Manfred Kets de Vries and Laura Guillén Ramo
INSEAD, France
and
Konstantin Korotov
European School of Management and Technology, Germany
Like all weak men he laid an exaggerated stress on not changing his mind (W. Somerset Maugham, Of Human Bondage)
‘Any company can become a great place to work’. This is an appealing statement, but how are ‘great places to work’ characterized? At the heart of the definition of a great place to work are trust and mutual respect between senior executives and their employees, and value-driven leadership – performance with purpose. Great places to work show a strong commitment from CEO and senior management (who walk the talk), a genuine belief that people are indispensable for the business, active communication among the entire organization, the perception of a unique culture and identity, a well-articulated vision, and values that are lived and experienced at all levels of the organization (Schrage, 1999; Kets de Vries, 2001a, 2006).
But even if many executives know what characterizes a great place to work, they fail in their attempts at creating one. Why are these organizational characteristics – in theory quite clear – so difficult to attain? How do organizations become and remain great places to work? What can leadership do to motivate people to create a better organization? And how do high performance organizations keep stress among their employees at acceptable levels? In this chapter, our aim is to increase our understanding of organizational change processes and the relationships between change, organizational culture, leadership and stress.
Organizations have to adapt their behaviour on a continuous basis in order to sustain their competitive advantage. The need for change usually induces a high degree of stress (Kets de Vries & Balazs, 1998; Lichtenstein, 2000). The good news is that it is precisely this that constitutes a major catalyst for organizational change. As the saying goes, ‘no gain without pain’. Stress at individual and organizational levels can help get change on its way. Stress is an acknowledgement of the serious consequences if the organization carries on ignoring changes in the environment. Negative emotions are potential triggers of change.
Changing mindsets is never easy. Usually, a strong jolt is needed before people realize that the traditional way of doing things is no longer adequate. Awareness of the need for change is achieved most effectively when the employees in an organization come under internal and external pressure. Organizational stress from both directions, and the associated discomfort, may trigger organizational change processes.
Kets de Vries refers to a four-stage process to illustrate how leaders accept the need for change (Kets de Vries & Miller, 1984; Kets de Vries, 2001a 2006). First, pain in the organizational system makes people aware of the serious consequences of perpetuating existing patterns. Second, key power holders react to this awareness with shock and disbelief. Third, these reactions can activate defensive routines that block further movement – fear of the unknown may contribute to a reluctance to introduce the kind of change that is needed. Some executives will be concerned that any form of change will threaten their professional identity and financial security (Kets de Vries, Carlock & Florent-Treacy, 2007). Consequently, the organization may continue to act as if nothing is happening. Finally, there is the recognition that the status quo cannot be maintained and that change has to be faced. There comes a point when clinging on to the status quo only creates greater problems and a higher level of stress. At that point, diving into the unknown is the lesser of two evils and the organization is ready to enter the change process. Figuring out how to deal with this may seem an insurmountable obstacle for the key power holders in an organization, especially if cultural norms have broken down in a changing environment.
What are the factors that cause stress in organizations? How can organizational change be conceptualized? And what can be done to transform the mindset of people within the organization?
In the first part of this chapter, we discuss the internal and external pressures that may trigger organizational change – or conversely hinder it and add to levels of personal and organizational stress. The second section explores how we can conceptualize change management. In the third section, we comment on the process of individual and organizational transformation and describe how to create the psychological space that can help it to take place (Korotov, 2005; Kets de Vries & Korotov, 2007).
Some of the external factors that can cause pain in organizations are threats from competitors, declining profits, decreasing market share, scarcity of resources, deregulation, technological demands, and problems with suppliers and groups of customers. Examples of internal pressures are ineffective leadership, morale problems, a high turnover of capable people, absenteeism, labour problems, increased political behaviour in the company and turf fights (Kets de Vries, 2001a).
