4 Shaping and Sustaining Change Ryan McVayPhotodiscThink.docx

4 Shaping and Sustaining Change
Ryan McVay/Photodisc/Thinkstock
Learning Objectives
After reading this chapter, you should be able to do the
following:
1. Describe the major reasons why organizational change
programs fail and succeed.
2. Evaluate how to recruit and empower employees.
3. Analyze the five pillars of successful, sustainable change.
4. Explain the characteristics of built-to-change organizations
that position themselves to successfully sustain
change.
5. Examine useful principles and practices in sustaining change.
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© 2015 Bridgepoint Education, Inc. All rights reserved. Not for
resale or redistribution.
Introduction
Nothing is easier than saying words. Nothing is

harder than living them day after day.
—Arthur Gordon
Pretest Questions
1. True/False: Because speed and efficiency are hallmarks of
the American business
system, a short–term fix approach to organizational change is
often successful.
2. True/False: Recruiting experienced individuals to a company
that is planning trans-
formational change is risky because such people tend to resist
change.
3. True/False: Knowledge management is a system in which
organizations sustain
change by making intellectual capital available to employees so
they can continu-
ously learn.
4. True/False: Built-to-change organizations prioritize
temporary competitive advan-
tage over long-term stability by continuously implementing
important changes.
5. True/False: A self-designed organization is one in which
stakeholders choose the
direction of the company.
6. True/False: A common mistake in implementing change
strategy is to reject a
“blockbuster” innovation in favor of small, unexciting changes.

In Chapter 3 we discussed three companies that underwent
significant planned organizational
changes. They are summarized here to illustrate two successful
overall outcomes (Ford and
AlliedSignal/Honeywell) and one unsuccessful change (Avon).
Ford
After working at Ford for 25 years, Alan Mulally retired as CEO
on July 1, 2014—8 years after
leading Ford’s transformation. Chair Bill Ford said, “Alan
deservedly will be long remembered for
engineering one of the most successful business turnarounds in
history. Under Alan’s leadership,
Ford not only survived the global economic crisis, it emerged as
one of the world’s strongest auto
companies” (as cited in Media.Ford.com, 2014, para. 4).
Mulally’s change strategy, “One Ford,” worked. In 2006 Ford
lost $12.7 billion, its worst
performance ever. In 2010, however, the company had net
income of $6.6 billion, its highest
profit in a decade. The stock price was $1.25 a share in 2006
when Mulally came on board;
it closed at $17.21 on the day he retired. In 2011 he was
awarded stock bonuses worth
$56.5 million (Henry, 2011).
After careful research, Mulally targeted major problems at Ford
as “inefficiencies in production,
bad relationships with suppliers, unrealistic delivery dates—and
management that deflected
blame” (as cited in Henry, 2011, “One World, One Plan,” para.
2). With the One Ford strategy, he
reorganized the company’s operations and global managers to
focus on the same agenda.

Mulally’s overall success factors were that he had a compelling
vision for Ford as a mobility
company. He focused on technological innovation (for example,
MyFord Touch entertainment)
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Introduction
across vehicles and led product development with partnerships
in the consumer electronics
industry. This allowed Ford cars and trucks to transform into
mobile centers of entertainment
and communication that grew in concert with smartphones and
social media. Now all major
automakers focus on personal technologies to make cars mobile
entertainment and information
centers (Caldicott, 2014).
Mulally promoted accountability and collaboration across
leadership structures. He also carved
a path for outstanding execution. Ford moved forward with new
product vehicle development,
redesigning the Taurus, Focus, and Fiesta models. Mulally then
streamlined Ford’s products,
removing 97 weak auto products and concentrating on 20. This
resulted in a simpler, leaner
product line that allowed Mulally to focus on and showcase
manufacturing, product development,
and customer service excellence (Caldicott, 2014).

