Forces driving successful change

There are certain economic and social forces that drive the need for major change in organizations. These include technological change, international economic integration and maturation of markets in developed countries. The technological changes include faster and better communication and transportation and more information networks connection people globally. International economic integration results in fewer tariffs and currencies linked via floating exchange rates. There is more global capital flow all together. In developed countries there is a slower domestic growth and more aggressive exporters and more deregulation. All together this leads to the globalization of markets and competition. The hazards of this are the increased competition and the increased speed of the market development. On the other hand, the markets are bigger and there are fewer barriers.

In general, there are more large-scale changes taking place in organizations. These changes include reengineering, restructuring, quality programs, mergers and acquisitions, strategic change and cultural change.

Successful transformation is 70-90% leadership and only 10-30% management. The problem therefore is not managing change, but leading change. Management is a set of processes that can keep a system running. The most important aspects are planning and budgeting, organizing and staffing, and controlling and problem solving. Management produces a degree of predictability and order and has the potential to produce short-term results. Leadership however is a set of processes that creates organizations in the first place and adapts them to changing circumstances. Leadership defines what the future should look like. It includes establishing direction, aligning people, and motivating and inspiring them. Leadership produces change, often to a dramatic degree.

Overmanagement in a company can be very harmful. After a business strategy is developed and a fairly dominant position is established in the market, it can get difficult to cope with growth and therefore pressures on managers grow. Organizations often hire and promote managers, not leaders, to cope with the growing bureaucracy. Arrogant cultures can grow in an environment where managers believe that their traditions are best. Often, managers fail to acknowledge the value of customers and behave in an insular fashion. Also, they fail to acknowledge the value of leadership and the employees at all levels who can provide it. They tend to hinder innovation and initiative and behave in bureaucratic ways.

A powerful guiding coalition with sufficient leadership is not created by people who have been taught to merely maintain the current system. Visions and strategies are not formulated by individuals who have learned only to deal with plans and budgets. Only leadership can blast through the many sources of corporate inertia. Only leadership can motivate the actions and sacrifices needed to alter behavior. Only leadership can get change to stick by anchoring it in the culture of an organization.

Leaders have visions and strategies. These are sensible and appealing pictures of the future and a logic for how the vision can be achieved. Managers on the other hand, have plans and budgets. These are specific steps and timetables to implement the strategies and plans converted into financial projections and goals.

If there is a lot of leadership and no management, transformation efforts can be successful for a while, but often fail after short-term results become erratic. With no leadership and no management transformation efforts go nowhere. With a lot of management and no leadership short-term results are possible, especially through cost cutting or mergers and acquisitions. But real transformation programs have trouble getting started and major, long-term change is rarely achieved. Both, good management and good leadership is needed for highly successful transformation efforts.


Christian Herbst

Chief Executive Officer