Managing Organizational
Change
A multiple case study research on
variables influencing organizational
Managing Organizational Change
A multiple case study research on variables
influencing organizational change
November 20, 2006 Ruth Vos S1508180
Supervisor: Drs. C.I. Quispel Co-supervisor: Prof.Dr.Ir. R. Goodijk
University of Groningen
Faculty of Organization and Management International Business and Management
Tell me and I’ll forget
Show me and I’ll remember
Involve me and I’ll understand
PREFACE
In front of you lies the result of the research I conducted from March until August 2006. Herewith, I finish my study International Business and Management at the University of Groningen.
This thesis describes organizational change and its management, its main influencing variables and real life stories of four European organizations. The case study findings are provided in a clear overview and provide theoretical and managerial implications on change management in general. Thereby, it tries to fill the gaps that exist nowadays in the body of knowledge on change management.
I would like to emphasize the pleasure that I had when executing the research. It has been a tremendous learning experience for me. Especially, conducting the interviews was valuable to me. Several people helped me in one way or another during this period. Without them, it could not have come to this success. Therefore, I would like to place special thanks to these people.
First of all, I would like to thank my supervisors Caroline Quispel and Rienk Goodijk for their supervision. Their feedback has been critical for writing my thesis.
Also, I would like to thank all people that I have interviewed for the research. To all of them, thank you very much. Especially, I would like to thank Marcel Metze for providing me with many contact details and detailed information.
Furthermore, I would like to thank my brother and his business partner, Tijmen Vos and Rishi Lodhia, for enabling me to work at their office in Amsterdam. It was an enjoyable time!
Last, I would like to thank my family for having faith in me and providing me with feedback. Especially, I would to thank my boyfriend, Jorg van de Kamp, who always stood me by and provided me with excellent feedback. Thank you very much!
Ruth Vos
MANAGEMENT SUMMARY
In this research, variables have been identified that influence organizational change management. Three components are pivotal in this research. These are the organization, process and leadership. The first component, organization, is regarded as the coordinating component. Within this level, two components are researched more thoroughly; process and leadership. These components are chosen because they are believed to have a great influence on organizational change (By, 2005). Organizational change can be processed in several ways. Whereas Lewin (1951) draws attention with a planned model of change; current models regard organizational change as a more emergent phenomenon though. Also, contingency models are common. This model emphasizes that no change is similar and that one should approach change in a situation dependent manner.
Leadership also influences organizational change. A leader’s role can be fulfilled via several approaches. The literature distinguishes “managerial” leaders who focus on the transactional side of change from “transformational” leaders who are able to combine this transactional side with the emotional side of change. Also, consultants and the works council are considered in this research as they both play an important directing role, albeit indirectly.
These variables resulted in a conceptual framework. Based on this framework, a case study research has been executed. In the case study research, change programs of four European multinationals have been analyzed. These are Philips, Siemens, Britisch Petroleum and Shell. The case study findings support the literature on change management in several ways. As the literature suggests, internal drivers cause problems within organizations. These problems tend to maintain until external drivers pressure the organization to change. For both Siemens and Philips, these external drivers have been shareholders. For BP and Shell, these drivers have been stakeholder forces. The last few years, Siemens and BP focused on organizational learning by stimulating continuous change. This resulted in less radical change efforts. The cases of Philips, Shell and BP (before 1995) illustrate episodic change efforts.
“bold strokes” (radical) change models based on the case study findings. This is because these models are implicitly related to radical change characterized by high urgency. Consequently, this raises higher resistance than incremental, smaller scaled change efforts.
External consultants were attracted when urgency was high. Also, the question arose whether a connection exists between the Rhineland culture and not attracting external consultants. Furthermore, the cases that attracted external consultants showed higher resistance. This is related with change being more urgent and radical. Resistance is therefore expected to be higher.
In general, this research supported the literature on organizational change by providing empirical evidence from four European multinational organizations. The strength of this case study research is that it enabled to detect interrelationships among the cases. This field of combined variables which resulted from the case studies enables one to create a complete picture on organizational change and its management. In practice, this can be done to combine relevant variables into one framework which results in a contingent framework. Important variables are culture, types of change, leadership, role of consultants or the extent of urgency.
Although the distinction between success or failure cannot be made in an instance, it seems that organizations that take into account stakeholder management go through smoother change processes. Also, it seemed that organizations that were able to anticipate on the emotional side of change proved to be more effective. It arouses less resistance of the parties involved, creates more commitment and therefore can proceed at a much faster pace. Excluding key stakeholders might result in resistance slowing down the change process. Thus, stakeholder management takes an important position in organizational change. Based on these findings, it shows that the hybridization theory offers good perspectives where the best of both systems is combined.
This research showed that communication is the key factor in change. With effective communication, a sense of urgency can be created, stakeholders are aligned and commitment is created. Consequently, change can be processed smoothly and the chance for successful change is enhanced. It can help the management to develop a contingent framework designed for a specific situation. Also, management should also anticipate on the type or phase of change as different phases or types (e.g. restructuring or revitalization) call for different approaches.