AlliedSignal/Honeywell
During Larry Bossidy’s term as CEO, Honeywell emerged from
a disastrous merger with
AlliedSignal in 1999, when the latter purchased Honeywell for
$14.4 billion. Honeywell operated
in the controls and aerospace business; AlliedSignal was at the
time an aerospace, automotive,
and engineering firm. There was a clash of cultures.
AlliedSignal was overwhelmed with cost
control, which caused it to neglect its long-term investments
and strategic planning. By contrast,
the original Honeywell was known for being customer-centric
and creative, but not for execution.
Bossidy was asked to find a successor who could handle the
challenge of merging the two warring
cultures. In 2002 he took a chance on David Cote, who had
worked under Jack Welch at GE.
Cote’s first step toward a turnaround was to terminate a long-
standing aggressive accounting
policy used by AlliedSignal and Honeywell and adopt a
conservative approach that put both
firms on a more level playing field. Secondly, Cote introduced a
new collaborative strategy for
dealing with Honeywell’s difficult legacy and litigious approach
to solving asbestos lawsuits
and environmental liabilities. Honeywell established a trust for
the claims, making expenses
predictable.
Cote also introduced principles of best practices in all
businesses to stop the conflicts between
the companies. He focused attention on manufacturing practices
in particular, sending

70 managers to a Toyota plant to master output production
methods. The rewards were
described as spectacular. Since 2002 the company’s sales have
grown by 72%, while its head
count only increased by 21% (Tully, 2012). By keeping fixed
costs like labor relatively flat, Cote
generated “operating leverage” that magnified brisk revenue
growth into outsize earnings.
Since 2003 Honeywell has increased sales by 7% each year, and
operating profits have grown by
12% (Tully, 2012).
Cote also excelled at company acquisitions. Honeywell acquired
70 companies. These moves
tripled Honeywell’s profits. In effect, Cote’s collaborative,
detailed, and big-picture approach,
along with his relentless focus on integration, has made him a
change champion at Honeywell
and within its industry.
Avon
Avon Products’ ex-CEO Andrea Jung stepped down in 2011 and
was succeeded by Sherilyn McCoy.
Several large change efforts had faltered and failed under Jung
since 2005 (Martin, 2012), and
Avon’s profits had declined every year since 2008. McCoy said
in 2012:
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Introduction
Avon’s products and pricing were “off target.” Technology and
service “did not
keep pace.” Senior managers were moved so often they couldn’t
gain traction.
Avon doesn’t need yet another new strategy. We need to focus
on the core of
Avon’s business: representatives, consumers and our people.
The challenge
we’re facing didn’t materialize overnight. They developed over
years, and our
solutions will take time as well. (as cited in Martin, 2012,
paras. 23–25)
What went wrong with Jung’s transformation efforts? What led
to her eventual downfall?
Himsel (2014) answered this question by identifying five
“traps.” Trap 1: Jung failed to develop
the agility to factor global scale and local requirements into
decisions. Avon attempted to
manage economies of scale and local customization
requirements with erratic business moves.
First it decentralized the system; then the following year it did
the opposite and went back to
centralized control. This led to the company being unable to
meet customer demands and being
perceived as overly reactive.
Trap 2: Jung did not align organization culture with strategy.
She may have underestimated the
power of culture, which can and did undermine even the
strongest strategy. She failed to evolve
the culture with the strategy.
Trap 3: Jung occasionally refused to hold leaders, including

herself, accountable for controversial
changes and performance-related decisions. When leaders do
not send clear, certain, and
consistent messages and follow-up actions, employees lose
confidence in them.
Trap 4: Jung failed to understand the demands of officers and
leaders when globally integrating
the company. During this transition, Avon needed a CFO who
could improve and consolidate its
financial systems, create consistent financial controls and
processes, and increase margins while
decreasing inventory. Instead, the company hired a CFO
generalist and “deal maker.” These skills
did not match the demands of a company expanding and
integrating into emerging markets.
Trap 5: Jung failed at due diligence and vigilance in having
employees work in “at-risk” global,
emerging markets. The result: Avon paid a $135 million
settlement with the U.S. Securities
Exchange Commission and the U.S. Department of Justice for
allegedly bribing Chinese
government officials. CEOs and their staff must screen and train
new hires to follow corporate
values and codes of law and ethics both at home and abroad
(Kowitt, 2012).
When McCoy took over from Jung in 2011, Avon’s revenue was
$10.7 billion. The loss from
continuing operations was $38 million. In 2014 revenue was
$8.9 billion, and the net loss from
continuing operations was $385 million. Avon’s numbers have
continued to decrease with McCoy
as CEO.

