To appreciate the ways in which transition impacts employee well-being and organizational performance—as well as the actions required to recover from a transition—it is helpful to distinguish between incremental organizational changes and transitional organizational changes. Incremental change refers to the evolutionary adjustments, improvements, and product or service alternations that organizations need in order to satisfy the increasing demands of customers and keep up with current changes in technology. Transition refers to major disruptions in an organization’s core competencies, offerings, markets, and business models.

Transition is much more debilitating to work organizations and their members and has deeper psychological impact than more rudimental occurrences of incremental change in the workplace.^[1] Incremental change is a path to a known state: something discrete, with orderly steps. Moving the start of the weekly staff meeting from 9:00 AM to 8:00 AM is an example of such a change. It may cause some conflicts and require some accommodation—people have to leave home for work earlier or cancel other early morning commitments—but its discrete nature allows people to know exactly what to expect and lets them get on with their lives inside and outside the organization.

A transition, by comparison, is a path to an unknown state: something discontinuous that involves many simultaneous and interactive changes and the selection of “breakthrough” ways of thinking, organizing, and doing business. When pharmaceutical company Pfizer acquired Warner Lambert, the integration strategy called for enhancements in the process of discovering and developing new drugs. That prompted transitional changes in Pfizer’s Global Research and Development organization, including a radical structural redesign, the closing of some laboratories, and a cultural transformation that emphasized collaboration rather than competition across regions. In other words, transition poses a break from the past. It involves death and rebirth; existing practices and routines must be abandoned and new ones discovered and developed. Adapting to transition is much more psychologically taxing than adapting to incremental change.

Some scholars and practitioners suggest that in many industries, life is now discontinuous, abrupt, and distinctly nonlinear, as radically different ideas and commercial developments render established products and services outmoded.^[2] Concurrently, they argue that periods of stability are a thing of the past and that classic models of leading organizational change are obsolete.

The problem with this perspective of organizational life is that recurrent discontinuous change is not a natural condition of life, and that resistance is a to-be-expected response.^[3] People can handle only so much disruption in their work situations. Over time their threshold for dealing with stress, uncertainty, and disorientation is met. Their ability to cope with all the changes is impaired, resulting in detrimental attitudes, maladaptive behaviors, disappointing performances, and the many other unintended consequences of organizational transition.

Increasingly, people in organizations are being exposed to multiple waves of transition, often with one overlapping another. Take the case of MK Enterprises (a fictionalized name, but a real situation). At its peak in the mid-1990s, MK boasted revenues of $19 billion, employed 22,000 people, and had a reputation as a stable, well-managed company. It also was regarded as an excellent place to work. People took jobs there because they wanted a place of employment with stability, predictability, and growth.

In 1995, MK made an opportunistic acquisition of a competitor’s operations. In announcing the acquisition to employees, chief executive officer (CEO) Michael Dingold acknowledged there would be some redundancy in positions but promised to take care of this through attrition, assuring his troops there would be no layoffs. As tough economic times set in toward the end of the decade, however, MK’s debt obligation loomed larger and larger. Revenues remained flat, expenses increased, and margins eroded. Within three years, Dingold ordered two major restructurings—the first to streamline decision making in general and the second to eliminate bureaucratic hurdles slowing the introduction of new products to market.

The restructurings changed the organization’s design and reporting relationships, but produced few cost savings. Still confronted by debt and flat growth, the company had to cut expenses dramatically. In 2000, Dingold announced the first reduction-in-force program in MK’s history. It was voluntary, providing enhanced early retirement benefits for employees over fifty-five and severance pay incentives for all other employees. Despite its voluntary nature, the program sent shock waves through the ranks of MK managers and employees.

A few months after the reduction-in-force announcement, Dingold proclaimed a new vision for MK: it would become the “premier” company in its industry segment. Soon Dingold initiated two projects to achieve this vision. First, he engaged a prominent consulting firm to conduct a value-added work analysis. Shortly thereafter, Dingold returned from a conference on organizational learning to announce that he had commissioned a training company to deliver a “continuous improvement process” program to all MK managers.

As the economy weakened in late 2000 and into 2001, MK managed a small operating profit but could not reduce its heavy debt load. The broader economic malaise diminished long-term prospects for revenue growth, and Dingold concluded that severe cost cutting was necessary for his company’s survival. In June 2001 he announced that MK would have to implement an involuntary downsizing program.

