Management and Leadership Change and Innovation - Handbook For Students and Managers - Nodrm PDF

Management
and
Leadership Change
and Innovation

Amir Levy Ph.D
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Amir Levy Ph.D

Management and Leadership Change and Innovation
Hebrew Edition Yael Shachnay Rimonim Publishing
Senior Editors and Producers: ContentoNow
Producer: Natalie Grin

English Version: Joanna Valency
English Edit: Book Masters Group
Design: Ivan Bogod | Contento De Semrik
Cover Design: Yael Rosen | www.yds.co.il
Copyrights © 2017 by
Amir Levy Ph.D
All rights reserved. No part of this book may be translated, reproduced, stored in a retrieval system or
transmitted, in any form or by any means, electronic, photocopying, recording or otherwise, without prior
permission in writing from the author
ISBN: 978-965-550-118-6
International distributor:
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3 Habarzel Tel-Aviv, Israel
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To my mother, who gave me the desire and the curiosity to know

TABLE OF CONTENTS
Introduction
SECTION 1 | CHANGE MANAGEMENT AND LEADERSHIP

Chapter 1
Classic and Modern Approaches
1.1 Roles and Skills of the Manager - Classic Approaches
1.2 Roles and Skills of the Manager - Modern Approaches
1.3 Self-Evaluation Questionnaire
Chapter 2
Managerial Styles
2.1 One-Dimensional and Two-Dimensional Managerial Styles
2.2 Situation-Dependent Models
2.3 Managerial Styles and Ability to Change
2.4 Integrative Approach
2.5 Management-Style Questionnaire
Chapter 3
Modern Management Methods
3.1 Management by Objectives (MBO)
3.2 Sociotechnical Approach
3.3 Total Quality Management (TQM)
3.4 Just-in-Time Management (JIT)
3.5 Balanced Scorecard
3.6 Benchmarking
3.7 Reengineering
3.8 Theory of Constraints (TOC)
3.9 Lean Management
Chapter 4
Leadership of Change
4.1 Leadership Characteristics
4.2 Leadership Models and Typology
4.3 Characteristics of Leaders Conducting Basic Change
4.4 Integrative Approach
4.5 Summary
SECTION 2 | ORGANIZATIONAL CHANGE PROCESSES

Chapter 5
Theoretical Approaches to Understanding the Occurrence of
Organizational Change
5.1 The Origin of Change Is External
5.2 The Origin of Change Is Intraorganizational
5.3 The Need to Sustain Interaction and Compatibility with the
Environment
5.4 Change as a Natural Character of Organizations
5.5 Open and Complex Systems Approach
5.6 Paradigm Shift – Change as Leadership Operations
5.7 Chaos Approach
Chapter 6
Types of Change, and Levels of Change
6.1 Distinction According to the Content of Change
6.2 Distinction According to the Extent and Scope of Change
6.3 Distinction between Initiated
6.4 Additional Distinctions between Types of Change
6.5 Significance of the Distinctions between Types of Change
Regarding Change Management
Chapter 7
Cyclicality of Change and the Standpoint of Managers and Leaders in the
Process
7.1 Cyclicality of Change
7.2 Process of Change in Personal Aspects
7.3 Conclusions on Change Management
Chapter 8
Organizational Decline, Stagnation, and Crisis
8.1 Stagnating Organizations
8.2 Managing Pullout from Situations of Stagnation
8.3 Organizational Crisis
8.4 Dealing with Crises
8.5 Case Examples
SECTION 3 | CONDUCTING CHANGE

Chapter 9
Characteristics of Planned Organizational Change and Its Management
Strategies
9.1 Prerequisites to Initiate Planned Change
9.2 Planned Change Management Strategies
9.3 Characteristic Stages of Planned Change Process Management
9.4 Planned Change Management Methods
9.5 Diagnosing the Issues that Can Affect the Success of Managing
the Process of Change
9.6 Typical Difficulties in Planned Change Management
Chapter 10
Managing Resistance to Change
10.1 Introduction
10.2 Theoretical Approaches to Identifying the Source of Resistance to
Change
10.3 Dimensions of Resistance
10.4 Identifying Resistance and Opponents to Change

10.5 Summary: Ways to Deal with Resistance
10.6 Example Questionnaire
Chapter 11
Organizational Politics and the Process of Change
11.1 Definitions
11.2 The Difference between a Political Model and a Rational Model
11.3 Negative Aspects of Political Organizational Behavior
11.4 Political Culture and Organizational Change
11.5 Organizational Politics Questionnaire
Chapter 12
Conflicts and Ways to Their Resolution
12.1 Change Accelerates the Occurrence of Conflicts
12.2 Methods for Settling Conflicts
12.3 Questionnaire Diagnosing Behavior Style in Conflict Situations
Chapter 13
Tools and Methods to Diagnose Organizational Problems
13.1 Methods and Tools for Organizational Learning and Diagnosing
13.2 Intraorganizational-Focused Diagnosing and Learning
13.3 Diagnosing and Learning Focused on the Organization’s
Environment
13.4 Diagnosing and Restructuring Organizational Strategy
13.5 Strategic Diagnosis Process
13.6 Strategic Management – Operation Orientations
13.7 Summary
Chapter 14
Working with an Organizational Consultant and Measuring the Success of
Change
14.1 The Organizational Consulting Paradigm – Organizational
Consulting and Organizational Development
14.2 Consulting Process
14.3 How to Measure the Success of Change
SECTION 4 | RESTRUCTURING THE ORGANIZATION
Chapter 15
Designing a Corporate Culture Supporting Innovation and Change
15.1 Definitions and Characteristics
15.2 Models and Typology of Corporate Culture
15.3 Culture, Innovation, and Change
15.4 Examples Highlighting Values and Norms of Innovation,
Entrepreneurship, and Change in Successful Companies
15.5 Corporate Culture Identification Questionnaire according to E.
Cameron and R. Quinn, 2006
Chapter 16
Developing the Internal Ability of Innovation and Entrepreneurship
16.1 The Importance of Innovation
16.2 Stages of Intraorganizational Innovation Development
16.3 Innovation as an Inseparable Element of Corporate Culture
16.4 How Do They Do It? Examples of Successful Innovative
Organizations
16.5 Intraorganizational Entrepreneurship
16.6 Case Examples
16.7 Questions to Test Your Intraorganizational Innovation and
Entrepreneurship
Chapter 17
Redefining Corporate Vision
17.1 Introduction
17.2 Vision Structure
17.3 Examples of Vision and Mission Statements of Successful
Companies
17.4 Characteristics of Efficient Vision and Mission
17.5 Planned Change Process of Corporate Vision
17.6 Example of the Process of Formulating a Vision, a Mission, and
New Beliefs

Chapter 18
Establishing a Flexible Organization
18.1 Manpower Flexibility
18.2 Structural Flexibility
Chapter 19
Managing Mergers and Acquisitions
19.1 Main Causes for Mergers and Types of Mergers
19.2 Difficulties and Merger Failure Factors: The Human Aspects
19.3 Necessary Stages in Merger Processes
19.4 Leadership as a Guide to Successful Mergers
19.5 Issues to Deal with in the Merger Process
Chapter 20
Development of Knowledge Organizations
20.1 Developing Intellectual Capital
20.2 The Learning Organization
20.3 Organizational Learning
20.4 Worker Development and Personal Learning
Chapter 21
Building Network Organizations
21.1 Background of the Phenomenon
21.2 Characteristics of a Networked Organization
21.3 Types of Networks
21.4 Advantages and Difficulties in Network Management
21.5 Networks – Examples
SECTION 5 | FORMATION OF EXEMPLARY AND DURABLE

ORGANIZATIONS
Chapter 22
Built to Last
22.1 Outstanding Companies
22.2 Built to Last – The Stories of Long-Lived Exemplary Companies
22.3 Long-Lived Companies in Europe
22.4 The 500 Small and Medium Unknown Global Champions
22.5 From Good to Great: Why Some Companies Make the Leap and
Others Don’t
22.6 Crazy Times, Crazy Organizations
22.7 High-Performing Organizations (HPO)
22.8 Companies that Outsmart Their Competitors
22.9 Classic Conservative Organizational Structure Versus Structure in
Constant Renewal
22.10 Conclusion
Bibliography
Index

“Only the paranoid survive.”
– Andy Grove, CEO of Intel

INTRODUCTION
n this day and age, we are experiencing changes at such an intense pace, to an
I extent that we never could have imagined in the past. Such change is
increasing and will prevail in the future. Organizations that are not capable of
withstanding such a ruthless pace of change will not survive due to the fact that
today’s competition lies within the ability of quick innovation and change. The
times in which organizations were able to carry out change, and then remain in
quiescence, or to introduce change through slow stages of unfreeze, change, and
freeze as Kurt Lewin claimed (see, for example, Burns 2004), or to proceed to
step-by-step change, have long gone. Organizations that enable fast change, a
corporate culture that supports fast change, a managerial style that encourages
innovation and change, the ability to learn quickly, as well as the in-depth
capability of deciphering trends, threats, and opportunities aroused by the
environment are all crucial to the survival of organizations in a future
environment.
The environment which we are confronted with nowadays and which we will
experience more intensely in the future is characterized by advancing
technological development in various fields: information and communication,
computerization and software, Internet and long-distance contact, medicine,
genetic engineering, miniaturization and compression, etc. Modern, futuristic
technology will change the course of our lives, each person will be able to carry
with him from place to place any means of communication and information
necessary for contact and for business. The location in itself will be of less
importance. The importance of product and service knowledge will increase,
while the importance of substance will decline. Long-distance learning, long-
distance business, and online shopping are becoming more and more popular.
Unexpected changes can occur suddenly in an open environment in which we

have no knowledge of the past. Additional knowledge of the environment does
not guarantee knowledge of the future, but rather predicts, in fact, the opposite.
The more we know, the more surprised we are. The inability of the Israeli
military intelligence to predict the eruption of the Yom Kippur War, the eruption
of the Intifada, the fall of the Berlin Wall, the collapse of the Soviet Union, the
inability of the Western world to predict the revolutions in the Arab world,
among others, indicate a new additional phenomena: the ability to learn through
the ability to forget knowledge of the past, to investigate the environment
through various angles in accordance with different mental models, and to learn
how we learn. Incertitude, thus, becomes certitude. Therefore, the critical
question is how to build solid organizations facing uncertainty and surprise.
We witness the growing complexity of systems and processes, which generates

new qualities: such complexity triggers innovation in terms of supervision and
control systems – in order to prevent the crash of overcomplex systems and the
inability to control them – and yet, vehicle collisions, aerial disasters, electrical
system collapse, among others, still occur as a result of lack of control and
supervision. Increasing complexity encumbers systems and organizations and
makes them hard to control. The popular method to deal with such a
phenomenon is decentralizing, allowing autonomy to each unit, and finally
outsourcing – carrying out operations outside the organization. Nonetheless,
such activity only increases complexity, as each unit resumes to the process of
growth and increasing complexity. Managing organizations in complex
conditions demands an innovative thought process on management,
organization, and change.
The occurrence of change at a fast pace to an extent that is new to us, and
changes generating new qualities affecting the change itself, are a new
phenomenon. In the recent past, very few people experienced changes over the
course of their lives. They worked and lived in one place, their lifestyle
practically never changed, and the technology available to them also underwent
little change. Nowadays, and even more so in the future, people will be forced to
work at several places at the same time, to go through various careers in the
course of their lives, and to continuously learn new things, most of which are
things they did not know in the past, such as autonomous learning by means of a
computer, on-the-job training, learning as part of a team, etc. The responsibility
of people’s own fate is being passed on to them. Organizations will be less and
less able to take responsibility for their employees and will enable them, even
encourage them, to take responsibility for themselves.
Even the corporate world is increasing its pace, and more and more players are
entering the competition. Third world countries are gradually developing their
pace and are making their mark on world economy, which itself is globalizing
and gradually becoming unlimited. Nowadays, it is possible to import goods
from one location, export products to another location, raise capital in one
location and market products anywhere – all in accordance to market
considerations. In an open and globalizing world in which complexity is
increasing, new phenomena are emerging, such as the Domino Effect and the
Butterfly Effect. A bank crash in the Far East may cause a domino chain
collapse of all its related systems, until reaching Western organizations. A small
and imperceptible change at the edges could effect and instigate large-scale
changes at a distant place.
Organizations generate profit through mergers and acquisitions of competitors to
an extent that employees cannot know with certainty who their boss is, or how
long he will be their boss. Along with the phenomenon of mergers and
acquisitions another phenomenon emerges: the splitting and the autonomy of
each unit. A new type of organization thus quickly develops: a network,
spreading around the world through autonomous units, yet connected to one
another through complex affiliations that are different from one another.
In such a world, the ability to change and innovate is rapidly becoming a factor
that could determine the fate of an organization. The establishing of
organizations capable of flexible operations and able to withstand difficult
conditions is becoming a central challenge for managers. No more going through
step-by-step changes, no more exhausting confrontation with committees and
workers regarding every single insignificant change, no more change followed
by quiescence. None of the above will work in the future. What is necessary is
the establishment of flat, flexible, and imaginative organizational systems for
which innovation and change are the way of life; systems which not only
respond to their environment but also generate a new environment themselves;
organizational systems which are capable of learning and whose corporate
culture is of innovation and change; systems possessing entrepreneurship and
innovation skills, which benefit from and are proud of renewing and producing
new things; systems whose employees constantly learn, benefit from changes,
and see them as a life-saving challenge, rather than as a disaster.
Upon this basis, the distinction between management and leadership emerges.
Guiding organizations toward growth, success, and dynamism in a tempestuous
and uncertain environment demands new leadership and managerial styles. The
importance of traditional management, which focuses on improving efficiency
and preserving what already exists, and which is characterized by centralization
and instruction, is thus lessened. Leadership capable of managing innovation and
changes by reinforcing its workforce and by deploying concealed powers of

thought and creativity is gaining importance. Leadership must have the power to
design improved reality through innovative services and products which respond
to people’s complex needs.
The role of management is to implement and internalize a culture and processes
which promote constant innovation. The role of leadership focuses on creating a
significant vision shared by all, on guiding and motivating through inspiration.
Management and leadership are becoming complementary roles as their fields of
activity also overlap. Establishing human systems that respond to human needs
and that are able to prosper in a dynamic and competitive environment – this is
the challenge that managers and leaders face.
This book deals with instilling concepts and studying processes that will assist
anybody interested in leadership conducting change and innovation, in change
management itself, and its optimal implementation. The book will assist
managers in reorganizing their conception and improving their capability to
successfully manage constant organizational change. The book also deals with
the issue of establishing more durable organizations facing vicissitudes and
uncertainties, as well as establishing organizations capable of fast change.
Alice never could quite make out, in thinking it over afterwards, how it was
that they began: all she remembers is, that they were running hand in hand,
and the Queen went so fast that it was all she could do to keep up with her:
and still the Queen kept crying “Faster! Faster!” but Alice felt she could not
go faster, though she had not breath left to say so.
The most curious part of the thing was, that the trees and the other things
round them never changed their places at all: however fast they went, they
never seemed to pass anything. “I wonder if all the things move along with
us?” thought poor puzzled Alice. And the Queen seemed to guess her
thoughts, for she cried, “Faster! Don’t try to talk!”
Not that Alice had any idea of doing that. She felt as if she would never be
able to talk again, she was getting so much out of breath: and still the
Queen cried “Faster! Faster!” and dragged her along. “Are we nearly
there?” Alice managed to pant out at last.
“Nearly there!” the Queen repeated. “Why, we passed it ten minutes ago!
Faster!” And they ran on for a time in silence, with the wind whistling in
Alice’s ears, and almost blowing her hair off her head, she fancied.
“Now! Now!” cried the Queen. “Faster! Faster!” And they went so fast that
at last they seemed to skim through the air, hardly touching the ground with
their feet, till suddenly, just as Alice was getting quite exhausted, they
stopped, and she found herself sitting on the ground, breathless and giddy.
The Queen propped her up against a tree, and said kindly, “You may rest a
little now.”
Alice looked round her in great surprise. “Why, I do believe we’ve been
under this tree the whole time! Everything’s just as it was!”
“Of course it is,” said the Queen, “what would you have it?”
“Well, in our country,” said Alice, still panting a little, “you’d generally get
to somewhere else – if you ran very fast for a long time, as we’ve been
doing.”
“A slow sort of country!” said the Queen. “Now, here, you see, it takes all
the running you can do, to keep in the same place. If you want to get
somewhere else, you must run at least twice as fast as that!”
Excerpt from Lewis Carroll’s, Alice’s Adventures Through the Looking Glass,
Chapter 2.
“The Garden of Live Flowers,” Tribeca Books.

SECTION 1
Change Management and Leadership

Chapter 1
Classic and Modern Approaches
his chapter reviews the different approaches to the definition of the term
T “management” and the roles of the manager in the past and present. The
chapter focuses on classical and modern approaches and on the development of
managerial thinking regarding the roles of managers.
MANAGEMENT - DEFINITION
The general definition of management is based on the words of classic and

modern theorists and attempts to briefly include the roles and goals of
management:
Management is the efficient and purposeful achievement of the goals of

the organization through planning, organization, coordination, leading,
and control of the resources of the organization.
Efficiency means doing things right, or, in other words, taking advantage of the
organization’s resources in the best possible way in order to achieve its goals.
Purposefulness means doing the correct things, or, in other words, choosing the
right goals for the organization’s activities.
Planning means the setting of goals and priorities for the future, as well as
allocating resources in order to achieve those goals.
Organization is the process that sets up the plan, and its meaning is the
organization of the structure and the work groups, defining tasks, and allocating
resources for the achievement of those goals.
Coordination is generating cooperation and congruence between the

organization’s activities and the efficient achievement of its goals.
Leading is using influence to motivate employees and middle management

toward optimal performance.
Control means overseeing activities and their adherence to schedules, as well as

quality and efficiency in achieving goals.
The evolution of managerial thinking presents a more complete and complex

view than the generic definition above. In the following sections, various
approaches of the functional aspect of management will be presented.

1.1 ROLES AND SKILLS OF THE MANAGER - CLASSIC
APPROACHES
The question about what managers should be doing was asked by researchers as
early as the turn of the previous century. Eventually, set principles were written
by Frenchman Henri Fayol (1949). Fayol presented a model that includes five
main roles:
• Planning - analyzing the environment, annual planning, setting goals, and
drawing up plans for future execution.
• Organizing - building an organizational structure, hiring and placing
employees, raising funds, and ensuring task completion.
• Commanding - taking responsibility for making decisions, solving
problems, and obtaining results.
• Coordinating - coordinating all the organization’s activities and
cooperation between various departments.
• Controlling - overseeing and ensuring tasks are completed in accordance
with existing decisions and procedures.
Fayol also set 12 principles of management:

1. Dividing work according to expertise.
2. Combining authority with managerial responsibility.
3. Discipline and adherence to protocols, rules, and labor laws.
4. Unity of command, meaning that each employee has one manager.
5. Supremacy of the interest of the organization over that of the individual.
6. Fair payment for work.
7. Existence of a chain of command.
8. Organization.
9. Equal and nondiscriminatory treatment of employees.
10. Stability of managerial staff.
11. Promotion of managerial initiative.
12. Building team spirit.
Frederick Winslow Taylor (Taylor 1911), an American manufacturing engineer

who lived at the beginning of the twentieth century, was the first to develop an
approach that focused on optimization of the organization and its activities using
scientific methods. This means that he used measurements and set norms and
standards of performance. Taylor was a pioneer in the field of performance
research, as well as the issue of “organization and methods.” Taylor belonged to
the group of thinkers who saw the organization as a mechanical system and the
worker a person motivated solely by material motives. He was thus not
interested in the processes of change and in their implementation difficulties. His
attention was mostly focused on changes aimed at rationalizing the organization
and the efficiency of its activities. The type of change he advocated was of
improving the efficiency of the system.
Taylor’s claims were:

• Basic premise: man is an economic being with material cost-benefit
considerations; organizations can be made more efficient and effective by
using scientific tools such as a performance study.
• By measuring time and quantity, standards of production, performance,
and manpower can be reached.
• Work can be made more efficient by adequate organization and methods.
• Workers can be motivated by payment according to performance - bonuses.
• Standardization is a simple method for making production more efficient.
• Written procedures and systems for performance and control should be
developed.
• It is important to separate line managers and administrative staff so that
each employee has one direct manager.
Roles of the Manager - according to Taylor, managers must constantly deal

with control and with assessment of performance as well as processes which
strive for constant streamlining, improvement, and change. Taylor believed that
material rewards would motivate workers to cooperate and support streamlining
processes.

ROLES OF THE MANAGER ACCORDING TO HUMANISTIC THEORY
In the 1950s, researchers such as Abraham Maslow (1954), Douglas McGregor
(1960), and others brought a new approach which focused on the worker and his
needs. The Hawthorne experiment (1978), Maslow and Herzberg’s motivation
studies (1987), among other studies on the influence of management style on
employee satisfaction and motivation – gave rise to a new point of view on the
role of the manager, especially the team manager. Humanistic theorists as part of
the field of humanistic psychology centralize their focus on the autonomous,
mature employee who comes to work not just for livelihood, but also for the
fulfillment of psychological and social needs. This approach sees the success of
the organization as directly related to worker satisfaction, motivation, and
commitment to the organization. Hence, the roles of the manager are focused on
the following areas:
• Ensuring fulfillment of psychological needs of the worker, such as credit,
self-development, promotion, power, partnership, challenging tasks, and
self-fulfillment in the workplace.
• Ensuring team spirit, as well as its creation and development as a source of
identification and commitment for the worker.
• Open communication with workers.
• Development of norms and values of openness, honesty, cooperation, and
joint problem solving.
• Incorporating workers in decisions regarding the goals of the organization
or the team.
• Ensuring worker satisfaction, commitment to the goals of the organization,
and motivation for optimal performance at the job.
Researcher Peter Drucker (1954) presented a slightly different approach. He

believed managers have five roles:
• Setting goals - setting goals in every field of activity, deriving performance
objectives, and describing what is needed in order to attain them.
• Organizing - designing an organizational structure, defining roles, hiring
and training workers, posting workers.
• Motivating and communicating - motivating workers, creating open and
honest communication and efficient teams.
• Evaluating - creating performance benchmarks focused both at the level of
the worker and the level of the organization.
• Developing the workforce - training and developing workers, developing
both knowledge and skill.
Peter Drucker initially believed that among the roles of the manager was a role
related to constant processes of improvement by setting goals and assessing their
implementation.
Researcher Henry Mintzberg (1973) examined what managers do in medium-

sized companies. He claimed that the manager’s role depends on the type of
organization and on his position in the organizational hierarchy. His roles are
varied, and their importance depends on the aforementioned factors. Mintzberg
details 10 roles, divided into three categories:
• Interpersonal roles - this role derives from his hierarchic position:
1. Representative role - He represents the organization as well as formal
authority facing stakeholders. He signs documents; he is an outward
representative of the organization, etc.
2. Leadership role - He is responsible for staff recruitment, worker
motivation, and guiding the workers in the achievement of the
organization’s goals.
3. Public relations - He is the contact with external stakeholders and
contact with workers without any relation to their tasks within their
departments.
• Communicational roles:
4. Supervision - He receives and transmits information for control and
inspection purposes, communicates with the environment, clarifies
ideas, intentions, and plans, and utilizes communication.
5. Information distribution - He ensures open communication and shares
knowledge in order to involve the workers.
6. Spokesman - He is the external and internal spokesman of the
organization.
• Decision making - he is responsible for the process of decision making in
accordance with his hierarchic position:
7. Entrepreneurial roles - He initiates innovation and change, taking
advantage of change opportunities, project development, and
incorporating constant improvements.
8. Preventing disturbances and incidents - He deals with incidents and
problems, solves existing problems and incidents, and deals with
conflicts.
9. Allocating resources - He assigns people, budgets, places, and
technology for departments or for people.
10. Negotiating - He is responsible for agreements with workers’
committees, labor agreements, contracts with clients and suppliers, and
contracts with other organizations.
Mintzberg was one of the first to highlight the roles of managers in initiating
constant innovation and change from success rather than from crisis. Developing
new products and services are part of the duties of the modern manager.
An additional approach was brought forward by Adair named the “action-

centered model” (2009). Adair proposed three basic roles of team managers:
• Duty of mission, including:
Responsibility for attaining the objectives of the team.
Defining roles and assignments.
Planning work.
Allocating resources.
Defining roles and fields of responsibility.
Inspection of quality and performances.
Ensuring focus and adherence to objectives.
Initiative toward renewals and generating new challenges for the team.

• Duty of team development, including:
Establishing team spirit and morale.
Group consolidation.
Norms and values.
Internal communication.

Guidance and development of teamwork.
Appointing deputies.

• Concern for the worker as an individual, including:
Concern for the needs of the worker as an individual.
Solving personal problems.
Personal appreciation and support.
Solving conflicts.
Developing and training the individual.
In the form of a diagram, the model appears as follows:
Researcher Laurie Mullins (2000) summarizes the research on the roles of

manager by indicating fields of manager roles:
1. Roles of communication and information.
2. Traditional management - planning, control, decision making,
organization, coordination.
3. Networking - establishing internal and external relations and connections,

fostering teamwork.
4. Managing human resources - recruiting and posting, training, motivation,
compensation, ensuring commitment, satisfaction, and identification.
5. Optimization, improvement, and development of the organization and its
workers.

THE ROLES OF THE MANAGER AS A FUNCTION OF HIS POSITION WITHIN THE
ORGANIZATION HIERARCY
The roles of the manager depend on several factors, including his hierarchic
position. The more senior his position, the more he is supposed to focus his
efforts on company policy and less on its current management. The more senior
his position, the more he is supposed to focus on the company’s future and less
on its present. The more senior his position, the more he is expected to focus on
leadership aspects and less on managerial aspects:
• As chairman of the board of directors, he must outline the company’s
policies.
• As CEO, he must implement the company’s policies.
• As manager, he must transcribe the company’s policies into goals and
objectives by way of planning operations, organization, instruction, and
control.
• As team manager, he must define the team’s objectives, as well as
consolidate the team and its organization for the achievement of its goals.

1.2 ROLES AND SKILLS OF THE MANAGER - MODERN
APPROACHES
So far, we have seen that very little has been dedicated to the importance of the
role of the team manager and the middle manager regarding innovation and
change. The reason for this is in the nature of the work environment. Up until the
1970s, work environment was relatively stable, and changes and innovation were
rather slow. With the emergence of faster change processes in every aspect of
life, the approach highlighting the role of the manager in the event of change has
also emerged. An example of this is the manager’s position and roles in
accordance with the domain of organizational development.

THE MANAGER AS AN AGENT OF CHANGE
The approach of the manager’s roles, focused on pushing toward change and
innovation, is displayed by organizational development specialists (see, for
example, Senior 2001). This approach categorizes managers according to their
conception of their roles and their ability to conduct change, to initiate it, or to
encourage it. Such a manager is also known as an “agent of change.” An agent
of change is any person from inside or outside the organization who sees as a
significant part of his job to push toward, to initiate, and to conduct change and
innovation within his organization. This is a person having power of execution
inside the organization. Such a person may be a leader, a manager, a human
resources person, or any person having the strength to initiate and push toward
planned changes. This archetype takes on the responsibility of generating the
change and focuses on it. This is his field of expertise and professional
inclination, and he is capable of assuming the role he committed himself to.
1. Excellent analyst. This includes:
• Ability to decode the organization’s basic premises.
• Understanding the branch/sector in which the organization operates.
• Diagnosing the organization’s maturity for change; identifying the
factors restraining or promoting change.
• Producing an integrative diagnosis; providing the client with new insight
and framework of familiar occurrences.
2. Maintaining dialog with his clients “at eye level,” at an interpersonal
level, and at a group level.
3. Vagueness of lifestyle, adopting the yin and yang as a work philosophy,
learning and teaching.
As a conclusion, it appears that nowadays the job of a manager consists of a

complex variety of different roles. This combination depends, of course, on the
nature of the role, on the environment in which the organization operates, and on
the manager’s natural inclinations.
A complete model combining the different approaches and the manager’s roles
was suggested by Quinn (1991). He established a model detailing the opposing
roles and the complementary roles of the manager (diagram 1).
This model is built upon four basic personalities of managers, each of which is
split into two other types (see inward circle). Quinn attributes characteristic roles
to each of the eight types (see outward circle). Each style and role has its own
importance facing weaknesses:
1. Innovation and initiative - the entrepreneurial type; the innovative and
creative manager who brings innovative ideas to light and who frequently
deals with initiatives:
• Innovator - creative, innovative, entrepreneurial; investigates
possibilities for the future; brings new ideas; clarifies problems. Problems
- excess changes; things are left incomplete; worker exhaustion due to the
load of changes.
• Broker - focuses on gaining outside recognition by obtaining resources
from external agents. A political person possessing power of influence and
persuasion.
diagram 1
Meets many people on the outside; spokesperson who provides the
organization with public relations services. Problems - dedicates himself
to politics rather than to the internal management of output.
2. Production and output - the manager who is focused on obtaining results:
• Producer - ambitious, mission-oriented, and focuses on output.
Demands high performance; spurs his workers and is ready to delegate on
the condition of satisfactory performance. Problems - stress and
exhaustion of the workers.
• Director - provides direction, vision, and goals. Defines and sets
objectives and priorities. He is a strategist. Problems - doesn’t direct
attention to the present or to individual needs.
3. Management - management focused on internal processes, roles, and
organizational structures:
• Coordinator - maintains stability, coordinates independent operations,
maintains order and processes for the purpose of continuity, prevents
dysfunctions. Problems - focus-oriented more on maintaining the current
situation.
• Monitor - generally close to the workers he controls and supervises;
ensures objective fulfillment; punctilious in the observance of procedures and
processes; analyzes situations; ensures no deviation from objectives.
Problems - dry management; operates by the book.
4. Interpersonal relations - the democratic manager who shares and fosters
teamwork:
• Facilitator - participation; involvement in teamwork; consensus and
cohesion; mediation and conflict prevention; atmosphere of rapport,
interpersonal relations, participative processes. Problems - excess meetings
and long procedures; lack of efficiency.
• Mentor - dedicates himself to personal development; empathetic and
caring; sensitive to people’s needs; is concerned with personal fulfillment;
fosters people individually; creates a good atmosphere and personal
commitment. Problems - permissiveness; lacks consideration for the needs
of the organization.

IN CONCLUSION
The fast-changing environment, the necessity to cope with an open market,
evolving technology, as well as customer needs for quality and service all
modify the characteristics of a manager’s role. Old models focused on
improvement, maintenance, and organization will no longer work in the near
future, possibly even nowadays. The complex world also entails more
complexity in the role of the manager. A manager with limited capacity will not
be able to guide his team toward success. A mission-oriented manager focused
only on results will eventually find himself with an embittered team. A manager
who solely dedicates himself to personal fulfillment will not achieve any goals.
A manager who doesn’t know how to impose minimal order will eventually find
himself in chaotic situations. Hence, management nowadays is a complex
profession which demands learning. Managers are expected to fulfill their
positions, whether antagonistic or complementary. They must be capable of
balancing the variance among their different roles according to situation or
according to the task. They must fulfill their position of “and, and also” rather
than “or, or.”
1. Ability to obtain results, on the one hand, and to be attentive to workers’

needs, on the other hand.
2. Ability to motivate toward change and innovation, on the one hand, and to
be organized, on the other hand.
3. Ability to develop and promote their workers, on the one hand, and to set
common performance objectives, on the other hand.
4. Ability to obtain influence and resources for team success, on the one hand,
and to make use of them by way of the team for goal achievement, on the
other hand.

