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How to manage change in an age of uncertainty.

How to manage change in an age of uncertainty

It's easy to insist that all your internal departments be consistent in operation and output. But, in doing so, are you encouraging your employees to become uncreative or, worse, inflexible? One Canadian executive thinks an error-proof company is a doomed one. Here's his management approach. Customer needs and market sectors are in a continous state of flux these days. Staying on top of the changing requirements over a sustained period of time is probably the most difficult part of managing our business today. It means continously changing one's way of doing business and changing the way we are organized.

As we all know from experience, changing is much tougher--and much more important--than most people realize. Unfortunately, business organizations are, by their very nature, not very dynamic or flexible. Our existing policies, attitudes, and values tend to get in the way of change. So why do it? What is forcing us to adapt, to continously seek new revenue opportunities for our companies, to reallocate resources, and to redirect capital?

Why even consider changing?

There are five important factors that force us to change: globalization, market segmentation, government policy, technology, and values. Globalization--Whether we want them to or not, businesses are competing in a world market. PCL Construction regularly competes in the North American construction market with Japanese, German, Korean, French, Italian, British, and Norwegian firms, as well as the many local American and Canadian contractors. And the construction business is rather typical in this regard. The purely local, regional, or national markets are becoming a thing of the past.

Canada and the U.S. no longer have insular economies dominated by products made in North America. Today, I think it would be hard to find half of the products on our Canadian store shelves with a Canadian label on them.

Multinational corporations from other countries often take a longer range perspective in developing our markets. For example, these past few years my firm has been involved in joint ventures with Japanese contractors in such projects as the Toyota plant in Cambridge, Ontario. The Japanese watched our operation for a few months, then asked if we would take on some of their sharp young engineers, to teach them English and to teach them Canadian construction methods. We asked, "Why should we train a new crop of competitors?" Their reply: "We will never be able to compete with you on normal-sized jobs in Canada, and we will always need a competent joint venture partner in larger Canadian jobs. Let's work together for the future." Market segmentation--The niching of markets is a very significant trend. Many of us are trying to be innovative enough to find such a niche--some distinctive area where our particular talents shine. If we can find that slot before others do, we can reap significant rewards. Government policy--Depending on your point of view, regulation can be friend or foe. But anyone who ignores the issues of regulation and deregulation does so at his peril. The airline industry is a classic example of change brought on because of revisions in government attitudes about regulation.

The role of governments in the world of business is an increasingly complex issue. Most companies today work with a number of government organizations and jurisdictions. With three political parties in Canada and two in the U.S. and with different federal, provincial, state, or municipality governments, business has to stick-handle its way among them all and survive. Really, what we look for most is a level playing field in any jurisdiction, with no unsual preferences, so we have a fair chance of developing a potential new market in a particular location. Technology--Over the past few years, more than half of our productivity growth has come from technological innovations. Today, technology affects virtually every phase of our life. As someone coming from the City of Champions, I note that technology has shaped the keels of 23-meter yachts off the coast of Australia. It affects the outcome of professional football games through video replay. It has altered the design of golf clubs, even the sweet spot on a tennis racket.

We now have compact discs in our home, soon to be replaced by optical storage discs. Super chips, one inch wide, will soon be as powerful as some of our major, present-day computers. How we digest all this new technical information, and how we handle the myriad of changes coming to us, will determine how successfully we enter the 1990s. Values--Maybe the most fundamental reason for change is occurring in people's values, both personal and professional. Here in North America, no longer is a good salary, fringe benefits, and security enough to attract and retain quality people. Employees want to know exactly what part they play in the overall game plan. They no longer are satisfied to be mere cogs in the machinery of business.

At PCL Construction, we have attempted to satisfy this desire to be involved by changing, over the past 10 years, from a tightly owned and controlled organization to an employee-owned firm, where more than 450 employees own 85 percent of the shares. It may be a radical solution, but it seems to have worked for us. Our annual billed volume of $1.3 billion is 10 times what it was when I started bringing employees into ownership 10 years ago.

Responding to change, then, is essential if a company is to gain a competitive advantage in today's business world. Many North American managements, in an effort to assure that their organizations become error proof, have established standard policies, efficient administration procedures, stable organizational structures, and evenhandedness in reward programs.

Such internal systems promote consistency, yes. Unfortunately, though, in the process of creating an error-proof company, management establishes a change-proof environment. This new, rigid business environment makes it difficult to react quickly to changing customer requirements and new developments in the marketplace. So we North Americans must work hard at being more flexible in our business systems.

We must also work hard at establishing an entrepreneurial environment in our own corporations, creating an atmosphere where employees are encouraged to bring out new ideas, better ways of doing routine and not-so-routine tasks.