Each of these events resulted in the experience of cumulative stress for MK employees. For several months, MK employees observed and vicariously experienced disruptions in other companies in their industry and heard rumors of impending change at their own workplace. Then MK employees were subjected to the acquisition, poor economy, restructuring, voluntary reduction in force, programs like value-added work analysis and continuous improvement, and finally the involuntary reduction in force. By then, many MK employees had become numbed by the dizzying course of events. Literally and figuratively, the ability to cope and contend with disruptions to their work situation had become saturated.^[4]

Sometimes the saturation effect occurs on an individual level and not necessarily companywide. Still, when a critical mass of people in an organization’s workforce gets saturated with transition impact, it brings down the entire organization. In many organizations like MK, employees have suffered intellectual and emotional paralysis brought on by their saturated coping capacity. They are psychologically worn out, unable to get revved up about meeting new challenges. (We return to the case of MK Enterprises later in this chapter and see how the organization and its people recovered after this series of transitions.)

Certainly organizations need to “rightsize” by eliminating unnecessary work and “reinvent” by adopting new ways of doing things in response to economic, legal, technological, and consumer changes. If organizations did not change, they would not remain competitive. Moreover, a transition can be a beneficial impetus for workplaces and employees. A CEO, business unit leader, or department head with the right mix of visionary and charismatic leadership skills can rally employees around the notion that a merger, acquisition, or downsizing is not only a necessary response to business realities, but a proactive opportunity to improve how work is approached and conducted in the organization. Similarly, a middle manager or supervisor can use the transition as an opportunity to enhance teamwork, build better cross-functional relations, and identify and correct impediments to work group productivity.

And individuals can experience a personal form of renewal as a result of organizational transitions. Although many employees stay mired in maladaptive responses to the stress and uncertainty of a transition, others come to recognize that in crisis there is opportunity. Unfortunately, however, using transition as an opportunity for personal growth, team development, or organizational renewal is very much the exception, not the rule. Reports of mergers, acquisitions, and downsizings rarely describe productive, regenerating, or even rebalancing outcomes. In contrast, they depict transitions as painful and wrenching. As a result, there is a serious need for leadership to embrace a program for workplace recovery following mergers, acquisitions, downsizings, and other major organizational transitions.

Transitions are difficult events to manage.

To be fair, major organizational transitions are very difficult to manage. Eighty-three percent of all mergers fail to deliver shareholder value and 53 percent actually destroy value.^[5] Most downsizings provide one-time-only cuts in the cost of doing business but fail to return organizations to financial health or leave the organization with any true enhancements in how work is accomplished.^[6] To understand why there is such a dismal track record, look no further than at how mergers, acquisitions, and downsizings transpire, both in practical and emotional terms.

Transitions are difficult events for people to cope with.

As previously noted, adapting to transition is much more psychologically taxing than is adapting to change. And, after years of mergers, acquisitions, downsizings, and other major transitions, people’s ability to cope with transition has become saturated. Even when they themselves have not gone through a difficult transition, people learn vicariously from the experiences of their friends, relatives, neighbors, and counterparts in other organizations.

William Bridges identifies three stages of individual adaptation to organizational transition:^[8]

Not all people make it to the new reality. Some never let go of the old reality, despite all the changes that may be going on around them. Some get stuck in the quagmire of the neutral zone—they accept that the old is gone but they never latch on to the new. While individuals move through the three phases at varying speeds, all go through the phases sequentially.

Mismanaged transitions have negative, not merely neutral, consequences on people and organizations.

In principle, a transition should enable an organization to improve its competitiveness without impairing its ability to execute its strategy. In practice, however, a transition can exact a heavy toll on organizational effectiveness and employee well-being. The unintended consequences of mismanaged mergers, acquisitions, and downsizing have critical consequences, both human and business.

While a broad review is beyond the scope of this chapter, the unintended consequences of mismanaged transitions on workplaces and their members have been well documented.^[9] These include the loss of confidence in management, heightened cynicism and distrust, decreased morale, reduced loyalty, and, in general, a dismal outlook for future life in the organization. Especially debilitating to surviving employees is the perceived loss of control over their work situation. No matter how well they do their jobs, they could be hit in the next wave of layoffs.