Critical-Thinking Questions
1. What went wrong at Avon, according to this brief case
scenario?
2. As a student of organizational change, identify a few key
concepts you have studied
that would have helped diagnose Avon when its sales began to
decline.
3. Identify a few actions that Mulally took at Ford that helped
turn Ford around at that
time.
4. Identify and briefly state your opinion on a strategic action
that Cote implemented
that helped changed the direction of AlliedSignal and
Honeywell at that time.
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Section 4.1 Failing and Succeeding at Change
Introduction: Back to the Future
Sustaining major organizational changes—that is, ensuring that
planned changes
endure—does not involve “one-shot” or quick-fix solutions.
Embedding change in organiza-
tions requires continuous top-down, bottom-up leadership and
process improvements—
including supportive and innovative actions throughout the

enterprise. The CEO and top-
level team generally define and lead the change, but everyone
must be involved in managing,
re-creating, and rejuvenating the ongoing renewal processes.
The transformational change programs at Ford, AlliedSignal,
and Avon required years to plan
and complete. Looking back at their successes and problems
informs us about the people and
processes used to implement change goals and the initiatives
undertaken in response to dif-
ferent environments.
4.1 Failing and Succeeding at Change
Although some transformational changes may start with a “big
bang,” embedding and sus-
taining them takes time, talent, and effort. Rosabeth Moss
Kanter (2002), Harvard profes-
sor and change expert, noted that effective change is sustained
by “long marches” not “bold
strokes.” In order to revitalize and sustain large-scale changes,
it is important to know some
of the major reasons why changes fail and also what makes
them succeed.
Why Change Programs Fail
There are more than enough reasons why organizational change
programs fail. We previously
discussed some in this text and have selected some of the more
notable ones to discuss here.
Understanding and learning from each of these can prevent
failure and help facilitate strate-
gies and efforts to sustain change. Fletcher and Taplin (2002)
list these reasons why organi-
zational change programs fail:

• Opposition to change
• Failure to recognize the need for change
• Superficial recognition of the need for change
• Failure to systematically implement change
• Short-term fix approach
• Structural impediments to change
• Cultural impediments to change
• Failure to sustain change
Large-scale, planned organizational changes are generally
complex processes that require
expertise and systematic methods that take the entire enterprise
into consideration. Just
as important, the people involved in and affected by the change
must not be excluded. Fail-
ing to communicate with and involve professionals and
employees who are affected by such
changes often creates opposition and resistance.
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Opposition to Change
Change programs are often destined to fail because of the top-
down imposed nature of the pro-
cess (Nohria & Beer, 2000). The following scenario is all too
common: a CEO or top-level team
member gets some new ideas from either talking to friends,
witnessing a change in a competi-

tor, attending a seminar, reading current business trends, or
following a current management
fad. He or she then decides to try something new with a division
or the entire company.
When change is arbitrarily imposed, poorly explained, and
hastily announced from the top, man-
agers and employees can become disillusioned, lose motivation,
and become increasingly resent-
ful and resistant to the change. Their work often changes and
increases, while resources and
attention to quality decreases. Managers in particular are thrown
into confusion when they are
asked to implement and guide changes that are not adequately
explained and for which they
have few or no blueprints or models. Also, when managers are
given little strategic direction or
rationale for implementing change, they typically revert to
emphasizing what they know best:
operational detail that is activity (not goal) driven (Fletcher &
Taplin, 2002).
For example, Friendly’s restaurant chain filed for bankruptcy in
October 2011 (Reuters, 2011).
Although many reasons explain this chain’s failure—including
the slumping economy and the
chain’s debt and financial situation—the lack of a clear
strategic direction was also an issue.
One author described Friendly’s in the following way:
The restaurant smells like a bus station. Food takes a long time
to arrive at the
table, no matter how painfully empty the dining room is. The
salad looks like
it was assembled a few weeks before I ordered it. Only the
nostalgia keeps me