TABLE OF CONTENTS
PREFACE ... 4
MANAGEMENT SUMMARY ... 5
PART ONE
CHAPTER 1ORGANIZATIONAL CHANGE: THE CONSTANT FACTOR.... 10
1.1 Introduction to Change Management ... 10
1.2 Relevance of the research... 12
CHAPTER 2 PROBLEM STATEMENT... 13
2.1 Research objective ... 13
2.2 Research Question... 13
2.3 Sub Questions... 13
2.4 Conceptual Model ... 14
2.5 Research Methods and Techniques ... 15
2.6 Phases of the Research ... 17
2.7 Thesis Outline ... 18
2.8 Timeline ... 18
PART TWO
CHAPTER 3 OUTCOMES OF THE LITERATURE STUDY... 19
3.1 The Organization... 19
3.1.1 Drivers for Change ...19
3.1.2 Change and Resistance ...23
3.1.3 Change and its Rate of Occurrence...24
3.1.4 Types of Change ...25
3.1.5 Change and Culture ...26
3.2 Process of Change ... 27
3.2.1 Planned Change ...27
3.2.2 Emergent Change ...28
3.2.3 Contingency Model ...28
3.3 Change Leadership... 30
3.3.1 Role of Leadership...31
3.3.2 Leadership Style ...31
3.3.3 Leadership Approach...32
3.3.4. Other parties influencing leadership ...34
3.4 Conceptual Framework ... 35
PART THREE
CHAPTER 4 PHILIPS ... 37
4.1 Description of the Case ... 37
4.1.1 Organization ...37 4.1.2 Process ...37 4.1.3 Leadership ...39 4.2 Interpretation ... 39 4.2.1 Organization ...39 4.2.2 Process ...42 4.2.3 Leadership ...43 4.3 Conclusion ... 46
CHAPTER 5 SIEMENS ... 47
5.1 Description of the Case ... 47
5.1.1 Organization ...47 5.1.2 Process ...47 5.1.3 Leadership ...48 5.2 Interpretation ... 48 5.2.1 Organization ...48 5.2.2 Process ...51 5.2.3 Leadership ...52 5.3 Conclusion ... 54
CHAPTER 6 BRITISH PETROLEUM... 56
6.1 Description of the Case ... 56
6.1.1 Organization ...56
6.1.2 Process ...56
6.1.3 Leadership ...57
6.2 Interpretation ... 57
6.2.2 Process ...60
6.2.3 Leadership ...62
6.3 Conclusion ... 64
CHAPTER 7 ROYAL DUTCH SHELL... 66
7.1 Description of the Case ... 66
7.1.1 Organization ...66 7.1.2 Process ...66 7.1.3 Leadership ...67 7.2 Interpretation ... 67 7.2.1 Organization ...67 7.2.2 Process ...70 7.2.3 Leadership ...71 7.3 Conclusion ... 72
PART FOUR
CHAPTER 8 ANALYSIS... 74
8.1 Organization... 75 8.2 Process ... 78 8.3 Leadership ... 79 8.4 Conclusion ... 80CHAPTER 9 CONCLUSION AND RECOMMENDATIONS ... 83
9.1 Conclusion ... 83
9.2 Recommendations ... 88
REFERENCES... 89
APPENDIX 1 VALUE SYSTEMS ... 97
APPENDIX 2 EIGHT STEP MODEL... 98
APPENDIX 3 SOURCES OF RESISTANCE... 99
APPENDIX 4 CHARACTERISTICS OPERATION CENTURION ... 100
PART ONE
Part one is an introduction to the research. The first chapter introduces the topic organizational change, its development and the relevance of the research. The second chapter gives an impression about the context of the research. It introduces the problem indication and the main research question. Further methodological research aspects are also provided in this chapter. Note, throughout this thesis, the notation ‘he’ can also be understood as ‘she’.
CHAPTER 1 ORGANIZATIONAL CHANGE: THE CONSTANT FACTOR
The first chapter poses an introduction to organizational change and its management. Prior research is discussed as well as the relevance for this research.
1.1 Introduction to Change Management
Organizational change has become a crucial element in organizations the last few decades. More specifically, successful management of change is crucial to the organization in order to survive in the highly competitive and continuously evolving business environment. Change has become the constant factor within organizations where it flows through the organizations (By, 2005). Due to its increasing importance, management of change becomes more important.
The foundations of organizational change can be found in the concept of organization development (OD). Several authors, among others Boonstra (2004: 25); Cummings & Worley (2001); (Kahn, 1974; Woodman, 1989; Sashkin & Burke, 1987; Clark & Krone, 1972; & Burke, 1982) in Weick & Quinn (1999), described the concept of OD. The goal of OD is to achieve greater effectiveness by improving how organizations relate to their external environment and function internally to attain high performance and high quality of work life (Boonstra, 2004). Thereby, Boonstra emphasizes that OD is planned and deliberate (2004). Yet, it addresses change as a process, without a clear event or end state.
management is a broader concept than OD because it includes a wide range of intervention strategies (process consultation, work restructuring, strategic HRM planning, and the design of information technology solutions) that may enhance human performance (Worren et al., 1999; Sashkin & Burke, 1987; Woodman, 1989). Furthermore, OD comprehends an organization-wide change. Contrary, change management is regarded as one component of a larger organizational change effort. The other components are strategy, business processes and technology. Both concepts regard change as an ongoing process, but the difference lies in the state of departure (Worren et al., 1999; Boonstra, 2004). In OD, change is phased like the force field analysis of Lewin (1951), i.e. the organization is in a state of equilibrium, goes into transition and refreezes. The two forces that maintain this state of equilibrium are driving forces and restraining forces. The driving forces stimulate organizational change while the restraining forces tend to keep the organization in the state of equilibrium. If these forces maintain balanced, the organization remains static. However, when one of these forces becomes stronger than the other one, change occurs. After the change, a new state of equilibrium is reached1. This feature of equilibrium in OD arises from the idea that people needed routines to be effective and able to improve performance. Routine was something that only occurred in a state of equilibrium.
Change management regards phases of change differently. Nowadays, it is of vital importance to organizations that people are able to undergo continuous change (By, 2005). That is, an organization changes continuously, refreezes its new behaviors, and returns to the state of constant movement (Boonstra, 2004). This state of constant movement becomes the routine in its own right (By, 2005).
The driving forces also made that change has become more radical in its nature (By, 2005). Environments are changing faster and more dramatically implying that organizations should anticipate on these events. This means that the factors that lie between these ends (driving forces and change) also have changed. Two factors are process and leadership. Both are regarded as two phenomena which strongly influence organizational change. Since it is believed that process and leadership greatly impact organizational change, these factors are believed to have changed also. It also means that, during the years, it has become evident what ways to manage change seem more effective and raise less resistance.
This research focuses on an organizational level by closely researching leadership and process aspects within organizational change. Other factors that are believed to influence organizational change are also researched in more detail. These are types of change resistance, culture, role of consultants and the works council.
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1.2 Relevance of the research
Much of the research on organizational change emphasizes the importance of leadership and change processes. However, little empirical evidence is provided that supports theory on leadership and processes in organizational change. Especially, empirical evidence on European organizations is not strongly represented. This study contributes to the literature on change management because it provides empirical evidence and discusses change programs from four European multinational organizations.
CHAPTER 2 PROBLEM STATEMENT
In this chapter, the research goal is presented. Subsequently, the research question and sub questions are formulated. Thereafter, the conceptual model which structures the research objective is presented. Next, the time schedule of the research is specified. This chapter concludes with a plan of the thesis research, which describes what is discussed in each chapter of the thesis.
2.1 Research objective
The research objective is formulated as follows:
“To study what variables on the level of organization, process and leadership constitute and influence `organizational change´ by means of multiple case study research”
2.2 Research Question
Based on the research objective, the following research question is formulated:
“What variables influence organizational change on the level of organization, change processes and its leadership and how are these elements interrelated to each other and related to successful organizational change?”
2.3 Sub Questions
The sub questions, formulated below, function as a means to structurally answer the main research question.
