The prospects for radical change: nine attributes that indicate organizational readiness for transformation.
"For PDCA, the transition we are going through has proven to be a great learning experience for many of us and has provided a great deal of enthusiasm in the many new and different things taking place.... Our national staff and board of directors ... have made incredible strides in developing marketing and educational plans to help contractors add value to their businesses. They have moved us forward from being generalists to focusing on the fundamentals of our organization." --Richard Liddeke, 2002-2003 board president, Painting and Decorating Contractors of America, St. Louis, in PDCA's September/October 2003 PWC member journal.
IN JUNE 2002 RICHARD LIDDEKE was president-elect of the Painting and Decorating Contractors of America, St. Louis, a federation serving painting contractors in the United States and Canada. At that time, Liddeke and his predecessor, Doug Hampton, were leading a PDCA executive committee of talented, ferociously dedicated people. They were, however, simultaneously grappling with a daunting number of issues for an organization of 3,000 members and 10 full-time-equivalent staff with a $2 million annual operating budget.
For starters, a series of operating budget deficits had prompted aggressive downsizing and cost cutting. Roles and accountabilities of the remaining PDCA staff were vague, and roles and relationships between management and elected leadership, among board members, and among tiers of the federation were strained and also unclear. Several new member-service initiatives were being discussed but were not moving forward. The annual convention was less than nine months out, with little work done and no one selected to manage it. Though the executive committee was doing an impressive job with board communication, grassroots member communication had been largely abdicated to the staffs of the magazine publisher and federated entities.
As a transitional CEO for organizations facing strategic change, I was a part of PDCA's leadership team during its dramatic turnaround in which the association repositioned itself to provide greater value to an expanded constituency. In the 15 months between June 2002 and September 2003, PDCA
* revamped its governance structure (adopting the Carver Policy Governance model);
* reformulated the association's basic strategic direction, moving from appropriate but imprecise descriptions of its role (e.g., the "voice of the industry") to clearer articulations of member needs;
* refocused its markets and introduced several new products and programs;
* introduced a new national education program, raising more than $300,000 in cash and in-kind support for the start-up phase;
* developed a pilot program for restructuring PDCA's federation service model;
* sponsored a convention and trade show that met 90 percent of its aggressive goals;
* initiated the consolidation of several related trade shows into a major, industrywide show;
* reworked the association's relationship with its corporate partners, dramatically increasing their expressed satisfaction with and financial support of the association; and
* relocated its headquarters from Fairfax, Virginia, to St. Louis.
My experience at PDCA has prompted me to think at some length about the circumstances and actions that allow an organization to accomplish dramatic change on multiple fronts quickly and simultaneously--a phenomenon I call radical change. In providing temporary transition leadership to nonprofits, I have seen and led organizations with apparently fewer challenges than PDCA, that undertook changing fewer elements, but that progressed more slowly, even though they worked very hard at their transformation.
Of course, not all organizations are good candidates for radical change, nor should they be. Some circumstances suggest that an incremental approach to change is more appropriate. Yet, these disparities invite leaders to consider what combination of circumstances and attitudes are necessary to make an organization a candidate for radical change.
Based on my experience in seven such transitions, I have identified nine attributes that I believe allowed PDCA to achieve the magnitude of radical change it did in a relatively short period of time. It is my thesis that the greater the number of attributes present and the greater the degree to which they are exhibited by an organization, the more radical the change initiative that the association's leadership can successfully undertake.
1 Core, shared values
Don Nielsen, CEO of the Northern California Cancer Center, Union City--who has presided over two nonprofit turnarounds--once said to me, "It has been my experience that a common goal, especially one that arouses passion, can deter self-interests or interest in the status quo and ... facilitate change."
Nielsen suggests that a passionate, shared commitment is valuable for any organizational change, but it is absolutely essential for radical change. And that commitment must be rooted in a set of core values that bind people to the organization.
Building change on core, shared values may prove possible even if the organization is deeply divided. From my experience, the best way to expedite healing and allow antagonistic parties to quickly work together toward a goal is to find values held in common and to articulate a new common enterprise in terms of these values. Even when an organization hits a snag, its leaders and members can revisit those shared values and remind themselves why this organization merits their collaboration and sacrifice.