As a large contractor, we try to create entrepreneurs by having many smaller, stand-alone profit centres. Each branch does its own thing under broad corporate guidelines. Within a branch, each project manager is totally responsible for not only the team of supervisors and tradespeople but the timekeepers and accountants he has on each job. And he gets the bouquets if the job goes well--or the brickbats if it doesn't. We believe this is a good way to develop engineers into managers, and managers into executives.

Joint ventures--a change on the horizon

Change is frightening to employees and management alike unless they fully understand why the change is required and how the organization intends to react. Management must work hard to communicate any new corporate direction to those employees affected, so people don't feel threatened by the unknown. A classic example of this occured at Robert Campeau's Federated and Allied Stores, where thousands of senior employees suddenly found themselves possibly expendable.

In the management of change, possibly the most significant action occurring in the organizational thinking of industrial and service firms is the increased use of joint ventures and other forms of strategic alliances. What we are looking at now are newly structured networks of companies--competitors even--joined together in a variety of partnership arrangements for a mutually beneficial strategic purpose. I once heard joint venturers described as "dancing partners": companies that come together for a specific turn or two, some briefly and others for an extended time. Joint ventures, of course, have been around for hundreds of years, and in the recent past have been a ticket of admission paid by companies from mature economies to companies in developing economies for permission to enter their markets.

More recently, such alliances have shared the risks and high capital costs of large-scale undertakings, for example, exploring for oil offshore, mining, and building coal gasification plants. Now, joint ventures increasingly are being used by multinational companies in their own home markets to accelerate the introduction of pioneering products. Examples of such products are the fibre optics venture between Siemens of Germany and Corning Glass Works and the robotics ventures between Fugitsu and General Motors and General Electric.

Combinations like N.E.C. and Honeywell-Bull give customers broader product choices, like an alternative to IBM, at a lower risk to the original developers. Industry globalization, as in the automobile industry, is accelerating the need for greater standardization of products across geographically dispersed markets. It is unlikely that any one firm can satisfy all customer desires. Thus, firms in cross-national strategic alliances, like General Motors with Toyota or Volvo with Daewoo, will rely on "dancing partners" as preferred sources of products they cannot economically produce alone.

We will be seeing more and more strategic alliances in the future because of shorter product lives, precipitated by technological change, as in the electronics, biotechnology, and pharmaceuticals industries. We will see more alliances as barriers come down as a result of deregulation, as in telecommunications; more joint ventures because of the capabilities we now have in data processing and global communication, as in robotics and in the financial services industries; more firms coming together because of economic maturity and the need to do something about import competition in such industries as automotives, steel, petrochemicals, and farm equipment.

Today, smart firms are looking around and analyzing who would make a good joint venture partner. You don't get to be a championship dancing team without some practice. The smart firms are not going to be industry wallflowers, waiting until they are asked to join a group.

Joint ventures only last as long as the partners are mutually attracted to each other. What is important to realize about alliances is that, in polite society, you don't dance with one partner all night. You move around. And, in today's world society, being a good joint venture partner requires a recognition of the different business perspectives found in different parts of the globe. A healthy joint venture has all partners asking themselves," How can I keep this partnership as attractive to my partner as it is to me?"

When approaching potentially attractive dancing partners, North American companies are handicapped by their traditional industry competitiveness. Typically, with our frontier-competitive mentality, we are frantic about the need to control what is happening in any venture, and that fixation makes us inherently unattractive partners. We have to get over that mindset if we want to play the global game properly.

European and Japanese sponsors of joint venture alliances have learned how to work within strategic alliances by necessity. In the final analysis, the national origin of the sponsoring company is less important than what the company itself is offering the alliance.

Some of the best recent ventures have combined a strong outsider with a local player who already has a good relationship with the customer in delivering service and value. In return for providing the local prestige, thelocal firm wants to gain technology. So strategic alliances are one good way for smaller firms to keep up with world competitors. To compete effectively in rapidly changing, technology-driven markets, company managements will be experimenting more with a multitude of partners in a variety of dances.

On the labour side of change

The Canadian Labour Congress Convention, held in Vancouver in mid May of last year, featured president Shirley Carr calling for militant action by Canada's trade unions against freer trade, against deregulation, against privatization of government-owned companies--really against any or all changes. While I certainly understand the union's sensitivity to the human impact of change, the refusal to cooperate with management and governments to cushion the shock of inevitable change is a continuation of the head-in-the-sand attitude that has characterized much of North American organized labour these past 10 years.

It seems Canadian labour leaders do not listen to or learn from socialist countries like France, which is a strong advocate of European free trade, or New Zealand, which has probably taken deregulation the furthest of any western nation, or to the European Free Trade Union Federation (representing 44 million workers in 21 countries), which recently voted strongly for complete free trade.