To research the context of organizational change and its importance to organizations nowadays, the first sub question discusses how organizational change can be described.
1. How can organizational change be described on the level of the organization, process and leadership?
Now that factors influencing the chance for successful organizational change have been identified, the following sub questions are designed to analyze the case study findings.
2. “How can the organizational changes in the case studies be described on the level of organization, change processes and leadership based on the case study findings?”
The final sub questions compare the empirical evidence from the case studies to the existing body of knowledge from the theory on change management and discuss the theoretical and managerial implications.
3. “Based on the selected literature, what conclusions can be drawn from the case study findings?”
4. “What can we learn from the findings of the research with regard to the existing body of knowledge on change management?”
2.4 Conceptual Model
The conceptual model supports the problem situation and structures the research objective. It shows the concepts and their relationship in a graphical way (Gill & Johnson, 2005). According to Gill and Johnson (2005), a concept is an abstraction which allows ordering impressions of the world by enabling to identify similarities and differences in phenomena and thereby classify them and also defines the scope of the research2.
As illustrated in figure 1, the conceptual model is structured around three pillars. These are the
organization, process and leadership. In this research, the first bloc (drivers, type, resistance and
culture) is considered as variables that fall under the concept of the organization. While process and leadership also fall under the concept of organization, they are approached separately because the content of these two concepts greatly depends on the previously mentioned variables and vice versa. This research is focused on change at the micro level because change impacts the organization in its core. The first component, organization, is regarded as the coordinating component. At this level, specific variables that drive the organization to change and choices upon the type of change are analyzed in more detail. Within the organization, two components are researched more thoroughly; process and leadership. These components are selected because they have a great influence on organizational change and thereby its chances for success (By, 2005). The second component is process. The process of change is considered in this research because it determines how change is approached, illustrates important steps in change and relates to variables at the organizational level, for example the type of change.
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The third component is leadership. Research on organizational change has also shown that leadership plays a pivotal role (Kotter, 1988; 1996). In fact, many theorists agree that the primary task of management today is the leadership of organizational change. Therefore, leadership is considered an important influencing component in organizational change (By, 2005).
Figure 1: Conceptual Model Author: Vos (2006)
2.5 Research Methods and Techniques
In this section, the research methods and techniques are outlined. This enables the research to be conducted in a structured way. Also, the case study protocol is introduced in this chapter which serves as a guide in carrying out the data collection from each single case study (Yin, 2003). The research is conducted via three methods: literature study, desk research and interviews.
First, a literature study gives an insight into literature on change management in general and on the three concepts which are considered in this research (organization, process and leadership). Second, desk research is conducted to collect information concerning the cases. This concerns articles and information that are gathered from inside the organization. Third, interviews are conducted to obtain primary information and an insight in the change stories of the selectes cases. The case studies provide empirical evidence which can be used to compare with the existing literature on change management and provide real life examples of how change is managed (Eisenhardt, 1989). It deals with two forms of research questions, the how and why questions which suit the main essence of case study research; “trying to illuminate a decision or set of
decisions: why they were taken, how they were implemented, and with what result” (Yin, 2003).
Below, the case study protocol is presented which is based on Yin (2003).
CASE STUDY PROTOCOL A. Introduction
A1. Sample: In the electronics industry, Philips and Siemens are selected as representative case studies. In the
in the top 5 of the world’s largest conglomerates (Forbes, 2006a). This industry is also characterized by very short product life cycles meaning that organizations are forced to regularly change its behavior in order to survive in this market. In the petroleum industry, Shell and BP are selected. The oil industry illustrates an instable past where many events and circumstances (e.g. oil crisis in the 1970s) led to organizations to radically alter their behavior. In both the Shell and BP cases, restructuring efforts in the nineties are paramount. BP and Shell are selected because they are European organizations and possess a position in the top three of oil producing organizations worldwide (Forbes, 2006b).
B. Data Collection Procedures
B1. Data collection plan: The structure of case study research is divided into two phases. These phases are
desk and empirical research. The desk research consists of collecting literature from the case studies such as articles, books, internet sites, internal documents. The empirical research consists of conducting interviews with people who were involved in the change programs at the four selected organizations. The case study research answers the questions ‘who’, ‘what’, ‘when’, or ‘how’ of the change (Cooper & Schindler, 2003). It should be noted that this research is not focused on determining whether the outcome of the change was good but only on the successful of the process of change.
C. Outline of the Selected Case Studies
C1. Organization: This part discusses variables that influence organizational change on the organization level. C2. Change Process: This part describes the change process and answers the questions ‘who’ ‘what’, ‘when’,
‘where’, and ‘how’.
C3. Leadership: This section discusses the leadership during the change program. It provides an analysis of
the leadership role, style and approaches. Also, it discusses the role of consultants during change.
D. Empirical Research
D1. Interviewees: Table 1 presents the list of interviewees. The following people are interviewed: managers,
consultants, members of the works council and a journalist. These people are selected because they provide distinct views on change management and the change programs. The management is able to provide inside information on how the change was managed. Also, external experts are also considered. This expert is a consultant. At Shell and Philips, a research journalist is interviewed. Last, the works council is interviewed because it is involved in change programs aligning the interests between management and employees.
Nr. Company Interviewee Job Details Change Program Date
2.3 Siemens R. van Putten Works Council Fit 4 More July 26, 2006 3.1 BP R.P. Schwippert Corporate Program Director Acceleration July 19, 2006 3.2 BP M. Hikke Works Council Acceleration July 25, 2006 3.3 BP I. Kievit External Consultant General May 11, 2006 4.1 Shell W. Groen Employee Relations & Policies Transformation of Shell August 8, 2006 4.1 Shell S. van Heck (Central) Works Council Transformation of Shell August 8, 2006 4.2 Shell M. Weggeman External consultant Transformation of Shell July 5, 2006 4.3 Shell F. Waals Internal consultant Transformation of Shell July 21, 2006 4.4 Shell M. Metze Research Journalist Transformation of Shell July 12, 2006
Table 1: List of interviewees
D2. Preparation: This part presents a list of questions for the interviews which is presented in appendix 4. D3. Findings: The third part presents the findings of the interviews. These findings are presented in the
appendix “Interview Reports”. The interpretation is used to analyze the case studies in part four. Sources of the interviewees in the chapters 4 to 7 are provided in italic, e.g. (Timmer, 2006).
E. Evaluation
E1. Interpretation and Analysis: This part provides the interpretation of the case study findings.