At PDCA we felt sure, and our research later confirmed, that new members joined the organization to strengthen their businesses. We also knew that established members remained, at least in part, because they enjoyed being part of a mutually supportive group. However, newer and prospective members were concerned that our larger, established members had lost sight of the need to justify the value of membership. The executive committee--composed predominantly of larger established firms--responded by urging board members and staff to focus on providing value to member businesses in specific, measurable ways. As such, the first core, shared value we identified was that of adding value to members' businesses.
A second common value we identified emerged from the long-term commitment of established members. We realized that members who had been with us for several years were part of a community that emerged from PDCA's guild tradition. These members shared information, ideas, and equipment, and they spoke of lifelong relationships and how those relationships had strengthened their businesses. Not surprisingly, they were deeply distressed by the strained relationships that had surfaced in the association. Strengthening the community of PDCA members was therefore the other core, shared value we knew we had to honor.
Once we identified these and other values, we tested every major decision against them. For instance, we moved from Fairfax, Virginia, to St. Louis to be closer, on average, to our member community and to reduce association costs--thereby allowing us to spend more money on adding value. We established a federation model pilot program so that we could strengthen relationships within the community and learn how to collaborate to add value to members' businesses.
However, when we initially sought to consolidate trade shows--a decision that required board action--we made the mistake of focusing primarily on why this was a good decision economically and how it might lead to further industry consolidation. The board tabled the action. Six months later when we went back to the board, we explained our vision in terms of an industrywide show that would provide enhanced value to contractors and to associate members (manufacturers and service providers) and how it would serve and broaden the PDCA community. The newly articulated measure passed overwhelmingly.
2 Market clarity
The direction set by any organization, whether for-profit or nonprofit, must serve a market or markets in ways that meet the needs of those markets as expressed by the customers who comprise those particular markets--not by those providing the services. Across time, the way to identify markets and needs is by doing extensive and consistent market research and by constantly testing new product and service ideas. During a period of radical change, however, several days or weeks of careful probing and listening will often identify some low-hanging fruit in the way of core markets and their immediate needs.
For instance, at PDCA we were able to differentiate fairly quickly the needs of emerging professionals and impact contractors. We learned that our biggest-selling product, a cost and estimating guide, was extremely valuable to emerging professionals (primarily smaller contractors) but was out of date and somewhat awkward to use. So we elicited the commitment and provided the resources to get a new edition into the marketplace. We were even able to generate tens of thousands of dollars in advance sales by inviting members to pay a discounted rate for the right to receive first copies.
PDCA's impact contractors, on the other hand, are market leaders. Because they are fewer in number, creating new value for them was more difficult. However, we were able to establish a separate, advanced track of course offerings for them at our annual convention, and we invited this market to help us fashion additional offerings of value for them and their peers.
3 Clear, strategic direction
Once leaders have identified an organization's core values and clarified its markets, they are ready to ask this question: "What must we accomplish, across time, to know that we are applying our values to the relevant market?" At PDCA, we established six goals for the short term. For each period of activity, we identified several specific objectives connected with each goal. For instance, with regard to adding value, we decided that in 2003 we would introduce three new member programs with 80 percent favorable ratings.
During the early part of any radical change initiative, the strategic direction will be relatively narrow and focused on the short term. Even so, it must be closely tied to the organization's longer-term vision, its values, and its identified markets. Across time, this direction will grow to include longer-term considerations. However, whether short term or long term, the strategic direction must be so clear that if 10 key people--on the board, within the membership, or on staff--were to describe it in their own words, any outsider would hear the same basic message.
At PDCA, the executive committee introduced the Carver Policy Governance model immediately prior to my arrival. Consistent with Policy Governance, the board spent time at every board meeting reviewing PDCA's strategic direction and moving toward greater long-term clarity.
4 Separation of governance and management
Susan Braun, CEO of the Susan G. Komen Foundation, Dallas, recently mentioned to me that, far too often, corporate governance in the United States is spearheaded by management and management's designees. Braun and I agreed that, among nonprofits, the more common failure is the opposite.