1.3 SELF-EVALUATION QUESTIONNAIRE
Self-evaluation questionnaire of the roles of the manager according to
Quinn’s model of antagonistic managerial roles (1991).
Fill out the following questionnaire according to your perception of your

role:
Question Give a grade from 1, very

Statement: As a manager, I:
No. seldom, to 7, very often
Am attentive to the personal problems of the members of

1
my team
2 Meticulously examine quality control reports
3 Influence decisions made by my superiors

4 Solve problems creatively and intelligently
5 Clarify domains of responsibility of the subordinates
6 Display total commitment to the job

7 Encourage consensus at staff meetings
Put emphasis on the importance of continuity of daily

8
task completion
Study and compare data reports among others to identify

9
problems
10 Show empathy in my attitude toward my subordinates
11 Set clear objectives for my subordinates
12 Seek ways to constantly renew and improve

13 Create and nurture a network of influential contacts
14 Get involved as little possible in the workflow
15 Display high motivation for the job
Encourage participation and involvement of my workers

16
in decision-making processes at staff meetings
Report the grades you gave yourself according to the division of roles

below:
facilitator
Grade for Qu. 7 _____
Average grade ______
innovator
producer
coordinator
mentor
broker
director
monitor
Now, report the grades in the following diagram. Indicate the grade by a dot
on the graduated line. Connect the eight managerial roles profile dots as
you consider yourself to fulfill them.

Effective ______________
Ineffective____________
Quinn investigated the link between the characteristics of the role and the
success of managers. The findings show that successful managers balance all
eight aspects of the role. Although there are different types of balance, the case
of very high grades for some roles and very low grades for the others has not
occurred.

ARCHETYPES OF SUCCESSFUL MANAGERS
Successful managers are very good at six out of the eight roles, and are average
at the other two. Their success depended both on the nature of the specific role
and their hierarchic position. Managers that ranked as ineffective were either
weak at all eight roles, or they were very strong at two or three of the roles, and
weak at the others. The conclusion of the research is that a certain balance
between roles is necessary, depending on the type of role and on hierarchic
position. Therefore, the manager’s desired profile should be a balanced one.

Chapter 2
Managerial Styles
his chapter focuses on summarizing approaches and models that diagnose

T different management styles and on their relevance to change management.

2.1 ONE-DIMENSIONAL AND TWO-DIMENSIONAL
MANAGERIAL STYLES
The main topic of this chapter is the research on the issue of effect of managerial
style on the members of the team. Many researchers investigated the nature of
relations between the manager and his workers, and their impact on dimensions
such as output, motivation, satisfaction, and commitment. The classic
approaches focused on distinguishing between an autocratic manager who is
focused on performance and a democratic manager who is focused on the
members of his team. From Frederick Taylor’s book, Principles of Scientific
Management (1911), we understand the importance of management style which
highlights the importance of focus on performance and output as well as the
manager’s exclusivity in decision making - as leading to accomplishments. A
few years following that, schools of thought appeared, stressing the importance
of managerial style focused on interpersonal relations and worker satisfaction
(see, for example, Lippit and White 1960), and the influence of different
management styles on worker output. The research investigated the influence of
three managerial styles on team performance: 1. A tough managerial style,
centralized and authoritative, imposing tasks and giving orders without
consideration for the team’s opinion. 2. A democratic managerial style, taking
into consideration team opinions, responding to the team’s needs. 3. An
indifferent managerial style, letting workers achieve their goals as a result of
their own will, without involvement in how they complete their tasks.
The research showed that an authoritative style was an advantage in reaching
high levels of performance, especially in the short term. Its downside lies in
negative feedback from the staff or in the generation of dependent relations, as
well as small-mindedness amid the members of the team. The participative style
was advantageous for positive team feedback, but performance, on the other
hand, was weaker.
Later research conducted by Bales (1965) determined that in various situations,
three characteristic manager behavioral types appear within the group: task-
oriented behavior, social behavior, and activist behavior. Bales claimed that the
ideal managerial style is a combination of high skill in all three dimensions:
task-oriented, social, and activist. Any other combination will either have an
impact on team satisfaction or will impact team output.
THEORY X AND THEORY Y
A more in-depth and detailed approach was brought to light by Douglas
McGregor (1960), who developed his Theories X and Y following Maslow’s
Hierarchy of Needs. McGregor claimed that managers have to identify the needs
of workers and respond to them due to the existing adequacy between the needs
of the workers and the goals of the organization. McGregor formulated
characteristics for both managerial prototypes. The first is known as type X, and
the second, type Y.
Type X emerges from negative basic premises concerning the person or the
worker. He assumes that the worker is inherently lazy, lacks willingness to take
responsibility, and that he is naturally opposed to change. He is indifferent to the
goals of the organization, he avoids initiative, and he operates solely for his own
benefit and for his comfort and material needs. The conclusion as a result is that
the manager must be decisive, motivate by means of recompense or punishment,
avoid imposing responsibilities on his workers, and supervise them personally
and regularly. Consequently, this type is more centralistic by nature, imposes his
opinion, imposes decisions, and is a soloist go-getter.
This manager arrives first and leaves last, continuously spurs his workers,
preaches morals and principles, and is never satisfied with their work. He works
hard and takes responsibility for all the actions of his workers. His performances
are good, but only on the short term. His behavior is the cause of worker
dissatisfaction and high turnover. In the case that workers cannot quit, they stay,
bow their heads, become narrow-minded, and wait for the anger to blow over.
Type Y emerges from the assumption that the needs of the workers go beyond
needs for security; they want to make their mark in the workplace, and such
workers are those who are best adapted to the goals of the organization. Workers
want interpersonal relations and a friendly atmosphere; they strive for
professional advancement and fulfillment, to have influence; they strive for
personal involvement and participation in work processes that concern them. An
atmosphere supportive of workers generates creativity and initiative. All of the
factors above support the success of the organization as well as the achievement
of its goals. For this reason, worker motivation is not based upon recompense
and punishment, but rather on the fulfillment of their social and psychological
needs.
Manager Y is the type who is attentive to his workers’ needs, responds to them
in accordance, and thus, generates a participative, supportive, and reinforcing
working atmosphere. He puts emphasis on personal fulfillment and advancement
of the worker, on his participation in decision-making processes, and generates
conditions that enable the worker to develop his capacities, according to
Maslow’s Hierarchy of Needs. This type of management produces a good
working environment within the team and ensures strong commitment of its
members to the organization’s goals. A sense of similarity is generated between
the goals of the worker and the goals of the organization or the team. McGregor
claimed that in such a situation, the atmosphere within the team would be better,
its members would be more committed, and their performance would improve
over a longer period of time.
Criticism of McGregor’s work didn’t take long to emerge, especially coming

from the business sector, which claimed that McGregor’s view was somewhat
naïve and that a connection between performance of the organization and worker
satisfaction didn’t necessarily exist. It is possible that excess emphasis on worker
needs will lead to negligence rather than to his better performance. In any case, it
appears that McGregor laid the foundations of management that relates to the
worker as a mature person in its entirety, in search for not only financial security
but also personal fulfillment, strength, and satisfaction in his work. They are the
ones who can genuinely adjust to the organization’s needs and its ability to
succeed.

QUESTIONNAIRE ON MANAGEMENT STYLE ACCORDING TO MCGREGOR’S X Y
MODEL
What is your opinion on the following statements? Circle the corresponding
number.
People generally benefit from work and

People are generally essentially lazy 1 2 3 4 5 6 7
ambition
Most people are interested in their own

1 2 3 4 5 6 7 Most people care about others
personal benefit
Punishment and criticism generate Excessive use of punishment and

1 2 3 4 5 6 7
positive results criticism will affect motivation
Most people are not interested in the The results of the organization are
1 2 3 4 5 6 7
organization’s goals important to most people
Most workers don’t assign much Workers generally want to know that
importance to the significance of the 1 2 3 4 5 6 7 their work is important and meaningful
work they do to them
Most people are usually dishonest 1 2 3 4 5 6 7 Most people are honest
People are willing to act solely for their Most people are inclined to act for the
1 2 3 4 5 6 7
own benefit benefit of others
Most workers are not interested in Most workers are willing to take
1 2 3 4 5 6 7
taking responsibility responsibility
Workers are motivated by challenging

Money mainly motivates the worker 1 2 3 4 5 6 7 tasks that enable them to demonstrate
their capacities
People can usually work independently

Most people need supervision 1 2 3 4 5 6 7
and oversee their own work
It is necessary to direct and pressure People like to direct themselves in their

1 2 3 4 5 6 7
people to do their work work
It is risky to give the worker

responsibility and authority, for then it Worker responsibility and authority
may be difficult for the manager to 1 2 3 4 5 6 7 generates self-motivation
control him

Add up your points:
Up to 24 points: Your style is classic, as per category X
Up to 36 points: Your style tends toward category X
Up to 48 points: Your style is a combination of both X and Y
Over 54 points: Your managerial style tends toward category Y
Over 60 points: Your managerial style is very close to category Y
Over 66 points: You are practically a classic Y
Over 72 points: Your managerial style is classic Y

MANAGERIAL GRID
Two researchers, Blake and Mouton (1965), used McGregor’s model and
established a new model combining both types into a more complex system. The
model they presented consists of two behavioral dimensions as a matrix: on the
one hand, a managerial style focusing on people and their needs, and on the
other hand, a managerial style that focuses on production and the completion of
workers’ tasks. This way, we obtain a scale on the basis of nine levels, and thus,
four windows or managerial types:

• 9/1 – This manager is situated high in his concern for production and
situated low in his concern for people. He is goal-oriented, centralized, and
rigid. He is autocratic, motivates by means of recompense and punishment,
close control, and supervision, and demands discipline. Worker satisfaction
is low.
• 1/9 – This manager is situated high in his relationship to people and low in
his relationship to production. This leader is known to researchers as the
“Country Club.” A manager of this type is concerned for his workers,
generates a pleasant atmosphere within the team, involves his workers in
decision-making processes, and he is attentive to their needs and responds
accordingly. Nonetheless, team performance is low.
• 1/1 – This manager is weak in both dimensions. Researchers named him
“Impoverished.” He gives his workers freedom of action, and he isn’t too
concerned about their needs, nor in managing goal achievement.
• 9/9 – The ideal manager. A team manager with a combined style. This
manager knows how to combine both approaches, how to relate to people
and to optimally attain team objectives.
This model is normative. It results from the assumption that in any situation,
with any type of work or workers, a combined managerial style is preferable.

TEAM FREEDOM AND MANAGER FREEDOM IN DECISION-MAKING PROCESS
A slightly different model was suggested by Robert Tannenbaum and Warren
Schmidt (1973). They are both among the founders of the organizational
development branch, based on the extent of freedom of decision making that the
manager grants his workers. The model displays different approaches of
managers on decision making within the team, in accordance with the extent of
their consideration of the opinions of the members of the team. Here too,
different types of managerial styles are represented, this time through the
spectrum of leadership styles ranging from taskcentered to a style that grants
team members a lot of freedom in the process of decision making. (Table 1)
Table 1
This model presents a variety of possibilities for the manager when the
procedure he chooses depends on several factors. One factor is the level of
professional knowledge of the workers. A second factor is the position they are
filling. Another factor is the issue to be debated upon, and an additional issue is
the situation and context of the operation. For instance, regarding professional
high-tech workers or people working on development projects, a managerial
style allowing freedom of action to the workers is more efficient. This also
applies to management tasks. On the other hand, in the case of a packed
schedule, crisis, or pressure from a client for an immediate solution, allowing the
manager to make decisions quickly without wasting time on team involvement
would be the right way to go.

2.2 SITUATION-DEPENDENT MODELS
The thought that there is no optimal management style that can be defined as
efficient in any situation has been raised by much research at the end of the
1950s. For instance, researcher Fiedler (1971) raised the idea that indeed two
basic managerial styles exist. He named them “task-oriented” and “human
relations-oriented.” Fiedler claimed that team success doesn’t depend only on
the manager’s style, but also on additional factors. Fiedler found that team
effectiveness depends on three factors: the nature of relations between the
manager and the workers (good or poor), the extent of clarity of the objective
(clear or vague), and the extent of the manager’s power (strong or weak).
On the basis of the variables in the table, Fiedler analyzes the effectiveness of
both styles: human relations-oriented and task-oriented. According to Fiedler’s
research, a task-oriented style can be effective in the case of poor relations
between the manager and the workers, vagueness of structure of the objective,
and weak extent of his power. Fiedler even found that in extreme situations on
both sides – for each parameter – a task-oriented style is preferable over a human
relations-oriented style; in fact, the latter is more suitable to intermediate
situations for each parameter. Fiedler’s argument is that since it is difficult to
change a person’s nature, namely management style, it is necessary to befit the
situation to the managerial style. In other words, to each style its own situation.

Another situational approach model was brought forth by Hersey and Blanchard
(1972). The researchers based the definition of management styles on Blake and
Mouton’s Managerial Grid. The situation is defined by two dimensions:
1. Extent of knowledge, experience, and professional ability.

2. Extent of self-confidence, commitment, and motivation to complete tasks as
requested.
According to this approach, the manager must adapt his situational management
style to the level of maturity of the workers.
The style of authority delegating means that the manager has little influence on
people or the assignment. He abstains from instructing them on how to complete
their tasks. Instead, he delegates them the authority to complete the task their
own way. The reason for this is that his workers are highly knowledgeable,
skilled, and experienced, as well as highly willing, committed, and motivated for
task completion.
The instructing and directing style is more suitable to inexperienced workers
having little knowledge, limited skills, little self-confidence, and a lack of
willingness and motivation for task completion. In such a situation, the manager
must be authoritarian and centralized and instruct the workers on what to do and
how to do it.
The participating style is more suitable to highly skilled and experienced
workers having little self-confidence, willingness, and motivation. In such a
situation, the manager must provide motivation through involvement and
participation in decision-making processes and in the manner in which tasks are
completed.
The selling style is more suitable to highly willing, committed, and motivated
workers having little professional experience and limited skills and knowledge.
In this case, the manager must utilize their motivation to learn and develop their
level of professionalism by way of suggestions and advice on how to learn and
develop.

TEAM MANAGEMENT STYLE DIAGNOSIS QUESTIONNAIRE
SITUATIONS POSSIBILITIES
A. Put emphasis on goals and

attaining objectives, and at the
same time underline the need
1. Communication between yourself and your subordinates for procedures.
is strictly formal. They are not interested in informal B. Discuss things with them and
contact with you, and it seems to you that they feel that elaborate new goals with their
you don’t care about them. Their performance has participation.
decreased significantly. C. Sit in meetings with them and
listen to what they have to tell
you.
D. Not do anything.
A. Be friendly and continue

reinforcing responsibility
specifications and performance
2. Your team results are increasing. You are sure that procedures.
everyone knows what they are responsible for and is B. Not do anything.
aware of the performance norms of their jobs. Each and
every one of your subordinates knows what you expect C. Give the team a feeling of
from them. involvement and importance.
D. Put emphasis on the importance
of goals and adherence to
schedules.
A. Work with the team in order to

solve the problem.
B. Let the team solve the problem
3. Team members are stuck on one problem they cannot without getting involved.
resolve themselves. You usually don’t get involved. C. Respond immediately in an
Team performance and interpersonal relations are good authoritative manner in order to
at the moment. solve the problem.
D. Encourage team members to
solve the problem and support
them in their work.
A. Allow the team to participate in

implementing the change
without being authoritative.
B. Update the team on changes;
following this, carry out the
4. You want to implement significant changes, your change under tight supervision.
subordinates have had good results in the past; they C. Let the team plan the
understand the need for such change. implementation of the change.
D. Involve the team in planning the
change while adopting a stance
leading to the guarantee of
completion of the change as
required.
A. Let the team direct itself.

5. Your team’s performance results have decreased in the B. Consult the team and reinforce
past months; team members don’t take objectives or the need to attain objectives.
schedules seriously. In the past, tasks and responsibilities C. Redefine tasks and
have been defined with the help of the members of the responsibilities. Closely
team. You need to remind them regularly about schedules supervise their performance.
and assignments. D. Allow the team to redefine tasks
and authority with your help.
A. Give the team a feeling of

importance and involvement.
B. Emphasize the importance of
6. You are a new manager in a very efficient organization. goals and adherence to
The previous manager was very authoritative and schedules.
controlled everything. You want to maintain efficiency, C. Not do anything.
but at the same time, you would like to develop a less D. Allow the team to be involved
authoritative leadership style. in decision-making processes
and at the same time, find out
how the team attains objectives
on-site.
A. Define and implement the

changes yourself.
B. Cooperate with the team on
things related to change, but let
them implement it.
7. You want to implement a new organizational structure. C. Be ready to involve the team
Your team members have suggested a number of and take their suggestions into
changes. Your team is efficient and flexible. consideration in the thought
process on the change.
However, always maintain
control of the actual
implementation process.
D. Not do anything.
A. Not do anything.
B. Talk to the team about the
situation and carry out the
required changes.
Your team’s performances and interpersonal relations C. Help the team perform their
8.
within the team are good. You don’t feel confident tasks in a more precisely
regarding your leadership of the team. defined manner.
D. Talk to the team about the
situation without pushing
toward a specific solution and
without being authoritative.
A. Let the team solve their

problems on their own.
B. Consult the team regarding how
9. Your supervisor appointed you to manage a team to solve the situation, but put
incapable of sticking to schedules. The team’s objectives emphasis on the importance of
are unclear, and team members don’t attend meetings. goal achievement.
When there is a meeting, it usually seems more like a
friendly get-together. The team has very high-performance C. Define objectives and control
potential. task completion.
D. Let the team set objectives –
make suggestions without
directing.
A. Allow the team to participate in

setting objectives and
procedures without controlling
the process.
10. Generally, your subordinates are capable of taking B. Set objectives and control task
responsibility, but lately, they don’t pay attention to the performances.
objectives and norms that you set. C. Not put pressure and not get
involved.
D. Get feedback from the team, but
insist on the need to attain the
objectives that you set.
A. Increase supervision on
teamwork.
11. You have just been promoted to a managerial position. B. Involve subordinates in
The previous manager wasn’t involved in the team’s decision-making processes and
work issues. The team dealt with goal achievement and underline their contribution and
adherence to schedules very well. Interpersonal importance.
relations within the team are good. C. Discuss change and need for
new procedures with the team.
D. Not do anything.
A. Discuss the possible need for

new procedures within the team
and implement your solution to
the problem.
12. You have knowledge of problems within the team. Your B. Respond immediately and insist
team has had excellent results in the past year. Team on the need for a solution to the

members attain objectives without difficulty and problem. Direct the team toward
teamwork is good. Each of them is adequately skilled a solution.
for their role. C. Let the team members solve the
problem themselves.
D. Participate in the problem-
solving process and support the
team in its implementation.
See the answer key for decrypting on the next page.

ANSWER KEY
Report your answers for each situation in the following table.
After you finished, count how many answers you have for each column and
write the totals on one line.
For a description of your leadership style, report your grades in the

corresponding boxes:

The more the workers are subjected to your authority, the less they are
accustomed to taking responsibilities; they accomplish less and work on simpler
tasks. In this case, management style is more authoritative.
The more the workers accomplish, the more professional they are; and the more
accustomed they are to taking responsibilities, the more management style tends
toward participation. This also applies to the level of work development of the
team. The newer the team, the less organized it will be. This calls for a more
authoritative style.
The meaning of the grade you received:

The questionnaire you have filled out is based on a model consisting of two
dimensions: directing people and directing mission. These dimensions
themselves depict four management styles as represented below:
The grade category you received represents the combination of styles

corresponding to your personal team leadership style. The category of style for
which you received the highest grade is your dominant style.
A. Authoritative style (High task and Low relationship): This manager
dedicates most of his energy in task completion through the least relations
possible with the team. This appears in displays of authority, giving orders, tight
supervision, using reward and punishment, maintaining a distance between him
and his workers, and giving firm and clear instructions.
B. Participating style (High relationship and Low task): This manager dedicates
himself to his workers in order to jointly achieve goals. This appears in his
interpersonal relations, proximity, sharing, consulting with and developing the
team.
C. Integrative style (High relationship and High task): This manager dedicates
his energy in both interpersonal relations and task completion.
D. Procedural style (Low relationship and Low task): This manager allows
freedom of action to his workers without demonstrating authority or excess
dedication to people. This type of manager is suitable to a mature, experienced
team capable of functioning properly without intensive management.

PATH-GOAL THEORY
The “Path-Goal Theory” was developed by House (1971), who himself supports
the approach of situation-dependent management. The model is established upon
two processes: the manager’s responsiveness to the needs of the workers leading
to satisfaction, commitment, and motivation, as well as setting goals, objectives,
expectations, and guidance required for goal achievement. House added the
importance of goal achievement and its definition. The goal doesn’t consist only
of operational effectiveness in terms of output, but includes worker satisfaction
and commitment as well. It’s the team manager’s job to specify the team’s goals
and lead them to excellent performance and high satisfaction, and subsequently
assist the team in achieving its goals. He must pave the way for goal
achievement with the team, to increase the motivation of the workers by means
of recompense and suitable managerial behavior. The manager must adapt his
management style to the situation. There are various situational factors:
Task characteristics – defined and fixed assignments, demanding knowledge
and professionalism, etc.
Worker characteristics – worker knowledge, skills, and motivation; the nature
of his needs and the importance of these needs to the manager, as well as his
way of satisfying such needs.
Management styles:
Directive – gives explicit goal-oriented instructions. The workers are expected
to follow these instructions in accordance with specific regulations and
procedures.
Supportive – focuses on the needs of the workers and on a personal approach to
guiding them. Participative – consults with the workers and involves them in
decision-making processes.
Achievement-oriented – sets objectives and challenging goals and trusts his
workers’ ability to achieve them.
House’s approach is presented in the following diagram:

An example of House’s approach is represented in Yukel’s model (1994), which
followed House’s Path-Goal model. Yukel defined the connections between
different work situations, the manager’s behavior, and its influence on the
workers and their results. His model is represented as follows:

diagram 2

REDDIN’S THREE-DIMENSIONAL MODEL
Reddin’s model (1967) bases itself on the four leadership styles described by
Blake and Mouton. He further developed the model as per his claim that each of
the four styles can be effective or ineffective, depending on the circumstances.
Reddin presented a three-dimensional model of basic styles and their disposition
on a matrix of more effective styles and less effective styles, as follows (diagram
2).
The Related Type can be more effective if the manager puts emphasis on the
development and empowerment of the workers, reinforcing their trust and
commitment. Reddin named this manager “developer.” However, the Related
Type can become less effective if he expects compromise and consensus at any
cost, if he avoids conflict, or puts excess emphasis on relations at the expense of
performance. Reddin named this negative related type “missionary.”
The Separated Type can be effective if he emphasizes order and procedures,
control and evaluation, as well as emphasis on quality and performance measure.
This effective style is called “bureaucrat.” The Separated Type can be less
effective when he neglects minimal requirements. He doesn’t operate toward
fostering initiative, thus hinders creativity; he operates toward reinforcing what
already exists at a minimal level. Reddin named this style “deserter.”
The Dedicated Type, who puts emphasis on the importance of goal achievement
and output, can be more efficient if he assists his workers in attaining their
objectives by setting common objectives and rewards according to performance
– the “benevolent autocrat.” When this type operates in a centralized manner,
obliges, and demands blind obedience and immediate results, he becomes less
effective. Reddin named this style “autocrat.”
The Integrated Type, combining emphasis on both task orientation and human
relations orientation, can be more effective if he fosters teamwork, responds to
the needs of the workers, and tailors new challenges with the participation of the
team. Reddin named this style “executive.” This type can be less effective if the
manager resorts to compromise in both aspects due to his difficulty to combine
them at high levels. He frequently vacillates between his relationship with his
workers and his task requirements. This style was named “compromiser.”
Reddin, as well as his predecessors, Fiedler, Hersey, Blanchard, and House,

identified a number of situations requiring a certain style for team effectiveness:
Nature of the task – technical and practical knowledge, complexity, deadline
pressure, structured, etc.
Corporate culture – organizational values and norms, expectations,
organizational climate, concealed basic premises, etc.
Basic leadership style of the manager – personal inclinations, basic style, and
personality patterns.
Professional colleagues – their expectations and the management style they
accept.
Worker characteristics – expectations, knowledge, abilities, skills, and values.
Reddin’s model is the most complex among those of his predecessors. Reddin
suggested creating a map representing the characteristics of the situation in every
dimension described above, according to which management style can be
adjusted. Reddin presents an approach which suggests the capacity of
managerial flexibility in accordance with the situation.

2.3 MANAGERIAL STYLES AND ABILITY TO CHANGE
MANAGEMENT STYLE AND EMOTIONAL INTELLIGENCE – GOLEMAN’S MODEL

Goleman’s research (2000) describing optimal management characteristics in
terms of social climate and business results points out an additional important
variable: the emotional intelligence of the manager. Goleman’s research
indicates a combination of environmental and personality-related factors
predicting successful management. Management styles and environmental
conditions are represented in the following table (diagram 3).

diagram 3
Goleman’s research points out the combination of personal characteristics and

environmental factors, but the most important variable here is the manager’s
emotional intelligence. What is emotional intelligence?

1. Self-awareness
• Emotional self-awareness: the ability to read and understand our emotions
and their impact on us and on others.
• Accurate self-assessment: realistic assessment of our strengths and
weaknesses.
• Self-confidence: strong feeling of personal value.
2. Self-management
• Self-control: ability to control emotional outbursts and urges.
• Self-management: managing my objectives and responsibilities.
• Adaptability: ability to adapt to changing situations and overcome
obstacles.
• Drive to succeed: desire of high standards of excellence.
• Initiative: the ability and willingness to seize opportunities.
• Optimism.
3. Social awareness
• Empathy: ability to understand other people’s emotions, understanding
their perspective, identifying the matter of their concerns.
• Organizational awareness: ability to understand what is going on in the
organization, to establish networks and connections, to make decisions
and to conduct policy.
• Service orientation: belief in the importance of giving.
4. Social skills
• Developing others: ability to strengthen other people’s capacities by way
of feedback and guidance.
• Communication: ability of attentiveness, of delivering clear and
convincing messages.
• Conflict management: ability to mediate and to reach compromises.
• Building bonds: creating and fostering networks of contacts.
• Teamwork: collaboration and building a team.
The importance of Goleman’s model is in the fact that it is possible to develop

and teach emotional intelligence capacities regarding its many characteristics.
Furthermore, the combination of environmental situations and personal skills
offers the most adequate answer to the question of what optimal management is.
Nonetheless, both Goleman and Reddin agree on the fact that management style
has influence on the environment and can modify it at will.

LIFE CYCLE OF THE ORGANIZATION AND MANAGEMENT STYLE
This approach links management style to the organizational situation and to the
situation of the organization in its life cycle. For instance, researchers Clarke and
Pratt (1985) identified four management styles, each corresponding to a different
organizational phase.
• Champion – the necessary style to establish initiative, new organization,
and project launching. The champion has the power to turn a small, starting
organization into a successful business. He has the skills to simultaneously
deal with several tasks, such as marketing, financing, organization, and
managing teams, leading an initial system to a successful system.
• Tank Commander – this style is suitable for the second phase. When the
organization is in a phase of growth, the ability to organize a consolidated
team in order to establish the organization on the market is necessary.
• The Housekeeper – this style is suitable for a stage of organizational
maturity. In this case, the organization enters a competition with other
stronger and bigger organizations. This management style focuses on the
management of economy, efficiency, quality and control, and efficient
performance processes.
• The Lemon Squeezer – this style corresponds to a stage of decline. This
style can prevent bankruptcy by bringing out and exploiting the
organization’s potential, focusing on income and crisis management by way
of reduction, innovation management, and recovery from decline.
A similar yet more complex situational approach, putting emphasis on the

importance of the suitability of management style to the phase in which the
organization stands in its life cycle, is that of Ichak Adizes (2004). Adizes
claimed that managers can be characterized by four possible management styles.
Realistically, however, each manager will display a different combination of
proportions of these four styles:
• (P) Productive – purposeful manager who leads to obtain results; project
manager.
• (I) Integrator – this manager connects and involves people; he combines
people’s needs with task requirements.
• (A) Administrator – this manager puts emphasis on procedures,
organization, and obedience; clear and organized control and evaluation
processes.
• (E) Entrepreneur – solves problems, innovative and creative, establishes
initiative; independent by nature.
Each organization has a life cycle which begins at the idea or initiation of
business establishment, followed by the birth of the organization, infancy,
growth and takeoff, adolescence, prime, and stabilization period. From that stage
on, the organization goes through a period of descent, atrophy, until its final
downfall. Following Adizes’s ideas, organization life cycle can be described in
the following diagram (Adizes 2004) (diagram 4).
diagram 4
Adizes’s model indicates the need to adapt management style to the situation of
the organization. The entrepreneur type is the one who brings the idea of
establishing the new project or the organization and the new business. However,
such a style isn’t suitable for managing a young organization needing to
establish itself on the market, in which the workers and the products need to be
introduced on the market to ensure business growth. This task corresponds to the
go-getter manager, who is, by nature, capable of leading the young organization
to development and growth. The establishment of a business constitutes a threat
in itself for its future, thus making an entrepreneurial and innovative approach
necessary to give the business new momentum. Consequently, the entrepreneur
comes back to the head position.
System organization comes at the stage of business establishment and

adolescence. At such a stage, the administrator comes in to instigate order,
organization, procedures, task definition, as well as a remuneration, control, and
quality system. Following this, it’s the integrative manager’s turn to bring
forward a climate of relations that emphasizes the importance of the worker, his
self-development, satisfaction, and commitment, as well as the importance of
teamwork and a culture of fair treatment. Prevention of system collapse, if such
be the case, is possible by posting the entrepreneur at the head of the system in
order to instigate innovation and initiative preventing atrophy, crisis, and
collapse. The broken lines symbolize the natural eventuality of existing crises,
typically during intermediary periods. Organizations are prone to crises in
periods of transition, and a transition from a small, intimate organization to a
large and established organization requires change in corporate culture, as well
as in management, control, and evaluation methods. Such a transition may cause
adaptation difficulties for both workers and managers. Only change in
management style and managerial culture can prevent such a crisis.
Teamwork management – Adizes’s model – highlights the necessity of a
management team comprising four complimentary attributes.
Each stage requires the existence of all four qualities, but each stage requires the
dominance of one specific quality. It can be supposed that the manager will have
difficulties changing styles according to the situation, and thus, the preferable
option is to consider management as teamwork between people possessing
complementary qualities. It doesn’t necessarily have to be a team of four, but it
needs to include all four of the qualities enumerated by Adizes.