2.6 Phases of the Research
The research is divided into four parts (see figure 2). The first part provides an introduction to the research and introduces the problem statement. Part two provides the outcomes of the literature study. This leads a conceptual framework based on the conceptual model presented in figure 1. The third part describes the selected case studies and their change programs. Part three describes the selected changes and interprets the findings. The fourth part analyzes the findings. It discusses the theoretical and managerial implications and provides recommendations for future research.
2.7 Thesis Outline
The research is structured in seven chapters.
Chapter 1 This chapter describes the context of the research, provides a short overview of the existing literature on change management and discusses the relevance of the research
Chapter 2 The second chapter introduces the problem statement and introduces the conceptual model, key concepts are presented in the conceptual model
Chapter 3 Chapter three presents the outcomes of the literature study. The concepts identified are the organization, process and leadership. At the end of this chapter, the conceptual framework is presented which serves as a guide for the analysis
Chapters 4, 5, 6, 7
This chapter discusses the case study findings. Each change program is shortly described after which the findings of the desk research and interviews are interpreted
Chapter 8 Chapter eight analyzes the empirical evidence based on the conceptual framework
Chapter 9 Chapter nine gives an answer to the research question by answering each sub question in a structural manner. Also, recommendations for future research are given
2.8 Timeline
The research is scheduled in the following timeline.
Figure 3 Timeline Author: Vos (2006)
PART TWO
Part two of this research provides a literature study on organizational change and its management. Chapter three in this part introduces the three concepts and discusses these in more detail.
CHAPTER 3 OUTCOMES OF THE LITERATURE STUDY
This chapter discusses the findings of the literature study and introduces the conceptual framework. It elaborates on the three concepts included in the conceptual model which are the organization, the process and leadership. Paragraphs 3.1 until 3.3 discuss these concepts. In each concept, variables are discussed which are believed to have an impact on organizational change. The last section of this chapter provides the conceptual framework resulting from the literature study. It integrates all parts of the literature and is used as a basis for the case study analysis.
3.1 The Organization 3.1.1 Drivers for Change
Organizations change for different reasons. These forces are internal or external to the organization (Sheth, 2005).
Below, several internal and external forces are discussed. These forces are derived from the contextual research theme on change which focuses on forces or conditions existing in an organization’s external and internal environments (Armenakis & Bedeian, 1999).
In this research, a distinction is made between external change drivers and internal change drivers to the organization. These external forces for change imply a responsive change as organizations respond on the events in their external environment. In this situation, the organization is primarily concerned with solving problems. The internal forces for change, however, imply that an organization takes a proactive position towards change. In this situation, an organization is keener on managing performance and developing the organization (Nelson & Burns, 1984). This is related to knowledge development whereas external drivers relate to problem solving issues (Kemelgor, Johnson & Srinivasan, 2000 in Damanpour, 1991). These external and internal forces coincide when triggering an organization to change (Strebel, 1994).
Internal Reasons for Change
Several internal forces for change can be identified. One example of an internal reason is that
complacent because of their success. This leads to them being less responsive and flexible as they keep wondering in their own success while competition is outperforming them (Sheth, 2005). These internal reasons can also be drivers for the organization to improve the processes, structure, strategies, and the culture by means of changing the culture, reengineering of its business processes or even an acquisition or merger.
Another internal reason for change can be found in human resources. As organizations are faced with constant and faster change, also HR is required to redesign in order to meet new organizational demands. These requirements come primarily from shifting workforce and labor market demographics, globalization, technology, or other external factors. Therefore, many organizations seek improvement in workforce, thereby shifting towards a more strategic function (Hawthorne, 2004). Thus, such required changes in HR also imply organizational change.
Damanpour (1991) studied six internal contextual variables that positively relate to organizational change and are focused more on knowledge development. These six variables are 1) specialization, 2) professionalism, 3) managerial attitude toward change, 4) managerial tenure, 5) technical knowledge resources, and 6) slack resources.
Ad 1) Specialization within an organization is positively related to organizational change because a greater variety of specialists provides a broader knowledge base. Therefore, it increases incentives to cross-fertilize ideas (Damanpour, 1991).
Ad 2) Professionalism is positively related to organizational change since it increases boundary-spanning activity and self-confidence. Thereby, it also creates a commitment to move beyond the status quo (Damanpour, 1991).
Ad 3) In general, managers have a favorable attitude toward change, this leads to an internal climate conducive to innovation (Damanpour, 1991).
Ad 4) The longevity of managers in their jobs provides them legitimacy and knowledge of how to accomplish tasks, manages processes, and obtain the desired outcomes (Damanpour, 1991). Ad 5) When an organization possesses technical knowledge resources, it creates an environment where new technical ideas are understood and where procedures for their development and implementation can be attained. Such organizations are therefore more conducive to change (Damanpour, 1991). This growth in technological knowledge is one driver that has contributed to the growing importance of human capital (Lawler & Worley, 2006). This led to a focus on talent management, for example by the design of reward systems (Lawler & Worley, 2006).
External Reasons for Change
Also, several external forces for change can be identified.
Ad 1) Globalization means that organizations can seek more opportunities outside their home country which stimulates the economy on both the supply and the demand side. However, how favorable this may seem, it also means that demands are changing at a faster pace. As a consequence, the stakes of dealing with change have never been so high since the Industrial Revolution (Beer & Nohria, 2000). This may be an organization facing declines in sales, but it may well be thriving organizations in order to develop new products or find new markets for its existing products (Jones, 2004: 301).
Ad 2) Regulatory forces lead to restructuring of industries. Many companies have problems keeping up with these regulatory forces. One form of regulatory forces that appears often is deregulation. Deregulation is the process by which governments remove restrictions on business in order to (in theory) encourage the efficient operation of markets3. An example is liberalization of emerging markets. If it proceeds too fast, it leaves the organization unprepared. In India, many domestic companies were unprepared and went under from foreign competition (Sheth, 2005). Ad 3) Companies can also be forced to change by investors, for example when a company falls out of favor with investors. This happened with Microsoft when Google arose as the major Internet search machine. Lacking investors´ interests carries great risks. One of them is that companies no longer have access to the equity market. Consequently, the organization cannot leverage its debt-to-equity ratio on the equity market which can lead to problems (Sheth, 2005). Ad 4) Also, organizations have to deal with competitive forces where the entry of non-traditional competitors forces organizations to adapt to industry circumstances when business rules are altered. The rise of the Asian economy is an example of a competitive force. It forces Western companies to adapt their systems in order to compete with this economy (Sheth, 2005).