Association boards often respond to tension with management by expanding board member roles beyond setting strategic direction and providing fiduciary oversight. A board's responsibility is to support operational change intended to pursue the direction the board sets forth, even if management's decisions are not those the board would have made. If strategic direction is not pursued successfully, responsible board action is to change staff leadership rather than have board members assume staff roles.
At PDCA we believed that the association's annual convention had huge profit potential (a theory since validated). However, because we started planning for the 2003 convention rather late and a number of trade show exhibitors were disgruntled, we agreed that simply turning a profit in 2003 would be an important goal. We worked hard to meet that goal, but we failed--narrowly.
As a result, management had to admit failure to the board, accept full responsibility, and explain why we fell short and how we planned to avoid repeating the problem. As a whole, the board acknowledged our error with disappointment but with grace. A few board members responded by suggesting that they might supervise staff more closely. However, those who made this case were reminded by their peers that management is judged by total performance, not by individual successes or stumbles, and that management must succeed or leave but not share their jobs with the board.
Because our elected leaders responded in this way, our commitment to radical change was strengthened. Staff realized that they were respected, that mistakes were not terminal, and that professed roles and latitudes were real.
5 Able, empowered management
Because management's key responsibility is to focus the direction set by the board and make the direction operational, senior managers and key service providers must be equal to the tasks at hand, know what they are accountable for, have immense latitude to achieve those tasks, and be able to create strong channels for coordination and communication. If the right people are not in place, then senior management must have complete latitude to make necessary changes. If the people are right but the systems are not, management must have the freedom to correct those problems as well.
Bob Miller, Richard Liddeke's successor as PDCA's board president, emphasized the role of empowered senior management with these words: "Even with the things we were trying to do--opening up our communication, reconsidering our approach to governance--we would not have [gotten] through it without the strength and diplomacy of a strong CEO."
By the time of my arrival, PDCA's full-time staff had been downsized by about half, and the executive committee was eager to have an assertive staff leader. To me, full latitude to manage, hire, and fire staff and service providers (except the general counsel and the auditors) is an imperative for taking on a transition leadership engagement. Without the board's firm commitment to provide such latitude, achieving even basic effectiveness is difficult, and radical change is impossible.
To the credit of PDCA's elected leadership, they focused on direction and results, not on the process. Given the possibility of a geographic move, we expedited an established trend toward aggressive outsourcing, contracting for the management of the marketing and membership functions and the convention and trade show. Throughout the transition, PDCA elected leaders challenged us on goals and budgets only.
6 Candor and transparency
For a leader of radical change to evoke candor from colleagues, he or she must also demonstrate it--to colleagues, to bosses, and to the world at large. Though it may be possible to move an organization quickly without candor and transparency, adopting these attributes can multiply the opportunities for change and provide new methods of communication that are increasingly important for sustaining change.
When organizations stall or experience internal strains, individuals may become defensive and begin keeping information from one another because they fear being misunderstood or blamed. The effect is to obstruct fluid communication, partially blindside decision makers, and cause others to impute sinister motives to those with-holding information.
The willingness of PDCA's executive committee to share information freely was absolutely crucial to engaging our network of members and supporters and empowering decision makers at all levels to act quickly. For instance, we informed our more than 50 board members in great detail--and the full membership on key points--of a pending legal dispute. We held Web-based discussions on important issues. And when we made mistakes or when programs went awry, we made sure that members heard it from us first. In a matter of weeks, allegations of secrecy and hidden motives, rampant when I arrived, had all but disappeared.
7 Tolerance for error
Radical change is not about buttoning down. It's about building momentum. Similar to a fast-break strategy in basketball, a radical change initiative can produce great results quickly, or it may as easily result in a turnover. Any organization engaging in a radical change initiative must understand and accept that from the start.
I would like to think that one reason PDCA recovered from its convention red ink so smoothly is that long before this stumble we agreed, frequently and emphatically, that we would move fast and live with mistakes. And whenever we celebrated successes or when members offered kudos, we made a point of saying, "Remember this when we screw up. It will happen, and we'll need your confidence and support even more then."
8 Reliable information
If the quality of your information is not good, your prospects for radical change are proportionately weakened. At the outset, PDCA's antiquated systems and lack of institutional memory meant that our information--financial, membership, governance--often misled us.