coming back. (Baab-Muguira, 2011, “Times Have Changed,”
para. 3)
Restaurants like Friendly’s, which was founded in 1935, must
continually differentiate themselves
from similar establishments in order to remain competitive in
the marketplace. They must be
sure that the public knows what makes them unique. In 2009
Friendly’s former CEO, Ned Lidvall,
stated that the restaurant’s differentiator was ice cream and that
the lines and definitions of
brands in the industry were starting to blur (O’Brien, 2009).
Friendly’s attempts at competitive-
ness by emphasizing ice cream and other piecemeal marketing
ideas proved unsuccessful.
Failure can also occur when the pur-
pose of the change is not shared by the
people and is, in turn, separated from
the organizational processes required
for implementation. When an affiliate
of the private equity firm Sun Capital
Partners took over Friendly’s restau-
rant chain and filed for Chapter 11
bankruptcy protection in 2011, 1,260
workers, or more than 12% of that
chain’s 10,300 member workforce,
were told one evening they would lose
their jobs the following day. A spokes-
person for Friendly’s at that time
AP Images/Charles Krupa
Unfavorable economic circumstances, competition,
and unsuccessful change to differentiate Friendly’s
from other restaurants contributed to restaurant

closures and bankruptcy.
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stated, “We’re not trying to put people out of jobs. We’re trying
to ensure the future of the com-
pany” (as cited in Hines, 2011). That spokesperson noted that
closed locations were unprofit-
able and that closing those locations would help the company
and its parent, Sun Capital, gain
control over $296 million in outstanding debt (Hines, 2011).
The company survived the painful
downsizing and emerged from bankruptcy, then in 2012 hired
John Maguire, who helped rein-
vent the chain (Pohle, 2015).
Failure to Recognize the Need for Change
In the 1970s and 1980s, CEOs of some of the largest, most
innovative world-class U.S.-based inter-
national firms were entering a period they did not anticipate,
one featuring fierce global compe-
tition and new ways of streamlining operations. IBM, Digital
Equipment Corporation, Polaroid,
and General Motors were still resting on their past successes,
because they believed they could
continue to dominate their industries with bulky hierarchies,
unrealistic overhead costs, and out-
dated operations. As a result, Digital Equipment Corporation
and Polaroid did not survive.

Japanese auto and electronics companies entered the scene with
the first wave of new and
competitively priced products that were made with higher
efficiency operational methods.
The result was 2 decades of radically induced change for all
U.S. industries: total quality man-
agement, just in time, reengineering, and the introduction of
information technology into the
assembly line process.
Failing to recognize the need for change is not relegated to the
past. In 2014 the Huffington
Post published a list titled “9 iconic brands that could soon be
dead” (Jacques, 2014) because
of failure to adjust to contemporary markets, customers, and
business models. These included
Quiznos, JCPenney, Zynga, Red Lobster, BlackBerry, the
Women’s National Basketball Associa-
tion, Volvo, Martha Stewart Living magazine, and Abercrombie
& Fitch (Jacques, 2014).
The inability to recognize the need for change continues to be a
major cause of failed change
programs. Other causes for failure include changes that are
initiated too late to regain com-
petitiveness; are initiated poorly, without proper attention to
how change processes should
be planned; or are not initiated at all.
Superficial Recognition of the Need for Change
Some CEOs and organizations move forward with a change
without the necessary commit-
ment to allot the resources and harness the energy of the entire
enterprise. They believe that
targeting a certain division, business unit, department, program,

or management practice for
change will be enough to solve the problem and generate new
opportunities throughout the
entire organization.
In such instances concern for cost, in terms of time and money,
is the prohibitive factor. In other
instances such shortsightedness may be due to a top-level
individual, team, or dominant coali-
tion’s lack of political or business acumen or some other
limiting capacity. Whatever the spe-
cific reasons for not understanding or taking action on the need
for total change, this general
type of thinking has been characterized as myopic or
nearsighted (Colea & Coltea, 2013)—that
is, top-level leaders are trapped into thinking in terms of the
status quo: “If it isn’t broken, don’t
fix it.” Moreover, leaders do not direct enough attention to
frontline managers, and they do not
focus these managers on specific actions needed to achieve
stated business outcomes.
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When incremental, piecemeal, or selected organizational targets
for limited change are
adopted in place of needed enterprise-wide and transformational
changes, the result is often
loss of resources, time, effort, and competitiveness. For

