vaara, 2008, p. 342; Mintzberg, 1994).
Nowadays there are other forms of participation in organizations that are based on an iterative process between the organization and stakeholders to make the best possible product. Participation is no longer seen something that is done to get stakeholders to commit, but working together and letting stakeholders participate in the daily business is a way of working. For instance, co-creation, or working with in or with a lean start up. The change is not about working towards a set goal, but: ‘..(…) testing hypotheses, gathering early and
frequent customer feedback and showing minimal viable product to prospects’ (Blank, 2013,
p. 5 ). This is working without a set business model, and looking for the best form for the organization to work. This new way of working is about listening to costumers, investors or other stakeholders, and bringing the wishes from outside inside the organization to better the products that are made. With co-creation, the product is created together with the
stakeholders. Not just with investors, but also with customers. The idea is that the role of the customer has changed. The customer is no longer ignorant, but because of all the information and easy access to organizations via social media, the customer becomes more and more active (Prahalad & Ramaswamy, 2004). There needs to be added value for the customer, this is done in a process of letting the customer participate, the customer is no longer active at the point of exchange. Organizations need to be active and include the outside world in their business model to improve the development of the products (Prahalad & Ramaswamy, 2004). (2004).
Using participation is not a guaranteed success
Participation is a term that is ambiguous in a strategy change process, everyone gives participation a different meaning and uses participation in a different way. Participation is multidimensional and multiform concept (Cotton et al, 1988; King et al, 1998). Participation is used differently and does not always lead to a guaranteed success of the strategy change process.
According to Strikwerda (2017, p. 31), participation, as part of strategy generation or implementation process, focusses: ‘(...) on involvement, the role of individuals and teams,
19 values, culture, style of decision making, style of leadership’. He mentions that the
effectiveness of participation is limited for organizations that are not used to change or are used to working in a dynamic environment. Strikwerda compares participation in a strategy change process to a culture program in an organization, well intended but somewhat naïve in the context of modern developments. Participation needs to be seen in the strategic context and in the context of modern developments in technology, building online communities and fast changes, and industries.
Also, participation is not a goal in itself, but can be seen as a means to finish the strategy process successfully. Using participation needs to fit the organization, the
environment of the organization and with the strategic challenge. When the manager or the higher management uses participation as a trick, as an obligation in the execution process, employees will still behave as if participation is not a part of the strategy generation - implementation process (Kotter, 1995).
Cotton and co-authors (1998) claim that different forms of participation can have different effects on the success rate of a strategy generation – and implementation process. It depends on where in the organization participation is needed and what the subject is of the problem that needs participation. For instance, long term forms of participation appear to have more effect on the success, than short-term forms (Cotton et al, 1988; Schweiger & Leana, 1986). Long term forms of participation are forms that are embedded in the organizational structure, for instance participation in work decisions. This form of participation focusses on the work itself; on how it is organized and how it is done. When workers can have a say in how they need to do their work, participation can lead to a higher productivity and job satisfaction (Cotton et al, 1988, p. 12). So, also the form of participation needs to be chosen with care. If not; participation might not be a guaranteed success.
Participation is not a vote for everyone
For (higher) management it is important to notice and to realize that participation does not mean that by including it in a strategy change process, the decision making process in the change process and that the outcome is based on a form of democracy (Eden et al, 2011, p.14). Participation does not mean that all stakeholders have a vote in the way the strategy is shaped. Participation is about involvement, understanding and the feeling of a degree of influence of the stakeholders. But, sometimes the strategy simply needs to be executed, for example in order for the business to survive. Stakeholders and employees all have their own
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interests, but eventually (higher) management is responsible for the organization and the (financial) health of the organization.
Fisher and Ury (2012) describe in ‘Getting to yes’, how to communicate during a participation process in order to get result without giving in. The authors call this principled negotiation. Why not giving in? Because participation does not mean that the strategy change process is a democracy, it is more about getting people involved an committed. When the strategy is set, there is not much room for negotiating, only for getting commitment (Fisher & Ury, 2012, p.6).
Upsides and downsides of using participation
As written in the introduction, participation can be useful in a strategy generation - and implementation process to make the working of the new strategy to a success. But, when using participation, what are the benefits, the upsides, of using participation in such a process? And what are the downsides, what can be a negative effect of using participation?