To the CLC, none of this matters. The Congress pays little attention to much of the organized labour movement around the western world, which demonstrates that it is quite possible to be of the unionized left and also be forward looking and progressive. Possible almost everywhere it seems--except in Canada.

Militant labour leaders see technology as a threat to the values that we have developed over the centuries. Not unlike King Canute, they would like to see the tide made to turn back. They say they believe that technology is adversely affecting the workplace or, worse, that technology is taking the humanity out of our dealings with each other.

Many rank and file workers do not believe that. On the contrary, they believe that technology can relieve people of repetitive, assembly line-type tasks. It can provide individuals with an extension of their capabilities. Itcan create time to think and the opportunity to be creative. Simply put, technology can create a more worthwhile life for those who successfully adaptto it. The key question though is how this adaptation will take place.

The future is changing

Today, more than at any time in history, with perhaps the exception of the industrial revolution, we are living in an age of discontinuity. There is no question that people are finding it difficult to adapt to change, and they are resisting it because they feel confused, somewhat disoriented by the rapid pace of technological advancement.

As we approach the beginning of the twenty-first century, those of us who manage must accept the reality of continous change. However, we must do more than live with uncertainty. Our challenge is to manage that uncertainty.

Managers must be constantly aware of their employee's reaction to change. We must understand how these changes affect our people. We must be concerned and actively involved in helping our people to adapt.

As managers, we must accept this as a fundamental responsibility. We must sincerely care for our co-workers, understand and be mindful of their limitations, dispel their fears, and help them fulfill their aspirations. If we fail in our task, then our companies, our schools, our banks, and our society could well be faced with social instability.

Daniel Roos of the Massachusetts Institute of Technology predicts that "over the next 25 years, all over the world, semi-skilled labour, whether cheap or expensive, will rapidly give way to `smart machinery.' Neither cheap Korean labour nor expensive American labour is our real problem. The problem lies in rapidly introducing and perfecting the new generation of design and process equipment and in handling the complex social systems that must accompany that equipment."

The task for managers then is clear: to ease the inescapable pain of adaptation while ensuring that the inevitable change takes place in the most acceptable and productive fashion. We will have to adapt to new international trading patterns, to foreign competition, to changing consumer expectations, to advanced high technology equipment, and to new and unforeseen tools and techniques making greater use of automation and information.

Just as important, in a society increasingly seeking self-fulfillment, we know that we must continue to adapt the workplace and create an environment that is fully responsive to the aspirations of those who work in our industry.

That is our challenge. It will require all the humanity and insight, all the feeling and concern, and all the care and consideration that we each possess as human beings.

The way to master technology is intellectual. The way to manage adaptation is emotional and sensitive. Both have their complexities. And this applies to every industry, to every manager, and to every employee. No matter how fascinating each of us may find the applications of new technology, no matter how exciting the new vistas revealed, and no matter how much potential we believe is provided by advancing science, we must always remember the most important element of the equation--the human element. For in the end, our society will not be judged by our military might, our industrial power, or even the pace of technological change. We will be judged on what benefits we have been able to provide people, how their lives have been enriched, and what we have left for future generations. We must never allow our technical skills to outpace our humanity.

So, in every facet of our lives, change is all around us. Yesterday's papers outline some of these: erratic world oil prices; sky-rocketing home prices; the change to men's traditional job roles as a result of working wives; corporate takeovers; freer trade; massive changes to our lives made by the inroads of computers.

Change is everywhere. Change is today's norm. But change makes it a wonderfully exciting time to be in business in North America. We have to overcome our fear of change and look at it like the great opportunity that it is. You would have to say that imagination and creativity are the two elements most lacking in North American companies today. Canada and the U.S. need entrepreneurs for the next decade.

PHOTO : Adam and Eve, cotton needlework, anonymous American, 19th century The Adam and Eve

PHOTO : metaphor was a popular one in American folk art. This needlework portrays a married couple

PHOTO : surrounded by symbols of family and community. Somewhat crude in execution, the piece

PHOTO : probably was stiched by a young or untrained needleworker.

PHOTO : A crib quilt, pieced velvet and silk, American, c. 1900 An example of employing unusual

PHOTO : materials, this baby's quilt is made of black velvet, probably scraps from a curtain or an

PHOTO : old dress. Many early American quiltmakers were forced to stitch their blankets with

PHOTO : whatever fabric was available.

PHOTO : Baltimore album quilt, cotton and wool, American, c. 1850-60 This quilt is a parable of

PHOTO : American tradition, from the flora, hearts, and birds that are standard albumquilt motifs

PHOTO : to the landmark building and anchors that identify a port city as its origin.In the

PHOTO : detail, the name "Franklin" appears on the stitched fire engine, probably identifying the

PHOTO : quiltmaker.
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Author:Stollery, Robert
Publication:Financial Executive
Date:Jan 1, 1989
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