Ad 5) Another force that leads organizations in need for change is technology and rising human
capital; a factor that forces organizations to work with the latest and newest technologies and so
keep up to date with new inventive developments in the market (Sheth, 2005). Armenakis & Bedeian (1999) highlight the influence of technological factors, for example in the loan and savings industry. An important technological factor is the information technology boom of the nineties (Lawler & Worley, 2006). This increasing interest in human capital has shifted the attention to talent management more and more (Lawler & Worley, 2006).
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Ad 6) Last, the changing customer demands implies that organizations have to anticipate on these changing demands in order to maintain valuable in the business. These changing customer demands may occur due to cultural changes, demographic changes (Sheth, 2005).
There is another force that should be mentioned here which is the increasing attention to value systems coming from both external and internal pressures. After World War II, three value systems emerged which place attention on different areas (see appendix 1). This force elaborates on the relevance of stakeholder management. In this phenomenon, there are three theoretical streams: ‘convergence theory’, ‘varieties of capitalism and the ‘hybridization perspective’.
Convergence theorists argue that the stakeholder system (Rhineland model), no longer suits the interests of the shareholders. This system implies that organizations focus on aligning the interests of multiple parties; the government, suppliers, customers, shareholders, community and other involved parties (Börsch, 2004). The Rhineland model depicts a state governed by close coordination of political partners, trade unions, and industry associations. That means that the relationship between business strategies, HR policies, and performance is moderated significantly by institutions and stakeholders, both inside and outside of the organization. Such collective bargaining agreements and labor laws prescribe, prohibit, and influence HRM practices and policies4. Thereby, they try to balance these interests in contrary to convergence theorists who argue in favor of shareholder value maximization only. This Rhineland system has been predominant in both The Netherlands and Germany the last few decades. According to convergence theorists, though, it is no longer tenable in an era with highly integrated financial and product markets (Börsch, 2004). This is because financial markets no longer accept the poor profit and shareholder value orientation. This means that those organizations will not have access to the desired amount of capital. Therefore, strategic and institutional changes are required in the governance system and the organization (Börsch, 2004).
Second, convergence theory assumes that companies with a shareholder orientation produce more efficiently. Consequently, stakeholder organizations are forced to adopt more market oriented practices enabling them to achieve similar cost structures (Börsch, 2004). In this sense, Jensen (2000) argues that the purpose of organizational change should be to maximize shareholder value. Research has shown that when all firms in an economy maximize total firm value, social welfare is maximized as well (Jensen, 2000 in Beer & Nohria, 2000).
However, there are many theorists and researchers who do not believe in convergence theory (Borsch, 2004; Hall & Soskice, 2001; Donaldson & Preston, 1995). Contrary, the ‘varieties of
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capitalism approach’ argues that different institutional frameworks lead to different responses to e.g. globalization, to distinct adjustment paths of firms and to a reinforcement of their strategies and structures (Börsch, 2004). Here, learning is more important than optimizing Senge (1997). This means that when employees understand an organization’s purpose for change, they can understand why it is important to change in that direction in order to serve its purpose (Senge, 1997 in Beer & Nohria, 2000).
Between the convergence theory and varieties of capitalism approach, there is another view that encounters parts of both theories; the ‘hybridization perspective’. This system comprehends characteristics of shareholder systems and the stakeholder model. It questions the convergence/ divergence of Anglo-Saxon corporate governance practices and stakeholder oriented models (Börsch, 2004). Companies must decide whether to act upon the interests of the shareholders, stakeholders or combine them. External pressures make that organizations think about these systems and change their attitude of governance constantly.
3.1.2 Change and Resistance
Organizational inertia is also a phenomenon that is studied in contextual research on change. It is regarded as resistance to environmental reassessment and to change in social and structural relationships (Armenakis & Bedeian, 1999: 300). Resistance to change can be viewed in two distinct ways. On the one hand, resistance is regarded as a concept that affects the change process. This can be in the form of delayering or slowing down the beginning, obstructing its implementation or increasing its costs. On the other hand, resistance is regarded as a construct that tries to keep the status quo (Pardo del Val & Fuentes, 2003). That means that resistance does not imply that employees resist the concept of the change, rather, it lies in the personality of the employees. In this view, resistance is equal to inertia (Pardo del Val & Fuentes, 2003).
organization silence. The second group deals with a low motivation for the change. Direct sources for these problems are direct costs for the change, past failures of change, different interests among participants or fear of bringing sacrifices. The third group deals with a lack of creative response. Sources in diminishing the creativeness are: fast and complex environmental changes, reactive mindset and inadequate strategic vision or lack of clear commitment.
Ad 2) The implementation stage deals with other groups that cause resistance problems. The first group deals with potential political or cultural deadlocks to change. These can be problems arising from departments that will suffer from the change, strong disagreement among groups about the nature of the change or e.g. deep rooted beliefs and values. The second group deals with remaining issues such as the inability of the leader to change, embedded routines, cynicism or lack of the necessary capabilities to implement change (Pardo del Val & Fuentes, 2003).
The above shows that resistance to change can be caused by several factors.
Boonstra (2004) discusses another cause which he believes is a major cause of resistance and that is the exclusion of relevant stakeholders. “A stakeholder is someone who has an interest in a
particular decision, either as an individual or as representative of a group”5. These are people who can influence the decision, as well as those who are affected by it. In corporate terms, this can be employees, customers, suppliers, the community or the government. When stakeholders are excluded from change, the reaction can differ per group and can be prevented by including all the stakeholders (Boonstra, 2004). In this alternative view, resistance is not regarded as a natural phenomenon that occurs, rather, it is an indication of bad change management. In this sense, Boonstra argues that a stakeholder oriented change approach can prevent resistance (2004). Also, Pardo del Val & Fuentes (2003) concluded that resistance occurred in higher numbers in strategic change than in evolutionary change. This would seem logical since strategic change requires more radical change in the behavior and mindset of the employees.
3.1.3 Change and its Rate of Occurrence
In chapter one, it was argued that OD states that organizations cannot be effective or improve their performance if they are constantly changing (page 10). People needed routines to be effective and able to improve performance (By, 2005). Nowadays, it is more important that people are able to undergo continuous change where the state of change becomes a routine in its own right (By, 2005). In this sense, Boonstra (2004) distinguished episodic from continuous change. “Episodic change tends to be infrequent, occurring during certain periods when
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organizations move away from their equilibrium status” (Boonstra, 2004). Continuous change, though, can be described as “a pattern of iterative modifications in work processes and social
practice” (Boonstra, 2004). The equilibrium condition is thus the changing pattern (see figure 4).
Both change patterns can be identified in the three stage model of Lewin (1951). Episodic change starts from the condition that the organization is in a static, frozen situation, while continuous change is regarded as a constant movement without an end state (Boonstra, 2004).