Upsides of using participation
An interesting description of why participation is needed in a strategy generation – and implementation process is given by Eden, Ackermann and Page (2011). They state that when using participation in a strategy change process, it will make the strategy analytically sound, because of the multiple perspectives caused by the inclusion of multiple stakeholders. It is not just the (top) management layer that forms the strategy, also others. This can lead to more understanding and willingness to work with the new strategy. Participation can create divergence and avoids group thinking so that this strategy leads to more recognition among the involved parties.
When everyone is involved in the new strategy and is working together on a new strategy, early commitment towards the strategy can be a result. Employees feel heard, feel that they are taken seriously. This can lead to engagement, more cooperation in the strategy process and trust toward (higher) management and the new strategy from the involved stakeholders. By using participation, the success rate of finishing strategy change processes can be positively influenced (Eden et al, 2011).
Mantere and Vaare (2008) describe the same social benefits of using participation. They state that participation can positively influence the effect of the success of the implementation of strategic change through increased commitment by stakeholders. This commitment can be reached because stakeholders feel that they are heard and can have an
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influence on the process. One of the upsides of participation, in their research, is that
participation leads to collective sense making; the group of stakeholders needs to understand the new strategy and together. All employees and (higher) management together then can make sense of what is changing in the organization and why the new strategy is important for the company.
This collective sense making is also confirmed by the research of Hutter (Hutter et al, 2011). They see that collective sense making in a strategy change process builds towards group cohesion and more commitment of that group towards the new strategy. When participation is included in the process, stakeholders are more satisfied with the process in general which will lead to more commitment. Also, the involved stakeholders show more commitment on the issues on which they were allowed to participate. Even is this issue is a negative issue. For instance a large layoff of employees as a result of the new strategy. When there is understanding, employees feel that they have been taking seriously and that (higher) management did everything in their power to avoid the layoffs, stakeholders have a more positive take on the situation.
Collier, Fishwick and Floyd (2004, p. 68) give a graphic overview of the effects of participation. This figure (figure 1) shows that participation has many positive effects on the involved stakeholders in this process. Stakeholders, as mentioned before, feel heard, have a better understanding of the new strategic vision and they can show more commitment towards this process. Eventually this can lead to a more efficient implementation process.
Participation can lead to a higher acceptance of the new strategy, it creates a greater understanding and commitment toward the new strategic vision. For employees and / or stakeholders this means an increased rationality and more adaptive strategy development (Collier et al, 2004). It is about focusing on the formation of the strategy. The employees and stakeholders need to make sense of the context of the new strategy (Eden et al, 2011). This links back to the feeling of perceived control, as mentioned by Spector (1986).
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Figure 1. Effects of involvement, described in the literature (Eden, Ackermann & Page, 2011).
Downsides of using participation
The upsides of using participation seems clear and obvious. But, participation can also have negative consequences in a strategy generation – and implementation process. The literature shows that using participation has more positive elements than when participation is not used. It also mainly shows the upsides of using participation. But, some authors are critical when it comes to participation, or using participation.
Strikwerda (2017) mentions that using participation can be naïve in the context of modern developments. He claims that there are new ways of strategy execution and using
participation, for instance co-creation. When this way of thinking in strategy execution is not linked to the changing world, for instance in resource allocation, outsourcing or co-creation, participation is well intended but naïve (p. 31-32). He describes the ‘participative school’, that focuses on involvement, the role of teams, style of decision making and leadership.
Innes and Booher (2007) mention that when participation is not used correctly, it can become counterproductive, resulting in anger and mistrust by the stakeholders. This counter productiveness of participation is caused by ambivalence of participation; you want solve the problem together and use participation because it is so effective in getting results. But not every issue is suitable for participation. For instance, budgeting. By being over committed to participation and by letting everyone participate in all the facets of the problem, mistrust can
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be the result. Some aspects are not suited for participation, so don’t try to use participation in these aspects.
As shown in figure 1, not using participation can lead to (1) cultural inertia, (2) increased politics and (3) more constrained strategy (Eden et al., 2011). This model can be seen as a summary of several studies about the use of participation. It shows that not using participation can have negative effects on the organization and the quality of the new strategy. Knowing that participation means that stakeholders are involved, by not using participation stakeholders are not involved. The new strategy is thought of by a limited group of people, thinking in their own way. This way of thinking can be great, but can also lead to cultural inertia and a more constrained strategy. The chance of ‘thinking outside the box’, to create a strong and sustainable strategy, is smaller when participation is not used.
When participation is not used as a method to improve the quality of the strategy during the strategy change process and to increase commitment, stakeholder are less involved. The new strategy can be a black box, the ‘why’ of the renewal is unclear. Stakeholders don’t understand the new strategy. According to Eden, Ackermann and Page (2011) if people are not included, they don’t say what is on their mind, because they have the feeling that they are not heard. They show behavior that is politically correct, mostly agreeing with (higher) management.