THE STYLE OF THE AGENT OF CHANGE
Those engaged in the field of knowledge of planned change point out the fact
that in many organizations, workers and managers in key positions dedicate their
time and energy to initiate, to push, to conduct or to be part of the process of
change and innovation. They are the ones that are chosen time after time to be
part of the change team or part of the team in charge of conducting change. They
are characterized by their desire to change, to take on challenges, to take risks, to
innovate, and to change. Within such people lies the characteristic combination
of Adizes’s “entrepreneur” and Clarke’s “champion,” but in addition to that,
they are less impulsive. They demonstrate a more organized thinking process in
comparison to others, and they are able to manage change. In the field of
organizational development, these people are known as “agents of change.”
They are the small or sometimes the great leaders who encourage changes within
the organization and who perceive their role as such.
Required knowledge, abilities, and characteristics of agents of change:

• Understanding and willingness to initiate and conduct constant change.
• Knowledge and recognition of the origins of change.
• Understanding of the different types of change and how to manage them.
• Understanding of the origins of resistance and of how to deal with it.
• Ability to identify and to deal with crisis and stagnation.
• Understanding of corporate culture and political ability.
• Knowledge and ability to deal with conflicts and confrontations.
• Understanding the process of change management and its required stages.
• Initiative and innovative abilities.
The agent of change is the link between leadership and management. Leaders
indeed focus on reshaping the reality of the organization on a macrolevel.
Agents of change operate on a microlevel of the organization.

2.4 INTEGRATIVE APPROACH
Generally speaking, it appears that the manager’s understanding of the worker’s
need for appreciation, warm personal attention, empathy, guidance, freedom of
action, encouragement, delegation of authority, involvement in decision making,
power and influence, open relations, teamwork, open communication and
information, interesting and challenging tasks, interest and fulfillment from
work, etc., is crucial to get a sense of satisfaction, fulfillment, commitment, and
motivation of the worker.
On the other hand, management style highlighting the importance of excellent

performance, profit, output, adherence to objectives, remuneration for
performance, performance evaluation, performance efficiency, performance
quality and quantity, is crucial to the success of the team and the organization
facing harsh competition against other organizations as well as demanding
customers. It seems that a combination of these basic abilities with dosage
flexibility according to situation is likely to generate better results.
The manager’s style is one of the most important factors in team success. His
impact on worker satisfaction, commitment, motivation, performance level, and
quality is decisive. Nevertheless, it also seems that there is no unique right style.
The success of the team and the organization in this context depends on
compatibility between different complex elements:
• Manager characteristics – personality, values, beliefs, managerial
perception, style flexibility.
• Worker characteristics – personality, knowledge, skills, expectations, needs,
experience, expertise, professionalism, age, sex, etc.
• Task characteristics – structured task, defined or nonstructured, domain of
the task, sales, production or development, etc., type of technology required
for the task, alone or in the team, knowledge and skills required for the task,
level of task, etc.
• Team characteristics – stage of development of the team, constitution of the
team, relations within the team, team cohesion, team culture, team stability,
etc.
• Organization characteristics – public or private organization, high-tech or
simple production, organization providing services, production, or
knowledge, organizational structure and it’s characteristics, corporate
culture and prevalent management style of the organization, stage of
development of the organization in its life cycle, size of the organization,
independence of the organization or its being part of an additional system,
etc.
• Types of problems and their nature – need for creativity, dismissals, conflict
resolution, increasing efficiency, fast change, mergers, etc.
• Environment characteristics – competitive environment, environment of
uncertainty, tempestuous and dynamic environment or a stable, familiar,
and predictable environment, etc.
• Characteristics of national culture – cultural characteristics, as well as
customary values and norms of the country.
Despite the fact that adapting style to situation can be perceived by a part of the
workers and by financiers as inconsistency and lack of personality, the right
proportions will lead to good results. Management style flexibility is inevitable
in the fast-evolving business world. Organizations go through constant
vicissitudes and changes, and continuous learning as well as functional,
professional, and mental flexibility is expected from the workers. Team and
department managers are not changed or replaced as long as they operate
properly. Their functioning is conditioned by their flexibility and ability to adapt
to evolving situations. The development of managers must therefore include
learning of interpersonal relations, open-mindedness to various different
complex situations, and the ability to diagnose and identify changes and needs.
Managers must understand and internalize the fact that success depends on their
approach to the complexity of the context in which they operate, internalization
they are operating in, and thus, respond accordingly.
Conclusion: Managing efficiency and developing the organization –

management styles
The debate on the research on management style and its effects mainly focuses
on the results related to dimensions such as efficiency improvement and the
development of the organization and the worker.
At the level of the worker – emphasis is on satisfaction, commitment,
motivation, development, performance quality, teamwork, and personal growth
and advancement.
At the level of goals – emphasis is on task-orientation, adherence to objectives,
obtaining results, quality, and efficient performance.
At the level of the team – emphasis is on team formation, team consolidation,
open communication, solving problems within the team, and team effectiveness.
In terms of change and innovation, there is little emphasis on management style

of that sort. The entrepreneur manager mentioned by Adizes neither focuses on
radical changes and how to conduct significant organizational change, nor on
innovation development. That is the personal behavior of one single person
encouraging his own personal initiative, not that of entire organizations.
Managers in organizations nowadays are at first-line or intermediary levels.
They manage teams, departments, and professional fields at an intermediary
level. Their job is mainly to focus on managing people, managing goal
achievement, team building, and improving the system that has been put under
their responsibility.
Our suggestion is to add the management style that focuses on innovation

and initiative at the level of the line manager and the team manager. In the
business reality, not only is this style necessary but many organizations also
encourage it and seek for managers of that type. Moreover, many
organizations invest development and training resources in the learning of
such a style.
For readers willing to test the characteristics of their management style or that of
their managers, see the following questionnaire.

2.5 MANAGEMENT-STYLE QUESTIONNAIRE
To which extent does your manager operate and behave according to the
following questions below? Circle the corresponding number.

Combination of management styles: add up your points for each
category, then divide them by six and report the total averages in the table
below.
STYLE AVERAGE GRADE TWO DOMINANT CHARACTERISTICS

Centralized
Participative
Task-oriented
Coach
Bureaucrat
Entrepreneur
Relationship-oriented

Chapter 3
Modern Management Methods
anaging organizational change is very often carried out by introducing a

M new management and organizational method that changes the old game
rules and generates new structure, culture, and processes. This chapter covers the
main methods, their advantages, and disadvantages.

3.1 MANAGEMENT BY OBJECTIVES (MBO)
The approach “Management by Objectives,” or MBO, was first published in
1954 in The Practice of Management written by Professor Peter Drucker (1954).
Despite the fact that it is one of the oldest managerial methods since the 1960s,
this approach is still used, with changes and adjustments, in many organizations
all over the world.
The basic premise behind this approach is that “anything measurable can be
managed”; it is thus necessary to attempt to quantify, if possible, organizational
and managerial phenomena. To a large extent, this basic premise coincides with
the strict requirements of statistic proficiency of both managers and workers as
one within the TQM framework. The theoretic basis of this approach at the level
of the individual, worker, and manager as one is especially present in
psychologist Locke’s work and findings (1968), with regard to goal setting: the
more direct involvement of the employee in the decision-making process, the
more motivation and commitment he will have to achieve these goals.
Locke found that there is a link between the motivation of the workers and their
involvement and influence on the goals and objectives of the organization. He
also found that in order for the objective to be bound to the motivation of the
workers in a positive way, it needs to be challenging, clear, specific, measurable,
and perceived as achievable. By way of periodic feedback to the worker, it is
possible to increase his willingness and endeavor to meet the objective.
The central characteristics of MBO are:

1. Formulation and assimilation of quantitative organizational objectives for
everyone and at every hierarchic level.
2. Setting personal quantified objectives for every member of the organization,
which contribute by way of a detailed translation to implementing these
organizational goals.
3. The objectives are to be jointly determined by a supervisor and a
subordinate at any hierarchic level.
4. Periodic performance evaluation, in accordance with previously set
quantified objectives, at any hierarchic level.
5. Giving periodic feedback to members of the organization at any hierarchic
level regarding their performance and how they relate to set quantified
objectives.
6. Integrative approach to all resources: human, financial, and physical
resources of the company.
7. Integrative approach to all levels in the company: overall, departmental, and
functional. 8. Constant vigilance to environment changes, as well as
updating organizational quantified objectives according to different
environmental situations.
9. Goal and objective determination for the whole organization is to be done
by senior management.
10. Periodic activation of the cyclic process of MBO: quarterly or yearly,
depending on the type of organization.
Based on Locke’s findings with respect to objective determination impacting

worker motivation, the MBO method outlines the characteristics of the
objective:
1. The objective must be directly related to the organization’s goals and
objectives.
2. The objective must be challenging, but not too difficult to attain.
3. The objective must be concrete.
4. The objective must be measurable.
5. The worker has resources at his disposal to meet his objective.
6. By attaining objectives, the worker will be rewarded.
Method implementation process:

The broad management of the organization determines its goals and assigns
them to all levels of the organization. In the process of team discussions at every
level, concrete measurable objectives are derived from these goals and are to be
attained in a predefined time frame. Such a process operates cyclically: from top
to bottom, and from bottom as feedback to top.
Managers of different departments of the organization receive these goals and
objectives, and in cooperation with their workers, they derive from them the
goals and objectives of their own departments.
Resource requirements, such as budget, information, equipment, technology, and
manpower, are then derived from department objectives. Such requirements go
through top levels for approval.
Department managers and team managers periodically sit with each of their
workers separately, and together they determine personal objectives: quarter,
half year, or a full year.
After introducing the method, a fixed process of examination and change of
goals and objectives is carried out. Moreover, a process of worker and manager
evaluation is carried out, which examines adherence to objectives.
Such a process is backed up by a computer system in which data is accumulated
and periodically updated. This constitutes the organization’s cumulative
memory.
The process most significant to the worker, derived from the method, is the
process of worker performance evaluation, in a structured and measurable
process. Every year, sometimes every 6 months or even every trimester, team
managers sit in personal conversations with each worker. The basis of this
meeting is a form which includes different dimensions examining the worker’s
behavior on a scale ranging from “poor” to “excellent.” Furthermore, this form
tests the extent of the worker’s adherence to the objectives set for him in the
previous meeting. Each party fills out the form and comes prepared for the
meeting. Information on the worker is gathered by his direct manager, and it
consists of personal information as well as information from additional sources,
such as the worker’s clients, colleagues, and managers.
During the conversation, the manager allows the worker to voice his feelings and
opinions regarding his performance and the way he feels within the team. The
manager gives him feedback on his positive behavior and on aspects demanding
improvement. They jointly summarize the objectives of the upcoming year.
There are several positive goals to these conversations:

• To allow the worker to express his feelings and standpoint regarding his
position.
• To praise the worker for his positive behavior.
• To provide feedback in order to ensure the worker knows where he stands.
• To know what the worker needs regarding knowledge and guidance to
ensure his task completion.
• To give information on advancement and future plans for the worker.
• To signal outstanding workers as well as less efficient workers for dismissal
or transfer.

• To reinforce satisfaction, motivation, and encouragement through feedback.
If performed professionally in terms of how the conversation was handled, in

terms of follow-up on the results of the conversation, and finally in terms of
evaluation criteria, the evaluation process definitely contributes to reinforcing
the motivation of the worker. On the other hand, if performed unprofessionally
and superficially, the evaluation process is likely to cause more damage than
good and generate bitterness for anyone who goes through it (see also Ronan et
al. 1973).
Advantages of the method: The advantages of this method are in the focus of
the entire organization on its goals and how to achieve them, through a periodic
examination of what requires change. The fact that the method focuses on
measured results constitutes another advantage. It is clear that performance
evaluation of the worker adds an important dimension to organizational success
through structured periodic feedback to the worker. In terms of change
management, the method focuses on improvement and efficiency, and it is
appropriate for first-order change.
Disadvantages of the method: The disadvantages of the method are limited
participation of the workers, excess emphasis on results and not enough on
quality, and finally, the lack of a satisfactory dimension of creativity and
innovation. The method is also disadvantageous in the fact that a bureaucratic
mechanism needs to be established in order for the method to be activated.
Additionally, feedback meetings, if conducted superficially, may be ineffective
and may negatively impact worker motivation rather than reinforce it.

3.2 SOCIOTECHNICAL APPROACH
The sociotechnical approach was developed by researchers Emery and Trist
(1981) at the Tavistock Institute in England. This approach examines the
interaction and influence between technology and human factors, with the
purpose of creating optimal work and organization methods, enabling the
satisfaction of psychological needs of the workers, on the one hand, and on the
other hand, maximal output and productivity by means of existing technology.
According to this approach, the managers must not only be aware of the internal
organization of the work, but also be aware of environmental changes and
guarantee a dynamic balance between the human component and the
technological component. Psychological needs of interest in work, involvement,
participation, advancement, evaluation, variety, influence on workplace,
teamwork, interpersonal relations, and additional needs are satisfied when work
methods are focused on teamwork, when the employee’s job is varied and
plentiful, and when he is involved and has impact on his workplace. These
conditions can be achieved through correlation of such technology and work
methods.
Later on, additional dimensions broadened this approach by adding new aspects
to it. One dimension is the environment and its impact on the sociotechnical
system and the other dimension consists of the goals of the organization.
Nowadays, the sociotechnical approach is wider and entails optimization
combining organizational environment, goals of the organization, its internal
subsystems, and its sociotechnical systems.

WIDESPREAD DEFINITIONS OF SOCIOTECHNIQUE
• The scientific theory on organizational behavior is based on the interaction
between technology, people, and organization.
• The strategy is based on the suitability of the organization to its different
environments.
• Normative theory on management by way of worker participation and
involvement in decision making.
• A guiding approach toward problem solving in service and production
organizations.
• A method for designing and establishing work organizations.
The human system includes:

Tasks, manpower policy, remuneration methods, norms and values,
communication, interpersonal relations, management style, evaluation methods,
advancement, worker development, and motivational factors. In terms of
motivation factors, emphasis is on diversified work and the meaningfulness of its
content for the worker, on the ability to learn and to develop, on influence and
responsibility, social support, understanding of the entire process, and its place
within the organization.
The technological system includes:

Equipment, automation, production and operation methods, operation
instructions, required technical skills, and workplace structure. Here, emphasis is
on congruence between organization and production methods and the human
system; or in other words, work within autonomous teams. These two systems
operate in a given environment and for goal achievement purposes.
Sociotechnique highlights the importance of the following principles:

• Teamwork.
• Granting teams autonomy in the performance of their tasks.
• Full participation and involvement of the workers in the processes of
designing work and decision making regarding its execution.
• Combined optimization of technology and people.
• Optimal grouping of assignments, responsibility, and authority in order to
generate plentiful, interesting, and varied tasks.
• Self-supervision, adjustment, and control.
• Establishing a flat and participative organization on the basis of
autonomous teams.
• Fostering cooperation and emphasis on sociability.
• Relating to the goals of the organization and its needs.
• Fostering worker commitment.
• Fostering innovation and initiative.
Sociotechnique highlights the establishment of autonomous teams and their

implications are as follows:
• Responsibility for a whole process, not only parts of the process.
• Planning, supervising, and controlling work.
• Responsibility for equipment maintenance and its adjustments.
• Initiative for changes.
• Research and development resources.
• Responsibility for results.
Example:
Transition from an organization according to function to an organization
according to process: from an organization which includes control and planning
staff units and in which production is carried out by departments of production,
processing, assembling, and maintenance, to an organization which includes
work teams that complete all tasks by themselves:

Organization of operations according to process and establishing enriched work
teams:
The example demonstrates the advantages of the sociotechnical method:

• Enriching and varying tasks.
• Teamwork.
• Combining product and process.
• People are moveable and products are stationary, not the opposite.
• The team itself determines the work pace, not other teams.
• Ability to learn new things.
• Payment and team bonuses.
• Self-supervision.
• Team responsibility for results and quality.
• Absence doesn’t stop production.
Consultancy characteristics of the sociotechnical approach:

• Support combining technology and social and personal aspects.
• The goal of consultancy is to improve the organization’s functioning and
the quality of work life.
• The emphasis of support is on learning processes as well as on the content
and the nature of the change.

• Emphasis on establishing work teams and autonomous groups.
• Pair work: organizational psychologist and industry management engineer.
Advantages of this method: The advantage of this method is in the systemic

perspective of the integrative approach that combines human systems and
technology. This method demands full observation capacities more than methods
focusing only on the technical aspects or only on human aspects. It is
participative, and it implies important principles of teamwork. It reinforces the
motivation of the employee and the team by setting challenges and plentiful
tasks in their activities.
Disadvantages of the method: The disadvantage is in the narrow and focused
approach on subsystems rather than on wider systemic aspects of the entire
organization. It can improve teamwork and worker performances, but it cannot
respond to systemic and managerial problems which may entail lack of
motivation and teamwork.

3.3 TOTAL QUALITY MANAGEMENT (TQM)
Total Quality Management, or TQM, was developed by Edward Deming. Being
an American who couldn’t find an attentive ear to his method in his country, he
moved to Japan, where he initially put his method into action in the context of
reconstruction of the country following World War II. The method was shifted
to the United States in the mid-1970s, and in August 1989, the American
Ministry of Defense forced the method (Document 5000.51 G-DOD) upon the
suppliers of the ministry. That was, in fact, the main reason for its initial
implementation in the country.
Basic principles of TQM implementation:

1. Constant improvement of all processes, technologies, work methods, and
decision making in every field of activity of the organization.
2. Management actively conducts cultural change in its management
approach.
3. Emphasis on the different processes of the organization through identifying
clients and internal suppliers, as well as activation of feedback mechanisms.
4. Process improvement becomes the main strategy to improve competitive
position in order to guarantee future profit.
5. Everybody participates in the effort; barriers between managers and
workers are removed. Workers are given authority in decision making, and
the manager is in charge of guiding, coordinating, and providing positive
reinforcements.
6. Commitment is constant, even facing obstacles on the way.
Main characteristics of TQM:
1. Commitment, guidance, and permanent support from management.
2. Positive, secure, and pleasant work environment.
3. Extensive investment in change of positions and guidance.
4. Involvement of every person of the organization, at all levels.
5. Willingness for extensive investment in the short term for the benefit of
achievements in the long term.
Fourteen TQM principles according to Deming, founder of the method:
1. Products and services will be diligently improved.
2. All managers and workers will adopt quality norms.
3. Quality and inspection will be integrated in work processes.
4. The number of suppliers of the organization will be reduced in accordance
with their commitment to quality.
5. Service, development, and production processes will be diligently
improved.
6. Workers will receive training according to their work.
7. Managers will be leaders and guides.
8. Fear and worries in labor relations will be driven away.
9. Barriers between organizations within the company will be removed.
10. Slogans and goals that haven’t been properly defined will be avoided.
11. The use of fixed quantitative norms will be avoided.
12. Barriers that deprive the worker of a feeling of pride in his work will be
removed.
13. Training toward improving and updating the knowledge of employees will
be instituted.
14. Management and workers will operate through commitment to the
promotion of these principles.
Central concepts and methodology of the TQM approach:
1. Quality Circle (QC) – quality centers or quality circles for teamwork.
2. “The Magnificent Seven” – seven statistical techniques which provide full
support to the managerial-scientific side of the approach: checklists, Pareto
chart, histograms, fishbone diagrams, flowcharts, scattergrams, control
charts.
3. SPC (Statistical Process Control) – support to Deming’s principal number 3
by means of “the Magnificent Seven.”
4. QFD (Quality Function Deployment) – technique which combines the
customers’ needs and desires, customer satisfaction of products and services
existing within the company that employs the technique as well as within its
main competitors, with the derived research and development,
manufacturing, and service providing processes, which are intended to
reinforce client satisfaction of the operating company’s products and
services. This method was first initiated by Akao, a Japanese business
management professor at the Mitsubishi industry car manufacture in Kobe,
Japan (see also Lawler and Moharman 1992, and Ashley 2008).
The TQM method did not last long outside of the U.S.A. as a comprehensive
management method with all its principles and processes. It seems that the
method is complicated and difficult to adapt to the Israeli management culture
characterized by its improvisation and centralized style. What has remained in
many organizations is the essence of the method and its ideas: emphasis on
constant improvement, striving for total quality of all organizational processes,
the perspective of the next stop as a customer entitled to quality service, and
work teams organized from above for the purpose of efficiency improvement
proposals.

3.4 JUST-IN-TIME MANAGEMENT (JIT)
This managerial approach comes from Japan. It constitutes the link between total
quality management and reengineering.
This approach adds to total quality management its missing aspect, the
technological dimension.
Main characteristics of the method:

• Precise synchronization of sales and production operations.
• Selling products immediately after their manufacture.
• Reducing inventory levels and storage costs.
• Fast solution to conflicts breaking out between different organizational
functions.
• Product quality improvement through securing total quality at all levels of
the organization.
• Production by means of work teams, delegating maximal authority to work
teams.
• Consistent improvement in shortening schedules.
• Pulling rather than pushing batches in the manufacturing process.
• Improvement of logistic systems and reducing the number of suppliers.
• Proper use of computerized production systems.
• Generating an atmosphere of harmony, mutual trust, and security.
• Implementation of the method in physical, marketing, and social domains.
JIT system characteristics:

Pull systems focus on quality improvement, small batch production, uniformity
of loads at workstations, tight relations with suppliers, workforce flexibility,
Line Flow strategy, automatic manufacture, and preventive maintenance.
Reasons for JIT success:

1. Suppliers – Generating buyer-supplier partnerships.
2. Array – The goal of JIT is to reduce movement of people and material.
Movement is waste.
JIT demands:
• Workstations for different product families.
• Movable machines.
• Short distances.
• Reduced space for inventory.
• Direct transport to work area.
3. Inventory – The goal of JIT is to reduce inventory levels.

JIT demands:
• Small batches.
• Reduced set-up times.
• Fixed number of items in containers.
4. Scheduling
JIT demands:
• Communicated schedule with suppliers.
• Synchronized material levels.
• Schedule freezing immediately before appointed times of supply.
• Small batches.
5. Preventive maintenance – Enabling all facilities to operate without faults.

JIT demands:
• Scheduled daily preventive maintenance.
• The operator will perform preventive maintenance; he, thus, will be familiar
with the machinery and will be responsible for the quality of the product.
6. Quality – JIT uncovers quality problems with inventory decrease, limited

numbers of defects, and small batches.
JIT demands:

• Statistical quality control.
• Worker involvement through self-supervision and quality circles.
• Immediate feedback.
7. Manpower – Worker involvement in the product and in processes.

JIT requires:
• Empowerment.
• Multidisciplinary workers.
• Instructive support.
• Few task specifications.

JIT IMPLEMENTATION PRINCIPLES
PRINCIPLE HOW TO DO IT
• Reduction of work batches.

• Processing within the time frame required for
Inventory reduction process. each item.
• Identifying and solving problems rooted in the
process.
• Adjustment preparation during manufacture,

not after.
Reducing adjustment or booking costs.
• Reduction of the size of orders and their
adjustment to demand.
Adding resources to increase production capacity

Increase of production capacity at workstations. and decrease waiting time at the same time as
resource efficiency decrease.
Fixed production plan based on the use of

Fixed production schedule and low variance. predetermined small production batches at the
same time as small, controlled changes.
Transition to production by the “pull” method,

Production as per customer demand. enabling production only as a response to
customer demands.
Training each worker to perform heterogeneous

Multidisciplinary workers.
tasks.
Removing barriers between different departments

Cooperation.
and between workers and management.
Decrease of response time through transition

Parallel production.
from serial production to parallel production.
• Selection of suppliers according to quality

considerations.
Continuous supply of raw materials in the desired • Long-term networking with suppliers.
quality and quantity, and at the required time,
through fostering relations with suppliers. • Participation of suppliers in production plans.
• Transportation of raw materials directly to the
production line.
Refer, for example, to Hirano (2009).

3.5 BALANCED SCORECARD
A balanced scorecard is a strategic managerial method (and not only an
evaluation method) that aims toward enabling organizations and managers to
clarify corporate vision, mission, and strategy to stakeholders by translating
them into feasible action measures, operation methods, and service. When the
balanced scorecard is implemented in its entirety, it transforms strategic vision
from an academic exercise to a central nervous system in the day-to-day life of
the organization. The method was originated by Kaplan and Norton (1996) and
quickly became a customary change method.
This method is, in fact, the continuation of the development of the TQM method,
and it is based on the work of teams at every level, whose job is to translate
strategy and vision to processes that will lead to their implementation.
The method translates vision and strategy to concrete activity within four fields:
• Financial field
• Customer field
• Internal business process field
• Learning and growth field
The following diagram represents the relations between vision and the four
fields and its implementation:

In each field, the vision is translated into primary goals. These primary goals are
then translated into objectives. The objectives are then translated into indices in
terms of the SMART approach. In other words, an action program translating
objectives into specific quantitative, measurable terms, delineated in time.
SMART stands for:
S = Specific. The objective must be presented in accurate and specific terms.
M = Measurable. The objective must be presented in a term that can be
measured.
A = Achievable. The objective must present a challenge, be not too easy or too
hard to achieve.
R = Reachable, Resources. There are resources available to achieve the
objective.
T = Time bound. There is a time limit to achieve the objective.
The logic of this method is represented in the following process:

• Learning and growth: knowledge acquisition, abilities, skills, proper
attitudes, motivation, and commitment, leading to:
• Internal business processes: workers who learned, developed, and grew
improved performance processes of their work, and this leads to:
• Customers: service improvement, quality versus the price of the product,
increased customer satisfaction and loyalty, which leads to:
• Financial: increase in purchases and buyers, improved business results,
income increase, profit increase, positive cash flow.
Stages of implementation:
1. Redesigning vision: What we want to be. Redesigning mission – What we
want to do, our core skills – what we are better at than others, what is
unique about us in our operation processes, the values guiding us in our
relations with workers, clients, and other stakeholders. Incorporation of
corporate strategy to the definition of the vision – what are the main modes
of action and means to implement the vision.
2. Setting strategic goals or general primary goals that derive from the
vision and general strategy: Time span up to 3 years. Example: quality
and service improvement, introducing new products on the market, core
skill improvement.
3. Translating primary goals into more concrete goals in all four
perspectives: The time span now is from 6 to 12 months for goal
implementation. Examples:
• Financial goals: increase in sales, market segment increase, profit
increase, decrease of costs, cash flow improvement, and investment
return.
• Internal process goals: improvement of production, storage,
transportation, sales, distribution, equipping, and mechanization
processes.
• Customer goals: new customers, customer satisfaction (from
products/service), preserving existing customers, brand strength, sales
percentage of new products, on-time supply – according to the schedule
defined by the customer.
• Learning and growth goals: developing new products, developing new
service, developing workers, and introducing new technology.
4. Translating goals into performance objectives in terms of SMART,

specific, quantitative, measurable objectives that are limited in time.
Example: 10 percent increase in customer satisfaction in comparison with
the previous measure by means of a customer satisfaction survey.
5. Translating objectives to performance indicators: Each objective
includes performance indicators, precisely detailing a specific plan for its
implementation. Example: A detailed plan on how to increase customer
satisfaction by 10 percent.
6. Defining new initiatives in each perspective and translating the
initiatives into objectives and performance indicators.
7. Drawing a map or a structured card for each perspective separately,
detailing goals, objectives, performance indicators, and initiative.
General map example: As stated, to each perspective its own separate map. The
leadership team is to ensure congruence and coordination, as well as to prevent
duplication and redundancy in the teams’ work.
The method operates by way of three teams: Leadership team – represents the
organization’s leadership, and its duty is to lead the process, to coordinate
activity within departments, and prevent duplication and redundancy, as well as
provide the team with time resources, capital, knowledge, and training.
Core team – represents middle managers, and its duty is to assist the heads of the
performance teams.
Measuring and follow-up team – represents the workers, and its duty is to assist
in everything related to quantification, measuring, and assessing performance
objectives, as well as measuring and assessing results and progress.
The process itself is carried out by workers of each department, and the teams
assist in the activities of these departments. Completing a full process within a
department or a certain field should take about 3 months, but introducing the
process to the entire organization may take a year or more.
Advantages of the method: The method focuses on improvement and

efficiency related to vision implementation, which constitutes its great
advantage. It directly deals with the existing difficulty of many organizations to
transform the statements of vision and mission into daily behavior. Its advantage
is in worker involvement in the process and in the fact that it’s an engineering
method; in other words, based on indices and quantitative measures.
Disadvantages of the method: It is difficult to carry out this method over time,
and it generally consists of activities of change leading to quiescence. It focuses
more on quality and efficiency improvement, or first-order changes. It demands
professional support due to its engineering characteristics. The method is very
organized and structured; thus, it may not be compatible with the Israeli culture,
and it is likely to be only a fad.

3.6 BENCHMARKING
More than a comprehensive management approach, benchmarking is a tool in
search for optimal performance leading to the greater achievements of the
organization, striving to become the best of the best. Implementing the method
consists of the continual and methodical process of measuring and comparing
the organization’s processes, products, and services with those of other
outstanding organizations in the field, comparing and assimilating them, all the
while adjusting them in the organization.
The method is, in fact, a focused and powerful technique based on the
widespread argument that there is no need to “reinvent the wheel” and that “only
a fool learns from his own mistakes; the wise man learns from the mistakes of
others.” In order to establish systems or to introduce improvements within the
system, it is necessary to gather data and find out what other organizations of
similar activity do in the best manner. In order to implement the method, an
efficient and up-to-date system of business information, as well as a learning
system analyzing the gathered information, is necessary.
The process is carried out in the following manner:
1. Identifying the strengths and weaknesses of the organization.
2. Identifying competitors and identifying their strengths and weaknesses.
3. Investigating and understanding the reasons and causes for competitors’
strengths and advantages in fields in which the organization is weak.
4. Establishing a change scheme: preparing resources, preparing the team,
planning the physical changes and the schedule.
5. Introduction, as well as adjustment, of the processes, methods, and
technologies adopted by competitors.
6. Examination and adjustment.
7. Immediate continuation of the process.
(For more on the subject, see Stapenhurst 2009.)
Advantages: The advantage of the method is that it takes innovative and

successful processes which have already proven efficient in similar
organizations. It then copies and adapts them to the organization. The advantage
is in terms of cost, time, and price in comparison with independent change
processes.
Disadvantages and difficulties: the main difficulty in the implementation of the
method is in gathering good and up-to-date information. Each method is
comprised of small details which themselves are hard to identify and copy.
Furthermore, there are imperceptible factors at the base of the processes and
methods, such as values and norms, which themselves are difficult to identify
and copy.