Because of the importance of leadership to organizational functioning, we are going to focus on the relationship between leadership and stress and look at it from two different perspectives. First, we will talk about stress associated with playing a leadership role in an organization and then examine how the level of stress experienced by employees in an organization may be related to the way leadership executes its role. Stress at the individual level may transform into stress at the organizational level; dysfunctional leadership may convert into free-floating paranoid and depressive anxiety within the organization as a whole (Jaques, 1974). We start by looking at the psychological costs of ineffective leadership at the individual level and go on to explore how this translates into organizational stress.
Kets de Vries, Korotov and Florent-Treacy (2007) argue that recent changes in society and the world of work have contributed to a significant rise in the psychological pressures of leadership. For example, Coyne and Coyne (2007) suggest that “the mere arrival of a new organizational leader represents a high level of stress for the various constituencies in the organization including the new boss.” There are a number of factors that contribute to this:
To the person in the executive corner office, the ‘now what?’ crisis is particularly acute, given trends in executive turnover at the top. A recent Booz Allen Hamilton study by Lucier, Wheeler and Habbel (2007) suggests that in the period from 1995 to 2006 there was a 59% growth in annual CEO turnover. Within the same period there was a dramatic 318% increase in performance-related involuntary turnover. In 2006 almost one in every three departing CEOs left involuntarily, a surge from only one to eight in 1995. The tension of high expectations and an unstable future is contributing to the stress levels of senior executives.
All members of an organization are intimately affected by the actions or inactions of those at the top. Many senior executives are genuinely unaware of how their behaviour may impede healthy functioning in the organization. Not only do they fail to realize how stress inducing their behaviour can be, they often have no idea how to manage their own stress level. This lack of self-awareness can seriously affect performance throughout the organization (Kets de Vries et al., 2007).
Kets de Vries (Kets de Vries & Miller, 1984; Kets de Vries, 2006) has identified a number of constellations of neurotic executive behaviours contributing to elevated stress among followers:
Because organizational culture is highly susceptible to the influence of leadership behaviour, neurotic leadership patterns lead to toxic organizational cultures – and vice versa. Neurotic leadership patterns trigger social defences in followers, diverting energy away from attaining organizational goals.
Stress in the organization makes employees question the fundamental purpose of the organization. Existential anxiety of this kind accelerates all sorts of dysfunctional organizational processes, such as unrealistic ideals, toxic corporate cultures, neurotic organizations, or problems with motivation. Within such a work environment, people experience negative emotions, become alienated, and drift with no sense of direction. A dysfunctional culture like this can impede any remedial action on the part of senior executives. Even if they sincerely want to improve organizational health, they don’t know how to go about it. This kind of vicious circle can only be broken by creating a culture of purposeful performance – a concerted effort towards organizational renewal.
But even if most organizations accept that they must either change or die, a remarkable number of change initiatives fail (Beer & Nohria, 2000). The first critical step is to develop the leader’s awareness of the kind of leadership behaviour that has a negative impact on the organization’s membership. But many leaders are sadly reluctant to seek and receive honest feedback about the impact their behaviour has on their subordinates. What measures can be taken, in spite of people’s resistance to change, to manage organizational renewal? How can leaders take advantage of their adaptive capacity to turn their organizations into great places to work?
Various authors (e.g. Beer & Nohria 2000; Palmer & Dunford, 2002) have suggested two approaches to organizational change. The ‘hard’ approach is where shareholder value is the only legitimate measure of corporate success; the ‘soft’ approach is to develop a corporate culture that enhances human capability through individual and organizational learning. According to Beer and Nohria (2000), change can be managed through engagement in controlling activities and shaping capabilities.