example, a department in a large uni-
versity organization needs laptops replaced every 4 years on a
revolving basis for eligible
members who sign up for the program well in advance. This is a
change that is not large in
scope and that does not need a complicated plan. At the entire
university level for all depart-
ments, a change plan may be needed.
An example of a successful organizational change that followed
a plan is the United Arab
Emirates’ du Telecom. The firm was started in 2006 and offers
mobile and fixed telephony,
broadband connectivity, and Internet Protocol television to
consumers and businesses. The
company acquired almost 40% of the region’s market share by
2010 and has sustained a 32%
growth rate since.
The company’s strategic capability, planning, and leadership are
factors that contribute to
its success. For example, the firm expanded by joining China’s
Huawei Technologies Co.
Ltd. in 2013. Huawei is a multinational networking and
telecommunications equipment
and services provider. This partnership and du Telecom’s
strategic and tactical expertise
and vigilance have enabled the firm to (a) reduce project
failures; (b) reduce the number
of employees needed per project; (c) lower costs and tighten up
time frames and projects,
which cost less than predicted; and (d) create a single point of
contact to manage projects
(Wang, 2015).
Failure to Systematically Implement Change

Failing to systematically lay out a complete change program and
implement that plan can lead
to catastrophe. Productivity and financial gains are more likely
to be obtained when imple-
mented with a systematic approach (Kaydos, 2015). Companies
that attempt to change one
system without coordinating and aligning complementary
related systems to facilitate the
change generally fail to achieve their original goals.
Examples abound and include airlines that attempt to improve
customer relations by training
flight attendants but not check-in agents; firms that attempt to
decrease time between point-
of-sale and collection of payment by improving sales
professionals’ strategies but do not
change the internal processing of payments; companies that
move marketing content online
to extend their product’s reach to potential customers but do not
create systems to process
online purchases; and so on. When organizations do not study
all the core processes in their
business from the perspective of their new vision and change
goals and do not decide on an
implementation plan that aligns all the major systems, failure is
on the horizon.
Short-Term Fixes
The American capitalist business and financial system is based
on short-term time horizons.
U.S. corporations operate on a quarterly basis and are valued on
both short- and long-term
information. Financial analysts evaluate, predict, and
recommend buys, holds, and sells on
stocks from quarterly reports using past and future trends.
Although speed, efficiency, and

innovation are hallmarks of the American capitalist business
system, the short-term perspec-
tive also can and does contribute to myopic decision making and
short-term fixes (Tanden &
Effron, 2015).
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CEOs and executive teams that rush environmental scanning,
planning, and problem/opportu-
nity diagnosis may run the risk of targeting the wrong problems
and opportunities. Then, the
rush to hasty implementation compounds problems that can
create further failure, including
being left with poorly coordinated and ill-prepared
implementation teams that sacrifice the
quality of implementation; suboptimizing goals (selecting less
than desirable goals so as to
meet time and task completion pressures); and preparing the
change effort for increased
costs, wasted effort, and lack of goal attainment.
Diagnoses and implementation plans that impose a short-term
fix mentality and framework
on a large-scale change program usually suffer the symptoms
described here, as well as other
unintentional consequences that eventually lead to unnecessary
costs and delays, if not failed
goals and wasted time and effort.

Structural Impediments
to Change
Large corporations’ bureaucratic struc-
tures and hierarchies have posed major
obstacles to implementing large-scale
change. In fact, the methods of business
process engineering and reengineering
were revolutionary in that they elimi-
nated unnecessary barriers in all busi-
ness processes and were designed to
decrease time, effort, and costs while
increasing speed and effectiveness in
moving a task from start to finish. Orga-
nizations that begin with structure over
strategy and purpose risk not being
able to transform a company’s vision to
a new state.
Corporations are generally moving toward less structure to
achieve more economies of scale
and effectiveness. As we will discuss in the following section,
alternative solutions to tradi-
tional vertical structures are being used as a result of change
initiatives. Among these alterna-
tive solutions are outsourcing, streamlining business processes,
and experimenting with new
forms of networked structures and communities of shared
competencies.
Cultural Impediments to Change
Resistance to change usually stems from an old culture in which
employees refuse to give up
leaders’ dominant values, assumptions, and norms. The previous
state of the organization may
have worked well in a past environment or era but is no longer