The unintended psychological consequences of transitions are pervasive. In a longitudinal study of 10,000 U.S. employees, those from organizations that had been engaged in a merger or acquisition reported less favorable results than those who had not in every industry group and every facet of working life measured.^[10]

The unintended consequences of mismanaged transitions also are manifested behaviorally. Survivors of major organizational transitions work harder but not smarter—the workload doesn’t get smaller when the work force does.^[11] What about the promise of enhanced organizational effectiveness that accompanies the announcements of many organizational transitions? The reality is that no one has time to stop and think of creative ways to approach work. Compounding the sheer volume of work confronting people who survive a transition is a lack of direction in prioritizing which tasks to tackle first. Survivors want to get out of the blocks quickly and impress new leaders. But their intentions are thwarted when they do not know what the business priorities are or where to turn for the equipment, information, or support they need.

Risk taking plummets following a transition.^[12] Employees are so scared that there is a self-imposed pressure not to make waves or take risks, just at the time when innovation is needed. Further cuts may be in the offing, and no one wants a blemish on their record that might be used against them when the next list of victims gets drawn up. Instead, managers and employees go with what they know, relying on what has worked for them in the past. The problem is that what may have worked in the past is not necessarily appropriate for the posttransition organization.

The costs of mismanaged transitions have been measured in financial as well as human terms. When all the work remains but not all the staff, most companies are not prepared to handle the workload. Financial analysts do a very good job of predicting savings that result from a reduction in head-count, but underestimate the costs required to cover the tasks that had been handled by laid-off employees. Among the costs downsizing firms have to contend with are increases in retraining remaining workers, using temporary workers, outsourcing functions, and paying for overtime. Some firms also lose the wrong employees—people with critical skills or needed talents take advantage of incentives to leave the company.

Health care costs incurred by organizations rise for both victims and survivors of downsizings. It is easy to see how health care costs increase for transition casualties. The psychological trauma of losing one’s position, or of unceremoniously being invited to leave through an early retirement program, triggers psychosomatic ailments. Plus, early retirees have more time to visit health care providers and ring up expenses. Not so obvious—but equally costly—are increased health care costs for survivors, who are also subjected to the psychosomatic effects of intense stress on the job. Working harder to cover the work of others also results in a higher accident rate. Especially problematic is when older employees return to jobs involving physical labor after being in less strenuous supervisory jobs.

Importantly, anticipation or concern about job loss may be as damaging as job loss itself.^[13] Job insecurity has been found to be associated with increased medical consultations for psychological distress and with increased disability claims for back pain.^[14]

If properly managed, transitions have the potential to unfreeze organizations and their members.

A transition holds the potential to “unfreeze” an organization and its people,^[15] and establishes an opportunity to significantly change corporate culture and reinforce new ways of doing things. A major transition disturbs the status quo: it jars people, changes relationships, redefines work team composition and goals, and disrupts accustomed ways of doing things. It also is an opportunity to think in a proactive manner about what life after the transition could be like.

What makes a transition so stressful for people—its ability to separate them from their accustomed ways of thinking and acting—concurrently provides the benefit of unfreezing people. A transition also has the potential to put organizational structures, systems, strategies, programs, processes, and cultures “into play.” Hiring guidelines, reward systems, decision-making criteria, problem-solving approaches, reporting relationships, and all other aspects of the organization are temporarily pliable and ready to be set in a new mold. At the individual level, workplace recovery after transition hinges on changing perceptions and behaviors. This, in turn, requires unlearning familiar concepts or assumed mental models of cause-and-effect relationships and replacing them with new impressions and associations.

People have to let go of the old before they can accept the new.

Many efforts at organizational change fail because the leaders who initiate them and the staffers who implement them do not accept the reality that people have to end the old before they can accept the new. In some organizations, this natural process of individual adaptation to transition is understood, but not wholeheartedly embraced. These employers dismiss allowing people to deal with their feelings as an inappropriate use of time and other resources. This reasoning ignores the fact that people will go through the phases of holding on, letting go, and accepting the new whether the organization likes it or not. Time and attention get diverted away from work activities in any event. Rather than deplete resources, a workplace recovery program accelerates the speed with which people come to terms with and move through their adaptation process.