Figure 4 Three step process by Lewin (1951) Source: Boonstra (2004: 34)
Many theorists have criticized the model of Lewin because they believe that it is outdated (Dunphy & Stace, 1988). Dunphy & Stace challenge the universality of the OD theory, by providing a more integrated and differentiated model that is based on the life cycle of the organization and on the stability or turbulence of the environment (1988). They present four concepts of organizational change. These concepts are incremental, evolutionary change and transformative, revolutionary change. Dunphy & Stace discuss that revolutionary change was previously seen as exceptional (1988). However, the last few decades have shown a turnaround. This is mainly caused by the turbulent environment; organizations are forced to keep track with all developments in the market in order to survive. This requires transformational changes within the organization. Dunphy & Stace (1988) argue that it is not the complexity or the pace of the change that makes it an incremental or transformative change. Rather, the difference lies in whether organizations are effecting change on a continuous (incremental, evolutionary change) or discontinuous (transformative, revolutionary change) basis.
3.1.4 Types of Change
While the prior characterizations focus on the rate of occurrence, one can also characterize change based on the parts of the organization that are affected. Esterhuyse thereby discusses first-order and second-first-order change (2003).
incremental or evolutionary change. Contrary, second order change has a more radical nature and is focused on transforming the basic structure, culture and defining values in an organization (Esterhuyse, 2003). Because of its transformative character, it is automatically associated with resistance and uncertainty. A shift can be observed from first order change to second order change. According to Esterhuyse (2003), second-order change has replaced first order change because it is more associated with the changing environment, among others the globalization.
3.1.5 Change and Culture
Due to the increasing attention to and interest in human beings in organizations, culture has drawn the attention of many researchers because it influences how people behave and how the organization acts and responds to events in its context. The organizational culture comprehends shared behaviors, where people are socialized into it, have conditional relationships and are partly involved (Thomas, 2002).
Figure 5 The Competing values framework
Source: Adapted from Quinn & Rohrbaugh (1983) in Jones et al. (2005:365)
This first section provided both external and internal drivers for change. Also, resistance was discussed as both natural phenomenon and as change affecter. Furthermore, change was described by its type. Last, the role of organizational culture was discussed. These four categories are described as four important concepts of organizational change on the level of the organization. The next section discusses change by how it comes about.
3.2 Process of Change
The previous sections have characterized change by its rate of occurrence, type and its scale. Change can also be described by how it comes about (By, 2005). Several approaches attempt to explain the process that brings about change (By, 2005).
3.2.1 Planned Change
The planned approach emphasizes the importance of understanding the different states which an organization has to go through in order to move from an unsatisfactory state to an identified desired state (By, 2005:373).
is a rather static one. In theory, it enables researchers to look closely at how processes proceed. In reality, the phases overlap each other too much to be able to clearly identify each phase.
In practice, planned change tends to occur in situations with high urgency and where radical change is required. Planned change is quickly processed in a top down manner (Burnes, 2004).
3.2.2 Emergent Change
A less directive view is emergent change. As Weick (2000) noted, “emergent change consists of
ongoing accommodations, adaptations, and alterations that produce fundamental change without a priori intentions to do so” (Burnes, 2004: 3). Such small adjustments can together result in large
change although much of emergent change goes unnoticed, thereby corresponding to continuous change (Burnes, 2004). Contrary to planned change, emergent change tends to occur in situations where small scale changes are required and is more associated with change people’s behaviors. These change approaches are not competitors; but are complementary (Burnes, 2004).
Emergent change has also been labeled organizational learning, indicating that organizations see themselves as entities that need to improve continuously. It regards change from the bottom up rather than top down. However, the emergent change model is not as coordinated and coherent as the planned change model. Besides the emergent and planned change model, the contingency change model has gained more ground the last few decades.
3.2.3 Contingency Model
It should be recognized that organizations operate under different circumstances. Therefore, there is usually more than one approach applicable during a certain organizational change. The contingency approach is therefore based on the assumption that the structure and the performance of an organization are dependent on the situational variables that it faces (By, 2005:376).
Contingency theory is a rejection of the “one best way for all” approach stressing the fact that all organizations are dependent on the factors under which it operates and should also be considered as such. The contingency model assumes that the structure and business of the organization depends on three main variables which are technology, environment and size. For success, organizations need to align their structures with the particular contingencies they face. Therefore, no two organizations face exactly the same contingencies. Consequently, the “one best way for all” organization is replaced by the “one best way for each” organization (Burnes, 1996).
Bold strokes view change as a more planned activity. This corresponds with the blue print paradigm by De Caluwe & Vermaak (De Caluwé & Vermaak, 2003, in Boonstra, 2004: 219). “Long marches”, however, are regarded as change initiatives which comprise a whole series of small-scale, local (incremental) changes which have little effect in the short term but over the long term can transform an organization (Burnes, 1996). The long marches view change more as an unplanned change activity (De Caluwé & Vermaak, 2003, in Boonstra, 2004: 219). It should be noted that “long marches” complement the emergent model of change while “bold strokes” fit neither the emergent nor the planned model of change.
3.2.4 Change Strategies
There are several approaches to organizational change on which a leader or the organization can focus. Beer & Nohria (2000) distinguish two change approaches (see table 2). “Theory E” change strategies are change approaches that involve heavy use of economic incentives. This can be regarded as a hard change approach which usually involves drastic layoffs, downsizing, restructuring or re-engineering. It usually appears in Anglo-American countries where the organization’s performance has diminished to such an extent that its main shareholders demand major and rapid change to improve the organization’s financial performance (Burned, 2004: 890). Contrary, “Theory O” change strategies are based on organizational capability and are focused on building up the corporate culture, i.e. employee behaviors, attitudes, capabilities, and commitment. Although also aimed at improving an organization’s performance, it is a softer approach based on incrementally developing the organization’s culture and its human capabilities, and promoting organizational learning. It occurs more in stakeholder countries. These two theories of change approaches do not prevail on their own; they often coincide where “Theory O” always follows “Theory E” change approach (Beer & Nohria, 2000).
Purpose and Means “Theory E” “Theory O”
Purpose Maximize economic value Develop organizational capabilities Leadership Top-down Participative Focus Structure and systems Culture
Planning Programmatic Emergent Motivation Incentives lead Incentives lag
Consultants Large / knowledge driven Small / process-driven
Beer and Nohria (2000) believe that both models are valid but have their flaws. Therefore, they believe that successful change comes from matching the change mode to the change type (Burnes, 2004:890). Therefore, Beer and Nohria (2000) developed a model which incorporates both change modes and change types. Combining these modes should enable an organization to apply a change strategy most suitable in their given situation (Burnes, 2004:890).