Drawing on this polarity, organizational change processes may be induced by transformations in the ‘real’ (external) world, such as modifying existing technology, or changing organizational structure and policies, as well as in the inner world of the individuals (Amado & Ambrose, 2001; Kets de Vries, 2001a, 2006). There is an identifiable continuum in this process, ranging from intended to unintended change outcomes (Palmer & Dunford, 2002). Intended change presupposes rational modifications. In this case, change agents assume that by introducing planned (and rational) changes, the entire organization will change in the intended direction. Unfortunately, changing organizational structure, policies or making rational decisions may generate only the illusion of order and control. Usually, the CEO and other influential executives assume that employees will internalize the new rules and regulations they prescribe and the organization will change. However, employees are not necessarily rational human beings but subject to a considerable amount of out-of-awareness behaviour.
Organizational defensive patterns cannot be changed merely by making structural changes (Argyris, 1993; Kets de Vries, 2001a, 2006). The introduction of structural changes only scratches the surface of any transformation effort, because as we have already intimated, there are changes that cannot be easily and obviously manipulated by the power holders in an organization. These are changes in the employees’ inner world – the way they perceive reality. Considerable social interaction is needed among organizational participants to bring about mindset change. Because a large amount of behaviour takes place at an unconscious level, mindset changes are not easily accomplished. If organizational leaders want to be effective, however, they have to pay heed to these processes.
The organizational change process that we are going to illustrate is based on a model (Kets de Vries, 2001a) that recognizes the interplay of a number of variables:
All too often, senior executives ignore the inherent tensions between the ‘hard’ and the ‘soft’ issues. Beer and Nohria (2000) and Kets de Vries (2001a) maintain that there are ways to resolve these tensions, and that they require goals that embrace the paradox between controlling activities and shaping capabilities. To enable organizational change, leaders must set directions from the top that engage all the people in the organization, and simultaneously address the ‘hard’ issues (structures, technology and systems) and ‘soft’ issues (corporate culture and values). In the next section we illustrate how such a transformation process can be implemented within an organization.
The role of senior executives in leading organizational change processes is to provide supportive leadership that fosters a shared mindset and new behaviours. They must also ensure that changes are institutionalized in the daily social practices of the organization. Kets de Vries’s (2001a, 2006) model of change provides a roadmap that helps management overcome organizational resistance by using a participative approach to engage the entire organization in the change process. Referring to the model, we will examine the four stages of the organizational change processes – creating a shared mindset, changing behaviour, institutionalizing change, and transforming the organization.
The first leadership task is recognizing the need for change. To get the process of change into motion requires a strong inducement in the form of pain or distress. At this point, leaders may face the unknown with multiple stress-inducing fears: am I doing the right thing? Will my team support my decisions? Am I able to make unpopular decisions? Am I able to lead the change process? How am I going to ‘sell’ my project? Even when the need for change has been acknowledged, people may still need a push that converts their fears into something actionable.
Bennis and Thomas (2002) use the term ‘crucibles’ to describe the often traumatic negative events (life-threatening episodes, periods of self-doubt) that leaders experience and which force them to confront change. Crucible experiences unleash deep self-reflection and a process of trial and error that helps them examine their distinctive leadership abilities. Astute senior executives will take advantage of the learning potential of ‘crucibles’ by making appropriate developmental interventions within the organization. But they cannot do it alone. Key power players need to build strong alliances and obtain social support with other power players in the organization.
Social support has been identified as the single most important factor in helping an individual overcome barriers to change (Kets de Vries & Balazs, 1998). To provide social support, organizations may need to create safe environments for managing personal and organizational change. But before someone can change direction, he or she has to stop.
Executive coaching or transformational executive development programmes provide safe environments for structured feedback. Such feedback tools, particularly 360-degree instruments that touch on psychodynamic processes, allow a leader to observe and reflect, to identify behavioural patterns that contribute to personal and organizational stress, and to start thinking about change. These transformational programmes, which frequently take the form of in-company workshops, may foster behavioural change that helps executives become more effective in organizational and personal settings. A significantly higher level of self-awareness is one of the usual outcomes of such programmes (Kets de Vries et al., 2008). Change facilitators in these transformational programmes are some social practices (such as group coaching, networking and 360-degree feedback processes), the elaboration of action plans, the exploration of new selves through a test-and-learn process and the creation of a learning community that supports results over the long term (Kets de Vries et al., 2008).