There is another key reason why the adaptation process often is ignored in organizations engaged in transition: senior executives typically have made progress in letting go of the old before others in the organization have begun their adaptation process. Senior executives may have been involved in secret premerger discussions, deliberated the need for a downsizing, or pondered the cultural implications well before the transition was announced to the overall organization. They literally have several months’ head start in the process of psychologically rejecting the old and adapting to the new.

As Figure 9.1 shows, those at the top levels in an organization begin their process of moving from holding on to letting go of the old and accepting the new well before employees at other levels. Senior executives, those with the most at stake, often have the most intense reactions to a transition, and experience strong forces for maintaining the status quo. They adapt to change and mourn their losses through what typically is a private process, but one that nonetheless consumes personal attention and time. Significantly, however, their adaptation process is accelerated by the high degree of control they enjoy relative to others in the organization. Senior executives are the architects of the transition; they understand why change is needed and where it is headed. All other members of the organization have much less influence and a lot more uncertainty when it comes to adaptation.

Figure 9.1. Adaptation to Transition by Hierarchical Level.

By the time executives at the top of the organization are looking ahead to new realities, people lower in the hierarchy are only beginning or, at best, are in the middle of their adaptation process. In large organizations, transition implementation may not ripple down to the lowest levels for quite some time. Many employees do not experience their first wave of transition-related change—and thus do not begin their adaptation process—until senior executives have put the old behind them and are well on their way to accepting the new. Just as lower-level employees are beginning to contend with holding on and letting go, senior executives frequently repress memories of the pain and confusion of leaving the old behind. Consequently, they are unsympathetic to others’ needs for holding on. Having let go of the past, they are concerned with the future. Either because they are impatient to move on or because they refuse to consciously accept the pain of their own personal transition, executives sometimes forget that beginning the new starts with ending the old.

The first element of workplace recovery is to express empathy to employees. This means making it clear that leadership is cognizant of the needs, feelings, problems, and views of employees who have lived through a merger, acquisition, restructuring, or downsizing. Empathy weakens forces blocking employee adaptation to transition. Employees are not accustomed to hearing their superiors admit that times have been tough and that transition has taken a toll on people. In fact, the tendency for many leaders is to avoid admitting mistakes or responsibility and instead attribute poor business outcomes to external factors like the economy or threat of terrorism.^[20]

Recall the case of MK Enterprises. Executives there conveyed empathy though a combination of activities. The starting point was acknowledging the realities and difficulties of living through multiple transitions over a several-year period. CEO Michael Dingold owned up to his role in contributing to the pain of the past, initially through a mea culpa delivered at a town hall meeting. Employees at MK were surprised to hear their leader admit his awareness of the difficulty people had been through. Observing their CEO talking and acting in new ways at this and other events prompted employees to think about their own responsibility in letting go of the old and accepting the new.

Next, Dingold backed up his words with actions that displayed empathy toward employees. He freed up resources—including budgets and employee time—for workshops to help employees understand the complexity and intricacies of the transition and adaptation processes. These workshops featured two important components. First, they educated employees on transition and adaptation in a manner that showed these to be normal human responses to organizational events. Second, they helped individuals understand where they did and did not have control, and guided them in letting go of what was beyond their control so they could focus on actions that were within their control.

Another leadership action that conveyed empathy at MK was to sanction events and ceremonies that accelerated the letting-go process. “Venting meetings” in which employees could express their pent-up anger and other negative feelings were particularly helpful. Most employees find it difficult to express negative feelings at the workplace.^[21] However, a carefully facilitated venting meeting can get people to open up in a supportive and safe environment. Even for employees who do not speak up, simply vicariously listening to others express similar views contributed to weakening the negative emotions left over from living through a difficult transition.^[22] To keep the meeting on a productive track, it helps to have a trained facilitator lead the session. And it also helps to have senior leaders clear a path for these and similar activities by getting the word out to all executives, managers, and supervisors that the recovery effort is genuine and that time and resources must be made available for employees to participate in these activities.