Another distinction can be made in change strategies. When one combines both change modes and types, change strategies become apparent (table 4). This model suggests that much of the OD literature has focused on type one change strategies; participative evolution. However, due to environmental changes causing a turbulent situation for organizations, types two and four become more apparent. Type three is used more often in times when stakeholders oppose change. Yet, while this model presents four distinct change strategies, the choice upon them should depend wholly on a situational strategic analysis (Dunphy & Stace, 1988).
Incremental change type Transformative change type Collaborative modes Type 1 strategies
Participative evolution
Type 2 strategies
Charismatic transformation Coercive modes Type 3 strategies
Forced evolution
Type 4 strategies
Dictatorial transformation Table 3: Typology of change strategies
Source: Dunphy & Stace, 1988: 327
This model, however, fails to integrate the link with the type of change. Since first-order change implies a change in the confines of the system only, it corresponds with incremental change types. Second-order change implies a change in the fundamentals of the system and therefore corresponds with transformative change types. Change strategies one and three therefore relate to first-order change while change strategies two and four relate more to second order change.
3.3 Change Leadership
3.3.1 Role of Leadership
Kotter (1988) argues that the major force for leadership stems from the increasing competitive intensity. Therefore, effective leadership is required. Kotter regards effective leadership as “leadership that produces movement in the long-term best interests of the group(s)” (1988:5). Higgs and Rowland argue that leadership has a great influence on the extent to which a change initiative can succeed. The beliefs that leaders hold influence their approach to change and its implementation consequently (2005). Ineffective leadership is not so much concerned with the change approach. Rather, it has more to do with how the leader uses his power (Beer & Nohria, 2000). Another cause of ineffective leadership within organizations is that organizations do not recognize the need for leadership and thus ignore the leadership potential in people.
3.3.2 Leadership Style
TRANSFORMATIONAL LEADER
Charisma: Provides vision and sense of mission, instills pride, gains respect and trust
Inspiration: Communicates high expectations, uses symbols to focus efforts, expresses purposes in simple ways Intellectual Stimulation: Promotes intelligence, rationality, and careful problem solving
Individualized Consideration: Gives personal attention, treats each employee individually, coaches, and advises
TRANSACTIONAL LEADER
Contingent Reward: Contracts exchange of reward, rewards for good performance, recognizes accomplishments Management by Exception (active): Watches and searches for deviations from rules, and takes corrective action. Management by Exception (passive): Intervenes only if standards are not met.
Laissez-Faire: Abdicates responsibilities, avoids making decisions.
Table 4: Characteristics of transformational and transactional leaders Source: Bass, B.M. (1990:22)
While this distinction provides a good visualization of leadership style, it should be noticed that specific leadership styles are preferred in situations. Stoker distinguishes management from leadership and argues that different changes require different kinds of leadership. Leaders think of themselves being the ideal leader satisfying employees’ ideal picture. The reality is far from it. Stoker argues that before managers take care of change, they must change themselves (2005). A transformational leader focuses on empowering the employees, making them aware of their strengths and enabling them to achieve more than they expect. This means that transformational leaders are important in phases of culture change because he is able to influence the employees positively and able to change their mindset (Bass, 1992).
Contrary, a transactional leader is important when hard measures are taken such as restructuring efforts. In such situations, a leader should apply transactional or managerial leadership styles.
3.3.3 Leadership Approach
Leadership can also be studied on its process level. In this sense, Higgs and Rowland (2005) have focused on describing specific leadership approaches to organizational change. They identified leadership competencies which include both top-down and participative leadership styles, i.e. respectively hard and soft approaches. Top-down approaches appear when radical changes occur such as re-engineering or downsizing. “Top-down management emphasizes the process of
implementing and refining decisions made by top management as they are transmitted to the lower levels of the organization” (Nonaka, 1988: 9). Contrary, bottom up management enables
originating on the work floor by assigning a more central role to middle managers. This process is particularly suited in fierce market competition and rapid technological change (Nonaka, 1988). It is higher than middle management and more than a participative approach. While top down approaches emphasizes explicit knowledge transfer and bottom up approaches emphasize tacit knowledge transfer, the middle-up down approach deals with both types of knowledge (Crossan, 1996). This approach suggests that the role of middle managers is underestimated in the other approaches while they play an important role as knowledge engineers, thereby distinguishing themselves from front-line employees and top managers (Crossan, 1996).
Some researchers believe that top-down approaches have to do with the greed of a leader. Bennis (1996) that heroic leaders in top-down approaches are more driven by greed, ego or the lust for power than by the notion of contributing to productivity or human welfare in a company (Beer & Nohria, 2003). Top-down approaches with strong leadership appear in periods of high uncertainty. Beer and Nohria argue that “Theory E” strategies call for more top-down approaches while “Theory O” strategies call for more bottom-up or participative leadership strategies (2000). One author who has earned much attention for his research on leadership in change is John Kotter. Kotter (1996) has developed an eight-step process which should guide organizations and especially leaders through change processes. The eight-step process by Kotter (1996) provides leaders with a guide on how to structurally lead change in organizations. When viewed critically, this guide can also be divided into three main phases: getting your organization ready to change and gather your people, establish the change and last, reinforce the new behavior. In this way, Kotter’s eight-step plan corresponds with Lewin’s original ideas about organization development. This eight-step process is presented in appendix two and consists of the following steps:
1) Establish a sense of urgency 2) Create the guiding coalition 3) Develop a vision and strategy 4) Communicate the change vision 5) Empower broad-based action 6) Generate short-term wins
7) Consolidate gains and producing more change 8) Anchor new approaches in the culture
Ad 2) The second step is creating a guiding coalition, i.e. a team that can direct the change effort. Therefore, membership has to be considered carefully. Kotter (1996) argues that power, expertise, credibility and leadership are four key characteristics that are essential for effective guiding coalitions. Within the guiding coalition, trust has to be created through events and meetings and eventually a common goal should be developed so that it is prepared for the next step.
Ad 3) The third step is the development of a vision and strategy and is important because it helps to clarify the general direction. It motivates the employees to take action and coordination is achieved. The best way, then, for a vision to work is when it is communicated accordingly. Ad 4) Therefore, the fourth step concerns communicating the vision. A vision can be effectively communicated when its form and content is simple and clear. The vision can be communicated in meetings or in the form of memos, newspapers, or group meetings.