Members of the senior executive team should take the lead in participating in these transformational group interventions. They will have the opportunity to deal with otherwise ‘undiscussable’ issues and establish a shared leadership focus. In addition, these interventions may build a richer, deeper understanding of the leaders as individuals and the real reasons for their behaviour. The main objective of participating in transformational workshops is to develop a shared mindset characterized by collective ambition, commitment and motivation. Participation by a group of senior executives may help them recognize the need for action and acquire an external focus, critical at this stage of the transformation process (Kets de Vries & Balazs, 1998). The programme can elucidate the organizational change agenda at several different levels:
Transformational programmes must take place within a holding environment that helps lower defensive reactions, build mutual respect, foster transparency and establish trust. The interventions facilitate insights that illuminate hidden areas of the organization that need to be taken care of as a precondition for change. At the same time, they help build agreements about what needs to be changed and how the change process will be enacted. These transformational experiences have the following characteristics:
Transformational group experiences of this sort bolster trust, collaboration and commitment among the organizational participants. There are three types of transitional experiences involved in the process: (i) relinquishing earlier, dysfunctional, but still valued roles, ideas and practices; (ii) creating, finding and discovering new, more adaptive ways of thinking and acting; and (iii) coping with the stress that accompanies the changing conditions derived from both outside and within the organizational system. These transitional experiences can help set directions through focused leadership and a new, more coaching-oriented mindset.
Effective leaders recognize that employees need support when they are in the process of reinventing the organization. Creating a coaching culture is the ideal way to align management behaviour with business objectives and develop people’s emotional intelligence, encouraging continuous learning and recognizing achievements by providing constructive feedback. The major turning point comes when the organization’s leadership moves from being autocratic to authoritative. The role of the leader changes to that of being a more autocratic figure to that of a coach – a person who works with employees to help them discover the answers (Daudelin, 1996).
Employees’ participation and involvement are the key success factors for organizational commitment. People at all levels of the organization need to be involved in the change effort (Kets de Vries & Balazs, 1998). The next leadership task is to make sure that people at all levels of the organization have internalized the change.
Leaders recognize that the will to change is not enough; they have to work to promote the appropriate skills that will adjust the repertoire of behaviours of all organizational members. Changing behaviour starts with consolidating new ways of doing things to gain competitive advantage.
A sense of direction will have been achieved through the reflection process described earlier. With this focus in place, the time has come to align the important players in the organization behind the leadership’s new vision for the future. Leaders need to engage and empower their subordinates by transmitting that vision, the core values and desirable new behaviour patterns. Repetition of the change message and implementation of systems, structure and activities will aid the process of internalization. For a change process to be effective, executives have to be convinced both cognitively and emotionally of the advantages that the change effort will bring (Kets de Vries & Korotov, 2007).
Change will be accompanied by many fears. Some executives may be fearful of uncertainty (what do I need to do now?), obsolescence (everything I know is useless), self-doubt (am I capable of change?) and lack of significance (do I like these changes?). In the same way that the transformational workshop created a safe space for the transition process, the leadership of the organization needs to manage stress levels by making the organization a safe holding environment. The most salient role of leaders at this point is that of coach, enhancing the individual change process through trust and support (Kets de Vries, Korotov & Florent-Treacy, 2007).
Ambivalence is a key obstacle to change at this stage: people both want and don’t want change. Miller and Rollnick (2004) suggest motivational interviewing as a tool for helping people resolve their ambivalent feelings and move on. Leaders can help employees to explore the underlying cognitive and affective processes that trigger commitment and effective change. Worst-case scenarios have to be explored. Confronting and resolving ambivalence may create a tipping point to bring the executive on board (Kegan & Lahey, 2001).