as efficient as it needs to be.
With a new vision and fresh values—and perhaps leaders—new
cultural meanings, lan-
guages, symbols, and experiences must be embedded. When the
change champions and lead-
ers do not pave the way for a shift in the alignment of the
organization’s dimensions and
systems, previous cultural values tend to prevail with some
groups and managers; the status
quo is often the default position, even if it is to the detriment of
the organization.
Jirsak/iStock/Thinkstock
The traditional business hierarchy holds many orga-
nizations back. Companies are beginning to move
away from this structure for greater efficiency.
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Failure to Sustain Change
It has been estimated that 70% of large-scale change initiatives
in companies fail (Colea &
Coltea, 2013). This is due to any one or a combination of the
factors discussed here.
Generally, people settle back into the status quo if they do not
have to change. Change cannot

be sustained if people in an organization maintain a
bureaucratic and functional mind-set
and refuse to adopt new attitudes, beliefs, and behaviors.
Sustaining change requires strong,
committed, and informed leaders who involve others in the
alignment of all an organization’s
systems around the new vision.
Organizing to Succeed at Change
Maintaining an organization’s alignment to a new vision and
future state requires leaders and
followers to keep the organization’s big picture in mind. The
model shown in Figure 4.1 and
discussed in Chapters 1 and 2 provides a useful reminder that
leaders are an integral force at
the outset in guiding the alignment of organizational dimensions
to the new vision and future
state.
Customer Partnership
Transformation
Current to Future State
Customer Satisfaction
Outputs
Customer Requirements
Inputs
Vision and
Strategy

Culture
Nature of
Work
Structure
Technology
People
• Leadership
• Environment
• History
• Resources
Organizational Level
• Competitiveness
• Market share
• Product and service
quality
• Responsibility
(environment and
community)
Group Level
• Synergy
• Performance
• Effectiveness
• Satisfaction
Individual Level
• Performance
• Satisfaction
• Development and

growth
Measurement
Systems
Customer Partnership
Transformation
Current to Future State
Customer Satisfaction
Outputs
Customer Requirements
Inputs
Vision and
Strategy
Culture
Nature of
Work
Structure
Technology
People
• Leadership
• Environment
• History

• Resources
Organizational Level
• …
Supply Chain Integration
Supply chain integration is a major contributing factor to
organizational success. The goal of supply chain integration is
alignment within the supply chain. As a business leader, how
can you achieve greater supply chain integration with suppliers
and customers?
Amazon is a prime example of a company that has successfully
managed its supply chain to achieve growth and profitability.
Research the progression of Amazon's supply chain integration.
Write a 1,000-1,250-word paper that address the following
questions:
1. How do sales and operations planning in supply chain
integration impact the company overall? What would Amazon's
medium- and long-term forecast inform the operations
management department? How do logistics, transportation
modes, and warehouse locations impact Amazon's
competitiveness?
2. How does global sourcing and procurement impact the overall
effectiveness of the supply chain? What are the benefits and
challenges that have occurred when outsourcing logistic and
other functions?
3. How has Amazon successfully leveraged e-commerce
strategies to promote supply chain integration and boost sales
and growth for the organization? Which strategies have been
particularly effective and why?
4. Do you feel that Amazon sets an example for other companies
to model regarding supply chain integration? Be sure to explain
your rationale. Consider the ethical implications in your
response.
Incorporate five to seven resources to support your paper.
Prepare this assignment according to the guidelines found in the

APA Style Guide, located in the Student Success Center. An
abstract is not required.
RUBRIC
Criteria
Percentage
Excellent (100.00%)
Content
70.0%
Sales and Operations Planning
20.0%
An explanation of how operations planning in the supply chain
integration impacts the company overall makes meaningful
connections that are clear, concise, and integrated. An
explanation of how medium and long-term forecasting informs
the operations management department is substantiated with
acute detail. An explanation of how logistics, transportation
modes, and warehouse locations impact competitiveness is clear
and logical and illustrates an understanding of the content.
Supporting sources show a deep understanding of the content.
Global Sourcing and Procurement
20.0%
An explanation on how global sourcing and procurement impact
the overall effectiveness of the supply chain makes meaningful
explanation of benefits and challenges that have occurred when
logistics and other functions have been outsourced is clear and
logical and illustrates an understanding of the content.