Mantere and Vaare (2008) also describe that not including a form of participation can lead to a lack of engagement of the stakeholders. This lack of engagement often leads to a decrease in quality of strategic planning and can create problems for the implementation of strategic plans. It can create problems for the timing – making the deadlines, quality of the new strategy, continuity – does the strategy still make sense and commitment of the stakeholders towards the new strategy, working with that new strategy.
Conclusion
To sum up, when participation is used as a means, not as a goal itself, it can have many positive effects on the strategy generation – and implementation process; involving
stakeholders leads to more understanding of the why of the new strategy. The strategy makes more sense because people know the story of the new strategy and know why this renewal is needed. Stakeholders feel heard and can show more commitment towards new strategy.
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Including participation in a strategy change process, when used in the right way, can have a positive effect on the success rate of the strategy change process.
The downsides of participation tend to show when participation is not used in the right way. For instance when it is used as a goal, not as a means. Or when participation is used for a problem that is difficult to solve with participation because of the decision making authority and the circumstances of the problem.
An overview of the upsides and the downsides of participation is given in table 1. Table 1 shows that when using participation, the chance of successfully implementing a new strategy is bigger because of the effect participation has on the stakeholders. In the end, the strategy will work when the stakeholders are all committed to let the strategy work.
Participation can help with that. But under what circumstances can participation lead to a (more) successful strategy process?
Using participation leads to…: Not using participation, or not using it right:
A greater feeling of being included by the stakeholders Lack of engagement and commitment of the stakeholders, not feeling included in the process
Higher level and scope of involvement in strategy – making
Participation can become counterproductive, resulting in anger and mistrust by stakeholders
Greater understanding and commitment towards the new strategic vision
Increased politics in the organization and among the stakeholders
Increased rationality of the stakeholders towards the new strategy
When participation is not used; more constrained strategy making
More adaptive strategy development Participation can lead to cultural inertia Collective sense making of the stakeholders
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How can participation work?
Knowing that participation can have a positive influence on the effectiveness of the strategy generation - and the implementation process and, with that, a positive influence on the success rate of the change plans, it seems obvious that participation should (perhaps always) be a part of a strategy change process. But now it is also clear that using participation is not always a guaranteed success. So, what makes participation work?
In this chapter, the elements of the effectiveness of participation are described. The elements are part of several bigger domains aspects; the organizational design, the
management style and the participation form. The elements that can be of influence are put together in a theoretical framework at the end of this chapter.
The strategy change needs to make sense
An effective participation process starts with analyzing the context and identifying the purposes of the participation effort. What is needed and what fits the organization? The
process needs to be designed in an iteratively way. During this process there can be a redesign of the process (Bryson et al, 2013). If the strategy process is not a success during this iterative process, the chosen form of participation can have a negative effect on the success rate
because it does not contribute to the commitment and understanding the new strategy for the stakeholders. When the change manager thinks about the work form carefully and really wants to use this form to bring the new strategy to the next level, the work form of participation can pay off.
Strikwerda (2003) describes that a strategy change needs to be initiated from the perspective of humanity, from society. He sees a strategy change as an alteration of the production functions of the organization and the changing circumstances of that organization. The change is needed so the organization can continue to exist (Strikwerda, 2003, p. 10). A strategy change needs to be useful and needs to contribute to the further existence of the organization. An organizational change with another purpose should not be initiated, for instance because there is a new board that wants to change the organization on his or her behalf. His advice to the board of directors is to monitor the changes and to question whether or not the change is needed for the business to survive.
So, if the organizations want a new strategy it needs to make sense that the change is needed. This entails that if the stakeholders don’t understand why the change is needed for the
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organization to continue, there might be less commitment for this new strategy and participation can have less of an effect on the success rate of the strategy change.
Three domains that can influence participation
The literature is fragmented when it comes to naming or recognizing elements that are effective for the success of participation. Participation is described and researched from different points of view, it is described from different steps in the change process and with different types of organizations. Some of the participation literature describes the role of the manager, some describe the organization design and the influence of participation on the success rate. Others mention and describe the method of participation that can be used to make participation workable within a process of strategy generation and implementation.
Analyzing the literature, overall there are three domains that are described that can have an influence on the effectiveness of participation; (1) the organization design, (2) behavior of management (higher and middle) and (3) the method of participation, the work form. These three domains are the domains that are the most described when it comes to making participation work.