Informal networks and symbolic actions are inseparable from social support. Leaders must make sure that people at all levels of the organization are committed to the new way of doing things and that everyone is working in the same direction. Outputs at this stage are a focused/coaching corporate culture, and setting up appropriate systems, technology and structure for its long-term sustainability. Symbolic actions, which integrate learning with sense-making (Schwandt, 2005), provide a framework for articulating the change initiative.
Leaders need to institutionalize change by building new competencies and practices. Training and development are facilitated through skill-building exercises and other on-the-job practices (e.g. mentoring, job shadowing, job rotations or job assignments).
Practice is crucial at this point and leaders need to recognize the immense learning potential hidden in everyday experience. To what extent has change been actionable? What is actually happening in the organization? Leaders must keep abreast of the day-to-day effects results of the change effort. They have constantly to evaluate the desirability of outcomes and introduce corrective action if necessary. Desired outcomes must be rewarded in bite-size portions, making the overall task more palatable. Sanctions have to be put into place for undesirable behaviour.
At this point, the successful functioning of new behaviours and ideas should be apparent to all organizational participants. Obvious indicators of this are high levels of job satisfaction and productivity. But the good/bad news is that the change process is never-ending. Organizations need to build an innovation-driven culture that confronts change in a natural and incremental way: a coaching culture will facilitate the adaptability this implies. Leaders will need periodically to revise their assumptions and gather data from the organization to identify new requirements for change.
Having transcended the leadership crisis and established a focused, inspirational and coaching organization, participants will be bound in a compelling connective tissue of vision, mission, culture and structure. There will be clear leadership focus and the organization will be in the mood for change. At this point, organizations become authentizotic (coined from the Greek words for authenticity and vital to life) entities, a key quality of which is continuous self-renewal (Kets de Vries, 2001b). The action-reflection processes permit individuals and organizations to adapt continuously to the demands of change.
Reflective approaches require a coaching executive role (Daudelin, 1996). This supposes that the safe transitional space will, in the long run, be expanded to become a permanent feature of the system, part of its culture (Amado & Ambrose, 2001). The authentizotic organization finds meaning in work and invests trust in its people. It takes pride in what it is doing and the people who are doing it. It is this that makes the difference and makes an organization a great place to work.
Whether we like it or not, organizations are systems that change continuously. And facing change cannot be the result of a last minute wake-up call or a sudden eureka experience. It has to be a continuous process so that organizations can adapt seamlessly to the environment through an innovation-driven culture.
Summing up the observations made in this chapter, we’ve looked at how to address the journey of change and identified a number of challenges:
The impact of these change processes may be tremendous and they may extend their influence to the whole organization. Coaching-focused leadership can provide a platform for sustainable organizational effectiveness and be an appropriate approach to engaging and developing others. Workplaces will be healthier in the sense that there will be plenty of fun, cooperation, trust and meaning.
Change initiatives usually include shifts in strategy, structure, systems and technology, but they also need a permanent and lasting transformation of the internal world of the employees. But, as we have emphasized, attention has to be given to external social (symbolic) practices. Symbolic actions serve to build the capabilities of the members at all levels by constructing new shared meanings of daily experiences. In this environment, the salient role of leaders turns into the role of coach to their teams to promote trust and social support.
More than ever before, leaders need to lead from a different place (Pascale, Lillemann & Gioja, 1997), placing themselves in a zone of discomfort, learning to tolerate ambiguity and coaching their teams appropriately. Only then will organizations have the adaptive capability of self-renewal that characterizes authentizotic organizations. If that is the case, a result orientation and a coaching corporate culture are entwined. This ability for continuous self-renewal will make all the difference. It creates the vitality that characterizes authentizotic organizations. As the Swiss writer, Henri Frederic Amiel once said, ‘So as long as a person is capable of self-renewal, they are a living being’.