3.7 REENGINEERING
Reengineering, or RE, is a managerial approach originally from the United
States. It was initially published by Michael Hammer, president of a business
consulting firm and former computer science professor at MIT, and then
explained in detail in Michael Hammer and James Champy’s book
Reengineering the Corporation (2003). This method constitutes a sort of
comeback of scientific and technological computerized management, in which
the worker and management processes once again become the means of
production that are subjected to innovative technological requirements. The most
amazing finding may be the one reported in their book, the extensive damage
caused by reengineering management to the profession of management, as a
result of which 1.4 million manager positions were lost in the United States
between 1990 and 1995! This is due to the drastic requirements of the
reengineering sector for decrease in coordination, communication, and
management functions. This approach has reached Israel, and its main results are
the transition to direct services without intermediation such as: direct banking
and direct insurance, among others. The main characteristics of the
reengineering approach:
1. Focus on reengineering processes from the creative approach of
“destruction creates.”
2. Focus on results and not on tasks.
3. Performance of all actions in progress, if possible, by one single person.
4. Defining the job around the objective and not around only one assignment.
5. Single point of contact between the company and the customer, who knows
at any given moment the status of his order.
6. Linking actions of gathering and processing information.
7. Handling geographically scattered resources as if they were centralized.
8. It is necessary to relate parallel activities instead of combining their results.
Coordinating while working, by way of communication networks, shared
bases of information, and conference calls.
9. Process control and management by the worker himself – flattening the
pyramid.
10. “Thinking big” – training programs, recruitment, creating new career paths,
reengineering positions and jobs, advancement and giving priority to “can-
do” attitudes.
11. Leadership and genuine vision of senior management.
12. Task enriching through authority delegation.
13. Reengineering business processes in accordance with accelerated
technology capacities, instead of: adjusting old processes to modern
technology, accelerating old processes but freezing and preserving their
lack of basic efficiency.
14. Breaking basic premises at the base of different processes while raising
heretical questions, such as:
• “Is Form B31 really necessary?” instead of, “How to fill out Form B31?”
• “Information can appear at different places simultaneously, as needed,”
instead of, “Information can appear only at one place at a time”
• “A general worker can perform the task of an expert,” instead of, “Only
experts can perform complex tasks”
• “Business can benefit from the advantages of both decentralization and
centralization as one,” instead of, “Business must choose between
decentralization and centralization”
• “Field workers can send and receive information from any place,” instead
of, “Field workers need offices in order to receive, store, glean, and pass
information”
• “The best possible contact with a potential buyer is effective contact,”
instead of, “The best possible contact with a potential buyer is personal
contact”
• “Objects tell you where they are,” instead of, “You must find out where
things are put,” and all of this with the help of advancing technologies
such as common databases, expert systems, telecommunication networks,
wireless communication, laptops, interactive video disks, and automatic
identification and surveillance technologies.
15. Attempt of maximal implementation of the “pair of Ps” in organizations:
“People-less” and “Paperless”; less people and less paperwork.
16. Creative and revolutionary thinking and brainstorming. Imagination must
guide decisions regarding technologies, and not the opposite. Thinking in
terms of “all or nothing” – breaking the rules of the game and building on
the basis of destruction.
The method of reengineering is fundamentally different from total quality

management methods and other methods intended for changes in the domains of
quality or efficiency, inasmuch as quality and efficiency programs try to improve
existing processes, while reengineering aspires to replace existing processes with
new ones.
Moreover, while total quality management constitutes a complete approach,
reengineering displays characteristics of method, a method for change
management focusing on techniques of change based on innovation and
creativity. Unlike the methods presented above, reengineering, as its name
indicates, deals with revolutionary changes when the purpose is not process
improvement, but rather process revolution.
Reengineering is not a complete multisystemic managerial method, but rather a
thought process method and a method to work on problems. It is, therefore,
different from the other methods we have examined, which is also its advantage.
This method is applicable in every field or level of the organization.

3.8 THEORY OF CONSTRAINTS (TOC)
The Theory of Constraints, developed by Dr. Eliyahu Goldratt (refer to his book
The Goal, 1986, and The Haystack Syndrome, 1991), constitutes a structured
method of internal streamlining changes. The method claims that managing
systems of production, maintenance, and sales must be based on the fact that
output is limited by constraints, restricting sales, or production.
The basic premises of the method are: seeing the organization in its entirety –
“an organization is not the sum of its parts”; the organization’s actions are
limited in time by a number of critical factors (constraints) at any given time;
there are constraints creating bottlenecks in the organization. There are two types
of constraints:
External constraints – these are the limiting factors out of the control of the
organization, such as market demand or number of clients.
Internal constraints – these are intraorganizational factors, such as resource
constraints, technological, human, structural, and policy constraints, among
others.
With the theory of constraints, we think in terms of constraint points and
bottleneck diagnosis, adapting the array of production and sales to bottlenecks or
breaking open bottlenecks in a methodical way.
TOC results
• Assured improvement of supply time.
• Output/Revenue improvement.
• Decrease in lead times.
• Decrease in cycle times.
• Decrease in inventory levels.

MAPPING CONSTRAINTS
FUNCTION CONFLICT IMPLEMENTATION
High output (money) versus cost

Actions Concentrate on output and profit will follow.
reduction.
Performance measured according to output,

Measures Cost report versus profitability/cash.
operation, and inventory expenses.
Project Timely project completion versus all Management of security spaces in an efficient
Management timely task completion. way (see example*).
Supply Decrease in supply costs versus decrease Relating conflicts with suppliers to the core of
Chain in costs of the whole chain. the problems.
Price based on costs versus value to the

Marketing Solving customer problems!!
customer.
Sales in accordance with price versus

Sales Solving sales conflicts.
customer conflicts.
Human “Thinking” machines versus human

Using a TOC thought process.
Resources beings.
Investing in products and in the market

Strategy Strategy to loosen market constraints.
versus flexibility.
Methodical mapping of constraints permits methodical attention to each

constraint, just as constraint solving permits the value stream to flow freely. The
idea here is of constant change by breaking open bottlenecks, which constantly
reveal themselves one after the other. Whenever one bottleneck is solved,
another appears as a constraint.

3.9 LEAN MANAGEMENT
Lean management is a methodical and structured approach to constant
improvement through identifying and eradicating waste at the same time as
constant improvement in the flow of the product all the way to the end customer,
all the while striving for perfection (see for example Leach 2005). The goal of
the lean management tool is to improve the profitability of the organization. The
ways to achieve this goal are: reducing the time delay of a product in the
manufacture process, reducing inventories, and increasing the effectiveness of
workers and machines.
The “lean” thought process highlights processes which create and add value
from the customer’s point of view.
If value is not increased, it’s waste!
Most of the existing processes get stuck in bottlenecks in their transfer between
departments. Consequently, there is an emergence of situations of loss of orders,
delays, mistakes, and other malfunctions manifesting themselves in loss of time,
capital, and customers.
Eliminating waste is the greatest potential resource for improving operational

profit, performance, and customer service, as will be explained further.

ABSORBING AND IMPLEMENTING THE METHOD
Lean management may sound simple, but many companies struggle in its
implementation. The reasons can be:
1. It demands strong organizational commitment from the level of senior
management to field operators.
2. Lack of skill in lean techniques.
3. It’s hard work.
4. It’s difficult to mentally eradicate the “Push” approach.
5. Faulty planning and performing in the activation of the method.
Implementation principles of “Lean Management”

1. Specify the value of the product or service through the standpoint of the
customer.
2. Identify each step in the value stream in order to identify waste.
3. Allow the product to flow uninterruptedly by eliminating waste.
4. Produce what is pulled by the customer.
5. Strive for excellence through consistent improvement.
The structured approach of lean implementation is a seven-step approach to
eliminate waste.
The causes of waste are:

Excess production – superfluous production for the continuation of the process;
for instance, machines that are constantly working in order to justify their
existence, even when their work is not necessary.
Inventory – surplus inventory is generated as a result of the necessity to achieve
high efficiency and defense against problems from the suppliers’ end. Surplus
inventory has a direct impact on cash flow in the organization.
Defects – defects are generated because of poor quality control, poor quality
material and machines, inadequate training, defective product design, and lack of
understanding of customer needs.
Waiting time – a result of poor timing of production lines, long adjustment
times, incorrect use of automation, and problems with product quality requiring
quality tests.
Inefficient use of manpower – a result of inadequate training, conservatism,
and old-fashioned business thinking, high turnover, and low salaries. Excess
motion – any movement of people or machines that isn’t value-adding to the
customer is waste. Wasted movement is caused by poor arrangement of
workstations, inconsistent work methods, poor maintenance of the workplace,
and lack of efficiency of people and machines.
Excess transportation – a result of poor factory layout design, poor
understanding of the process flow, large storage units, large storage areas, and
long supply time.
Waste interferes with the smooth process or product flow, and it is characterized
by excessively long processes, inappropriate training or adaptation of manpower,
lack of information or direction, poor quality or delay in material supply.
The 5S tools to avoid waste:

Seiri (Sorting and Eliminating) – separating what is necessary from what is
unnecessary in order to carry out a certain process.
Seiton (Organization and Orderliness) – organizing the required items so that
they will be easier to find, use, and return.
Sieso (Cleanliness and Inspection) – cleaning all areas including equipment
and facilities, and confirming readiness for use.
Seiketsu (Standardization and Improvement) – maintaining and improving
the level of order and cleanliness at all times.
Shitsuke (Belief and Discipline) – belief in and ability to trust the method, thus,
becoming a custom while maintaining self-discipline.

IMPROVEMENT OF SYSTEM FLOW
Efficient flow is not only in the product, but also in information, paperwork,
inventory, and people.
Lean techniques to improve flow:
Visual Controls – aims at making processes easy to understand at one glance.
Common uses: highlighting problems, preventing shortcomings, identification,
inventory management, instruction, creating a universal language (red-green),
simple indications such as lines on the floor of the production facility in order to
define work areas.
Plant Layout – unification of activities sharing a common denominator,
identifying limitations, and disposing the plant accordingly, reducing
transportation.
Reducing Batch Size – as batch size increases, latency increases, inventory
increases in the process, and activities add up but don’t provide additional value
to the customer.
Kanban is an indicator for inventory replenishing and production renewal. It is,
in fact, an indicator that shows us when to act.
• When material is needed, we use Kanban indicators to replenish inventory.
• The Kanban system must supply enough material and support production at
the same time as the process of inventory replenishing. The next station in
the production of parts doesn’t start until it receives a signal!!
A Kanban can be:
A card, an empty space, a tank, a strip of tape on the floor/wall, lights, buttons,
colors, or shapes.
Functions of Kanban:
• Operates as a “sensitive system” for individual production and supply chain
management. (The system is defined as “sensitive” if it generates several
changes in orders of end items when there are no significant plan changes at
higher levels.)
» Provides information for “work order and pickup.”
» Eliminates waste of surplus production.
• Improves and reinforces production and supply chain operations.
» Visual control tools.
» Tools promoting continuous improvement.

USE OF AUTOMATED INFORMATION SYSTEMS ERP/MRP SYSTEMS
Material Requirements Planning (MRP) – computerized system for inventory
policy management (how much and when to order) and product policy
management (when and what to produce) for the item and its component parts,
assuming that the demand for the finished product is known.
Manufacturing Resource Planning (MRP 2) – expansion of MRP and
planning all the required resources for the matter.
Advantages of MRP systems
• Congruity between the company’s strategy and the different functions of the
organization.
• Customer order and purchase processes are standard processes in the
information system.
The appropriate operation of the system creates teamwork and confidence in the
organization. Moreover, it supports proper economic and financial planning.
Enterprise Resource Planning (ERP) – an integrative system for the
management of all of the organization’s resources.
• The system deals with all the resources of the organization, including
human resources, finance, and information.
• It provides lateral support for all processes of the organization.
• The system enables individuals to manage the process of supply, spread out
in various geographical points, of which only some can be external
suppliers.
• It provides a common database for everyone participating in the process.
Other additional support systems are:

SCM – Supply Chain Management system
CRM – Customer Relationship Management system
Document Management Systems

ESTABLISHING A SUPPORTIVE CORPORATE CULTURE
The transition of organizations from traditional management to “lean”
management implies many changes which demand long-term commitment to
constant improvement and ambition to achieve excellence. Such commitment
must be voiced throughout corporate culture, its main elements being: a
corporate vision clearly transmitted to all the workers, focus on the customer,
general commitment to improvement, empowering workers, teamwork,
managerial leadership in change management, constant training and guidance,
clear standards and procedures, and an overall drive for excellence.
The transition to a “lean” culture requires a change of behavior of the human
system in the organization. It is necessary to operate with the purpose of
consolidating a new set of values and beliefs and to achieve the creation of a
learning organization.
In order to guarantee change in the existing corporate culture, it is necessary to
operate on three learning levels:
Behavioral level: developing teamwork skills, leadership aptitudes, and the
ability to implement standardized work processes.
Cognitive level: developing technical knowledge-based skills in order to
achieve measureable improvements.
Values level: changing sets of values in order to manage the organization in a
lean culture.
The areas requiring the change from a traditional culture to a lean culture are:
1. Corporate vision/strategy – senior management defines and highlights the
vision for the workers. There are clear performance indices within the
framework of a work and control program.
2. Communication – access to information for all workers; no uncontestable
instructions are given.
3. Decision-making processes – team approach on problem solving, worker
understanding of his contribution to the improvement of the organization, a
defined process of information gathering in order to make decisions.
4. Teamwork – transition to lateral training; there should be team rewards.
5. Performance indices and achievement recognition – these indices are based
on organizational effectiveness and verify long-term implications such as
development, integrating new markets, etc.

Conflict resolution – conflicts are utilized for communication processes,
6. brainstorming, and performance improvement.
7. Comprehensive organizational process – every worker operates in full
understanding of the entirety of the process; he must fully understand his
contribution to the achievement of the organization’s goals; change
processes are managed in order to generate support in the planning and the
execution of effective change.
Change of values and beliefs will include senior management, middle managers,
and workers. Results will be seen in the short term in indices such as customer
satisfaction, profitability improvement, and measured improvements of internal
processes (see also Jackson 1996).
Example
An interesting example of lean implementation is the success story of Green
Camp production plant from Ohio, U.S.A., which was acquired by Parker
Hannifin Corporation in 1988, an atmospheric product manufacturer (aerospace)
for industrial and commercial markets, employing approximately 45,000
workers.
The factory underwent difficult periods and was on the brink of being shut
down. It struggled with serious problems with industrial relations as well as
relation problems between management and the worker committee. The lean
idea of the organization was to achieve continuous efficient training through
Value-Stream Mapping, or, in other words, verifying value-stream in every
action necessary, from the product conception and launching stage, to its
delivery to the customer, and at the same time eradicating all nonvalue-adding
stages.
The company sought for help through the services of the consulting firm Flow
Cycle Inc. on the issue of “lean” management and value-stream mapping
techniques. As part of the process, the managers of the manufacturing
department informed the workers: “We are going to change. We expect you to
change.” The managers added a relevant gimmick, a placard on which was
written: “I am committed to reducing cycle times,” and all the workers were
asked to sign it. The gimmick worked, and 80 percent of the workers signed it
immediately. After the workers understood the company’s mission to reduce
cycle times, to improve system flow, and encourage worker morale and
efficiency, 95 percent of the workers signed the placard. The first stage of the
process was to set up educational and training workshops for the plant. The
second stage included mapping all work and tasks, which would enable workers
and management to clearly see how raw material flows in the process of
production, as well as how and where value was added. Following this,
workflow had to be redesigned in order to eradicate nonvalue-adding stages (for
example, crossing the whole plant to locate work appliances).
The process was not simple due to the fact that the workers performed their tasks
in the same manner for a long time; thus, drastically changing their assignments
was necessary. In addition, in the Green Camp plant, there was a communication
barrier between the workers and the management team. It was decided that the
entire approach of the plant would change as part of the value-stream mapping
philosophy, and from then on, the workers would be the ones to lead the way.
The results were amazing, including: 80 percent cut in cycle times; decreases in
waiting times for orders from 90 days to 30 days; utilization of 70,000 square
meters of factory space; overtime was reduced by half; there was a marked
decrease in percentage of defects; a decrease in the number of shifts, from three
shifts to two with the same number of workers.
Another company that underwent a lean revolution is Boeing, which in 1990,
began implementing “lean” manufacturing. The first stage was to understand
how quality-driven businesses manage their revolution, as led by Japanese firms
such as Toyota. In the same year, Boeing managers flew to Japan to learn new
manufacturing techniques. Such learning entailed the creation of World-Class
Competitiveness training, which, in the long run, included over 100,000 Boeing
workers in the implementation of an organization plan, regulations for
manufacturing areas, and processes.
In the mid-1990s, Boeing was assisted by consulting firm Shingijutsu, a leader in
“lean” management, in order to change Boeing’s aircraft manufacturing into a
lean system.
JIT deliveries, flawless manufacturing, and flow techniques replaced old
processes, as well as acceleration of engineering and designing. Scientists and
engineers used computers in accordance with communication needs through the
Internet. This unique manufacturing worked brilliantly due to the simplicity of
its goal – produce and provide the customer with products that are:
• Exactly what the customer needs.
• Delivered exactly when required.
• In the required amount.
• In the right order.
• Without defects.
• At minimal manufacturing costs.
The use of visual control in the manufacturing line enabled the workers to assess
production in a fast and precise manner. Progress in communication, such as
digital apparatus or small portable radios, helped the workers to track down
whatever they needed whenever they needed it. Reading devices with flickering
lights were placed along the manufacturing line, enabling the workers to identify
any problems they could encounter.
The system was designed in such a way that anything the worker could need
(such as work tools) would be located in the exact place where it was used.
Workers who didn’t work on the manufacturing line would help out in different
matters. For instance, the workers of Renton found a special way to load the
seats onto the aircraft in a cheaper way than by using an expensive crane. As a
result, there was less wasted movement, time, and space.
Another contribution to improvements was replacing assembly lines with
moving lines. Moving lines enabled planes to move from one assembly team to
the next. Interruptions only occurred when a problem was detected in pace
timing as required by the customer.
As the parts reach each point of the line, machinists can concentrate on their
tasks in the same manner as a surgeon directly receives the right tools in his
hand.
The implementation of the process at Boeing required complex planning, but
above all, it required people who were committed to making it work. The goal
was to create an environment promoting teamwork. Such a working atmosphere
would allow the workers of the team to feel confident to come to work and voice
their opinions, as well as recognition of their contribution at any time.
“Working together” is the simple philosophy known by all the men and women
who built the Renton factory in Washington, which currently manufactures
aircrafts for Boeing.

SUMMARY
The “Lean Management” approach is one of the more focused approaches on
structured improvement management in the manufacturing world. It is also
penetrating the world of services where the product doesn’t consist of substantial
property.
A “lean” organization is focused on:

• Eradicating activities that do not add value to the customer.
• Building the right supply process compatible with the dynamic and
changing needs of the customer.
• Supporting the fundamental change of management philosophy.
A “lean” organization is characterized by:

Efficient processes which provide quality products to the customer, at the right
time, and at minimal costs. The supply chain process is flexible in such a way
that it enables the organization to adapt to the changing needs of the customer
and to sustain a genuine business partnership with suppliers. The approach is not
only applicable to manufacturing and service, but also to:
• Product development
• Sales and customer support
• Acquisitions
• Research and development
• Quality control and guarantee
In other words, any action involving people, processes, and resources may utilize
the lean management approach to their advantage.

CONCLUSION
Modern management methods are characterized by structured, predictable
processes, and are based on measuring tools and clear criteria of success. Each
method aims at a specific goal. What they have in common is that they are
directed toward maximal efficiency of the system. Change entailed by these
methods is essentially long-lasting improvement, based on meticulous planning
in advance.

Chapter 4
Leadership of Change
4.1 LEADERSHIP CHARACTERISTICS

The massive activity around leadership indicates the importance of leadership on
organizations, people, and the reality of their lives. In the business sector, more
and more research highlights the tight link between leadership and the success of
the organization. Similar evidence accumulates in the educational sector, in
schools, and in the service sector. Thomas Sergiovanni’s research on successful
schools (2001) outlines the importance of the position of the leader at the head of
the organization. The latest research on excellent visionary companies
themselves outlines the importance of the position of the leader in business
success (Collins 2001).
A recent study on 785 managers of the American tax office tested the differences
between the top echelons and the bottom echelons of their achievements by
means of a 360-degree performance evaluation method. The research compared
the group of managers that scored high grades, as per various management
indices, and the group of managers who scored low grades, as per the same
indices. It found that for each parameter, the achievements of the top echelons
significantly exceeded those of the bottom echelons in terms of their influence
on the workers and their clients: on the satisfaction and motivation of the
workers, on their level of absenteeism, on customer satisfaction, and on the
efficiency of payment collection. The characteristics of the top echelon were
those of excellent leadership, which applied to the level of team managers,
middle managers, and senior managers (Trivka 2006).
The fact that in every language we use two distinct words – leadership and
management – outlines the difference between managerial behavior and
leadership behavior. Moses, in the story of the Exodus in the Bible, is depicted
as a leader guiding his people from slavery in Egypt to freedom in the name of
divine mission, and Aharon is depicted as his right-hand man in terms of
management and organization. Leadership that guides an entire nation in the
name of new vision, gorged with a sense of purpose and courage, and carrying it
through all the way to the end even before the plan was set in motion, that is the
leadership of Moses. The conquest of the Promised Land and the establishment
of the kingdom dealt with management of the people.
Back to the matter at hand, it is interesting to examine the extent of overlapping
between both behaviors and their roles. Some view management and leadership
as two different domains; others perceive them as overlapping domains; yet
others see them as two concepts within a hierarchy, and some consider these
concepts as closely intertwined. In this chapter, we will present different
approaches and the conclusions drawn from them regarding team leadership.

DEFINITION OF THE CONCEPT OF LEADERSHIP
Researcher House (1971) defined leadership in these words:
“The ability of a person to influence, motivate, and enable others to contribute
to the effectiveness and success of the organization in which they are members.
It doesn’t matter how one defines leadership; it is always characterized by a
vision that shows a way in which the leader is able to influence those being led.”
Another definition of leadership is:
A leader is a person who people chose to follow to places they would never have
gone on their own
Or, for example:
Leadership is the ability to build a bridge from the present to a more worthy
future, and to encourage people to cross the bridge and to attain such a worthy
future.
Or:
Leadership is the ability to influence people and to shape their commitment,
common sense, emotions, and behaviors, through an emotional and trustful
connection, and by establishing a positive and attractive future, for them and
with them.
Leadership can also be defined by the differences between a leader and a

manager in their characteristics, their skills, and their roles.
What is the conceptual difference between management and leadership?

Saint Exupéry, author of The Little Prince, defined the difference between
management and leadership through the following metaphor:
How to build a ship
We gather people and teach them to love and yearn for the vast and endless
sea; we don’t drum up men and tell them to divide the work, gather
material, and build the ship.
Differences in personality traits, characteristics, and aptitudes
Over the years, research on leadership has examined the personality traits,
characteristics, and abilities of leaders. Such research was conducted on people
who were perceived as leaders by their subordinates. For instance, Stogdill
(1974) enumerated the traits of a leader as seen in research conducted at the
time:
• Energy and diligence in goal achieving
• Audacity and inventiveness in problem solving
• Drive to put initiative into action
• Self-confidence and sense of personal identity
• Ability to make difficult decisions
• Ability to cope with stress
• Ability to absorb frustrations and delays
• Ability to influence others
• Ability to establish a system of relationships in order to achieve goals
Recent studies (see, for example, Daft 2003) highlight the differences between
managers and leaders in their characteristics and their roles. A model of an
archetype for each concept, based on the “left brain” and “right brain” concepts,
is presented in the following table: (Table 7)

CHARACTERISTIC AND SKILL DIFFERENCES BETWEEN MANAGERS AND LEADERS
Manager characteristics Leader characteristics
• Analytical • Creative
• Rational • Visionary
• Gives advice • Instinctive
• Consistent • Flexible
• Solves problems • Inspiration
• Assertive • Innovative
• Structured • Courageous
• Direct • Imagination
• Authoritative • Experiencing
• Stabilizing • Initiates change
• Power of role • Personal power
Table 7
Another example of the traits approach can be seen in Kirkpatrick’s and Locke’s
research which they conducted on managers perceived as leaders by their
subordinates, as follows:
• Physical characteristics: energy and vigor
• Skill and ability characteristics: intelligent, cognitive ability, knowledge,
analytical skills, decisiveness
• Personality traits: self-confidence, integrity, honesty, enthusiasm,
willingness to lead, independence
• Social characteristics: interpersonal abilities, emotional ability, ability to
ensure cooperation, tactful, and diplomatic

Work characteristics: drive for achievement, consciousness in goal
•
achievement, not discouraged by obstacles, strength

DISTINCTION BETWEEN MANAGEMENT AND LEADERSHIP IN TERMS OF ROLES
This second distinction focuses on the difference between management and
leadership in terms of work and role. Generally and schematically speaking, the
differences between management and leadership can be defined by several
characteristics:
• Leaders create their environment, change, renew, and have influence on the
attitudes, perceptions, and values of the people they lead. Managers focus
on decision making, organization, planning, manning, control, problem
solving, and constant improvements.
• Leaders form and influence their workers, their immediate environment,
and the environment of the field in which they operate.
Managers adjust their style and roles to changing situations.
• Leaders focus on the future, create a new vision, design new objectives, and
generate a new and different reality from the previous one. They create the
future.
Managers focus their attention essentially on the present, on increasing
efficiency, and constant improvements.
• Leaders derive their power through strength of character and personal
ability. They rely on the trust that the people they lead give them through
their personal example, charisma, and ability to inspire.
Managers rely on their formal power. They derive their authority from their
formal role and their authority to grant rewards or to administer
punishment.
• Leaders motivate their employees through the power of inspiration,
corporate vision and values, and through personal and emotional
connection.
Managers motivate their workers through payment and punishment,
management according to performance, performance evaluation, and
payment in accordance with performance.
Warren Bennis (1989) is one of the leading researchers in the field of leadership,
and he too suggested a schematic division between leaders and managers based
on their roles:
• Managers organize; leaders innovate.
• Managers ask how and when; leaders ask what and why.
• Managers focus on systems and structures; leaders focus on people.
• Managers do things right; leaders do the right things.
• Managers maintain; leaders develop.
• Managers rely on formal authority; leaders inspire trust.
• Managers have a short-range perspective; leaders have a long-range
perspective.
• Managers accept the status quo; leaders challenge it.
• Managers focus on the bottom line; leaders focus on new horizons.
• Managers imitate; leaders create.
In his book Leading Change (Kotter 1996), Kotter also suggests a distinction
between management and leadership based on the jobs each of them perform.
The following table is based on Kotter’s distinction.
MANAGEMENT LEADERSHIP
Planning and budgeting – annual planning, lists of Setting the way – developing vision for the future,
priorities, performance phases, resource allocation, developing strategies to achieve the changes
and ensuring implementation. necessary for vision implementation.
Organizing and manning – building an

Preparing people – spreading vision through
organizational structure, manning, delegating
words and through deeds, mobilizing cooperation
authority, performance procedures, quality, and
in vision implementation.
control systems.
Control and problem solving – follows performance Motivation and inspiration – motivating people by
and digressions from the plan, fixes digressions, satisfying their needs in order to overcome the
planning and organizing solutions to problems. difficulties and barriers that prevent changes.
Results of his actions – obtaining the desired results Results of his actions – achieving change, quite
that are expected by the different stakeholders of the often dramatically; significant improvement in
organization in the short term. competitiveness.
The debate on the differences between managers and leaders is largely

theoretical. The differences in character, in skills, and in role are dichotomous,
and they are not compatible with our times anymore. More than revealing the
existing reality, they indicate a theoretical distinction between different types of
personality and roles. Nowadays, managers are expected to perform leadership
tasks, and it seems that this will change the overlapping of both abilities. This
chapter expansively deals with such a distinction.
The debate on the characteristics of a leader outlines a difficulty in the sense that
it is difficult to reach an agreement on who is a leader and what good leadership
is. It also appears that the characteristics which are considered essential to a
leader are also essential to a manager. This debate also leads the reader into the
polemic on whether leadership is inborn or acquired. It appears possible to reach
an agreement on the fact that the characteristics of leaders are very hard to learn,
such as will to lead, decisiveness, self-confidence, imagination, creativity, and
initiative, among others. Moreover, it seems that besides a few basic
characteristics, an agreement has yet to be reached regarding what personality
traits are common to all leaders, but it is possible to develop and reinforce latent
characteristics and dormant abilities by way of training and learning.
Furthermore, part of the roles and skills of leadership enable learning and
developing. Leadership isn’t always an inborn characteristic, but in specific
situations, people discover leaders in themselves despite the fact that they have
not yet before been considered as such. This approach was presented in detail in
sociologist Max Weber’s research.

THE SOURCES OF POWER OF LEADERS
Where does a leader gather his strength from? Where does the authority received
by his followers derive from?
Researchers French and Raven (1959) suggest a typological model of the
sources of power of the leader:
• Reward power and coercive power – the ability of the leader to provide
material reward, to punish or to prevent rewards, constitutes power of
influence on the subordinates’ behavior.
• Legitimate power – power coming from legal authority. Appointing to
positions is done on a formal basis. Legitimization is given through power
of law, as well as customary norms and regulations.
• Referent power – the desire to identify oneself with the leader and to be
with him in relations of approval.
• Expert power – the power of knowledge and expertise in a certain field
entails the ability to influence.
The power of faith can be added – leadership deriving from the representation of
divine mission or secular mission having significance to the ones being led.
We suggest a slightly different typology we believe is more suitable for today:

• Power of formal authority.
• Power of professional ability.
• Social power – emotional connections.
• Power of identification – personal identification.
• Power of moral standards – display of values.

4.2 LEADERSHIP MODELS AND TYPOLOGY
MAX WEBER AND THE CHARISMATIC LEADER

Max Weber (1968) was one of the first to research leadership and the sources of
its authority. Weber described three organizational situations and the sources of
authority in each situation:
• Traditional authority: Carried out in traditional companies, this type of
authority derives from the power of faith or tradition based on inheritance
laws. Leadership relies on tradition, and the company is characterized by its
continuity and immutability.
• Rational authority: Typical of bureaucratic structures and organizations
based on procedures and rational laws. The source of authority is the
agreement on procedures and laws, and the leader relies on formal
authority. In this case too, we are dealing with an immutable, organized,
and continuous system.
• Charismatic authority: This is more a phenomenon than a characteristic.
The people being led attribute noble qualities to someone, and they are
willing to follow him in anything they are told. This type of leadership is
generated in times of ideological crisis, at the end of which former beliefs
and perceptions do not explain the phenomena occurring around them.
People search for answers and solutions to their yearning and desire for
change. In such a situation, the time is right for someone to appear with new
and innovative solutions and ideas in hand that respond to people’s needs.
His ability to relate to such wishes by way of communication will enable
people to attribute charisma to him. This approach indicates the duty of
charismatic leaders to establish a new order, breakthroughs, and renewal.
However, according to Weber, the phenomenon of charismatic leadership is
temporary and fragile. As soon as the new order is stabilized, the attribution of
charisma to the leader fades away, along with the leader himself. Moreover, the
question of ethicality of the charismatic leader’s suggested solution is still left
open. He can be a negative leader (Hitler) or a positive leader (Churchill). Max
Weber perceives leadership as a separate and distinct behavior from
management. People attribute to leaders characteristics and abilities of
leadership. They don’t see in him a manager.
Contemporary research attributes to charismatic leadership qualities and

abilities, causing the one who has them to become charismatic in the eyes of
many. Charismatic leaders have the following abilities:
The ability to establish a positive and suitable vision and to ensure that workers
can identify with it. The ability to design a system of suitable and challenging
new values and norms.
Integrity and establishment of trust among workers.
Their main characteristic is their ability to design and present a fitting and
challenging vision. (For more on the history and research of charismatic
leadership, see Conger 1989, and Czovek 2006.)