E-Commerce
20.0%
An explanation of how Amazon successfully leverages e-
commerce strategies to promote supply chain integration and
boost sales growth for the organization makes meaningful
explanation of which strategies are particularly effective is
substantiated with acute detail. Supporting sources show a deep
understanding of the content.
Model Company and Ethical Implications
10.0%
An explanation of Amazon as an exemplary model, including
discussion of rationale and ethical implications, makes
meaningful connections that are clear, concise, and integrated.
Organization and Effectiveness
20.0%
Mechanics of Writing (includes spelling, punctuation, grammar,
language use)
5.0%
Writer is clearly in command of standard, written, academic
English.

Argument Logic and Construction
8.0%
Clear and convincing argument that presents a persuasive claim
in a distinctive and compelling manner. All sources are
authoritative.
Thesis Development and Purpose
7.0%
Thesis is comprehensive and contains the essence of the paper.
Thesis statement makes the purpose of the paper clear.
Format
10.0%
Paper Format (use of appropriate style for the major and
assignment)
5.0%
All format elements are correct.
Documentation of Sources (citations, footnotes, references,
bibliography, etc., as appropriate to assignment and style)
5.0%
Sources are completely and correctly documented, as
appropriate to assignment and style, and format is free of error.

Total Weightage
100%
5 Adapt and Rejuvenate: Agile and Learning Organizations
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Learning Objectives
After reading this chapter, you should be able to do the
following:
1. Analyze key traits of successful change leaders.
2. Describe how agile organizations approach change compared
to traditional ones.
3. Examine the characteristics, levels, and principles of learning
organizations.
4. Explain the relationship between learning and change in
organizations, the process a company goes
through to become a learning organization, and the importance
of leadership.
5. Summarize the mind-set that both agile and learning
organizations must have in the 21st century.
wei82650_05_c05_207-248.indd 207 12/15/15 9:46 AM

Introduction
Change is the status quo. Companies the world
over realize that success depends on their ability
to respond to new opportunities and threats as
they emerge, and to keep rethinking their
strategies, structures, and tactics to gain
ephemeral competitive advantages.
—Perry Keenan, Stephanie Mingardon, Harold Sirkin,
and Jennifer Tankersley
Pretest Questions
1. True/False: The traditional leadership traits of decisiveness
and composure con-
tinue to rank high in current change leadership models.
2. True/False: Agile organizations tend to have a high tolerance
for failure.
3. True/False: A learning organization is holistic, which means
it considers how the
entire industry and business market contribute to its specific
goals.
4. True/False: Learning organizations respond well to market
swings because they can

bring in outside marketing experts to advise them on how to
react.
5. True/False: In the 21st century, both agile and learning
organizations must accept
that change demands doing things differently.
6. True/False: Tension can actually be a source of energy and
renewal for a learning
organization.
Hyundai’s current successes may be surprising to those who
know its past. The Korean
automotive company has shed its former image of producing
low-quality, “me-too” vehicles—
and the experience of suffering a near collapse in sales in
1998—and replaced it with that of a
$66 billion company that controls 5% of the market today
(Holstein, 2013). The company’s cars
have vastly improved and are moving to the top of the list in
quality: J. D. Power and Associates
ranked Kia (owned by Hyundai) as number two, behind Porsche,
and Hyundai as number four,
behind Jaguar (Levin, 2015).
This change happened by design, not by chance. Hyundai’s
skills in design, product launch, and
consumer awareness are credited to its recently implemented
product management model. The
company’s overall success is attributed to the fact that it has
focused leadership; a dynamic
culture; competitive strategies; high-quality products;
innovative design; operational excellence;
shrewd marketing; and an empowered, disciplined workforce.
wei82650_05_c05_207-248.indd 208 12/15/15 9:46 AM