The second element of workplace recovery weakens forces against desired change by engaging people in understanding the business imperatives of recovery and eliminating roadblocks to achieving them. The actions leaders can take to engage employees in workplace recovery are consistent with the calls for breaking down resistance and enhancing involvement by organizational scholars from the classic to the contemporary.^[23]

Engagement at MK began in a very practical manner, by helping people accomplish their immediate work objectives by clarifying priorities and providing resources to get the job done. All superiors and subordinates conducted “work expectation meetings” in which shared priorities and expectations were established. When placed in the context of broader organizational opportunities and constraints, these meetings also achieve the benefit of alerting employees to the principal challenges facing the organization and engaging them in addressing those challenges.^[24]

Next, MK engaged people in the recovery process by stepping up communication and employee involvement. This was Organizational Behavior 101: the more people understood what was going on and felt involved in the process, the less resistant they would be to ensuing disruptions to their work situation. However, leadership at MK did not shrug off this requirement of recovery as a no-brainer. Executives spent the time required to go beyond a cursory communication effort and committed to keeping people in the know through frequent and thorough communication. They made—and stuck to—this commitment knowing they were stretched thin between running the business and managing the transition. In addition, most of MK’s corporate support staff had been let go in the waves of layoffs. Involvement also meant taking people off-line from their jobs and giving them the time to problem solve and recommend ways of truly working smarter—a difficult call given that employee ranks had been downsized and the financial community was wanting a short-term turnaround in operational results.

Increasing communication and involvement had a symbolic as well as a substantive value: it demonstrated that leadership was aware of the need to stay in touch with employees and was genuinely interested in their viewpoint. This led to a third engagement tactic at MK: identifying and eliminating barriers to adaptation. If leadership did not know—from an employee perspective—what the barriers to letting go were, then it could not take appropriate actions to weaken people’s grips on the old. The best way to understand what was inhibiting people from ending the old at MK was to ask them. Employee attitude surveys and focus group interviews were cost-effective methods for engaging employees and identifying obstacles to the letting-go process. The findings provided leadership with specific opportunities to weaken forces against desired change.

While the first two elements weaken forces for the status quo, the next two strengthen forces for the desired posttransition organization. The third element of workplace recovery is to generate employee energy for understanding, accepting, and adapting to new realities in the posttransition organization. This occurs when employees know what is in it for them to accept the posttransition organization and feel they can succeed in it. It is this link between organizational success and personal impact that is the foundation for creating energy.

The nucleus for creating energy for recovery at MK was a clearly articulated vision of a new and better organization. In contrast to his previous vague vision of becoming a “premier” organization, CEO Michael Dingold conveyed how MK now was positioned for success in a rapidly changing business sector, provided the business case for why further change was essential, and gave details regarding the new organizational order—the changes in the MK’s direction, mission, culture, and architecture that would contribute to an enhanced workplace. As a testament to how visions can take a variety of forms, Dingold worked with a small group of executives to generate a set of “guiding principles” that became criteria for adopting new practices that brought the new organizational order to life. For example, one principle was “integrate career development efforts with business goals.” Thus, meetings that previously had been limited to narrow reviews of business objectives now integrated discussions of individual career objectives and developmental opportunities. A long-term strategic planning session, in turn, became a forum for examining team members’ current capabilities and developmental needs.

The vision included a clear sense of strategic direction, a compelling mission for the organization, and the guiding principles. And, as Kotter suggests, every possible vehicle to communicate the vision was utilized.^[25] MK’s senior executives turned boring and unread company newsletters into lively articles about the vision. They reworked tedious quarterly meetings into exciting discussions of workplace recovery. They threw out much of the company’s generic management education program and replaced it with courses that focused on business problems and the new vision. And, they incorporated messages about new organizational realities into their day-by-day activities—routine discussions about business problems became opportunities to confer about how proposed solutions fit (or didn’t fit) into the new organizational order.

Research shows that managers and organizations tend to maintain the status quo during difficult times.^[26] To sustain the energy for moving forward, Dingold stressed the need to develop a learning environment in which employees could experiment with identifying new and better methods for achieving personal and organizational success. Trial-and-error learning was embraced as a powerful way to learn, albeit a painful way—employees had never been rewarded for raising and discussing errors in the company. For recovery to occur, employees not only had to be cognitively aware that leadership understood that mistakes would occur; they also had to feel there were incentives for turning those mistakes into learning opportunities for the overall organization.