THE EFFECTIVE LEADER (DRUCKER 2007)
Peter Drucker, one of the leading researchers in the field of management and
leadership, suggests a slightly different approach from the other research in the
field. Drucker, who developed the method of Management by Objectives,
concentrates on examining the results of a leader’s activity. Drucker uses the
denomination “effective leader” – leadership that is not related to charisma.
Eisenhower, George Marshall, Lincoln, as well as our Levi Eshkol, all lacked
charisma, but they changed the reality in which they operated. Peter Drucker
also contests the assumption that leadership is related to “leadership
characteristics” or “leader personality.”
Effective leaders don’t share common characteristics. Thus, he claims that
Franklin Roosevelt, Winston Churchill, George Marshall, Dwight Eisenhower,
Bernard Montgomery, and Douglas McArthur were all very effective leaders
that stood out during World War II. However, not even two out of all of these
leaders shared “common leadership characteristics or personalities” (Drucker
2007). Drucker highlights the fact that charismatic leaders brought the holocaust
upon their nations (Stalin, Hitler), or that they did little for their nations
(Kennedy, for instance).
What is leadership according to Peter Drucker?

Leadership is simply work and achieving the goals of the organization.
Leadership is the basic thought process on the organization’s missions, defining
objectives, establishing a list of priorities, establishing performance standards,
and, of course, the ability to perform and reinforce objectives. Leadership is a
responsibility, not a privilege. Effective leaders don’t accuse others, but rather
take responsibility for mistakes and necessary compromises. Effective leaders
build excellent work teams and choose task performers as managers. They
perceive their subordinates as genuine partners in success. They surround
themselves with excellent and ambitious people in order to ensure the continuity
of the organization. Drucker concludes that an effective leader is aware that a
leader’s supreme mission is to generate human strength and vision.
This approach coincides with recent research, which found that leaders at the
head of successful organizations are “discreet leaders.” They do not stand out in
terms of charismatic personality, and they don’t stand out as being orators with
excellent rhetoric abilities. They focus on getting things done, on changes facing
reality, modestly and discreetly. They are not well-known, and they do not stand
out. They know how to motivate their subordinates toward achieving excellent
results and to instill energy and enthusiasm and utilize their positive abilities to
the fullest. (Refer to Collins 2001, for example.)
Transformational Leadership and Transactional Leadership

Researcher Burns (1978) suggested a distinction between management and
leadership in characteristics and behaviors which he named “transactional
leadership” and “transformational leadership.” Transactional leadership, which,
in fact, possesses management characteristics, is based on give-and-take
relations, payment and punishment, and relations of exchange. This type of
leadership doesn’t lead to change, to breakthroughs, or to remarkable innovation,
but rather conservation of what already exists, optimization, and improvement
within the framework of the existing corporate culture. Transformational
leadership generates significant change in the lives of people and organizations.
It redesigns perceptions and values, changes the ambitions and expectations of
the workers, and it changes corporate culture. It is not based on concrete
relations of exchange, but rather on the leader’s personality, on his
characteristics and his ability to lead to change, through inspiring vision and
meaningful goals. Researchers Bass and Avolio (1993) placed both categories
one after the other, or in other words, they generated stages of transition from
transactional to transformational leadership. Their model is presented as follows:

This model displays the characteristics of transformational leadership:
• Contingent reward – providing reinforcement and appreciation of high-
standard performance, not only through punishment and reward, but also
through responding to psychological needs such advancement, professional
growth, empowerment through authority and responsibility, etc.
• Individualized consideration – attention to the individual, support, empathy,
open communication, response to special needs, guidance, advice,
coaching, and developing.
• Intellectual stimulation – necessity for, as well as setting, high standards of
in-depth and broad understanding of the profession and the business,
dealing with problems and challenges in a conceptual and creative way,
learning as a value, search for creative solutions.
• Inspirational motivation – motivation through emotional connection, trust,
and integrity. Enthusiastic and optimistic, sets a vision and elaborates it into
objectives, generates a feeling of mission; the worker is motivated not only
by material reward, but also by the impression and the belief that his job is
important and meaningful to others.
• Charisma and influence – joint design of suitable and challenging vision,
mission, values, and norms, which provide meaning to everyone in their
work. It instills pride, increases performance ability, and provides a
personal example. Workers have respect and pride in their relation with
others.
This approach, based on behaviors, can serve as a self-study basis for managers
who want to develop leadership skills.
Dutch researcher Kets De Vries (2006) has investigated what makes leaders
effective for many years. The conclusion of his research focuses on the abilities
and skills, enabling a division in seven categories:
1. The ability to make people dream: the ability to set a direction and motivate
people into following that direction; the ability to mobilize their
commitment; the ability to set a realizable dream and motivate many to
achieve it and identify with it.
2. The ability to identify patterns: the ability to discern logic, links between
phenomena; the ability to reorder situations of disorder; the ability to deal
with complications and to find understandable and performable patterns.
3. The ability to manage significance: use of images and metaphors; the ability
of rich expression; ability to communicate; rhetorical skills; pungent sense
of humor; ability to enrapture many people through communication.
4. Ability to devote to the goal: not discouraged by difficulties; stands by his
opinions; knows how to wait for the opportune moment; believes in his path
and is ready for obstacles on the way to its achievement; is capable of
endurance.
5. Ability to build social networks: high-standard interpersonal abilities;
knows how to generate relations and connections; to build work teams; to
coach and train people; possesses elaborate emotional intelligence.
6. Ability to empower his subordinates: knows how to delegate authority; sets
expectations and challenges and motivates their accomplishment; motivates
toward action through inspiration and individual attention; gets the
maximum out of everyone.
7. Ability to perform and achieve dreams and plans: performance ability,
ability to decide; strong motivation toward accomplishment; ability to
design reality.
Researcher Yukl (1994) formulated lines of action to transformational

leadership:
• Develop an attractive and challenging vision in collaboration with the
workers.
• Combine vision with its achievement strategy.
• Develop the vision and detail its elements and translate it to lines of action
and organization.
• Convey security, decisiveness, and optimism toward the vision and its
implementation.
• Reinforce vision by means of planned steps and small-scale successes on
the way to its full implementation. Design and highlight the values of the
organization supporting the vision in a radical manner.
A summary of transformational leadership is represented in the following model:

LEVEL 5 LEADERS
Collins’s research on successful organizations provides an additional approach
on leadership as a sequence of behaviors from management to leadership
(Collins 2001). In his research, Collins describes the conclusions he has reached
from the 5-year research he conducted on outstanding businesses regarding the
characteristics of their leaders. The researcher’s conclusion is that leadership
depends on, or is based upon, five levels:
• Level 1 – Excellent worker, skilled and professional worker, highly

motivated, and excellent performance.
• Level 2 – Excellent team worker, operates as a member of the team and
contributes to team success, committed to the goals of the team, and
operates with professionalism and motivation in order to achieve them.
• Level 3 – Professional manager, plans and motivates the team toward
achievement. Excellent professionalism in managing people and tasks at the
same time.
• Level 4 – Effective CEO. Builds vision and commitment to its
implementation amid all of his workers. Motivates his workers toward high-
standard achievements.
• Level 5 – Level 5 leadership is the highest level possible. It brings
organizations to exceptional achievements through two basic
characteristics: humility and decisiveness. Level 5 leaders do not have
strong egos or uncontrollable personal ambition; it’s, in fact, rather the
contrary. Quite often, they are humble and shy. They stay away from the
spotlight; they don’t rely on charisma or personal charm, but rather on
challenging criteria providing inspiration in order to generate motivation.
They ascribe their success to the workers and to circumstances, and not just
to themselves. They are driven toward the success of their organization.
They don’t shy away from taking responsibility for their actions, and they
confront times of crises and collapses. They develop and reinforce their
team, and they place right below them other managers of the same
excellence. They develop successors. They focus on fields in which they
have advantages over competitors. They reinforce their workers, and most
of all: together, with their workers, they produce a suitable and challenging
vision, internalized by all workers and translated into day-to-day behavior.
Additional characteristics:
• People first – Level 5 leaders do not begin their activity with goals and
strategy but rather with people. They put the best people in their field on the
bus and sit them down in the right seats. Quite quickly, incompatible people
will be let off the bus, and only after that can they start thinking about
where to drive.
• Confrontation with the bitter facts and belief in the ability to come out
stronger – Confrontation with brutal facts at an early stage and taking
responsibility immediately. Fast, purposeful, and determined preparation in
order to endure. Confidence and faith in success.
• Flywheel – Consistent performance of stepby-step changes leading to
revolution in retrospect.
• Focus – Focus on what the company can be best at in the world, and not
what it does better than others.
• Rational use of technology – Introducing technology as acceleration toward
success, not as a fashion. Technology is a means, not an end.
• Establishing corporate culture – Building a complex culture based on order,
discipline, and meticulousness in processes and procedures, on the one
hand, and in initiative and innovation on the other hand.
Servant leadership and enabling leadership

Due to changes of character of work and employees in the last few years, the
concept of “servant leadership” has emerged. The fact that many workers of
many places are professionals, possess academic degrees, are experts in their
business sector, and even exceed their own managers in terms of professional
knowledge led to a different approach of the concept of leadership.
The first to coin this concept was researcher Robert Greenleaf (1977), who
described this type of leadership as leadership characterized by the service of the
workers, their needs, their goals, and their wishes in their work, as well as by the
service of the organization’s vision, its objectives, and its goals. Servant leaders
set aside the needs of their ego, needs of authority, and needs of recognition of
personal achievement. They genuinely appreciate the abilities, contribution, and
consideration of their subordinates. They, therefore, encourage worker
participation and involvement, constantly operate toward the reinforcement of
their workers, share information and power with them, deploy their concealed
creativity in their work, and encourage the workers toward curiosity and desire
to learn and develop in the workplace. They integrate their workers to the
organization’s mission through emotional identification and moral commitment.
The concept of servant leadership has become a broad field of research.
Numerous articles and books were written on the subject (see, for example,
Block 1999), and the concept of “servant leadership” on the Internet yields
hundreds of thousands of items on the subject.
What is Servant Leadership?

“A servant-leader is a servant first. It begins with the natural feeling that one
wants to serve, to serve first. Then conscious choice brings one to aspire to lead.
He or she is entirely different from one who wishes to lead above all, perhaps
due to the need to assuage an unusual power drive or to acquire material
possessions. Leadership first and service after, as well as service first and
leadership after, are two extreme types… . The difference manifests itself in the
care taken by the servant to make sure that other people’s top priority needs are
being served. The best test for servant leadership is: Do those served grow as
persons? Do they, in the process of growth, become healthier, wiser, freer, more
autonomous, and more likely themselves to become servants? And what is the
impact on the least privileged in society? Will they too benefit, or at least not be
further deprived?” (Greenleaf 1977, introduction)
Characteristics and roles of the servant-leader according to Greenleaf:
Stewardship – sees himself as a public emissary committed to responding to the
public’s needs in physical, mental, cognitive, professional, and spiritual levels.
Healing – possesses the ability to heal physical and mental pain of the members
of the organization. Initiative – sets new ideas in motion; takes risks and says,
“come with me.”
Intelligence and foresight – able to understand the reality and to foresee
possibilities for the future.
Awareness – is aware of possibilities and opportunities.
Inspires trust – inspires trust among the ones he leads, is trustworthy, and has
integrity.
Listening – knows how to listen attentively and deeply understands the
significance of communication.
Empathy – is capable of accepting differences and is empathetic toward others.
Powerful and authoritative – by virtue of his mission as servant and as a result of
his personality and skills.
Man of vision – able to see beyond here and now and into the future and is able
to guide people into implementing such a future.
Ability to persuade – doesn’t believe that truth and wisdom are subjected only to
him; believes that the ones he leads also have ideas and should be able to express
themselves and reach a shared conviction.
Building community and concern for others – able to establish the organization
as a community of people who collaborate and who are concerned about others.
Makes sure he allocates attention and resources to those who need to grow and
develop.
Extensive ethical and moral approach – provides a personal example by

clarifying ethical rules of action and by the joint establishment of internal ethics.
Collins’s research presented in his well-known book Good to Great supports this
approach. The leaders of outstanding organizations indeed are endowed with
humility and ability to foster others. Enabling leadership opens up and
encourages the possibilities of initiative and the creativity of the workers. It
generates a culture and climate of freedom of action of internal initiative,

encourages workers to set innovation and change in motion, and offers the tools
and conditions enabling this.
Characteristics of servant/enabling leadership:

• Jointly designs organizational vision, mission, and strategy with the
workers.
• Builds a culture and climate of innovation, creativity, and initiative deriving
from all workers of the organization.
• Generates lebensraum for the workers in order for them to affirm their
professional potential.
• Encourages curiosity, searches for the best possible way to act, taking risks,
and personal responsibility.
• Builds flexible organizational structures based upon definitions of roles that
evolve in accordance with the situation.
• Encourages cooperation between teams, departments, and professions
toward a mutual transmission of inspiration and knowledge.
• Enables individuals to obtain adequate space for learning and personal
development outside the organization.
Warren Bennis’s approach (Bennis 1999)

Bennis, one of the great researchers in the field of leadership, claims in his book
The End of Leadership that old models of heroic leadership guiding vision no
longer explain or are no longer compatible with today’s reality. The main
difference for Bennis is in the nature of the workers and of the work itself. The
essence of workers’ abilities is no longer in their hands, but rather, the essence of
their potential is in their minds and in the information they accumulated and can
develop. The nature of work itself has evolved. It went from technical and
mechanical work to professional work to a technological and science-based work
environment.
“The new reality is that intellectual capital, brain power, know how, and human
imagination has supplanted capital as the critical success factor. Leaders will
have to learn an entirely new set of skills that are not understood, not taught in
business schools, and, for all of those reasons, rarely practiced.”
Bennis 1999

According to Bennis, the roles of leaders nowadays are different from the ones
of the past, being:
• The leader appreciates and cultivates skills – more of a “curator” than a
“creator.”
• The leader reminds the workers of what is important through a convincing
vision.
• The leader generates trust through his authenticity and integrity.
• The leader and those being led are allies; they are partners in their actions;
they relate to each other at eye level. Bennis’s argument is that great leaders
are created by organizations in which a cultural architecture generates
mutual respect.

4.3 CHARACTERISTICS OF LEADERS CONDUCTING BASIC
CHANGE
Who are the managers who build long-lasting outstanding organizations? Who
are the managers who successfully and constantly manage basic changes and
innovation? Who are the managers who initiate significant changes, especially
when their organizations are at the peak of their success? Who are the managers
who build learning network systems that are capable of evolving and
regenerating on their own? What makes them managers?
Much has been written on leadership, on what makes people leaders, and
whether leadership is inborn or acquired. There is abundant literature on the
subject of leadership and management styles. From my work experience of many
years with managers and leaders as their advisor and coach, and from my
personal experiences as the leader of basic changes, I have learned that there
isn’t only one way to conduct significant changes in organizations. Change
leaders are endowed with various qualities. They utilize their qualities, each in
their own way, in order to implement such change. There are a number of basic
processes which they carry out, but each in their own way. Part of these qualities
and abilities are learned, and another part, it seems, is not.
These basic processes can be summarized by the following characteristics:
1. Ability to create and describe an attractive desired future. Some will

call this vision and mission. Leaders don’t generally use such lofty names.
They describe a general direction or an overall futuristic picture in very
positive tones. They are convinced and believe that the future they are
describing will provide answers to current hardships. They deal with
internal conflict on their own before the actual birth of the idea.
2. Ability to get out of existing conventions and paradigms and suggest

innovative solutions and directions which are first considered illogical.
They are people who aren’t committed to existing paradigms, or who no
longer believe in the ability of these paradigms to interpret the reality as it
takes shape before their eyes.
3. Deep belief in their righteousness. They are convinced and believe that
the right solution to any present afflictions is in their hands. They are
imbued with the belief that their way is the right one and that there is no
other way. They have already gone through internal conflicts in their search
for the right way, and they are convinced that they have reached the only
possible way.
4. Ability to convince many that undertaking the journey toward change

is worthwhile, and that the light is at the end of the tunnel. All it takes is to
start moving. They are ready to go, each in their own way, by their ability to
communicate with people, some through rhetoric skills, others through
interpersonal skills, some through personal charm, and others through
writing skills.
5. Ability to persuade and to lead many to believe in their own abilities, to

implement ideas and actions which at first are perceived as impossible.
Transformational leaders are endowed with the ability to lead their
subordinates to believe in their own abilities to perform tasks which they
didn’t believe to be possible at first, and didn’t believe themselves to be
capable of reaching these positions. They stretch the limits of the abilities of
the subordinates to the maximum possible.
6. Ability to mobilize and involve many in the development of the idea

and to transform it into a possible work scheme. Transformational
leaders don’t go into details about their plans. They involve many people in
thinking and discussing the idea, allow constant dialogueue between them,
and mutual transmission of knowledge which leads to building a plan of
action. In this manner, they turn their ideas into the heritage of many others.
7. The ability to use positive reinforcements. Transformational leadership

uses various methods to encourage, reinforce, persuade, and give people
strength and belief – each leader in their own way. Some of them reinforce
their people as they transform them into “can-doers” and grant them a lot of
independence. Others tend to praise, encourage, and reward excellent
performances, and there are others who generate warm, personal
connections. The emphasis is generally put on encouragement and positive
reinforcement, and not on intimidation, threats, and punishment.
8. The ability to quickly disengage from the past. Transformational leaders
quickly pass through the mourning stages related to the past. They quickly
interiorize the fact that “everything is good in its own time.” They have the
ability to understand, whether it’s intuitive or rational understanding, when
a certain method has run its course, or when logic ceases to function, even
though it has functioned well so far, but now needs to be replaced by new
logic. They pass this ability on to their people. They know how to respect
the past and to give it a place of honor, this being part of the process of
separation from it.
9. Courage, decisiveness, perseverance, and ability to postpone immediate

satisfactions. Transformational leaders are courageous people. They dare to
speak unacceptable opinions out loud and are set to realize dreams, even
facing opposition, humiliation, and belittlement. They are able to persevere
and decide to reach their goals even if, in the eyes of many, it appears at
first illogical or improbable. They are capable of postponing present
satisfactions and take hard criticism in order to earn recognition at the end
of the way.
10. Ability to discern the first signals at the start of the downfall. They are
highly sensitive to changes in the environment and to ominous signs. They
are the first to sense that something basic needs to change. They are the first
to start learning and observing, and they are the first to go through the
process of creativeness that includes stages of personal research and internal
conflict.
11. Optimism regarding the future and pessimism regarding the present.
Transformational leaders are capable of transmitting optimism regarding the
future and the likeliness of its realization. They are a source of inspiration
and energy. They are the source of trust in the ability of the members of the
organization to attain this desired future. Facing the lack of trust and
pessimism of many others, they constitute a source of trust and optimism.
They transmit pessimism themselves in relation to the chances of the
organization to survive without constant change and innovation.
12. Ability to operate in situations of uncertainty and chaos. They are able
to operate in unclear situations, in situations of chaos and uncertainty. They
are guided by deep faith in their way, and they know where they want to go.
It constitutes a sort of compass that will guide their activities in ambiguous
situations.
13. Source of inspiration. They each in their own way constitute a source of
inspiration, of imitation, and quite often, personal examples. They establish
and instill within their people a set of values, norms, and beliefs,
encouraging innovation and change. They make this the way of life of the
organization and of their people, through fostering myths, rituals, and
heroes.
14. Change and innovation as a way of life. In the framework of the

definition of transformational leadership, we also include those managers
who don’t undertake onetime revolutions and who don’t pull organizations
out of deep crises, but rather, establish organizational systems, processes,
structures, corporate culture, mechanisms, and technologies, which thus
generate organizations that are capable of change and constant innovation,
and, which, in fact, generate long-lasting successful organizations. These
are managers who grew in a fast-changing technological and/or business
environment. They are highly aware of the many changes taking place in
the world, as well as their significance regarding the survival and success of
organizations. With respect to these many changes, evolution and
regeneration become an obvious issue to whomever longs for success, and
they are the source of organizational energy, enthusiasm, and pride.
These managers create the conditions or remove the barriers withholding

organizations and people from their natural inclination toward growth and self-
transformation powered from within. They therefore work on the soft spots of
the organization: values, beliefs, and norms which provide support to the
concept of self-transformation. They foster people having the ability to
constantly learn, change, and innovate. Beyond carrying out and conducting
change themselves, they deal with creating the conditions and mobilizing the
resources necessary for the natural emergence of change and innovation, change
that is generated as a result of complex interactions within the organizational
network and within the networks related to it that are relevant to its operation.
They nurture abilities, rather than focus on solutions. They focus more on
processes and less on design.

Today’s worker or even tomorrow’s worker will possess higher education, more
professional knowledge, and higher self-learning abilities than in the past. He
specializes and learns throughout his entire life. Nowadays, in most
organizations, these workers constitute the main component, and they will be the
main components of any organization in the near future. Therefore, this type of
leadership is compatible with most organizations. This type of leadership implies
several forms of behavior that can be learned and developed, and it is built upon
the outlook of self-creation and self-transformation that can be learned. This type
of leadership is more like a coach who opens and removes barriers and
obstructions. This is the type of leadership that nurtures and encourages internal
growth. It may be the dominant type of leadership of the new generation –
leadership that fosters and promotes leadership in all workers.

4.4 INTEGRATIVE APPROACH
LEADERSHIP AS INTERTWINED MANAGEMENT AND LEADERSHIP ABILITIES

This approach is slightly different from the approaches that distinguish between
management and leadership, or those that perceive them as a behavioral
hierarchy. It was presented by researcher Thomas Sergiovanni (2001).
Sergiovanni investigated the characteristics of particularly effective educational
systems and public organizations. His research led him to the conclusion that
leaders of outstanding organizations possess five qualities entwined together:
• Technical skill – technical management ability. Professional in managerial
technologies. Proficient in management theory. Plans, organizes, controls,
rewards, and solves problems in a professional manner.
• Humanistic ability – ability to motivate people and consolidate a team.
Ability to develop and reinforce workers. Empathetic, involves workers in
decision making. Delegates authority.
• Professional ability – expert in the core domains and core skills of the
organization. Extensive knowledge in the activity sector for which he is
responsible. Able to design changes and innovation, to achieve
breakthroughs, and to set a new vision in the activity sector for which he is
responsible.
• Symbolic ability – ability to set a new and challenging vision, to define
values, expectations and beliefs, to communicate metaphors that shape into
a desired future.
• Cultural ability – ability to create a connection between the past and the
future. Establish the vision in relation to the tradition and roots of the
organization. Maintain and preserve the basic values that are right for the
future and in connection with the past as well.
Sergiovanni outlines a path divided into stages for leaders in the process of
establishing excellent organizations.
His model is represented as follows:
• Bartering – management as a contractual system of give-and-take,
establishment of formal status, motivation generated by the response to
needs for security, business leadership, or transactional leadership.
• Building – transition toward motivation by responding to psychological
needs; responding to needs of appreciation, support, challenges, and self-
fulfillment.
• Bonding – developing a system of common norms, values, and vision,
uniqueness and difference, points of pride.
• Binding – firmly fixing the previous stage, transforming the organization
into a learning visionary community that is capable of fast change, that is
committed to vision and its implementation, and that constitutes a source of
imitation for others.
Sergiovanni’s research outlines the importance of knowledge and expertise in

the domain of management, and he adds to this the fact that knowledge is also
required in core activity domains of the organization – excellent school
principals possess knowledge and stance in the field of pedagogy – nonetheless,
the debate on the importance of knowledge in core sectors of the organization is
still open. Some say that leaders don’t have to be experts in the core activity of
the organizations they lead. Officers and pilots have been appointed to manage
schools, a CEO of health maintenance organizations appointed CEO of a
communications company, etc.
From our point of view, it is important that a leader understands these core
activities, which would prevent him from depending on the knowledge of others.
In any case, the important contribution of Sergiovanni’s research is the link
between management and leadership. It appears that the distinction between
management and leadership is essential in the higher levels of management in
large companies. In such companies, the CEO’s job is to focus on strategy,
vision, and organizational innovation, or in other words, on leadership tasks. At
the level of middle management or of management of medium-sized
organizations, the ability to combine management and leadership aptitudes is
important in order to constitute a springboard toward success.
The integrative approach is a modern approach based on the claim that the
environment in which leaders operate nowadays is different from that of the
past. It is characterized by new challenges set before those at the head of human
systems:
1. Conducting radical changes required by globalization, free market, new
technologies, changes in workforce, high customer demands, and social and
environmental responsibilities.
2. Constant designing and rethinking future strategies despite uncertainty of
the environment which is likely to cause today’s plans to be irrelevant
tomorrow.
3. Decentralization, organization and rituals, networks, matrices, mergers and
acquisitions constitute structural challenges that highlight teamwork,
networking, partnership, and a less centralized leadership style.
4. Workforce motivation of the twenty-first century is the fourth challenge.
Workforce is characterized by its high level of academic education, its
outspoken criticism of authority, its limited loyalty, its demand for meaning
in its work, its autonomy, and even by its need for the job to be enjoyable.
From our perspective and the literature survey, we can summarize the new
leadership characteristics at the light of challenges of the twenty-first century.
Nowadays, leadership demands four types of abilities:
• “BUSINESS” ABILITIES: comprising skills that affect the effectiveness of
strategy.
• “WORK” ABILITIES: including the skills related to “performance-ism” and to
obtaining results through others.
• “INTERPERSONAL” ABILITIES: they refer to those same skills that are
necessary to influence and to communicate with others – subordinates,
counterparts, supervisors, and clients.
• “PERSONAL” ABILITIES: focus on personal traits, values, views, and life
philosophy.
These four groups of abilities are detailed as follows:

“BUSINESS” ABILITIES
a) Design of the vision and strategy of the organization – contributes to
organizational excellence, sets strategic goals, establishes the cultural
architecture, and allocates the resources necessary for long-term goal
achievement.
b) Systemic and holistic thought process – this skill enables one to deal with
complications, to see the “whole picture,” to design adequate organizational
structures and mechanisms, and to establish a balance between emphasis on
processes and focus on results, the “bottom line.”
c) Focus on the customer – seizing opportunities to do things that add value to

the customer, as well as total commitment to constant improvement of products
and services.

“WORK” ABILITIES
d) Priority to performance and results – setting priorities, creating an
atmosphere of urgency of problem solving and opportunities, and identifying
ways to simplify work processes.
e) Initiative and innovation – initiating change and “breakthroughs,”

encouraging creativity and taking carefully considered risks that create
additional value.
f) Building the organization and workforce – designing the human resources

management systems which bring qualified people to join and persist in the
organization, as well as setting up organizational learning, information
management, and worker development mechanisms which maximize intellectual
capital.

“INTERPERSONAL” ABILITIES
g) Teamwork – developing consolidated teams committed to organizational
goals and objectives; empowering workers by delegating authority as well as by
assigning challenging tasks.
h) Mentoring and coaching skills – regularly analyzing the needs of the workers
for development, setting clear goals for them, utilizing mistakes for learning
opportunities, and providing feedback and opportunities for growth.
i) Influence and communication skills:

Creating a culture of open and honest communication by way of encouragement,
exchange of ideas and information, expression of opposing opinions,
demonstration by means of personal examples, and willingness to learn and to
share information.
Control and command of various influential techniques in order to generate team
commitment, handling disputes, and the ability to persuade colleagues,
supervisors, and customers.

“PERSONAL” ABILITIES
j) Risk taking, audacity, and determination – ability to make tough decisions
regarding people, as well as business issues, in spite of opposition, difficulties,
and “political” pressure; resolute and energetic activity, all the while displaying
self-confidence on the basis of clear principles.
k) Integrity and ethics – clear life philosophy that includes a code of values and
ethics; fulfillment and advancement of internal or external organizational activity
on the basis of these corporate, social, and personal values.
l) Emotional intelligence – awareness of one’s strengths and weaknesses as well

as those of others and utilization of such awareness in order to generate synergy
with those whose abilities complete his own.
More than pertaining to reality, our model constitutes a summary of the different
approaches and isn’t necessarily based on research. It constitutes a solid basis for
developing management and leadership aptitudes in the sense that it indicates
possible fields for development.
Recent research on the roles of leadership was conducted by Linkage, which

surveyed 350 manager development programs in the United States (Giber et al.
1999). The research found that leaders fulfill a variety of roles nowadays more
than they have in the past, and this is reflected in leadership development
programs.
These roles can be summarized in the following aspects:

Ability to elaborate and consolidate teamwork
In-depth understanding of the business
Conceptual thinking
Customer driven
Goal centered
Profitability driven
Systemic thinking
Global perspective
Emotional intelligence
This research outlines a more pragmatic approach that applies more on
leadership by those focusing on business leadership development.

4.5 SUMMARY
The debate on the issue of leadership presents different leadership approaches.
The definition of the concept of leadership is based at times on the researcher’s
specifications, and at times on the perception of the ones being led.
Can leadership be learned? It appears those who can possibly develop

leadership skills are people who have concealed abilities that don’t usually
manifest themselves for a number of different reasons. There seem to be basic
characteristics that cannot possibly be acquired or learned at an advanced age. It
also seems that leadership development workshops will not transform all their
participants into leaders. It is possible to teach leadership especially through
roles or by developing existing abilities. The possibility to teach courage and
decisiveness is, however, doubtful.
Is leadership the result of the situation? It seems that sometimes the answer to
that question is affirmative. In situations of crisis and despair, in situations in
which current leadership is missing, or in situations of loss of track, leadership
can be discovered in an unexpected person, as occurs in the business sector.
Many leaders were revealed only by the time they were assigned roles
demanding their leadership; others who were considered as leaders from a
previous task revealed themselves as lacking the ability to lead in a different
task.
Is leadership a behavior or a separate ability from management? Research

demonstrates that there is a certain overlapping between what has been defined
as the abilities and roles of a manager, and what has been defined as the abilities
and roles of a leader. Quite often, researchers use the term “leadership,” but, in
fact, refer to style and roles or characteristic behaviors of managers. For
example, transactional leadership (Bass and Avolio 1993) is, in fact, managerial
behavior, not that of leadership. Practically all research conducted on leadership
and business and behavioral results in organizations indicate qualities and skills,
and even roles that characterize excellent managers as well. Interpersonal ability,
integrity, ability to train and coach – these abilities, among others, can be typical
both to managers and leaders.
Are all leaders similar in their qualities and in their roles? The answer here
seems negative. Indeed, it has been agreed that leadership is related to vision,
inspiration, and motivation toward implementing significant changes, and that
leadership is reflected in a unique emotional connection with those being led;
however, the qualities of these leaders have not yet been agreed upon. Some of
them are humble, and others are extroverted. Some are eloquent speakers, and
others aren’t; some are insipid, and others are charismatic; some of them shone
for a moment, and others are considered as lifetime leaders. There are those who
are narcissists, and those who are shy; there are those who possess elaborate
emotional intelligence, and there are the insipid workhorses that are hard on
themselves and on their colleagues.
Does leadership have an impact on business results?

The answer is yes. Some research indicates that there is a clear link between
leadership skills and business success. Goleman’s research (2000) on leadership
that achieves results is one example out of the many that have been published
recently.