To incorporate participation in a strategy process, the form of participation needs to fit the organizational design (Mack & Szulanski, 2016; Innes & Booher, 2007). For instance; if the organization is hierarchical and management does not include employees, employees are not used to have a say in strategy generation – and implementation processes. Then
participation might not be as effective as hoped. There needs to be a choice of the form of participation that fits the organizational design. So that is the first step; for a successful strategy change process, the organization design is leading in choosing whether participation can be used and who it can be used.
The second domain is the management style of higher and middle management, the behavior of the management that is responsible for the result of the strategy change process. If management uses participation in the change process, it needs to be plausible and genuine. It needs to match the normal behavior of the management, so that for the stakeholders (often employees) the participation that is asked does not feel like a trick. If participation is
incorporate in the change process, it needs to be taken seriously by management. This has to do with ‘procedural justice’; if people are treated in the best and most honest way by using participation, they feel that they are taken serious and this will eventually lead to more commitment and trust in the new strategy (Mintzberg, 1978; Lee et al, 2017). If the
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management never shares anything and works with a top down approach, asking the
employees to think along with a strategy change process does not make sense in the mind of employees. The behavior needs to match with the form of participation so management is still credible and genuine (Kotter, 1995).
The third domain is the form of participation. Which form of participation will be used so that the stakeholders can actually participate? And which form can be most effective under which circumstances? For instance, the chosen form needs to fit the goal of participation; through the whole process or only for a small(er) part of the process in order to be as effective as possible. There are several forms of participation that can be used. These will be discussed later. What is important to realize is that the form of participation does not matter for the success rate if the organization is not ready to use participation or if management is not committed to using participation. So it is important to look at the organizational design and to look at the type of managers.
Three elements that build the theoretical framework
The three elements that are relevant for the effectiveness of participation in order to have a positive effect on the success rate of the strategy generation – and implementation process have, in itself, different elements. Some of these elements are already described above. The elements or characteristics show that the elements have different aspects that can have an impact on the effectiveness of participation in a strategy change process.
The three domains and the elements (organizational design, management style and participation forms), will be explained in the next section. It will become clear how these three domains with the elements, can lead to a more effective use of participation. These elements will form the theoretical framework that will be tested on the effectiveness via interviews and eventually used on change cases of NS.
Organizational design
In several studies, organizational design is marked as a condition that determines which forms of participation are the best option to use in a strategy generation and strategy implementation process (Strikwerda, 2017; Mack & Szulanski, 2016; Innes & Booher, 2007). Characteristics of the organizational design make participation more or less efficient to use in a strategy generation process. Mantere and Vaara (2008) describe that the form of participation can be linked to the organizational design (p 342), because of the increasing importance of
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participation in strategy in order to make participation into a success. The organizational design has an influence on participation and therefor an effect on the success rate of the strategy change process.
There are 4 elements of the organizational design that have a proven effect on the success rate of participation, on making participation work in a strategy change process:
(1) centralization vs decentralization (Mack & Szulanski, 2016; Ghoshal & Nohria, 1989; Andrews, 1971; Mintzberg, 1978)
(2) dynamic vs stable environment (Strikwerda, 2017; Weick & Quinn, 1999; Floyd & Lane, 2000)
(3) bottom up vs top down communication (Jentoft, et al, 1998; Westley, 1990, Kotter, 1995; Hall, 1972)
(4) the (middle) manager has the authority to intervene or to edict (Mack & Szulanski, 2016; Wooldridge and Floyd, 1990, Nutt, 1987, Nutt 1989; Huy, 2001; Mantere & Vaare, 2008).
These elements are found in previous research within the locus of ‘participation in a strategy change process’ and ‘organizational design’. The chosen elements are specific elements that have an effect on the success of participation in a strategy change process when looking at organizational design. These elements were found in several articles that were most cited. Of course there are many more elements within the organization domain that can have an effect on the success of participation. By choosing these elements, most of the prominent research is present and the locus stays compact.
The elements say something about the management design and the impact that it has on the responsibility within the role (or job) of the employees, about the environment of the organization and the possible impact of that environment on the organization. It also says something about the form of communication and the way the organization wants to see (middle) management act (with what authority?). Combining these elements gives an overall picture of the culture of the organization, whether or not the organization uses participation in the daily business and how the organization uses the input of the employees on the
organizations’ strategy and the change of that strategy. These elements are defined in appendix 1.