Introduction
Chung Mong-Koo, chair of Hyundai Motor Company, assumed
leadership in 2000. He succeeded
his father, Chung Ju-Yung, who founded the Hyundai Group.
Chung has rejuvenated the
workplace, changing Hyundai’s culture and its overall approach
to auto manufacturing. The
company’s redefined culture emphasizes learning and
innovation. This focus became clear in
2009, when Chung began recruiting top-level design talent from
Germany, Italy, and the United
States (Holstein, 2013) to execute his new design approach:
fluidic sculpture, inspired by natural
shapes. The company’s new designers are young and keep an
edgier, innovative culture that has
a degree of fearlessness (Levin, 2015).
Chung didn’t make these changes alone. John Krafcik, CEO of
U.S. operations, helped Chung
implement new strategies to move the company forward through
2013, which employees
meticulously executed. Hyundai’s workplace culture operates
with a mix of Korean superiors
and coordinators who are mostly U.S.-educated and more
Westernized than their counterparts
in Seoul. Coordinators help bridge communications between
Western and Eastern employees
and in some ways are equals of the U.S. executives for whom
they work (Holstein, 2013).

As the company expands its global reach, its major concerns
include balancing quality with
production and innovation with sustainable reliability, while
maintaining an entrepreneurial
pace in a hypercompetitive environment.
Critical-Thinking Questions
1. What are some competitive advantages Hyundai has shown
that have contributed to
its marketplace success?
2. What changes has Hyundai made to evolve from a low-
quality, me-too company to a
significant global competitor? (In your answer, refer to concepts
in the text as well as
specifics in the opening scenario.)
wei82650_05_c05_207-248.indd 209 12/22/15 10:21 AM
Introduction
Introduction: The Road Ahead
We began this text by defining different types of change and
showing how organizational
change can be diagnosed, planned, and implemented. In the
chapters that followed, strategies
and methods for sustaining change were presented. Here we
examine how organizations can
adapt to continuous change by emphasizing innovation,

creativity, agility, and learning, as is
the case with Hyundai.
Leading people is a crucial part of whether an organization
successfully adapts to continuous
change. Although leaders must facilitate and manage change by
articulating clear strategies
and creating flexible structures, they must also create a culture
that sustains not only the
“hard” dimensions of change (like strategies, structures, and
systems) but also its “soft”
dimensions, which involve motivating and developing people to
higher performance levels.
While transformational change happens rapidly and sometimes
dramatically, organizations
must also continue to make equally dramatic adjustments to
survive and succeed (Paton &
McCalman, 2000). At the same time, developing cultures that
attract high-quality talent
involves learning, innovation, and creativity.
Motorola’s 2011 restructuring exem-
plifies this type of continuous inno-
vation and creativity. The company
successfully split from a unified cor-
porate parent into Motorola Solu-
tions, which houses its businesses
that manufacture wireless devices
that are sold mainly to enterprises
and governments; and Motorola
Mobility, which sells cell phones and
set-top boxes to consumers. CEO
Greg Brown has helped engineer
the transformation from cell phone,
cable set-top box, wireless network,
automotive, and barcode scanner

divisions to a pure-play public-safety
LTE, a network technology that offers
high speeds and low lag times over
long distances. (Among other uses, it
provides first responders with valu-
able photos, video, and other infor-
mation via police radios equipped with specially designed
smartphones and other devices).
The turnaround involved trimming $500 million in annual
operating expenses in 3 years,
changing out 21 of 70 vice presidents, and adding 20% more
sales staff (Pletz, 2015).
Organizations that plan, implement, and strive to sustain change
must continually adapt
to unforeseen global competition, uneven economic shifts, new
technologies, and the rapid
increase of available data. Other challenges may be indirect and
less dramatic, such as learn-
ing how best to incorporate recent graduates into the workforce
when they may lack certain
skills because educational systems can’t keep pace with changes
in the workplace (Marquardt,
AP Photo/Richard Drew
CEO of Motorola
Solution
s Greg Brown helped Motor-
ola Inc. split into two successful companies, Motorola

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