SECTION 2
Organizational Change Processes

Chapter 5
Theoretical Approaches to
Understanding the Occurrence of
Organizational Change
his chapter presents a number of theoretical approaches explaining the
T reasons for organizations to change and their development.
These approaches can be categorized according to their perception on the origins

of change:
• Approaches that ascribe change to external factors existing in the outer
environment of the organization.
• Approaches that present the origins of change as intraorganizational factors.
• Approaches that present the dynamism of congruence between environment
and organization.
• Approaches that explain change as being a natural phenomenon related to
the evolution of human systems.
• Approaches on change as a leadership phenomenon – the paradigm
approach.
• Chaos approach of organizational change.
(Refer also to Burke 2010.)

5.1 THE ORIGIN OF CHANGE IS EXTERNAL
This approach, which was customary until the 1970s, highlights the fact that
organizational change derives from changes in the external environment in
which the organization operates. Changes in the nature of the economy and the
market, entry of new competitors, changes in the taste of consumers,
technological changes, as well as changes in regulations and laws, among others,
lead the organization to the necessity to respond to them.
The organization must find new ways to modify its internal configuration in
order to respond to the changes of the environment. According to this approach,
the reason for organizational change is external pressure. Moreover, this
approach assumes that changes of external environment are fast, coincidental,
unexpected, difficult to observe or predict, and chaotic. As a result,
organizations tend to detect these changes late; subsequently, they respond to
them late as well.
Another approach claims that changes in the external environment are
sometimes slow and difficult to foresee. They develop slowly, generate a critical
mass, and occur in suddenness. The transition from vinyl records to compact
disks, from cameras with film to digital cameras, from cubic televisions to flat
screens, are a few examples of technologies which developed slowly and
suddenly became products in high demand. Anyone who didn’t adapt to such
technology collapsed. This is how Kodak collapsed, by not reading between the
lines, as it didn’t prepare itself in time for the digital camera. That is also how
the Swiss watch industry collapsed, as it was late in detecting the signs of
change in the taste of the customers shifting toward the digital watch.
The approach of external origins of change bases the motive of change on the
occurrence of crisis and lack of options. Organizations perform changes because
of lack of options. Only the clear necessity not to ignore it entails the willingness
to change. Organizations tend to belittle external change or to avoid taking
preventive measures of change as long as no internal catastrophe has happened.
Emphasis here is on repression or denial mechanisms, mechanisms of hope
(everything will work itself out in the end), and mechanisms of procrastination,
or attempts for small improvements. Many researchers studied the phenomenon
of late response to environmental changes (see, for example, Cummings and
Worley 2009), and all of them share a common denominator: the assumption
that organizations are “victims” of environmental changes.
One of the sources of the approach is the classic evolutionist approach which
highlights the need of living organisms to survive in a specific environment by
way of constant internal adjustments. Living beings sense the need to change
themselves as a result of environmental changes: weather, ecology, and urban
development, among others. They either create a new internal adaptation system,
or they find themselves another niche somewhere else.
What is the managerial deduction from this approach?

Emphasis here is on a managerial approach rather than on leadership. In other
words, emphasis is on efficient and proper management that is quick to respond
to environmental changes. To do this, it is necessary to operate in the following
directions:
• Developing informational systems regarding the processes occurring in the
environment. Changes are developing in different areas, such as changes in
competitors, new technologies, changes in the market, in new products, etc.
• Developing the ability to diagnose the environment and making this become
a permanent and continual process.
• Knowing how to decipher and translate this information into the required
processes of change.
• Developing internal abilities to change prior to crisis: flexibility of
structure, of manpower, of development ability, and of organizational
processes.

5.2 THE ORIGIN OF CHANGE IS INTRAORGANIZATIONAL
This classic approach, which was dominant until the 1970s, claims that change
derives from feelings of unease and internal crisis; it also focuses on the
assumption that changes can also begin within the organization itself. The most
typical cause is a negative one. Feelings of unease of the managers or the
workers in situations of internal crisis constitute a motive for change. Negative
impressions and feelings of nonresponse to needs and dissatisfaction will
motivate the workers and/or the managers toward changing the situation.
Feelings of unease, feelings of insufficiency, feelings of deprivation, feelings of
threat, feelings of nonresponse to needs, dissatisfaction, feelings of degeneration,
feelings of frustration and more will all constitute motives for change. It will not
necessarily be directly related to the environment or to environmental changes,
but rather, related to internal factors, such as: an autocratic managerial style,
reward systems perceived as discriminatory, inadequate working conditions,
expectations, a corporate culture of fear and discipline, etc. Change can consist
of moral and ideological changes, such as lack of faith in the organization’s
goals and ideology. Many people believe that organizational change is set in
motion as a result of the presence of certain unease, of an internal crisis, or of a
feeling of threat. They believe that without such a factor, change will not occur.
The modern approach supposes that changes may occur not only in times of
internal crisis, but also out of success and exploitation of success. These factors
which motivate organizational change can definitely be positive ones. Growth
and success will lead to extensive changes in organization, management,
marketing methods, etc. The theory of open systems nowadays is the dominant
theory in the understanding of organizations and their action methods. It
highlights the fact that every system is composed of subsystems which interact
correspondingly. Change in one subsystem will result in change of all the
systems related to it. It will generate adjustments or a whole new pattern of
activity. For example, replacing a manager will lead to a new management style,
a new corporate culture, changes in communication patterns, and more, up to the
point where an overall adjustment is to be carried out.
Change of corporate culture will result in changes in structure, in work methods,
in organization and management, and in reward and evaluation systems, etc.
Introducing new processing or production technology will result in structural
changes, among others.
The most significant internal factor motivating change is the inherent human will
of many to succeed, to advance, and to triumph. The will to be the best, the will
to be the leaders in the market, the will to excel, to advance, and progress, the
will to shape the environment and to constitute an example for others, to
generate an impulse of competitiveness and curiosity, the will to give a positive
impression, and to design reality rather than be a victim of it are all significant
internal factors which set change in motion; these, in fact, are not within the
context of changes in the environment.
Successful organizations are the ones who encourage innovation, development,

and new experiments. They invest considerable resources in research, learning,
and development. They have a deep sense of mission and vision, as well as will
to constitute an example of success over time. They invest considerable
resources in advancement and development of the human capital and the
intellect of their workers. They encourage risk taking, learning from mistakes,
and from experimenting. They encourage creativity and innovation at every level
of the organization; they establish multidisciplinary teams for learning and
development; they encourage continuous learning in the organization and
establish multichanneled communication networks enabling everyone to take
part in the process of learning and developing. They establish flat organizations
in which teams operate autonomously and without central management. They
absorb workers capable of innovation and creativity, and as a matter of fact,
successful organizations generate a new environment for other organizations.
Introducing new technology in the organization, reorganization, flexible,

modern, and innovative organizational structure, innovative management
methods, marketing initiatives, cooperation initiatives, creation of networks,
mergers, and associations, initiatives to introduce new products and services on
the market, introducing knowledge into products, using human imagination
regarding the customer, responding to his needs, and even generating new needs
– these things, among others, come from within the organization. They come
neither from unease nor coercion, but rather from exhilaration and the inherent
competitive impulse within everyone, and from the willingness to change and to
gain the upper hand over competitors.
What is the managerial deduction from this approach?

The capacity for internal change and innovation, even in times of success,
•
must be developed.
• The constant ability to analyze the internal situation of the organization
must be developed.
• The ability to change, not only in situations of crisis but also in situations of
unease, must be developed.
• Tools and processes for fast change must be developed.
• Abilities to manage change within all levels of management of the company
must be developed.
Is it at all possible to make a clean-cut distinction between what is internal and

external to the organization? In theory, yes, and everything is also a matter of
point of view. Reality is, of course, complex, and it can justifiably be claimed
that in reality, there is constant interaction between internal and external factors
and mutual influence between them. The overall reality defines and has impact
on the needs and expectations of the members of the organization.
People are products of their times. In other words, it is necessary to see the
whole picture: the organization and the context in which it operates. Initiatives,
as well as scientific inventions and new technologies, don’t pop up out of
nowhere. They are the fruit of development based on the past. In spite of all this,
the point of view that the ability of growth and regeneration of organizations and
their members is found within the organization as well as imprinted within its
members and within their essence as human beings is more functional because it
relays the responsibility of the fate of the organization to the members
themselves. In the same manner that a mature individual cannot hide behind his
deprived childhood until his last day even if he actually had such a childhood,
organizations cannot indefinitely blame their failure on harsh environmental
conditions either. That could actually constitute a good reason to prove to
everyone that it is also possible to succeed when the outset conditions are
difficult. The approach explaining changes as interaction between the
organization and the environment is presented in the following section.

5.3 THE NEED TO SUSTAIN INTERACTION AND COMPATIBILITY
WITH THE ENVIRONMENT
Organizations are open systems that interact with their environment. The
environment not only holds the resources necessary for the organization to
transform them from input to output, but it is also the consumer of such output,
whether it is a service or a product. In order to operate, an organization needs
input of people, capital, information, equipment and appliances, technology and
machinery, and it competes for such resources with other organizations of the
same type. The organization also needs loyal customers who will buy its
products and services. Here, too, it competes with other similar organizations.
In a situation of open competition in a global open market, the organization must
constantly generate positive interaction with its environment in order for it to
survive. The organization must constantly ensure that the resources of the
environment are available and suitable, and ensure that its customers will not
shift toward its competitors. The best way to survive over time is, therefore, to
constantly renew and change, to create qualities of flexibility and agility,
innovation and creativity, to seek a unique niche in which the organization holds
the upper hand on resource control, as well as customer loyalty to its unique
goods.
Changes in the environment of the organization, therefore, compel it to change

accordingly in order to maintain positive interaction. Changes in technology, in
the taste of the public and changes in trends, demographic changes, political
changes, changes in regulations and laws, among others, all immediately impel
reorganization. Changes can occur within different related groups in the
organization that affect its success. Changes of ownership, mergers and
acquisitions, changes of financing systems, changes in marketing, distribution,
and sales systems, changes in supplier systems, changes in partners or in parent
companies, and changes in customer needs and habits will force the organization
to reorganize itself in order to preserve the channels nurturing its operations. In
this case, the ability to quickly create connections, the ability for mergers and
acquisitions, and the ability to relinquish and to pull out of operations are
important in order to preserve the ability of competition and maximum
flexibility.
Creating a situation of positive interaction with the environment thus requires its
constant examination and willingness for new and quick reorganization with the
discovery of any occurring change. For this purpose, organizations develop
survey and research systems, learning and information gathering systems, and
their interpretation. Outstanding organizations develop the ability to gather
information, to process it, and to make it useful for proper decision making. In
order to avoid misinterpretation, outstanding organizations develop the ability to
interpret information based on different conceptual schemata which they
perceive as acceptable. Distant and close contact with the environment, its
resources and its groups, openness to the environment, faint and absorbent
boundaries, and combining different teams within the organization are the ways
to achieve high sensitivity to environmental changes and to rapidly prepare
accordingly.
Many managers believe that adapting to the environment means adapting to

changes in the environment. This approach is essentially passive and erroneously
interpreted. Outstanding organizations create their own environment; they are
not its victim. Initiative and innovation of products and services are what create
the new environment. Information and new technologies developing at a
dizzying pace are the result of the development of people and imaginative
systems, generating a new environment and new opportunities. Indeed, there is
no ex nihilo, and organizations, just like people, are products of their times. In a
complex reality, there is a complex interaction between the organization and its
environment; however, proactive managers can influence the shape of not only
their own environment, but also that of others.
Closed organizations, whose limits are clear and closed off to the environment,
in which information, values, and technologies, as well as people and ideas they
receive, are controlled and supervised, and in which resources that reach them
are filtered and reduced according to their needs and values, may postpone
changes, albeit not for long. Communist countries were able to reject changes by
closing their borders, by tight supervision of what arrived to the ears, eyes,
minds, and hearts of their citizens. In an open world, where information flows
through modern channels and can be picked up at any place, it is practically
impossible to prevent change. Religious organizations invest tremendous
resources on shaping behavior, prohibitions and taboos, physical and conceptual
separation in order to preserve themselves, lest they change.

Public organizations such as schools, hospitals, and government offices can also
put off necessary changes without being immediately affected. The reason is
simple: They are protected from environmental changes through permanent and
stable financing of their operations. Their clients have no options; they operate
in a protected and noncompetitive environment. The organization and its
survivability become the goal, not the client’s satisfaction. But in today’s world
as well as in the future, the transition toward an open market is intensifying,
along with the options of the client in almost any field. Public organizations are
also becoming business organizations competing against other organizations
over the hearts and pockets of their clients, and it seems that this process will
only accelerate. In this manner, in the global village where there are no limits to
economy and no limits to information, in which one way or another it is almost
impossible to maintain closed borders, which would entail a heavy price to pay
in terms of coercion and brainwashing, it would be difficult for closed
organizations to survive, let alone thrive. Opening borders, on the one hand, and
maintaining the core of the organization, on the other hand, would actually allow
the organization to change and to prosper without giving up on its basic purpose.
Changes in the environment can be forced, or not, upon the organization.

Governmental decisions on change of policy and change of regulations,
decisions to privatize public enterprises as well as other decisions, compel
organizations to change. Changes in the environment can be perceived as threats
but also as opportunities. Both standpoints are helpful to understand the situation
toward which the organization is pushed.
Analyzing the threats within the environment and the opportunities offered to the
organization as a result of these threats is the basis of redefining the goals of the
organization as well as the strategy to achieve them. The fact that changes in the
environment constitute, in fact, change in the actions carried out by the different
factors in the environment of the organization should be highlighted.
Technological changes don’t happen for nothing. They are the result of initiative
and development of entrepreneurial organizations. Changes of ownership,
mergers, and connections are the initiatives of competing organizations. Change
in raw materials is the result of the development of initiatory organizations. In
other words, the changes in the environment are partly the result of slow and
uncontrollable development, such as changes in trends and tastes, increasing
needs and level of life, and partly the result of initiative of other organizations. It
is, therefore, possible to say in general terms that failing organizations are

victims of their own environment, whereas successful organizations create their
environment.
Changes in the environment that change in an internal subsystem of the

organization result in changes in the rest of the internal systems of the
organization. Since the internal systems are in adequacy with one another,
change in one of the subsystems will result in adjustment changes in the rest of
the subsystems. For example, introducing new technology will require change in
the production, organization, reward, marketing, and advertising systems, and so
on. In this manner, a seemingly minor change in the environment can lead to
major change in the organization.

5.4 CHANGE AS A NATURAL CHARACTER OF ORGANIZATIONS
The fourth cause of changing organizations is imprinted in their very existence.
Organizations are living systems with inherent qualities: growth and change, as
well as two different basic approaches explaining these dynamics. The first
approach attributes human characteristics to organizations and claims that
organizations, just like human beings, are born, grow, mature, age, and die. The
second approach also attributes living characteristics to organizations, but on a
different aspect. Organizations, just as living organisms, go from simple
situations to more complex situations, until the ability to control is negatively
affected. At that point, they face either death or being dismantled into small and
simple units, from which a new process of complexity starts in each unit, and so
on.
Organizational life cycle approach: Just as living organisms, organizations

have life cycles. Organizations are born after their procreators came up with the
idea, whether it’s a new product or new service, initiated the establishment of the
service or production system, and thus, the idea materializes. From then on, the
organization goes through phases of development similar to those of human
beings: childhood, a phase of growth, adolescence, a phase of maturity,
establishment, a phase of authority, a phase of degeneration, old age, and death.
The transition from phase to phase, just as for human beings, is accompanied by
transitional crises: birth crisis, adolescence crisis, middle-age crisis, aging crisis,
and death crisis.
The prominent representative of this approach is Ichak Adizes (2004). Adizes
described the natural course of life of organizations and its different stages and
transitions. In each stage, there are positive characteristics that enable the
transition to the next stage, as well as negative characteristics that endanger the
transition and lead to the collapse of the organization at every stage. The stages
as well as the positive characteristics are:
Courtship stage: The organization is not yet born; it only exists as an idea. At
this stage, the founder establishes his commitment and that of others, and
markets the idea. Energy and enthusiasm are accumulated, and there is
willingness to take risks. At this stage, not only are good ideas as well as
financial support, customer market, and teams necessary, but also the presence
of the committed “fanatical devotee” is especially necessary. Commitment is
product-oriented, and not market-oriented, this being in order to first develop a
product which will, at a later stage, suit the market. Emphasis at this stage is not
on profit, but rather on commitment to the establishment of the organization and
the product.
Infancy: The organization is similar to a newborn baby. There are no procedures

yet, no institutionalization, and no clear role distribution. The main mission is to
produce and to market. The organization is centralized, and the founding
entrepreneur does everything. There is no authority delegation, no performance
consistence, and no managerial depth. Mistakes are made, crises frequently
appear, and undercapitalization returns. Everyone concentrates on sales. The
chances of success are slim. The commitment of everyone to succeed, hard
work, external support, and most of all, an appropriate managerial style, will
lead the organization to the next stage.
Takeoff: The idea is operative. Sales are increasing, and the cash flow is
becoming positive. The company begins to blossom and to expand rapidly; new
facilities are acquired, employees are quickly hired, and the organization’s
occupation is to expand and to fulfill its orders. The company is organized
around people and not around missions or functions.
There are various different contracts with people; an overlapping of functions is
taking place; mistakes are made, and then utilized for learning purposes.
Adolescence: The beginning of conflicts, lack of consistency, old-timers versus

newcomers, lack of consistency in the goals of the organization, lack of
consistency in remuneration methods. At this stage, entrepreneurial leadership
style is changed into professional management, and authority delegation takes
place. The goals are also changing: from sales to profit. A board of directors is
established, and performance inspection begins.
The organization at its prime: This is the optimal point on the life cycle curve.
The organizational structure and other systems are consolidated, internalized,
and enable proper functioning. Vision is crystallized and internalized. Innovation
and creativity are present at every level. The organization is result-oriented and
customer-oriented. Plans are carried out, and performance is excellent. Sales and
profits are increasing. Within the organization, new infant organizations sprout
or emerge.
Stable organization: Characterized by lower growth expectations, lower

expectations toward occupying new markets, toward breakthroughs, and toward
opening additional fronts. Focus is on past achievements rather than on vision
for the future; mistrust toward change; reward is granted for discipline; focus is
on inward problems.
Aristocracy: Money is spent on control systems, on bonuses to workers, and on

facilities. Focus is on “how we do things,” instead of on “what” or “why.”
Emphasis is on formation. The organization is losing its vitality. Innovation is
disappearing.
Early bureaucracy: Beginning of conflicts and internal competition; searches

for who is to blame; decrease in all business dimensions.
Bureaucracy and death: The organization loses control of the situation.

Systems function on the verge of collapse. The good people leave the
organization. Path and direction are lost. Unfocused attempts to restrain the
situation only further deteriorates it, up to the point of bankruptcy.
The transition from stage to stage implies transitional crisis, difficulty to adopt a
new managerial style, and difficulty to get organized at a higher and more
complex level. Each stage has its characteristics and its risks that are likely to
lead to collapse.
The life cycle approach is essentially pessimistic and assumes that the fate of
organizations is death. What prevents organizations from getting old? What
makes transitional phases possible? What prevents the natural process of ageing?
Adizes’s answer is simple: management style and management team – they are
the ones that make the difference.
Adizes distinguished four different management styles:

Producer (P): the manager who knows how to get things done, to implement, to
perform, and to put ideas into action.
Administrator (A): the manager who concentrates on maintaining procedures,
maintaining order and organization, and maintaining rules.
Entrepreneur (E): the creative, imaginative, and innovative manager who
initiates new ideas.
Integrator (I): the manager who brings people together, establishes consensus,
and seeks compromises.
Each essential stage has its corresponding managerial blend enabling a smooth
transition to the following stage. For example, a managerial blend of
productiveness and entrepreneurship is crucial at the stage of infancy. The
following diagram describes the corporate life cycle, its crises, and the
management styles required for its success.
CORPORATE LIFE CYCLE
Diagram excerpt from: Adizes, Managing Life Cycles.
CONCLUSIONS ON CHANCE MANAGEMENT

• Change management quite often consists of managing the transitions of
organizational life stages. Managers must study and know at which stage
the organization stands, study and know which stage they are about to move
to, and plan the transition, all the while integrating workers in the learning
process.
• Transition management is, in fact, managing change in corporate culture,
and each stage is characterized by a different culture. Cultural change is
difficult to put into action due to the fact that change is primarily within the
hearts and the minds of people. Therefore, patience, maximal cooperation,
joint learning, and a climate of openness are necessary.
• The life cycle approach highlights the critical position of managerial style
in the prevention of crises and collapse. It highlights the importance of
managerial teamwork as a factor that motivates organizational innovation.
Managers must be aware of their managerial style; they must be capable of
building a managerial team with complementary abilities and give priority
to the style or the type of manager suitable to the stage in which the
organization stands. They must learn and develop complementary
management abilities as much as possible.

5.5 OPEN AND COMPLEX SYSTEMS APPROACH
This approach, which is the fruit of the conjoint elaboration of scientists in
various fields, also compares organizations to live organisms (see, for example,
De Geus 1997). Scientists in this field studied the durability of complex systems.
The basic idea is that human systems go from a simple situation to a complex
one. Just as a cell becomes a complex organism, human systems also become
more and more complex. Organizations can avoid processes of entropy and
processes of demise that begin in living organisms as a result of their lack of
ability to sustain complexity over time. Organizations deal with complexity
exceeding their ability to control by way of simplification processes. When
complexity exceeds the system’s ability to manage itself, processes of
simplification such as decentralization, granting autonomy to units, transition to
profit centers, as well as subsidiary companies, among others, begin. As long as
central control is not relinquished, this process will lead to increasing
complexity. Moreover, the characteristic of increasing complexity also occurs
within autonomous systems. In this manner, the lack of ability to relinquish
central control of complex systems, along with the lack of ability to manage
large complex systems, entail downfall, followed by collapse.
The origin of this theory is not new. Historians such as Mommsen, in his book
The History of Rome, analyzes the process of growth, spread, expansion, and
complexity of the empire, which lead to the difficulty to govern the kingdom and
to defend it, and which further lead to its atrophy and to its downfall. Human
history is a continuous sequence of the rise and fall of empires which expanded
beyond their ability to control themselves, degenerated, and collapsed. The
example of the collapse of the Soviet Union is not exceptional. Some of the first
sociologists such as Durkheim and Ziman also described the natural
development of organizations moving from situations of simplicity and intimacy
to complex and bureaucratic organizations, as well as the characteristics of this
process.
In the last years, interest and research in the field of complexity has increased.
This is a result of processes of opening boundaries, technological development,
globalization, and more. Because of such processes, the question of complexity
and controlling complexity is becoming critical. The complexity of systems is
gradually increasing, and questions of control and management, survival and
durability over time are becoming critical (for more on the subject, see Neil,
Sociology Theories, 2009).
The main characteristics of this approach are:

It is in the nature of organizations to develop and reach higher and more
complex levels. This process is divided into periods of evolution in which
complexity increases, but essence remains. In other words, growth is
quantitative, and thus, in times of revolution, the system goes through a period of
upheaval and crises, at the end of which it reaches a higher degree of complexity
as well as the creation of new quality.
There are a number of characteristics to increasing complexity:

Increasing multiplicity of subsystems: More of everything – more systems,
more sophisticated technology, more knowledge, more units, products, and
services – are diversifying, and spaces and surfaces are increasingly occupied.
However, manpower isn’t necessarily increasing. It might actually be the
opposite – complexity has increased, but manpower has decreased.
Distancing of subsystems from one another: Increasingly wide gaps are

generated between people and units due to the fact that people are increasingly
specialized and focused on specific fields, and due to the incessant learning in
increasingly narrower fields.
Growing interdependence between subsystems: The specialization of

subsystems in increasingly narrow fields causes the increasing necessity for
cooperation. Each subsystem needs the others in order to function. Dependence
of the systems on one another is generated.
Constant growth of sensitivity of the system to changes: Each subsystem

stands facing a relevant, changing environment. Each subsystem is related to, or
dependent on, one another. Therefore, change in one subsystem necessarily leads
to a corresponding change in the rest of the subsystems. Each change in the
environment results in quick adjustments of all internal systems.
Emergence of complex problems, nonlinearity, and paradoxes: Just as

complexity increases, so does the complexity of problems. Problems are no
longer within a structure of cause and consequence, but rather a complex
imbroglio of interacting factors. Aggravating cycles of problems and
dysfunctional patterns are generated, as well as the occurrence of patterns of
problems whose origins are unclear. These processes give rise to unexpected
phenomena, for better or for worse.
Limits of complexity: There is flexibility, but there are also limits to the ability
to control and manage complexity. The limits of the ability to control complex
systems are related to the existence of control and inspection systems.
Computing technology and information transfer and processing has developed,
and is still developing, and it promotes complex system management, but the
problem is that control systems are also becoming more complex, and the
difficulty to manage them has increased. In this manner, despite technological
development, as complexity increases, the authority of central management
decreases, and decisional authority shifts to subsystems. In complex systems,
reinforcement of central control only leads to a loss of control, to crisis, and to
collapse.
Authority delegation processes, decentralization, and splitting: The ability

for increasingly complex systems to last is in the creation of conditions enabling
control and management. This is done by means of increasingly deepening
processes of decentralization. At early stages, in organizations of low
complexity, processes of role distribution and definition are carried out. At the
following stage, authority is delegated to workers, and after that, additional
managerial roles are created. After that stage, a professional staff is established,
and at a more advanced stage of complexity, a process of authority
decentralization is set in motion. At the next stage, the organization switches to a
structure of autonomous units and profit centers. After that, the organization
begins to split into units according to various criteria of geographic location,
role, and customers, among others. After that stage, splitting up will take place
by way of moving different activities that focus solely on core operations outside
the organization. Another option is to create a network of autonomous units
interrelated by their provision of identical services or products. Franchising and
central ownership of geographically spread independent units is similar to
networks.
Simplification shifting back to complexity in a geometric process: Processes

of decentralization and reduction, or transition, to independent units accelerate
the process of complexity. Each independent unit reinitiates the process of
complexity, and the result is that complexity increases at a geometric pace. The
world in which we live is becoming more and more complex. Dealing with this
accelerated process is, in fact, managing the accelerated parallel process of
decentralization. Focus is on the core of the organization; activities are carried
outside; authority is decentralized, responsibility and authority is passed on to
individual workers, and workers become managers. Central management
concentrates on creating a comprehensive strategy and corporate culture through
coordination and inspection.
Mergers and acquisitions and the great paradox: Many organizations acquire
other organizations, merge with or take control of others in order to generate a
major advantage and to obtain a full selection of products and services. Research
outlines the fact that these processes go with the transition toward the autonomy
of the subsystems. A sort of paradox is thus created: as organizations expand,
their subsystems are reduced. (Refer to Naisbitt 1994, for example.)
Change: The complexity approach places change as an internal character of

organizations. The origins of change are in the system itself. The organization is
not a victim of its environment, but rather has an internal impulse to grow and
expand. Change is a natural process, which becomes possible through the
creation of surplus energy intended for growth, and not for managing and
preserving what already exists. Successful organizations accumulate the required
abilities and resources for the continuation of their growth. It is actually when
the organization is at the stage of its summit that it is time to conduct the change.
At such a stage, the organization has everything required for this: capital, time,
excellent people, and the ability to learn and to outline a new path (Garnsey and
McGlade 2006).
Management and leadership: The approach on open and complex systems

generates a combination between immanent processes and management and
leadership. The terms describing change leadership are “to ride the waves.” In
other words, the option is to actively participate in the natural process of
complexity and growth, by way of leadership actions such as: initiative,
innovation, development, guidance, shaping a new reality, or being drawn
toward a changing reality, and getting caught up in managerial activity in
response to crises.
Success and growth: In the approach on complex systems, success is defined by

most people as growth and increase of complexity. Without increase of
complexity, there is no growth, and thus, no success. Success is defined as an
increase in the number of customers, markets, products, subsystems, more
sophisticated technology, specialization, and so on. Consequently, success has
its price, being the increase in complexity and the difficulty to manage and
control.
Increasing complexity in our world can be observed in any field. In the recent
past, for example, we were familiar with two types of bread: black and white.
Nowadays, the shelves of bakeries hold dozens of types of bread, and such a
process will continue. This very phenomenon can be seen in any field of
business activity: the tourism sector is growing at a ruthless pace, and the world
of tourism includes infinite combined systems on a global scale. The media
sector is developing and growing and becoming more complex. In the medical
sector, we witness the growth of monsters, structures which in the past were
called “hospitals” and are now called “health centers,” and which have infinite
wards and specializations. The number of channels on television has gone from
two to hundreds. Organizations merge and unite and create global networks.
Giant global corporations are established. It is no coincidence that small shops
vacate their posts for giant shopping centers, whereas street shops are becoming
specialized shops in unique niches.
The following diagram describes the process of complexity.

The organization starts as a simple system. Factories, businesses, schools, or
start-up companies begin as simple systems. Everyone does everything, relations
are open and familiar, role distribution is not yet clear, the selection of products
and services is limited, and the structure of the organization is simple. However,
by way of leadership processes, riding the waves of the organization’s natural
growth, the organization thus shifts toward more complex situations.

Organization leadership takes a proactive approach. It encourages
entrepreneurship from every part of the organization, fosters a culture of
innovation and creativity, and it takes risks. It has the drive to lead and to
triumph over competitors; it is constantly in search for new markets and
products. It is curious and has a strong desire to influence and shape reality
rather than to drag behind it.
However, conductive leadership has a double price:

a. Constant increase of complexity and difficulty to manage the system.
b. Constant loss of uniqueness and distinction. For these reasons, the parallel
process of conductive leadership is to constantly simplify the system, or in other
words, constant delegation of authority, at first to people, then to departments,
units, and finally, to the organizations that constitute the system. Constant
structural change, which includes redefining roles and authority as well as
redefining the extent and boundaries of the autonomy of each subsystem,
fundamentally constitutes a managerial process.
The second consequence of the process of increasing complexity is the loss of
distinction and uniqueness as a result of imitation by competitors. This, thus,
demands constant examination of the core of the business as well as corporate
vision, by way of constant strategic thinking. This is, once again, a process

essentially of leadership.
The complexity approach outlines the central problem in change

management: the ones who can do it don’t do it because they are already
successful, and the ones who aren’t successful have difficulty doing it
because they lack the required resources.
Conclusions on change management and leadership:

• Change management is the main field of management. In fact, managers
carry out the natural process of growth and expansion toward
overcomplexity. Instead of destabilizing the system with major changes in
large intervals of time, minor changes which are intended to constantly deal
with overcomplexity should continually be carried out. The main way to do
this is to generate complimentary qualities: on the one hand, processes of
decentralization and division, and on the other hand, processes centralized
on the organization’s vision, on corporate culture and strategy, and, thus, on
coordination and control measures.
• Turning an individual worker into a manager, a promoter, and a contractor.

