Food for thought

On the folly of rewarding A, while hoping for B Managers who complain about lack of motivation in their workers might do well to consider the possibility that the reward systems they have installed are paying off for behavior other than what they are seeking…and this is what regularly frustrates societal efforts to bring about honest politicians and civic-minded managers. —Steven Kerr (AME, 1995, p.13)

Session 3 Managing Change at the Individual Level

Topics for Today

• Recap • Theme 1: individuals as agents and recipients of change.

– Case study: John Smithers.

– Discussion: your own experience in a change process.

• Theme 2: The role of incentives for individual behavior.

– Debate: Extrinsic or intrinsic motivation?

• Summary and takeaways

5 targets in managing change in a loosely coupled system Sources Solution Strategy •Presumptions of logic Doubt produces change Socialization processes Re-socialization produces change •Differential participation rates •Constant variables that disconnect units •Corruption of feedback loops Equalization produces change Distraction produces change Dependability produces change Attention management Training programs Decision structure Organizational slack Consultant, persistent expert sources

The Paradox of strategies: Exploration versus exploitation March 1991 • “Exploitation” or “exploration:” The strategic choice • Examples – IBM in the 1980s: PC or Mainframe?

– 3M: competing through new niche or existing markets?

• The trade-off between the two strategies • “Exploitation”: the temptation – Political – Cultural – The need for strategic vision—the trade-off • Reinterpreting 3M and Motorola

Theme 1.

Individuals as agents and recipients of change • Changes start and end with individuals – As strategists – As implementers – As recipients • Need to understand the role of individuals in the change process – The case of John Smithers • Some observations – The Silicon Valley phenomenon – Sun Hydraulics – Six Sigma Quality Program in Citibank • Questions: – What motivates individuals to behave this or that way?

– What do you think John Smithers’ role in the change process?

Case Study: John Smithers

Organizational chart at Sigtek

President and Founder Charles Bradley Vice President, Engineering Andrew Cross Vice President, Operations Richard Patricof Engineering Services Manager John Smithers New Products Introduction Manager Sam Murphy

The Context of Change

• The environment – Economic recession – Market competition – Changes in parent company (Telwork) – Need for change • Organizational structure – Tensions between engineering and operation • Organizational culture – Different managerial styles across departments • The introduction of the change program (TQM)

Background: Total Quality Management • Customer focus • Emphasis on continuous improvement • Problem solving processes with extensive tracking, measurement • Empowerment • Create fit between the social and the technical system – Focus on crossover or hand-offs.

– Benchmarking, comparing with norms – Ownership across boundaries of output

John Smithers

• Describe the approach to change at Sigtek • What was the situation Smithers faced in this assignment?

– barriers to change – drivers to change • Was Smithers effective?

– implementation steps – why did things get wrong?

• What should he have done differently?

• What are the future prospects for this quality control initiative? Can TQM be revived?

Consider Sigtek’s chronology of events

• April: • May-June: • July: • August: • September: • October: • November: • December: Smithers receives assignment; paired with enemy Murphy Murphy and Smithers (S/M) get 3 week TQM training Senior managers attended 2 day seminar S/M meet with TQM Team; Patricof denies one week teaching delay 25 employees trained [excitement]; follow-up action [frustration];accounting rejects S’ charge back Training continues Request temporary recoup break denied; Patricof promoted Smithers asked to be relieved

Change at Sigtek

• Barriers – interdepartmental conflicts – philosophical differences with partner Murphy and Patricof – Inflated employee expectations – Cultural resistance to change – Imposed, dogmatic program – Distraction of business demands – Smithers’ own “regular assignment • Drivers: – Opportunity to build bridges and integrate multiple businesses – Pent-up needs/problems – Need to break old habits – Excited, participative manager – Highly acclaimed program; widely known – Opportunity to save the business

Analysis from the three lenses

The lens of Strategic design

• Strategic issues: – Timing of change – Top-down or bottom-up – Incremental or quantum changes?

– A systematic program for change?

• Alignments between personnel, incentives, structures • Identifying problems in training program the workfloor.

 resolved at • Mismatch between the parent company and Sigtek in the change program.

The Political Lens

• Tensions between engineering and operation groups • The failure of building a political coalition – Support from top managers?

• Competition of interests and resources – Multitasking – Attention allocation • Different interests versus a common cause for change?

– Managers use the six sigma quality program to pursue their own agenda.

– Why didn’t Patricof allow a break in the training process?

The cultural lens

• Empowerment as the key to TQM – Autocratic, unresponsive to workers’ feedbacks – Ill fitted for the Six Sigma Quality Program • More on “culture” in the next session

Involving the whole organization for change

• Three change constituencies:

– strategists (declare the need for change, but no support or direction) – the implementers (mandate a new way of doing without considering internal customers’ needs) – the recipients (meeting felt needs)

• Sigtek problems:

– limited parent support; Patricof negative talking the talk – Smithers’ self-righteousness and lack of EI alienates internal customers – the recipients’ needs are disregarded, not aired

Takeaways for Smithers

• Have emotional intelligence to “register” resistance to change and coopt adversaries. Do not dig your own (TQM) grave.

• Use group composition to build bridges between engineering-operation department.

• Develop some small successes; Take some measurements. Grab the power that comes with empowerment!

• Build political capital; manage Patricof and Bradley, even Telwork.

Take aways for Telwork

• Signal support for TQM. Identify strategists, implementers and recipients • Provide milestones and other support • Empower people by giving them a sense of ownership • Create incentives for TQM team. Create customer awareness • Need to motivate change agents, need to understand their aspirations, goals, and needs.

• Need a systematic change program: timing—layoffs, cutbacks, etc.

Theme 2: On Motivating People

• Management is about managing people – The mission of business school training – The cases of Silicon Valley and Morgan Stanley • Is incentive an indispensable managerial tool?

– What is incentive?

– Do people respond to incentives?

– The folly of rewarding A, while hoping for B • What kinds of incentives?

– Incentive pay or intrinsic motivation?

– Individual-based or collective-based – Short-term based or long-term based?

– Types of jobs (professional versus nonprofessional)

Debate: Extrinsic or Intrinsic Motivation?

Extrinsic motivation

• For – The bottom line: economic rewards have to be competitive – Economic rewards are indicators of achievement and status – Incentive pay (to induce higher level of efforts) – Labor costs versus labor investment.

• Against (Kohn): – Induces only temporary compliance.

– Pay is not a motivator.

– Rewards punish.

– Rewards rupture relationships.

– Rewards ignore reasons.

– Rewards discourage risk-taking.

– Rewards undermine interest.

Intrinsic Motivation

• For: – The Hawthorn experiment; – Individuals enjoy work, collective activities; – Individuals respond to peer pressures, social comparison; – Socialization, professional training shape behaviors; • Against (?): – To what extent?

– Under what conditions?

In general, the more cognitive sophistication and open-ended thinking that was required, the worse people performed when working for a reward.

— Aflie Kohn (2000, p. 55)

Summary and takeaways

• Motivation and incentive matter.

• Incentives take different forms – Financial, social recognition – Individual-based, collective-based – Short-term, long-term • Motivations vary with— – Work environments – Different types of career lines – Stages in the life course • A key managerial task is to figure out what motivates your employees and design your ‘incentive plan’ accordingly.