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Centralization vs decentralization
In less centralized the organization authority of decision making is delegated to the middle management or frontline employees (Mack & Szulanski, 2016). The decisions are made lower in the organization which makes participation more attractive to use in a strategy change process and also more effective. In a more centralized firms top managers have an influential role in directing strategy of the organization. The decisions are made higher in the organization, far from the work floor where the stakeholders are that also work with the strategy. This does not always lead to transparency towards stakeholders in a strategy change process. These authors work with several propositions, these are shown in figure 2 .
Figure 2: Propositions by Mack & Szulanski, 2016, p. 386.
So in a more centralized firm, attention needs to be paid to the form of participation in order to make it effective for the process, and the stakeholders. Even more with the remark of Mintzberg (1978) who states that in centralized organization, participation can backfire. Especially when the strategy process fails or tends to fail. Stakeholders tend to be more happy when bureaucracy takes over in a failing process. Then there is a clear strategy that does not need to be questioned.
Dynamic vs stable environment
According to Strikwerda (2017), technological developments, the upcoming influence of (social) media, changing markets, customers that take more influence, the organization is in a constant state of conceptualizing the strategy and the resource allocation process. Strikwerda states: ‘…(…)…alignment in the modern economy and with dynamic capabilities is not a
state, but a continuous process of realigning’ (p. 11). An organization needs to be aware of all
the forces internally and externally and that these forces make the organization and the environment of the organization dynamic. In such a dynamic organization, change is
constantly happening (Weick & Quinn, 1999). So, it can be assumed that an organization in a dynamic environment is used to organizational change.
The environment of the organization has an influence on the effectiveness of participation. Floyd and Lane (2000) state that a stable environment leads to a more hierarchical
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administrative structure This structure is characterized with a top down approach. Here, participation needs to be used with care, because participation in itself is not part of a top down organizational structure. The authors describe that the organizations that operate in a stable environment are less likely to use participation and when it is used, it is not used in a way that fits the organization which leads to a less successful strategy change process. In a dynamic environment, organizations are designed to be more flexible in order to adapt to the constant change in the environment. This often encourages middle management and personnel involvement in the daily business (Floyd & Lane, 2000). And when there is a strategy change process, participation is more likely to occur and the use of participation will eventually lead to a more successful strategy implementation process.
Bottom up vs top down communication
Looking at the organizational design, the way that the communication is set up also has an influence on the form of participation and the effectiveness of participation. It is about the social interaction between top managers and other organizational members (Westley, 1990). If the higher management decides everything herself and the communication is designed in a top down way, participation is more difficult to incorporate in a strategy generation – and
implementation process. Participation can become less effective, it might feel like a goal instead of a means, resulting in a less successful process of strategy generation – and implementation. When there is more communication between several management layers (bottom up), participation can be more effective (Kotter, 1995). Because stakeholders
(employees) know that they are heard and feel included, participation can be used effectively as a goal to create a better strategy generation – of implementation process (Mack &
Szulanski, 2017).
Hall (1971) states that to get stakeholders to commit to the new strategy, the
communication structure also needs to be bottom up. Stakeholders need to feel that they are heard by higher management. When communication in the daily business is bottom up, higher management is more used to listening and stakeholders are used to speaking up.
The (middle) manager has the authority to intervene vs edict
In order to let participation thrive in a strategy change process, the role of the manager that is in charge of this process needs to have a certain mandate to do his or her work (Huy, 2001; Mantere & Vaare, 2008). Wooldridge and Floyd (1990) say in their research that the
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(middle) manager needs to be included in strategy processes and need to have a mandate to alter the content of the strategy change process. And that will eventually lead to a better organizational performance. If the manager has the mandate to change or alter the strategy, something can be done with the output of the participation. If the manager only can work within the boundaries of the new strategy, there is not much that can be done with the output of the new strategy. This can lead to a failed strategy process, that includes participation. Why use participation, if the strategy cannot be altered with the input of the stakeholders?
There are three mandates, described by Nutt (1987; 1989), called the ‘strategy implementation tactics’. These three tactics have a certain influence on the effectiveness of participation; (1) the manager can intervene, (2) the manager needs to persuade and (3) the manager can edict;
• Intervention: the manager gets delegated authority to make changes required by a strategy. This leads to the actions that the manager creates a need for change and works together with his team to implement the new strategy. According to Nutt, this form has the highest success rate on the successfulness of the strategy process, because of the high involvement of participation;
• Persuasion: higher management delegates the development of the new strategy and ideas, that are consistent with prior strategic directions, to an external technical staff or consultants. This is a successful way of getting result, but have low participation. So in the end, there is less commitment of the employees who need to work with the
strategy;
• Edict: this is a form that is derived from the use of power. Higher management is issued to make a strategy generation – and implementation plan, without involvement of the staff. Because management has more power based on information, expertise and charisma, they push the plans through. This is the least successful method, because of the lack of participation and therefor the lack of commitment for the new strategy.