The complexity approach provides support for the methods in which
authority of initiative and decision, as well as extensive team and individual
worker autonomy, are transmitted. In a complex world of high uncertainty,
in which each worker specializes in a unique field, “the ones below know
their field more and more, whereas the ones above know less and less.” The
need for quick decision making based on reliable information creates the
conditions for granting responsibility and authority to the worker and the
team.
• Relinquishing central control – The complexity theory outlines the fact that
it is neither possible nor necessary to reinforce central control as
organizational complexity increases. The paradox is that as central control
is reinforced, disorder increases, and the organization will be brought to
collapse. The opposite action is actually necessary: granting autonomy to
individuals and to organizational units, and eventually granting them full
autonomy as complexity increases.
• Ability to grant full independence to operations and departments –

Managers must come to realize that not everything has to be done within
the premises of the organization or by the organization. Relinquishing
central control also includes the willingness and the ability to give up on
operations and units and move them outside the organization or hire the
services of another organization.
• The importance of worker involvement in every process, including

designing vision – The natural tendency of organizations to grow toward
complexity implies the natural internal resources of the organization as
partners in the process. As their involvement increases, so does the capacity
of the organization to undergo such processes easily.

5.6 PARADIGM SHIFT – CHANGE AS LEADERSHIP OPERATIONS
This theoretical approach, different from the ones presented so far, was first
displayed by Thomas Kuhn in his book The Structure of Scientific Revolutions
(1962). In this book, Kuhn claimed that scientific progress didn’t happen via a
step-by-step evolutionary phase of development, but rather by way of revolution.
Such revolutions are the results of the actions of leaders who are designers of a
new reality in the field of science. Galileo Galilei, Copernicus, Newton, and
Einstein, each in their own time, led scientific revolutions based on new basic
premises – on a paradigm different from the existing one.
Kuhn coined the term “paradigm,” which is a Greek word describing a
conceptual scheme, thought patterns, and basic premises. These are concepts that
define the limits of human perception and thought and constitute a type of lens
through which we see and interpret reality. According to the paradigm theory,
there is no objective reality, but rather, a reality according to how it is reflected
through conceptual filters. Every individual or group of people has basic
premises, thought patterns, and ideology, through which they perceive and
interpret reality. Paradigms that are determined for individuals or for groups
define what is right and what is wrong, what is good and what is bad, how to act
in order to solve problems, as well as what is just and what is unjust. Paradigms
constitute filters which don’t allow those who adhere to them to see or to
perceive new information that isn’t compatible with the existing paradigm.
Paradigms are the conceptual basis onto which are established organizational
systems.
Science develops through revolutions. Galileo Galilei, Newton, and Einstein,

and others who broke through thought frameworks, created new ways of
thinking, suggested a new direction and a new thought framework, and, thus, set
the basis for a new paradigm.
Organizations and managers also operate according to paradigms (see, for

example, Barker’s book on the role of paradigms in organizational change and
innovation, J. Barker, Future Edge, 2000).
The Swiss watch industry operated on the basis of the premise that watches
consist of cog-wheels, springs, and hands. Its companies did not believe for a
moment that people would want to use electronic or digital watches for the
simple reason that in their eyes, they weren’t watches! The company couldn’t
function on the basis of any other paradigm. IBM operated on the basis of the
assumption that a computer is a central appliance in the organization and hadn’t
seen its hidden function as a home appliance. The American automobile industry
believed that a vehicle is a large car needing fuel. It couldn’t see the possibility
of a small and economical family vehicle.
The paradigm theory distinguishes between changes that occur within the
framework of the current paradigm and that are conducted by managers, and
changes of the paradigm itself, which are the result of the guidance of leaders.
Changes of the first type, in fact, sustain the current paradigm. They confirm that
the basic premises according to which the organization operates are correct and
valid. They are also relatively easy changes to perform inasmuch as they are
within the framework of organizational consensus.
Change of the second type is very difficult to carry out as they give rise to doubt
regarding the validity of the existing premises. Those who work at changing
paradigms are, therefore, condemned as being especially heretic and somewhat
crazy.
Paradigms operate as limits or as filters. They maintain organizational cohesion;

they give a logical basis to the organization’s actions and guide decision-making
systems, problem solving, and ways to operate. Their negative side is that they
prevent innovation, creativity, and breaking through the boundaries of
conventional thinking. In a fast-changing era, adhering to paradigms is likely to
be detrimental. The ability to identify and define the current paradigm and to
formulate a new paradigm that better suits the current reality is becoming fateful
to the ability of organizations to survive. Organizational learning is becoming
the acquisition of aptitudes to examine the existing paradigms and their validity.
Paradigms constitute the conceptual basis to fully organize and create entire
systems. Conventional medicine versus alternative medicine is a simple and
clear example. Each is based on different theoretical basic assumptions. They
developed different treatment and diagnosis methods and different methods of
ordination; they both have institutions, organizations, and associations. They
both bear different myths, heroes, values, and rituals. They battle against each
other, and each is convinced that it is the one in possession of the truth.
Conventional medicine competes against alternative medicine, and the former’s
perception of the latter as charlatanry and heresy is a reminder of bygone times.
The ones who sustain the paradigm of rational, scientific, and Western thinking
cannot see or absorb different information. Reality will show that in time, they
will become complementary, and one will embody the other.
Paradigms change in three manners:

1. Through the leaders at the head of the systems, generally new in the
organization, who aren’t stuck on old paradigms and who have the power
and the ability to suggest a new direction for the organization, a direction
based on a new functioning paradigm that functions better than the previous
one, and that guides the organization’s activity in the present situation and
in the future. According to the paradigm approach, paradigm shift is the
result of leadership initiative to give rise to revolutionary ideas of products
and services, to a new ideology or to a new direction.
Leaders design new paradigms which respond better to reality and push
humanity toward a better future. Some of these leaders operate on
technological innovation. Bill Gates, Thomas Edison, the inventors of the
technologies that have designed our lives, created not only new technology,
but also new service and production systems. Leaders don’t only lead to
new technologies, but also to new ways of thinking and new organizational
perceptions which constitute conceptual change. Stef Wertheimer isn’t only
an industry entrepreneur, but also a guide toward a new perception of the
role of industry in society.
2. Through people having leadership aptitudes at the edges of the

organization, who feel that its lack of functioning comes from something
deep and basic, and that a new direction different from the existing one
needs to be defined. They find themselves persecuted and condemned, but
they gradually gather around them more and more supporters and believers
until a critical mass toward paradigm shift is generated. At times, they
simply leave the system and establish a competing alternative system that
gains power over the new system. In both cases, they are people with little
engagement to current paradigms, or people who are highly sensitive to
situations of crisis and perceive the lack of relevance of existing paradigms
before others.

3. Through external leadership that doesn’t operate in the field of the
occurring revolution. People outside the system bring with them new ideas
which constitute a new paradigm. Those who conducted the idea of
preserving environmental quality, those who conducted the idea of
corporate social responsibility, and those who conducted the idea of the
digital watch, along with many others, symbolize the external leadership
that shaped the reality, through external outlook, on the existing system.
Both types of leadership share common characteristics:

The ability to suggest new paradigms and perceptions much before the
emergence of the need for their existence. In this manner, they are, in fact, the
creators of reality.
Courage and willingness to be denounced as delusional and blasphemous
charlatans.
Deep belief in the justice of their cause and patience until the adoption of their
ideas.
Paradigms do not necessarily find themselves one against the other. Paradigms
incorporate each other into one another. The ancient paradigm that assumed that
the earth was flat and developed engineering in the field became a special case
of the paradigm that assumed that the earth was round. Such was the case of the
paradigm that followed right after, supposing that the earth revolved around the
sun, and that it wasn’t the center of the universe. For example, the victory of the
paradigm of the electronic digital watch (Japanese) over the mechanic watch
(Swiss) was ephemeral. Nowadays, both methods exist, one within the other.
Paradigms don’t exclude each other, but rather contain each other after a certain
time: new ones contain old ones, and the old ones become special cases of the
new ones. What may start off as a confrontation between ideas, perceptions, and
life-or-death struggles, ultimately becomes complementary.
The following diagram describes this approach:

Managerial conclusions:
• In order to learn, it is first necessary to forget: Learning is limited by
current paradigms. In order to learn and break through toward new
directions and see new possibilities, it is necessary to be able to get out of
old paradigms and adopt new ones.
• Ideas of significant changes sprout in the minds of people at the edges of

the organization. Managers must be attentive and open to these sources.
• The ability to absorb and adopt new ideas depends on the ability to get out
of current paradigms and to see these ideas in a new context. It is necessary
to develop such ability.
• Creativity and innovation need a climate encouraging risks and adequate

remuneration, but more important, they develop through the rejection of the
existing paradigms.
• Excess identification with existing paradigms leads to the lack of ability to

disengage from them and to change rapidly. Just as essential as it is to adopt
and to identify with paradigms, it is also essential to know how to disengage
from them when they become dysfunctional.
• Paradigm shift consists of second-order change. It is the type of change that

takes place first and foremost in people’s minds and hearts. It is a change in
the ideology which they believe in. Therefore, strong resistance is to be
expected against such change, along with longing for as well as clinging to
the past: value the past and combine it with the future.
• There is limited ability to absorb new ideas, technologies, processes and

information from the environment which are not compatible with the
current paradigm. Managers thus need to develop learning abilities that
enable the introspection and the self-examination of their thought
limitations.

5.7 CHAOS APPROACH
The chaos approach is similar in character to the complexity approach, but it
went one step further. This approach deals with systems whose level of
complexity has reached such a point that they are liable to states of chaos. The
approach was also elaborated by scientists of different fields, especially
physicists, climate scientists, biologists, and more (for example, Mandelbrot
theory on fractals), and it was quickly adopted by behavioral scientists due to its
contribution in explaining phenomena that conventional science cannot explain:
phenomena of excursiveness, coincidence, and suddenness (Gleik 1987).
The science of chaos was developed as a result of disappointment due to the
incapacity of conventional science to explain phenomena of the modern world,
and as a result of failure, to plan and predict phenomena. The chaos approach
nowadays serves as a theory that is applied in various fields such as health,
mental health, and more (see, for example, Briggs and Peat, Seven Life Lessons
of Chaos, 2000).
While conventional science attempts to understand the order of the world, the
constancy of this order, and predictability, the chaos approach deals with
phenomena of disorder, instability, randomness, transience, suddenness, and
dynamism that go beyond law or predictability. Phenomena of regularity,
stability, and phenomena of cause and effect are only a small part of the
occurrences of our world. One could say that order in our world is a special case
of disorder, or in other words: phenomena of disorder and coincidence are not
out of the ordinary; they are an inseparable part of our world, and they follow a
different scientific paradigm.
A few of the main implications and claims of the chaos approach as were
clarified by behavioral scientists are as follows:
• Complex human systems find themselves in a dynamic situation; they are
far from being in a situation of balance. They are nonlinear systems in the
sense that there is no proportion between input and output. In such systems,
phenomena of coincidences, randomness, and vagueness occur, as well as
phenomena of lack of coordination and lack of unity, especially at the edges
of the organization.
• In such systems, there is high interdependence between subsystems: minor
change in the external or internal environment of the system may lead to a
chain reaction through positive feedback (feedback amplifying differences),
and may lead to the emergence of a phenomenon that is impossible to
foresee.
• Periods of order are temporary. Order, in terms of the chaos approach, is a
period of dynamic cyclicality which doesn’t exceed the limits of flexibility
of the system. Periods of order go with periods of disorder, as a result of
which a new order is created, and whose exact nature cannot be predicted in
advance.
• Disorder, uncertainty, and chaos are the source of creativity and innovation.
They allow freedom of choice and decision, and they allow people to leave
their own particular mark on reality. As order, supervision, and regularity
increase, the ability to renew the system decreases.
• Complex and nonlinear systems are characterized by the existence of
oppositions and paradoxes. They incorporate seemingly contradictory
processes which are, in fact, complementary. For example, in situations of
regularity, small points of irregularity are also present, and regularity itself
will be proportional. Centralization and decentralization, flexibility and
inflexibility can dwell together in organizations.
• Order, regularity, and balance are relative to time, context, and to the level
of analysis. For example, we know there is regularity between the seasons
of the year, but we cannot predict if a certain season, at a certain time and at
a certain place, will be hotter or colder than average. What seems like order
at a macrolevel is, in fact, disorder at a microlevel.
• With the existence of nonlinearity in change processes, the laws of the
change are modified at the time of the process, and the process itself
changes. Change entails change.
• Reality is complex, and there is no objective reality. Only observation from
different view angles may encompass the complexity of reality. Therefore,
an outlook from different points of view is also important in order to
encompass the entire complexity of systems.
• Phenomena don’t repeat themselves, and different occurrences can emerge
in the same conditions. Broader knowledge doesn’t aid us in our ability to
predict; such ability is limited. It is sometimes possible to predict general
trends of development, but it is not possible to predict occurrences and
specific directions. We must not generalize or pass solutions from place to
place without adjustments.

• Each planned process necessarily implies uncertainty and unexpected
changes. Unexpected phenomena occur, part of which are negative in
character, or part of which are positive.
• Nonlinearity – complex systems are characterized by nonlinear relations
among themselves as well as between them and their environment. The
relations between phenomena are generally not relations of cause and
effect, but rather a complex set of interrelated factors, along with other
indirect relations. Nonlinearity is also present regarding processes of change
and their results. It is not possible to know with certainty where change can
lead to, and surprises for better or for worse are to be expected.
• There is no relation between cause and consequence – Problems are a
complex phenomenon of infinite cause and effect relations. Instead of
looking for reasons, it is necessary to observe the systems of relations in
their complex entirety. It is impossible to know why terrorists attacked the
Twin Towers. Understanding the phenomenon of hatred toward the West is
closely linked to a complex ensemble of factors whose starting point and
whose one and only source are impossible to know.
• The Butterfly Effect – Minor distant change can lead to major change due
to the existence of myriads of nonlinear chains, part of which are
imperceptible, and part of which are unknown. The extent of the change
isn’t necessarily in proportion with the scope of efforts and resources
required in its implementation. Sometimes minor change at the edges of the
organization may unexpectedly lead to major change or change in another
part of the organization.
• Attractor – Complex and chaotic systems are organized around a central
axis that is, in fact, the essence and the core of the organization, as well as
the reason for its existence and purpose. When a system exceeds its
threshold of flexibility, it is thus organized around a new attractor, but it is
impossible to know its exact nature in advance. It is important to remember
that if we depict a precise futuristic picture of the situation we wish to reach
at the end of the process, when we do happen to reach it, it may turn out to
be something slightly different or even quite different from what we
thought.
• Management on the verge of chaos – The system combines within itself
order and disorder. Subsystems that are in direct contact with the
environment operate at the limit of chaos. This is in order to enable the ones
situated at the forefront or in direct contact with the environment to have
significant freedom of action in order to make fast decisions and to generate
the right conditions for creativity, innovation, and searching for new
adaptation methods stemming from points of contact with the environment.
• Chaos is inherent in every situation. It is present in complex organized
systems at a stage of seeming stability. It is present in informal structures,
in informal communication, in the corporate culture of subsystems, and
informal groups. It is present in the organization’s “backyard” and order.
The army is frequently considered as a methodic and orderly organization.
The truth is that behind such order, chaotic processes take place and emerge
in times of war.
• Chaos is present in periods of transition from one paradigm to the next. This
period can be short or long, depending on the leadership of such change.
The collapse of the Soviet Union due to increasingly uncontrollable
complexity revealed a chaotic situation which constitutes the scope of
action of entrepreneurs who generate order and new reality.
Conclusions on change management and leadership:

• Importance of awareness of the present, as well as constantly studying the
trends of the future with readiness for surprises.
• Constant preparedness: accumulation of resources of information, capital,
manpower, and technology for purposes of flexibility.
• Accepting the existence of paradoxes and oppositions as an advantage in a
world of uncertainty.
• Ability to regularly manage swift and mild changes.
• Ability to maintain a balance between order and disorder. Ability to allow
freedom at the edges of the organization in order to generate the right
conditions for innovation.
• Change is a natural process. Flow with it; don’t go against it. Release
barriers and inhibitions. See resistance as a desire to take part in the
process.
• Long-term planning is not efficient and wastes resources for nothing. There
is a limit to planning and predicting. It is thus important to learn trends and
set short-term objectives, or to review the plan and regularly examine the
goals and adjust them; each period has its changing needs.
• Improving the ability of the organization and of management to operate in
situations of chaos, vagueness, and uncertainty.
• Establishing teams, management groups, and diversified manpower.
Reconstruction, innovation, and creativity derive from differences, not from
uniformity. Disagreement, polarized opinions, as well as observation of
reality at different angles constitute a source of information and innovation.
• Complex systems are not necessarily in proportion. In other words, major
change doesn’t necessarily demand great effort, and vice versa. Change in
the system at the edges of the organization may lead to major change in the
entire system.
• Processes of change, planned as they may be, are expected to develop in
unexpected directions. This also applies to their results. The results will
generally be different from what was planned.
(For more on the theory and philosophy of change, refer to Smith and Graetz
2011.)

Chapter 6
Types of Change, and Levels of Change
rganizational changes can be categorized according to different criteria.

O This categorization is intended to enhance managers’ awareness of the
change process they set in motion and the type of process suitable to their
organization.

6.1 DISTINCTION ACCORDING TO THE CONTENT OF CHANGE
1. Change is possible in any field or topic. The following list is divided

according to subtopics:
2. Policy, goals, objectives, field of operation, strategy.
3. Workers, recruitment, absorption, selection, dismissals, promotion,
development, transfer, employment.
4. Organizational methods, organizational structure, organizational flexibility,
decentralization, centralization.
5. Management, leadership, management staff, replacement, management
style, means and methods.
6. Culture, values, norms, climate, symbols, rituals, legends.
7. Knowledge, information, systems, skills, organizational learning, training.
8. Technology, appliances, equipment, structures, location.
9. Remuneration, promotion, bonuses, rights, indemnity, contracts.
10. Quality, speed, cost, uniqueness, efficiency.
11. Unique, improved, and different additional product.
12. Advertising, marketing, sales, distribution, methods, means.
13. Inspection, control, auditor, evaluation, surveys, measurements.
14. Customers, contact, connection, location, market segments, quality of
service.
15. Suppliers, contact, connection, location, contracts.
16. Banks, credit, insurance, financing, investment, loans.
17. Partnership, mergers, acquisitions, creation of networks, floating shares.
18. Growth, expansion, start-off, transition, reduction.
19. Research and development, information, patent, innovation, brand.
20. Image, publicity, exposure, design.
21. Central processes, production methods, work methods, operating methods.
22. Communication, interpersonal relations, teamwork.
23. People, aptitudes, skills, knowledge, attitudes, identification, motivation.
Examining the different issues immediately reveals the fact that there are some
issues that are relatively easy to change, such as solely technical issues; there are
things that are difficult to change, such as issues related to change of human
attitude and thinking habits. Moreover, there are some issues which, in the case
of change, result in changes in different areas; there are also issues which, in
case of change, result in little additional changes. There are also broad issues and
narrow issues. Different fields can also be categorized according to a number of
basic issues:
Changes in the designated normative system – change in vision and mission;

change in the goals of the organization; change in perceptions and in beliefs;
change in conceptions; change in behavioral values and norms.
Change in the structural system – changes in the organizational structure:

partnerships, mergers, networks, subsidiary companies, profit units,
geographically dispersed units, redesigning roles, role empowerment, and role
autonomy.
Change in processes – control processes; evaluation processes; operation

processes; marketing processes; production processes; logistics. Human
resources processes such as recruitment, selection, training, stationing,
remuneration, promotion, and dismissal. Emphasis is on performance methods.
Change in products and services – development of existing products and

services, incorporation of products and services, development of new products
and services, and quality of service and products.
Change in physical fields – technological changes, new information systems,

automation, robotics, changes in the physical aspect of structures themselves,
open space, aesthetic structure, new materials, equipment and accessories,
computerization, etc.
Changes in the field of manpower – work relations, structure of manpower in

terms of constancy and personalized contracts, hiring workers from manpower
agencies, temporary workers, contractor companies, foreign workers, workers at
the age of retirement, etc.
Changes in people – changes in knowledge, in aptitudes and skills, in attitudes
and values, in beliefs, in perceptions, training and developing workers and
managers.
From the standpoint of change management and its intensity, it appears that the
most significant changes are changes in the system related to mission. Change in
such a system will result in changes of all the other systems. Another difficult
change is the change in attitude, in perception, and in the values of the members
of the organization. Less difficult changes, it seems, are physical and
technological changes, although changes of such sort also require changes in
knowledge, in aptitudes, and in skills of the workers. Such change isn’t easy to
implement either.

6.2 DISTINCTION ACCORDING TO THE EXTENT AND SCOPE OF
CHANGE
The most significant difference between types of change may be in their depth.
The extent of the change required is essential to understand the difficulty to
implant such change, and thus, understanding resistance to it, among others.
There are differences between types of change in accordance with their extent
and scope, and before we distinguish between different levels of change, we will
present a spectrum of possibilities of organizational change. The following list
consists of the possible issues and fields of organizational change.
Professional literature frequently categorizes two levels of change: Watzlawick,

Weakland, and Fisch, in their book Change (1974), distinguished two levels of
change:
First-order change: change in thought framework or in mind-set.
Second-order change: change of the whole thought framework or mind-set.
First-order change is characterized by minor changes established onto one

another, step-bystep changes, changes in the framework of existing patterns.
Second-order changes are characterized by quantum leap, by transition to a
different thought process, by a revolution which is first and foremost intellectual.
This is a change of organizational patterns, especially belief patterns and mind-
set.
Historians and sociologists had already made such a distinction in the past. Marx
distinguished between social revolution and social evolution, between the
revolution altering the essence of social methods and the establishment of the
existing method headed toward evolution. Thomas Kuhn, in his book on
scientific revolutions (Kuhn 1962), also described two periods of development
of human progress. Kuhn coined the term “paradigm” – Greek term describing
basic premises, conceptual schemata, and worldview, delineating the limits of
thought. They determine for us what is right and what is wrong, what is good
and what is bad. They define the limits between “us” facing the others. Kuhn
described how paradigms change within revolutions, how breakthroughs

thinkers, such as Newton or Galileo, led to revolution in our ways of thinking
and created a world of new concepts.
Kuhn distinguished between changes occurring within an existing paradigm,

changes that are developmentally established onto one another. Such changes
give excess validity to the existing paradigm and further establish it. On the
other hand, there are revolutionary changes of paradigms themselves.
Changes of this type occur as a revolution generating a new world of concepts
based on new basic premises and a new perception of the world. In most cases,
paradigm shift is set in motion by courageous people who go against existing
mind-sets and who suggest new directions. They come from the edges of the
system, they are new to the system, and they bear low commitment to the
dominant paradigm.
In the organizational and managerial reality, it is possible to distinguish between

changes intended to improve efficiency and changes intended for effectiveness.
The former are intended to “do things right,” and the latter are intended to “do
the right things.” In other words, we distinguish between changes intended to do
more with less and changes intended to do other things, changes within the
framework of existing goals as opposed to changes of organizational goals
themselves. We can also distinguish between improvements and changes.
Levi and Merry (1986) made a distinction between organizational development

and organizational transformation:
Organizational development
Short-term goals
Tactical level
Step-by-step efficiency-oriented changes
Changes in the framework of existing mind-sets
Changes in the framework of existing beliefs and values
Linear change, continuity of what exists all the while improving it
Results of change are predictable One-dimensional change
Organizational transformation
Strategic goals
Situations pertaining to crisis
Revolutionary change, tendency to search for new directions
Changes of the existing mind-sets
Changes of existing ideology
Nonlinear change, acute transition toward a new and different direction
Precise results are not predictable
Multidimensional change
Nonetheless, organizational reality is complex, and it is not solely based upon

these two aspects, but rather, layers established one on top of the other and
deriving from one another, and for this reason, it is difficult to distinguish
between two types of change. In reality, there are different depth levels of
change, and there are, thus, different depth levels of organizational revolution.
The strata of the organization are represented in the organizational iceberg
diagram.
The diagram describes an iceberg, whose base is immersed underwater and

invisible; the top part stands out above water and is visible to all.
The bottom part, which is concealed, is the logic upon which the process of
organization is based. The top part, exposed, is the process of organization itself.
The bottom part is concealed due to the fact that it is anchored first and foremost
in the minds and hearts of the members of the organization. The exposed part is
first and foremost the observable, physical reality.
In accordance with the strata of the organization logically built one on top of the
other, first-order change consists of change in the upper part of the organization,
whereas second-order change consists of change in the concealed part, in
organizational logic. The iceberg enables us, however, to make a more precise
distinction.
Basic change comprises two different levels:

1. Change in the mission and vision of the organization: This is
revolutionary change of such an extent that the essence of the organization
itself changes. The goals of the organization change, the field of operation
changes, and the customers change. The transition from manufacturing
central computers to home computers, the transition from a governmental
organization to a business organization, or the transition from a
manufacturing organization to a service organization are but a few
examples of such types of change.
2. Changes in corporate culture: Changes in values, beliefs, basic premises,

in norms, and in customs are all cases of basic change, but at a more
superficial level than the preceding. Introducing a total quality management
method, introducing a culture of services and service packages, or transition
to a customer-oriented organization are but a few examples of such a level
of change.
First-order changes comprise several levels, as shown in the iceberg diagram.
3. Change in terms of organization processes: Changes in organizational

structure, in management, in work methods, in procedures, etc.
4. Physical changes: Changes in equipment, in technology, etc.
5. Adapting behavior to changing situations: The typical situation here is

redoubling efforts, excess effort, or effort decrease. Organizational
flexibility is generated through flexible utilization of workers, flexible work
hours, and a flexible workplace.

Conclusions regarding change management
As the extent of change amplifies, it, thus, results in change in the above levels:
Change in mission and goals of the organization will result in changes in
corporate culture, and this finally results in changes in organization. Moreover,
managers quite often introduce organizational or technological changes without
being aware of the fact that such changes are based on new corporate culture. In
such a case, it will be difficult to introduce change that lacks conceptual basis. It
is, therefore, important to remember that generally speaking, the first step in
introducing second-order change is change in the thought process of the
managers and the members of the organization. Without change of the logical
basis of change, it will be difficult to introduce organizational or technological
change.
There are also organizational changes intended to improve efficiency. These

changes are based on the existing goals and corporate culture of the
organization; they do not necessarily oblige change of organizational logic, and
they can happen faster. Sometimes managers will introduce basic change by
using the “foot in the door” technique, meaning when resistance is high and time
is running out, it is possible to introduce basic change by implementing it in
subsystems of the edges of the organization. In such a manner, it is possible to
demonstrate to the workers the advantages of this method and to broaden it into
stages when the logic assumed at the base of the method is formulated and
introduced at a later stage. Introducing quality circles in a method of voluntary
participation, and establishing circle after circle, is an example of this approach.
As the extent of change amplifies, higher resistance emerges. Change of

organizational logic consists of change in people’s perception of the
organization, of “how things are done here.” In ideological organizations, in
organizations having a purpose and values, and in organizations for which
workers have worked for years and identify with them and with their mission,
strong resistance to second-order changes is to be expected.
Many managers are unsure of how to define the character of change regarding
subsystems of the organization. According to the open systems approach, each
system is a subsystem of the one above it, and it is itself a system comprising
subsystems. Such a division of levels of change is therefore applicable to every
system. The types of change displayed in the organizational iceberg diagram
may all occur within the subsystem.
Degrees of change according to their scope
The depth of change depends on its scope. In other words, in a subsystem, first-
order and second-order changes may occur. First-order change may occur in the
entire organization, just as well as second-order. According to the following
division, different types of change according to depth and scope can be seen:
According to this model, the depth of change doesn’t depend solely on the extent
to which it affects the basis of organizational logic, but also on how many
subsystems it affects, and how many elements such change comprises.
Computerized systems or new software can be introduced in a subsystem or in
the whole system, and corporate culture change can be carried out in a
subsystem or in the whole system. It is important to remember that sporadic
changes which aren’t interrelated and which don’t lead to the creation of a
complete picture of the future are likely to cause more harm than good. They
will cause tumult in the system, difficulty in grasping their logic, resistance
deriving from the lack of understanding of the purpose, and energy loss due to
adjustments.

6.3 DISTINCTION BETWEEN INITIATED
The most important distinction may be the one between changes occurring in
response to developments in the environment or internal problems and initiated
changes whose purpose is to gain the upper hand over competitors prior to crisis.
It can be stated that good managers frequently carry out initiated changes, while
less effective managers carry out responsive changes. From our standpoint, such
a distinction also differentiates leaders from managers. Leaders conduct
significant changes toward different directions; managers operate in response to
situations of crisis and difficulty. Organizations and leaders who initiate changes
usually become the best in their field as well as a source of imitation and
inspiration. They design reality, and they create a reality which shapes the lives
of many.
The source of initiated change is the leadership drive of the heads of
organizations striving to be the leaders in their field. These people are
characterized by their entrepreneurial and competitive drive, their curiosity, their
courage, and their taste for risks. The reality indeed shows that new products and
services hold an advantage in terms of profit yielded from investment.
Companies such as Gillett or Microsoft constantly strive for innovation and
leadership in their fields; in this manner, they become a symbol and brand name
of products in their field.
Responsive change, on the other hand, generally occurs as a reaction to crisis
and difficulty. Difficulty may be a consequence of external factors or the result
of internal problems and crises. The motive for change is lack of alternatives
rather than choice.
The external factors setting change in motion are crisis factors: the customers
do not purchase the products or the services due to noncompetitive prices or
quality; the competitors control the market; the competitors come up with better
products and services; new technology has appeared which has not yet been
introduced; incapacity to stand by new laws and procedures; incapacity to find
reliable and committed suppliers, etc.
The internal factors setting change in motion can be: inadequate manpower,
workers lacking the proper knowledge and skills, workers lacking the ability to
change and become more flexible, poor work relations, poor management, old-
fashioned and rigid structure, outdated technology, outdated information
systems, etc.
Some claim that change always originates in response to difficulty, but such
claims are irrelevant nowadays. Reality shows that in order to succeed in a
competitive, tumultuous, and uncertain market, risks and initiatives are worth
taking; they regenerate certitude, and turn incertitude to certitude. They are the
entrepreneurs and the innovators, and generally speaking, in times of
uncertainty, they hold a prominent advantage. The newly rich who came out of
the Commonwealth of Independent States knew how to utilize the chaos
generated from the collapse of Russian communism, and thanks to initiative and
risk taking, they became some of the wealthiest people.
There are prominent advantages to initiated change over responsive change.

Initiated change is carried out in times of success. Forced change or responsive
change is carried out because of failure and difficulty.
1. Initiated change is carried out through positive motives: It is done by

way of choosing among several alternatives; it is set in motion by a drive
for competitiveness, willingness to triumph, willingness to lead, abundant
curiosity, willingness to renew, to change reality, to be at the forefront of
information and technology, or to utilize it in order to design a new reality
and to be a source of inspiration to others.
Responsive change is carried out by force and due to a lack of options; it is

generally characterized by a lack of alternatives to choose from, or it is carried
out in order to survive, usually in a negative climate, along with accusations and
conflicts.
2. Initiated change also is advantageous in terms of schedule. It is carried

out in situations of organizational and business success; therefore, its
leaders have the necessary time to plan, to learn, and to search for
alternatives. Forced changed is carried out in haste and lack of time;
therefore, it is difficult to plan and establish an organized process for its
achievement.