Still feeling the pain of the lingering unintended consequences of organizational transitions, employees needed positive signs and feedback to muster up the energy to find novel approaches to making a run at MK’s new business opportunities. Developing this energy could not rely solely on the annual performance review. First, MK’s reward systems were lagging behind in assessing and reinforcing the new organizational order. Second, waiting a full year for the annual cycle to kick in simply would have been too long to generate and sustain employee energy. The answer was to create opportunities for short-term wins. Quarterly performance feedback cycles were established that featured relatively minor payouts. The objective was to start creating links in employees’ minds between experimenting with and adopting new ways of doing things and eventual recognition and reward.

Energizing people at MK also required the “human touch.” To help people struggle through the neutral zone and latch onto the new, leadership continued to connect with employees on a human level and provide both practical and emotional support. As in any recovery, confusion, cynicism, and concerns arose within the MK workforce. This prompted some individuals to regress to the comfort zone of the accustomed old. So one part of leadership being supportive at MK was being patient with people and accepting that they needed time to move through the natural adaptation process. This was shown in ways such as creating realistic rather than stretch targets. While the “gut instinct” of many managers at MK was to charge ahead as aggressively as possible, they recognized that the last thing needed in the organization—especially after people’s coping ability had been saturated by several years of ongoing transition—was setting the bar so high that it would only serve to demotivate employees. Another facet of leadership emerging in MK was to encourage dialogue and disagreement as new organizational dynamics settled into place. At MK, these dynamics were accepted as inevitable components of the recovery process, rather than regarded as failures or setbacks.

Enforcement brings the momentum for desired change to the level of consistency required for true cultural and cognitive change. Senior leadership aligns all of the obvious and subtle components of the organization—systems, procedures, actions, impressions, innuendos, and so on—to send as clear a message as humanly possible to strengthen the forces for the desired new posttransition organization. Consistency compels people to accept new organizational realities and abandon old ones. There is no way around the fact that the less consistent these messages, the less quickly the organization will recover from the unintended consequences of transition.

There were three components of enforcement at MK: alignment, involvement, and measurement. To strengthen forces for desired change, organizational systems and operating standards at MK had to be revised to fit posttransition realities. As noted, the compensation system and, in particular, the annual performance review process at MK lagged behind and continued to measure and reinforce the old organizational order rather than the new. A major overhaul was set in place. In addition to aligning the “hardware” of systems and policies, the “software” of people and behaviors needed to be aligned at MK. For example, the next generation of top management needed to personify new organizational realities. As a result, criteria for promotion and selection changed.

With macro-level systems and standards in place, enforcement of the new organizational order continued by aligning individual on-the job behaviors with the desired vision. Building on senior leadership’s vision and strategic direction for the posttransition organization, managers and supervisors developed business unit or functional mission statements to guide employee behavior. Then, in work groups, employees translated the vision, mission, and operating guidelines into day-to-day operating procedures. This clarified how employees could align their work with the vision and provided answers to prominent questions of how people could contribute to overall organizational success. Moving back up the hierarchy, supervisors and managers reviewed proposed new ways of approaching work to ensure they supported the mission and vision and to provide coordination across work areas. Thus, while based on the core vision of senior leadership, this approach generated the consistency of direction and support from all hierarchical levels that is required for true and lasting change. It also complemented the emotional energy of the vision with practical changes in employees’ day-to-day work activities.

Enforcement at MK benefited from measuring and tracking the development of the new organizational order. Various data were collected to monitor the extent to which the desired posttransition organization was truly being realized. Feedback regarding the success of workplace recovery was disseminated to every level in the hierarchy. Some measurements were objective (for example, measures of productivity, quality, and voluntary turnover); others, such as attitude surveys and focus group interviews, had the added benefits of involving people and enhancing upward and downward communication. This was especially important at MK, where the espoused posttransition culture included intentions to increase involvement and communication.

The formal and coordinated process of workforce recovery at MK truly was a turning point for the organization and its people. The most recent wave of employee research found that employees were more likely to discuss current and emerging business opportunities rather than look back at the “good old days” during pretransition or the “dark days” of the transition itself. Workplace recovery not only assisted in wringing out pent-up emotions and loosening attachments to the old ways, it generated optimism for the future and strengthened acceptance of new ways of thinking and acting in the organization. Also importantly, it provided a sense of stability in the ever more turbulent business world. As a result, MK has stabilized its financial performance and received positive endorsements from financial analysts.