Once again, the convention stumble provides a good example. The primary reason that we fell short on profitability was that we had bad information. We left the convention thinking we were comfortably in the black. Had we known we were short, we could have and would have managed expenses to ensure a profit. Not until all returns were in did we realize that some costs historically attributed to these events had not been captured in the new team's budget, thus throwing us into the red.
While we subsequently installed an elaborate new database and accounting system, weaknesses in our historical data and the fact that we had to keep making decisions during the conversion process caused us to commit several smaller stumbles as well. These included announcing successes that we later had to retract and identifying trends that reflected bad data rather than real patterns.
The seven radical change initiatives of which I have been a part, however, have all been conducted in spite of serious information deficiencies. Radical change leaders must create new and reliable information and information systems as soon as possible. In the meantime, they must be candid about the limits of existing information and the strong possibility for error. And when an error occurs, leaders must exercise candor. Otherwise, your radical change initiative will likely be derailed in an atmosphere of distrust.
9 Acceptance of acute pain
It is my observation and experience that few organizations will align or exhibit all eight preceding attributes unless they have been jarred from their established rhythms and relationships by some painful experience. The source of this pain may be as dramatic as financial peril. It may arise from intense pressure from an internal constituency, a funding source, or a crucial service partner. At PDCA this acute pain initially emerged from disagreements about how to deal with deficits. However, the real catalyst for radical change was that those disagreements threatened the admirable sense of community central to the organization's self-image.
In the absence of acute pain, organizations can take an incremental approach to change, focusing on one or two areas at a time. It may also be possible to create an anticipatory pain on which to rest a radical change initiative--if, for instance, an organization's leadership is able to rally members and staff to ward off imminent pain.
Whatever its source, acute pain disrupts working relationships and a sense of shared direction throughout the entire organization. In such circumstances, the role of radical change leaders is to invite members to embrace the pain and use it to create a new sense of the possible and new ways of working together. While this is the best response to acute pain, it is not the only response. In fact, the most common reaction is to pretend that the pain is the fault of others and to simply try to outlast it. The second most common reaction is to try to hold the pain at bay by making minor adjustments. Unfortunately, incremental change is rarely sufficient to reverse the debilitating effects of acute pain. And denial is almost always either a postponement of radical change or an inadvertent commitment to the most radical of all changes--organizational death.
Daily newspapers, industry list-servers, and lunch conversations all provide evidence that the nonprofit sector is full of organizations that demonstrate signs of the kind of pain I have described, though without the level of commitment necessary to remedy it. That being the case, we can reasonably expect many more stories of organizations crashing or grinding to a stop. Even so, I remain convinced that organizations with grave challenges can move dramatically and radically toward health and better service to members and markets. I am also convinced that an organization's readiness for radical change is in direct proportion to the number of these nine attributes that it can successfully align and exhibit.
Before you undertake radical change at your organization, check out these resources and increase your prospects for success.
* "The Anti-CEO," by A.J. Vogl, Across the Board, May/June 2004
* "Culture Rules," by Carole Schweitzer, ASSOCIATION MANAGEMENT, February 2004
* "Envisioning Dramatic Change Without Limitations," Journal of Association Leadership, Winter 2004
* "Living Strategy: Guiding Your Association Through the Rugged Landscape Ahead," by Paul Borawski and Arian Ward, Journal of Association Leadership, Winter 2004
* Birth of the Chaordic Age, by Dee W. Hock (1999, Berrett-Koehler Publishers)
* The Complete Guide to Nonprofit Management, by Smith, Bucklin, and Associates (1994, John Wiley & Sons) Author's note: See specifically chapter four, "Creating a Marketing Orientation in a Nonprofit Organization."
* The Great Game of Business, by Jack Stack with Bo Burlingham (1992, Currency)
* Managing Association Turnarounds, by Charles E. Bartling, CAE (1997, ASAE)
William Patrick Nichols is president of Transition Leadership International, Washington, D.C. E-mail: email@example.com.
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|Author:||Nichols, William Patrick|
|Date:||Aug 1, 2004|
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