Ad 5) The fifth step stimulates empowering of employees so that they take action in favor of the change. This means that employees and the management together try to avoid implementation barriers to the change, which can be in structure, skills, systems and supervisors.
Ad 6) In the sixth step, management should make the short term wins visible so that employees see that the change is working and that positive results are gained.
Ad 7) The seventh step should make sure that the short-term gains are consolidated and that more change is produced. This should avoid management from declaring victory too soon. It should keep them focused on the goal of the change as well as keep the organization flexible.
Ad 8) The final step implies that the new behavior and approaches are anchored in the culture. Kotter (1996) argues that culture change is the last change that the organization should go through because people can only change their mindset when they have already changed their actions.
3.3.4. Other parties influencing leadership
Consultants
Besides leadership, consultancy can play an important directive role in managing change. Consultancy can be regarded as “an advisory service provided to organizations by trained
persons who assist, in an objective and independent manner, the client organization to define and analyze management problems, recommend solutions and help when requested in the implementation of solutions” (Greiner & Metzger, 1983 in Kakabadse, Louchart & Kakabadse,
information and facilitating the choice of options available to managers. Contrary, the process role means that the consultant helps the organization in solving its problems by making it aware of its organizational process(es) (Kakabadse et al., 2006; Argyris, 1970). This role is concerned with guiding the process, creating commitment and empowering action (Argyris, 1970).
The role of consultants have shifted from “solving problems” to facilitating “organizational learning”. In this process of organizational learning, one would argue that skills transfer is the most important facilitating task of a consultant (Kakabadse et al., 2006).
Furthermore, a distinction can be made between internal and external consultants. External consultants are attracted to provide objective and a fresh view on the organization (Kievit, 2006). Internal consultants operate from within the organization. Therefore, they are able to provide valuable information since they know the culture, business habits, strengths and weaknesses.
The Works Council
The works council is involved in change processes to align the interests between management and employees. In case of organizational change, the board of directors is appointed to articles 25 and 27 of the WOR (Wet op de Ondernemingsraad). Article 25 determines that the organization enables the works council to advice the board on a proposed organizational change. Article 27 determines that the organization requires approval of the works council with regard to issues that affects the employees. The last few years, the works council obtains a more important and growing role in decision making with respect to organizational issues (Looise & Drucker, 2003). There are some consequences noticeable to this trend. On the one hand, it may slow down the decision making process of management since it has to consider multiple interests. Contrary, when the works council supports a decision, it may result in better cooperation from the personnel. Consequently, this enhances the chances for successful implementation of specific decision (Looise & Drucker, 2003). The role of the works council is not discussed in a separate section but in the general interpretation sections of the case study chapters.
3.4 Conceptual Framework
Figure 6: Conceptual Framework Author: Vos (2006)
Conclusion of Part Two
PART THREE
Part three provides the case study research. It is divided into four chapters according to each case study. Each case study chapter provides two sections. The first section shortly describes the case while the second section interprets the case study findings based on the three concepts in the framework. Thereby, it relates to the desk research and interviews that are conducted. The interview reports are provided in the “Interviews Report”.
CHAPTER 4 PHILIPS
4.1 Description of the Case
4.1.1 Organization
Philips is one of the largest electronics manufacturers worldwide, with some 160,000 employees in 60 countries and a sales volume of more than 30 billion euros in 2005. Philips is active in the health care sector with the production of medical systems, in the domestic appliances and personal care sector, consumer products, lighting and semiconductors6.
4.1.2 Process
When Timmer became CEO in 1990, he initiated Operation Centurion to save Philips from its financial problems (see figures 7 and 8). Operation Centurion was “a long term oriented program
aimed at creating a winning company through learning as a main element” (Management
Development Review, 1997).
The change process consisted of two phases, the restructuring phase and the revitalization phase. The restructuring phase was aimed at quickly closing the performance gap with competitors. This short-term restructuring was followed by a long-term “Philips Quality Drive” which was charged with creating the mindset for the revitalization phase of Operation Centurion.
The revitalization phase was focused on filling the opportunity gaps. To reach the minds and hearts of the employees, a three pronged communication process (communication, consensus, and commitment) was initiated (see figure 8), consisting of top-down centurion sessions, bottom-up town meetings, customer day satellite and group discussions (see appendix three). Though features of both top down and bottom up processes are recognizable, the change was primarily
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characterized by a middle-up down process (Weggeman, 2006a). Paragraph 4.2.3 discusses this leadership approach in more detail.
Figure 7: Building the winning company Source: Hayen (1996)
The top-down cascade model involved 14,000 managers during weekend sessions with groups of 30 to 70 participants from several hierarchical levels. The goal was to translate the vision into actions and targets for the product division and business groups (Ellis & Williams, 1996). An external consultant was present to provide process facilitation and specific cognitive inputs. The second tier of this phase consisted of meetings gathering more than 100 groups and was aimed at creating consensus and commitment for task force issues which managers themselves believed were key drivers in the process of revitalization.
Source: Hayen (1996)
After this top-down cascade model, the bottom-up town meetings arose, including 200,000 employees and were used as interactive forums to work out specific plans for improvement and were part of building an inherent change management capability (Ellis & Willliams, 1996: 10). Third, interactive satellite discussion days (Customer Day) were held for the European workforce. These discussion days formed the bridge between the restructuring and revitalization phase. Items such as “customer-orientation” and “quality” were discussed. Timmer used multimedia tools to organize Customer Day and was actively present which motivated and inspired the employees. The last part of the revitalization process consisted of information sessions which were CD-Interactive and included some 150,000 people.
4.1.3 Leadership
Timmer was a powerful leader whose philosophy of management was “getting things done through other people”. He was able to inspire fear but was kind, serious, and humorous, came across somehow dictatorial but had an open eye towards his subordinates (Metze, 1997).
Many critics doubted the credibility of the top management team that led Operation Centurion, since these were the ones who created the problems. Timmer had confidence in this team. Therefore, the top management team was not adjusted radically unlike the board of directors (Metze, 2006a). Between 1990 and 1995, Timmer appointed eight new board members (Ellis & Williams, 1996). For the first time, the board of directors was internationalized (Timmer, 2006).
4.2 Interpretation 4.2.1 Organization
Drivers for Change
Philips needed to change due to external factors. These were the globalization, technological revolution, the instability of many currencies, the production shift to “border zones” and the global culture clash (Hayen, 1996).
Besides these external factors, Philips was dealing with internal issues. Philips had been a market leader in the electronics industry for many years. However, in the early nineties, Philips came to a turning point. The problem was its complex (matrix) structure which increased the size and complexity of the organization structure.