Conclusions
The way the organization is designed has an effect on the effectiveness of participation, in the daily business and in a strategy change process. For instance, if the organization is organized with a top down communication structure, with a manager with the mandate to edict, there is a smaller change that participation will lead to a successful strategy change process. The organization needs to be fit to use participation. If the organization is fit to use participation, stakeholders can feel that participation is not a goal but a means to make
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the strategy change process into a success. The elements that belong to the domain of organizational design that can have an influence on the effectiveness of participation are shown in figure 3. These elements will, at the end of this chapter, become part of the complete framework of elements that have an effect on the effectiveness of participation.
Figure 3: Elements of organizational design that have an effect on the effectiveness of participation
Management style
Research has shown that behavior of the manager or higher management can be of influence on the way participation is experienced. The manager can influence the success rate with his or her behavior within the process (Nutt, 1987; Nutt, 1989; Kavanagh et al, 2006; Kotter, 1995). Reading the articles, the behavior of the manager can be divided in three
subcategories; (1) type of leadership: transformational vs autocratic, (2) type of behavior: Procedural justice vs self-interest and (3) Way of communicating: self – actualization or mystification.
Type of leadership: transformational vs autocratic
This category explains the type of leader that is needed when using participation so that this can have a positive effect on the success rate of the strategy change program. There are many forms of leadership and every form of leadership can have an effect on the success rate of the strategy change process; laissez- faire leader (no direct supervision), autocratic (top down and makes decisions alone), transactional and transformational (Kavanagh et al, 2006). The form of leadership that can be effective in a strategy change process is transformational leadership (Sagie, 1997; Ling et al, 2008; Riggio, 2009; Piercy, 1991). Transformational leadership is defined as a ‘style of leadership where the leader collaborates with employees to
identify the needed change, creating a vision to guide the change through inspiration and executing the change with committed members of the group´ (Ling et al, 2008). In this
definition, collaboration means participation, so transformational leadership means that participation is already top of mind for a transformational leader. The manager, the leader, needs to have this leadership quality. It is something that cannot be learned, but something
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that is unique in the being of the leader. Transformational leaders are leaders that are able to inspire followers because of their personality to change expectations and motivate others to work towards common goals, it is about working together (Riggio, 2009).
Piercy (1991) argues that transformational leadership is the type of leadership that is most effective in a strategy change process, because of the participation aspect. This type of
leadership can be effective in strategy change processes, because of the leader and the way that he or she involved stakeholders in the process, the collaboration that Ling (2008) mentions. According to Sagie (1997), transformational leadership is needed in the strategy generation and the strategy implementation process to let the process succeed. This type of leader looks at the future and can inspire to accomplish goals. Types of leadership that can also be seen with managers are transactional leadership. This is based on maintaining the status quo and uses rewards and punishment to inspire the stakeholders (Judge & Piccolo, 2004). This tends to be a type of leadership that does not always have a positive effect on the success rate of the strategy generation – and implementation process.
Other types of leadership can be present in the organization, but don’t have participation as an important or dominant aspect of the type of leadership. These other forms of leadership that are not focused on participation and inspiration by collaboration, might not have a
positive effect on the success rate of the process of strategy generation – and implementation.
Procedural justice vs self interest
The manager can be characterized as a type of leader (see type of leadership), but there is also certain behavior that the manager needs to show within that leadership style. Behavior of self – interest or procedural justice can lead to participation and will have an influence on the success rate of the strategy change process. In the literature these two factors can be of influence in strategy change management, that can lead to a higher commitment because the manager shows this behavior and therefor there is bigger change on a higher success rate.
The manager needs to behave in a way that involved employees are treated in the best possible way. This is called ‘procedural justice’. If the manager behaves in this way, for instance by listening, being honest, telling the truth and asking for feedback, there will be more commitment and trust in the strategy change process. This will have a positive influence on the success rate. Stakeholders feel that they are taking seriously and that the new strategy is what is needed for the organization (Mintzberg, 1978; Lee et al, 2017). Even is the new strategy is negative for stakeholders, they can still see this is a positive thing. Because of the involvement during the process. Also, the manager needs to behave or needs to be