Initiated change is advantageous in its ability to involve the workers
3.
and to establish thinking teams that learn and are involved in the process of
change. Involvement and participation of the workers in the processes of
change demands time, and in situations of planned change, for which time
is made available, it is possible to set broad, participative processes in
motion.
It is difficult to involve workers in forced change due to a lack of time. This type
of change is generally characterized by management and decision making
imposed upon from above.
4. Initiated change has the advantage of having resources available to

those conducting it. Since it is accomplished by choice and at a time when
the organization is in a positive business situation, time resources as well as
financial resources are available in order to set innovation, development,
and change in motion. Change costs time and money: it requires the
allocation of workers and managers to conduct it; it requires knowledge
resources; it needs resources in order to obtain assistance from consultants
and experts, to purchase new technology and equipment, to train workers,
etc.
Forced change is generally carried out because of failure and difficulty. In
such a situation, the resources that may be available for the leaders of
change are either limited or don’t exist at all. Such change is done facing
great difficulties.
5. Initiated change holds an advantage in people. Entrepreneurial

organizations are characterized by their excellent workers and managers.
Their success derives from the fact that these organizations are composed of
knowledgeable, skilled, highly committed, and motivated workers. Since
change is carried out in situations of success, the efficient workers and the
managers of the organization are willing to undertake, to conduct, and to
actively take part in the change. On the other hand, in the case of responsive
or forced change, the efficient workers and managers tend to seek
alternatives for themselves and leave the organization at the first
opportunity. Knowledgeable workers and excellent managers don’t stay
very long in failing organizations. Organizations in situations of crisis are
characterized by their lack of good managers and good knowledgeable

workers, either because there weren’t any to begin with, or because they
left.
6. Initiated change has the advantage of the climate in which it is carried

out. Initiated change is characterized by the intense energy of its leaders, by
high eagerness and motivation, team spirit, and enthusiasm. Workers are
proud to be part of such an organization. Processes of renewal and initiative
are carried out in a positive atmosphere much needed in order to release the
creativity within each person in the organization. An atmosphere of
encouragement is good for successful processes of change. Change in cases
of necessity and crisis are characterized by a sullen atmosphere, by a
climate of tension, by fear for the worker’s future, by uncertainty, and by a
sense of failure. Such change entails frequent mutual accusations of who is
to blame for the situation; managing planned change, thus, becomes
difficult. In such a situation, the learning ability and the creativity necessary
to change cannot manifest themselves.
7. The advantage of initiated change is in its positive results. This includes

the ability to grow and expand, to occupy new markets, to introduce new
products, to absorb new workers, and to improve their work conditions. The
results of forced change, or responsive change, or change in times of crisis,
are known to begin with, and it practically always implies cuts and worker
dismissals. The reason for such difficulties is that they derive from a
negative ratio between income and expenses, as well as between investment
and profit. The only option to find a way out of such a situation is
reductions and streamlining. In other words – dismissals.
8. Initiated change is advantageous in the nature of the change. Initiated

change of constant development and innovation disposes of several options
regarding the type of change it constitutes, its nature, its extent, its content,
and its scope. In other words, since the organization has the possibility to
choose, it can, thus, choose what needs to change. Moreover, organizations
that are leaders in their field don’t need to carry out major revolutionary
changes once every few years, but rather, quick and frequent minor changes
in different domains, thus, reducing the degree of risk of such changes.
Collins, in his research (2004) which dealt with outstanding organizations,

demonstrates that such organizations attained their success thanks to initiated
step-by-step changes in each of their fields of operation. Only in retrospect does
it appear that this accumulation of changes constitutes revolutionary change.
Collins’s book is titled Good to Great due to the fact that these successful
organizations are marked by frequent minor changes which have accumulated
into great momentum. Furthermore, they are characterized by their workers’
knowledge and excellent managers who conducted these changes.
On the other hand, responsive change doesn’t offer many options. Change in
times of crisis generally requires second-order change or revolutionary change:
The organization must carry out change that will give it the ability to compete
with the best on the market, this being in situations of crisis and difficulty and
the toughest conditions – lack of time, lack of resources, and lack of efficient
people. The mistakes were made by the managers; the workers will be the
ones to pay the price.

6.4 ADDITIONAL DISTINCTIONS BETWEEN TYPES OF CHANGE
Planned change versus unplanned change
Planned change is characterized by the preliminary planning of stages, leading
and implementation teams, mobilizing resources in advance, and supervision of
the different stages. The basis is that it is possible to control its characteristics
and its results in the process. Unplanned change is characterized by “putting out
fires,” its temporary and superficial solutions to problems in response to
continuous crisis situations and situations of lack of time for organized
processes.
It should be noted that the ability nowadays to conduct planned change, its
stages being supervised in advance and their entire process of development
being apprehended, is rather limited. Rapid changes in the environment, in the
course of planned change, entail unexpected changes, and negatively affect the
original plan. The change itself also causes additional unexpected changes.
Overall, the process of change entails unexpected phenomena and revelations.
This is similar to the processes known in advance in times of war. The battle is
planned in advance, and each unit knows exactly what to do and how to do it.
Nonetheless, the reality of chaos prevails. For this reason, planning is the basis
of understanding, of agreed-upon goals, and directions of operation, and it must
allow flexibility and freedom of action.
Change from the top versus change from the bottom

Most changes known to us are carried out through a process “from top to
bottom,” or in other words, initiated change is effectuated by management.
Management initiates and conducts the process, while the workers receive
explanations and instructions, or even participate in the process. The goals of the
change are defined by management, who then appoint the team in charge of
conducting the change. The objectives and its domains are also determined by
management.
“Changes from the bottom” take two different forms. The first one –
management has determined and controls the process of change, but the original
ideas and the origin of these changes come from below, from the workers. Such
a method is employed in the TQM approach, and it considers that workers
possess the knowledge and the ability to suggest novelty and solutions to make
their workplace more efficient, and to suggest changes that would contribute to
the efficiency of the organization. Organizational teams or worker involvement
are established in an organized manner within appointed times and deadlines and
make proposals to improve efficiency. Such proposals reach the top and are
examined according to how they can benefit the organization. If they are
approved and applied and if they benefit the organization, the team or the worker
is rewarded for innovation.
Another form is “developing change.” Change of such sort is managed and
initiated from the bottom, and it is characterized by small and quick steps, step-
by-step changes, carried out sometimes gradually and sometimes all at once,
according to the ability of the managers and the members of the organization to
manage such change. These changes are carried out in a growth method,
meaning fast minor changes which lead to immediate results, or to the
achievement of a general objective. These changes are continuously and
constantly carried out as being a part of the life of the organization when the
character of these changes and solutions grow along with the process.
With such a method, there are no major revolutions, and there is no “once and
for all.” Nor are energy and resources dedicated to the search for perfect long-
term solutions. The management of the organization supports and serves such a
process. It doesn’t manage the process and fix its objectives in advance, and it
doesn’t impose rules and planned processes in advance. Workers throughout the
entire organization are permitted to initiate changes, to promote ideas in search
for novelty and innovation, and management actually expects no less from them.
It is the job of management to make time and financial resources available and to
enable them to express their capacity for creativity.
This method is typically used by development organizations, start-ups,
development teams, and organizations at the forefront of technology. The
advantage of this type of change is in its openness to the innovation and
creativity within every person in the organization and in the generation of a
climate of innovation and initiative. This method requires entrepreneurial and
creative manpower that is highly committed and needs freedom of action and
creation. This method also requires a different leadership style than the ones we
already know. This is a managerial style that serves and enables people. It is
humble management based on reinforcing the abilities of the workers to bring
their capacity of creativity to realization.

INWARD-ORIENTED CHANGE VERSUS OUTWARD-ORIENTED CHANGE
The change directed outward: Most changes occur at the point of contact of
the organization with its environment. The nature of the relationship of the
organization with its environment changes in order to create a more functional
system of contacts that contributes to durability and success, as well as
flexibility and proximity to customers. Joint projects with competing or
complementary organizations, mergers, and partnerships generating a major
advantage, introducing partners, building networks of autonomous units, control
of supply sources, and marketing channels, among others, all constitute changes
directed outward. Outsourcing is also included in the domain, and its purpose is
to shift operations, processes, and units outside in order to simplify and reduce
the organization and to focus its operations on the essential field in the name of
which it exists – the core.
The change directed inward: The changes take place in the internal subsystems
of the organization. Preparation aims at additional internal flexibility, improving
efficiency, better organization, reestablishing the goals of the organization,
technological changes, changes in the organizational structure, changes in
different processes and regulations, in work conditions and in remuneration, in
the training and the development of workers, etc. Further in this chapter is an
array of issues that are subject to change.
Change whose essence is efficiency (Efficient), and change whose essence is

effectiveness (Effective)
Efficiency: This means doing more with less; in other words, to achieve
maximum benefit at minimal costs. These are changes that are intended to better
utilize the capacities of its systems and its members in the framework of the
existing goals and strategy. Metaphorically speaking, the meaning of efficiency
is “to do things right.”
Effectiveness: This means changes in the purpose of the organization, or in

other words, the goals of the organization, its mission, its objectives, and its
strategy. Metaphorically speaking, the meaning of effectiveness is “to do the
right things.” The question here is whether the products or services or the

organization are the right things to do or whether they need to be changed.
This overall perspective of the organization and its process of change must take
into consideration both processes as completing one another. In other words, the
objective of such change must be “to do the right things in the right manner.”
Exaggerated focus on improving efficiency is likely to prevent the leaders of
change to see the danger that all these changes lead to the improvement of an
outmoded product or services, or even an outmoded organization. Excessive
focus on the purpose of the organization is also likely to blind the managers of
change facing the danger threatening to affect the existing cost-benefit relations,
thus, not making it possible to, or not worth implementing, such a purpose.

6.5 SIGNIFICANCE OF THE DISTINCTIONS BETWEEN TYPES OF
CHANGE REGARDING CHANGE MANAGEMENT
The scope and extent of change has a direct effect on its management:
1. The larger the extent of change, the more time it will take to implement it.
The time required to introduce changes of such sort may take up to 2 years.
2. The larger the extent of change, the more preparation and organization
should be prolonged. Preparing workers, resources, and organizing change
teams, these, among others, are conditions for successful change.
3. The larger the extent of change, the more support and active involvement of
everyone concerned is necessary. Dealing with strong resistance demands
an approach of active involvement of the workers in the process.
4. The larger the extent of change, the more surprises are to be expected and
the more uncertainty is accentuated. Surprises may be for better or for
worse. Therefore, readiness for surprises and maximum flexibility in the
process are necessary.
5. Managing change on both broad and deep ground is problematic and takes a
long time. It is more convenient for organizations in times of deep crisis or
under existential threat, when awareness and willingness to change is high.
6. Generally speaking, in situations which don’t present existential threat or
crisis, it is preferable to manage changes from easy to difficult, starting with
the places and the domains riper for change. Managing change by breaking
through narrow grounds and then broadening these grounds can become in
most cases a better way, rather than operating on wide ground.
7. The chaos theory highlights the fact that minor change at a distant place
may entail comprehensive change at another distant place. The complex
systems theory indicates the fact that in an open and complex system,
change in one subsystem will result in corresponding changes in all the
other organizational systems. These approaches further support the
approach of pervasive and broadening change beginning on narrow
grounds.
Other characteristics of change:

Change management, its significance, simultaneous management of internal and
external changes: New internal organization, as good as it may be, is not a factor
of success. Without continuous adaptation to the environment of the
organization and without relevant connections with the environment and the
groups which it comprises, successful change is thus not possible.
It is preferable to carry out change coming from initiative, rather than change
due to constraint: Indeed, constraint transforms change as required and reduces
resistance, but the price to pay and the difficulties in its execution become
heavier, and this is due to the fact that this type of change doesn’t leave many
options or much choice of direction. Lack of free choice in the orientation and
nature of the change turn the organization into a constant victim of external
circumstances.
Managing planned change is preferable to managing change which “puts out

fires”: The method of putting out fires once again causes managers to be dragged
into circumstances and to become victims of constraints. This method,
customary in many organizations, doesn’t allow learning, planning, or overall
perspective.
In successful and expanding organizations, it is preferable to manage quick and

minor changes step-by-step, sequentially and concurrently, in the light of a
general agreed purpose. This method is low-risk, and the process becomes part
of corporate culture. Because of the fast changes occurring in the environment of
the organization, any major change requiring planning time as well as allocation
of abundant resources of capital and time is likely to become irrelevant sooner or
later.

Chapter 7
Cyclicality of Change and the

Standpoint of Managers and Leaders in
the Process
upervising changes occurring in business organizations or public
S organizations is characterized by a combination of unplanned –
uncontrollable – processes, as well as planned processes. Planned and organized
changes generally emerge because of crisis, stagnation, decline, and external
constraints, such as the threat of bankruptcy declaration. The object of this
chapter is to describe such a process and to gain insight on change management.
The process of organizational change is usually characterized by different stages,
one resulting in the other. Each stage is characterized by typical behavior, and
the whole process of change can be represented in a full model which includes
the stages of change and the typical behavioral patterns of the workers and the
managers. This model is called Cycle of Change – this is to highlight the fact
that the process of change is permanent and cyclical. Moreover, in reality, such a
process occurs in simultaneous parallel cycles, all in the same organization.

7.1 CYCLICALITY OF CHANGE
The following model represents the cycle of change as it occurs in most
organizations, in which many managers tend to postpone necessary changes or
revolutionary changes by way of improvements or step-by-step changes. Very
few are the managers who initiate revolutionary or second-order change in order
to create a competitive advantage when the organization is not in crisis.
Nonetheless, the time when managers could put off changes and take a long time
to carry them out is gradually becoming a thing of the past.
The pace of changes in the environment is accelerating, competition is
increasing, and more competitors are entering the market. Only the best
genuinely survive. The following diagram shows the typical process that
organizations undergo on their way to revival, as well as the possible shortcut
excellent managers and leaders take. The process includes four characteristic
stages:
• Stage of success and development at the end of which begins decline.
• Stage of decline ending in collapse, the beginning of revolution or
transformative change.
• Stage of transformation at the end of which new vision, goals, and strategy
are defined.
• Stage of transition and internalization of a new perception.
• Starting again from the beginning.
The diagram also indicates a shortcut able to prevent the “Via Dolorosa” process
which the members of the organization undergo: a quick transition at the peak of
success to the beginning of revolutionary change, in spite of the fact that there
seemingly is no need for it. This is, in fact, the essence of leadership: the ability
to anticipate, the ability to take risks and to indicate a new direction and new
options, and the ability to incessantly initiate and renew, and to prevent the
organization and its members to sink into complacency, smugness, and
intoxication from success (diagram 5).

THE PERIODIC CYCLE OF THE PROCESS OF CHANGE
The diagram below shows the different stages and the behaviors typical to each
stage.
1. Stage of decline
This begins with the incapacity of the organization to adapt to environmental
changes or to initiate innovation which would lead the organization to gain the
upper hand over its competitors. Complexity increasing uncontrollably,
excessive centralization or the lack of ability or willingness to decentralize the
system, smugness, clinging to outdated concepts, “excess fat,” bureaucracy and
complications, lack of information and control services, managers surrounded by
yes-men, centralized managerial style, outdated information, disregard for
ominous signs, false hope that the situation is only temporary – these, among
others, cause the deterioration of the organization plummeting toward collapse.
Many managers choose to ignore signs of ominous crisis ahead. They tend to
twist the reality and put off the need to prepare for change. Mechanisms of
denial are activated to protect the organization’s identity, its strategy, and its
current conception. Mechanisms of resistance to basic change are activated. The
managers attempt to carry out “more of the same” minor changes which will not
destabilize the system, entailing the resistance of the workers to change.

Small changes do not slow down deterioration, and symptoms of anger, fear, and
remorse start to surface. Additional “more of the same” attempts only increase
deterioration, and the organization finds itself stuck. A feeling of no way out and
lack of solutions accentuates the workers’ negative feelings.
Resistance to necessary revolutionary change takes various stronger forms. The
usual attempts toward solution only intensify stagnation. Efficient people leave
the organization, and banks start to threaten to cut off funding. The image of the
organization is negatively affected, and its customers eventually leave.
Management tries to improve efficiency and to downsize, but it is too little and
too late.
The organization quickly goes from stagnation to a series of crises, and finally to
an existential crisis. The feeling of impotence, on the one hand, and resistance to
necessary basic change, on the other hand, push the organization to the verge of
collapse. The option here is second-order change, genuine transformation,
revolution, or otherwise, collapse. Workers start to feel anxiety and shock, and
thus, start to defend the organization and its past. They adopt visible attitudes of
violence or turn to external agents for first aid assistance, with the hope that
things will somehow work out. A traumatic event, such as withdrawal of
financial resources or the shutdown of a factory, leads managers and workers to
understand the need for revolution, and this sometimes constitutes the last
catalyst for mobilization toward change.
An event accelerating change

Quite often, especially in nonbusiness organizations, an event causing a sort of
electric shock and tumult is necessary to lead to a process of renewal. Such an
event can be the cutting off of financing channels, CEO dismissals, the departure
of key people, etc. Such an event clarifies to the members of the organization the
fact that time is running out and that if they don’t prepare for change, the
organization will be crushed. We go from blaming ourselves and blaming others
to understanding that “everything depends on us.” This is the beginning of
positive energy mobilization and the starting point of willingness to launch a
process of basic change. Fear for the future goes with hope and a feeling of no
choice. The conditions favoring the arrival of a leader to the rescue are
emerging.
2. Transformation stage
This stage generally starts with the replacement of the manager by an external
leader who isn’t attached to old conceptions. Search for new ways, ensuring
permanent separation from the old world, defining new vision, mission, and
strategy, introducing beliefs that must and can be put into action, and recruiting
workers in accordance – this is the job of leaders. Without leadership, there is no
chance for revolution. The steering team under such leadership will carry out
containment measures and downsizing in the first stage. Other activity consists
of mobilizing time and trust from partners, banks, and customers. Slimming

down, superfluous assets are sold, any activity or system which doesn’t suit the
core of the organization is removed, workers are dismissed, and focus is on core
activities.
At the second stage, a learning process of the factors of failure and of the
different possibilities of change toward new directions begins. This is a different
type of learning process, which utilizes various different forces bearing a
different approach and perception of reality due to new basic premises: efforts,
basic premises, and new conceptions. We break away from old ways and build a
logical array, onto which new organization of a different type is established.
This kind of activity is carried out by integrating and involving everyone.
Workers slowly go from a situation of distrust and apathy to integration and
enthusiasm. A critical mass of supporters of change and leadership is suddenly
created, which is a stage typical to crisis situations. Minority suddenly becomes
majority due to the fact that perceptions of reality of many people change all at
once as a result of coming to a realization that the reality has changed. The
Israelis’ attitude toward their withdrawal from Lebanon, or the Israelis’ attitude
toward Palestinians and toward peace, are notable examples of this occurrence.
In due course, teams prepare the details of the reorganization process, and the
plan starts to take shape. A preliminary experiment confirms whether it is the
right direction.
3. Stage of transition to a new situation

At this stage, we go from the idea to implementation. The steering team splits
into implementation teams according to the field. General plans are translated
into detailed action plans. At the first stage, an extensive learning process of all
new things takes place. The workers are familiar with and incorporate the new
vision, values, and corporate culture; they learn and acquire knowledge and new
skills. New technologies are integrated, a new generation of products and
services are developed and sold. The structure of the organization also changes.
The organization is flatter, the number of managers is small, and the autonomy
of the workers and units has increased. The organization has also become more
complex. New networks and partnerships are created. Mergers and operations
carried outside of the organization take place simultaneously. All is according to
capacity considerations, quick action, and maximum flexibility. Self-confidence
as well as customer confidence gradually comes back. Efficient people want to
join the organization. Success is starting to shine.
4. Establishing success and developing the organization

This is a stage of relative stability. The organization diligently improves all
processes and methods, improves existing products and services, and establishes
corporate culture, which itself establishes processes and procedures. Emphasis is
on constant improvement of quality and consolidation, and people in the
organization try to maintain success and to “ride its wave.” Esprit de corps is
generated, as well as pride in service and product. Organization and management
methods highlight the achievement of goals and objectives, stress on total
quality, training and promoting workers, inspection, and evaluation. This is the
beginning of self-satisfaction.
“Excess fat” is starting to spread in the organization. Bureaucracy starts to
emerge: excess personnel, excess expenses, and excess luxuries. The thought
that it is possible to manage in such a way over time is deepening, and at first
sight, it works. Basic premises, conceptions, and intellectual schemata are
established in the minds of people and impede the perception of signs of decline
or new opportunities. Mechanisms of blindness gradually develop. Managers
and workers demand their share of success, and they obtain it. The first signs
indicating danger emerge from the edges of the organization and appear in
periodic reports, but they are outright rejected. Success leads to complacence
and to the beginning of failure.
Additional distinction between leadership roles and management

In the diagram above, there is another distinction between management roles and
leadership roles. Managers deal with institutionalization, the development of the
organization, increasing efficiency, continuous improvement, and avoidance of
revolutions. Managers operate within their perception of a relatively stable and
predictable world; they focus on the present, on the concrete day-to-day fields of
operation of the organization.
Leaders focus on the desired future and on less practical areas, such as vision
and goals, values and uniqueness. Leaders deal with revolutions, based on the
knowledge of the fact that they operate in an open and competitive world, in
which the only ones who survive are those capable of changing and innovating
rapidly and with joy. Leaders have the ability to find new directions, to lay out
an attractive future worth realizing, and to mobilize support and trust in their
ability to accomplish the impossible.
Very little has been written on leadership in times of success. Most descriptions
of leadership and most legends on leaders of business firms describe heroes and
saviors who succeeded in transitioning fallen organizations or organizations in
serious crisis toward overwhelming success. Lee Iacocca from the Chrysler
Corporation or Benny Gaon of Koor industries are obvious examples.
A different type of leadership is leadership in times of success: Military
commanders who executed their mission in a perfect manner have not been cited
and are not usually remembered as legends. The ones who were able to reveal
their bravery in times of loss, failure, or crisis are those who received
decorations of valor and entered collective memory as legends.
On the other hand, in the corporate world or in the world of civic organizations,
the importance of leadership in times of crisis will be gradually lessened. The
new heroes will be the leaders who are able to establish successful organizations
over time, with rapidly changing environmental conditions, conditions of
uncertainty and unexpected surprises, leaders who are able to constantly create
new dreams, to excite and to provide inspiration as they succeed.

7.2 PROCESS OF CHANGE IN PERSONAL ASPECTS
In the difficult process of basic organizational change, the members of the
organization go through painful processes of personal change – from a state of
personal disregard to a state of breaking free and embracing a new way. This
personal process is very similar to a process of separation and personal loss
(refer to Kübler-Ross’s books on the process of loss and change), and it is
characterized by the following stages:
• Stage of disregard and denial
• Stage of shock, being struck down, difficulty to digest, confusion
• Stage of pain, grief, intense inward emotions (Why me?) or intense outward
emotions (It’s all because of them)
• Stage of feelings of emptiness, lack of meaning, and lack of anchorage
• Stage of longing for what will be
• Stage of mourning, of reliving the past
• Stage of disengagement, taking the good things and leaving the irrelevant
behind, separating
• Stage of making space for what will be, combining the old with the new
• Stage of mobilization of energy for renewal
• Stage of search for new ways, learning
• Stage of stepping out toward the new way
The mourning approach highlights the delicate task of managers to assist their
subordinates in going through the stages of change in a manner that will enable
them to return to function as quickly as possible. Sensitivity, accepting the
sensitivity of others, and legitimizing emotional expression is required. Lack of
consideration of the direct manager for the feelings of the worker will entail
stagnation at one of the first stages, and in such a situation, it will be difficult for
the worker to function optimally.
Each stage of change goes with typical reactions of the workers. What goes on
with the workers can be characterized at each stage:
1. Rumor phase: Rumors on the intentions of management to carry out
change are widespread. The nature of change is not clear. The situation
causes restlessness, repression, disregard, distortion of reality, conviction
that it won’t happen, holding on to what is old.
2. Phase of awareness: Management informs and publicizes the reasons for

change and its orientation. The typical reactions of the workers are shock,
anger, aggressiveness, fear, accusations, misery, loneliness, and resistance.
3. Procession phase: Preparing for the process of change. Creation of

coalitions, search for compromises, struggle, hesitation, damage control.
4. Deciding on the solution: The workers feel helplessness, insecurity, self-

pity, emptiness, longing for the past.
5. Preparation for operation: Passive acceptance begins, resistance ceases,

disengagement from the past, easement, and melancholy.
6. Transition phase: Emergence of willingness, involvement, participation,

primary positive energy, active acceptance.
7. Phase of actualization: The workers behave proactively; they show

enthusiasm, identification, involvement, and energy emerges.

7.3 CONCLUSIONS ON CHANGE MANAGEMENT
The questions emerging from the description of the characteristic process of
change are: Is it possible to manage change within success, or is it possible
to skip the stage of decline and crises? Is it possible to shorten the long and
painful suffering that organizations go through on their way to recovery or
to wilting? Are managers also capable of initiating change without crisis or
existential threat?
The answers are yes! Nowadays, we have enough knowledge and insight
regarding the characteristics of organizational environment, regarding the
importance of changes of different types, and regarding the way to their
implementation. We have enough knowledge on long-lasting outstanding
organizations and their mechanisms of success. We also have in-depth
knowledge on psychological mechanisms of resistance to change, distortion of
reality, and defense mechanisms facing change. The fact is that in every field of
activity there are organizations that have successfully gone through periods of
recession or changes in the environment, and they have managed to do this less
painfully, in less time, and with less difficulty than others. Furthermore,
managers of today, just like their workers, are more educated and more aware of
the world around them than in the past. Indeed, in a world of uncertainty and
surprises, there are always occurrences that may possibly lead to crisis in a
certain branch or in a certain field. However, the ones who will be better
prepared for such situations, on a mental, organizational, cultural, and
managerial aspect, will deal with crisis faster and more easily, and their chances
of pulling out of a crisis toward a new way will be greater.
The arrow in the diagram in section 7.1, indicating change management within
success goes from successfully searching for new ways and directions and skips
all the stages of decline and pain. This is the recommended direction. The lesson
we learn from organizational history is that it is actually at the peak of success
that seeds of failure begin to sprout.
On the other hand, it is actually at the peak of success that the organization and
its managers have in hand all the abilities to prepare for change. The resources
necessary to find innovative solutions in technology, products, services, and
organization consist of time, venture capital and development, heterogeneous
teams of creative people, and experiences. All of these are plentiful in times of
success and growth, but they are, however, not at the disposal of the organization
in times of crisis. Moreover, it is actually in times of crisis, when there is
awareness of the need for change, that the organization doesn’t have the ability
in hand to optimally carry it out. The efficient people have already left; resources
of time, money, knowledge, and technology are no longer available. For this
reason, carrying out change during phases of growth and success is crucial.
Successful organizations don’t need to carry out major changes. Carrying out
durable changes and constantly innovating is already enough for success to
abide. Organizations in crisis must carry out deep and painful changes at a time
when they actually don’t have the resources to do it! The changes that
organizations in crisis must perform in order to withstand competition is
gargantuan! The leap has to be a major one, because change itself is what
enables people to gain the upper hand over the strongest competitors on the
market.
It may also be fit to mention the moral aspect. Revolutionary change in times of
crisis bears a heavy price: mass layoffs, destroyed families, different ailments
derived from anxiety, stress, decrease in standards of living, and loss of self-
respect. Blame for failure mostly falls onto the manager, and the workers are the
ones to pay the price. It is therefore necessary to foster and teach leadership in
times of success. Leadership is capable of leading organizations in periods of
high tide and low tide and creating mechanisms of durability, flexibility, and
innovation in any conditions. The period in which change is carried out only
because of crisis or threat has passed.

Chapter 8
Organizational Decline, Stagnation, and

Crisis
t is not because things are difficult that we do not dare; it is because we do
“I not dare that they are difficult.”
Seneca

8.1 STAGNATING ORGANIZATIONS
Systemic or organizational stagnation is the clearest characteristic of
organizational decline and constitutes a clear warning signal of danger of
systemic collapse. There are many causes that explain the process of decline of
products, services, and organizations; for example, changes in organizational
environment, such as: technological changes, cultural changes, changes
according to the terms of the market, increasing competition in an open world,
demographic changes, etc. There are also internal factors which contribute to
organizational decline, such as likeliness of increasing institutionalization,
excess smugness, excess confidence in justice of cause, complacence, lack of
control mechanisms, and outdated information systems, among others.
Organizations which are late to react and put off necessary changes due to fear,
resistance, blindness, disregard, or smugness frequently reach a situation of
precrisis and collapse – a situation of stagnation.
What is organizational stagnation?
In organizations or systems in a state of stagnation, slang phrases that actually

describe the situation are likely to be heard. For example: “We’re repeating
ourselves, and we’re not doing anything,” “We’re working on full gas but in
neutral,” “We’re trudging in the mud,” etc. Organizational stagnation resembles
a car stuck in mud while the driver is trying to pull out by stepping on the gas
pedal. The driver thinks that he is extricating himself while he is, in fact,
submerging the car deeper in the mud.
Feelings of stagnation and situations of stagnation are noticeable on an
individual level and on an organizational level. It is a negative state for anyone
to be in, but they bask in the situation because any other situation is perceived as
even more negative. A woman “stuck” with a violent partner for whom she has
no feelings, or even because of whom she suffers, will, nonetheless, persist in a
routine of arguments and humiliation, and she will not get out of it because she
perceives breaking the stagnation pattern as all the more threatening and
frightening. The same goes for organizations. Situations of organizational
stagnation are dysfunctional for the organization. They entail lack of proper
functioning as well as energy, time, and resource consumption in order to deal
with such situations of stagnation. Moreover, stagnation requires constant care
and preservation from “paroxysm.” The latter is perceived as more dangerous
than stagnation itself, and, therefore, efforts will be invested at all times into
maintaining a low profile as much as possible.
Unresolved struggles for power and control are typical situations of stagnation.
In such situations, fear is of the havoc that the losing side may cause, fear of
losing support, and uncertainty regarding the consequences. Another typical
situation is the conflict between the different perceptions of two sides of the
organization that are both equal in power. In such a situation, the organization’s
integrity comes first and is preferable to resolving the conflict. Endless clashes
between the opposing sides will continue, but they will, however, be cautious
facing rupture, which would lead to a rift and to the eventual elimination of one
group from the organization.

DEFINITION OF ORGANIZATIONAL STAGNATION
Situations of organizational stagnation are those which occur regularly and over
time and are perceived as harmful to the proper functioning of the organization,
but managers avoid finding a definitive solution to the situation because they
perceive the solution itself as all the more threatening to the functioning and to
the integrity of the organization. It seems sometimes that situations of stagnation
don’t have solutions because the solution itself is beyond the logic which
sustains such a situation of stagnation; creative thinking and getting out of
conceptual schemata are necessary in order to find a solution to the situation.
We distinguish between two slightly different types of situations of stagnation.
First-order stagnation pattern: This is the type of stagnation pattern which is

not solved because its solutions are considered as more threatening than the very
existence of the pattern itself. In this case, the solutions are known to the
participants, and they are not beyond the logic of the pattern.
Second-order stagnation pattern: This is a deeper and more complex pattern

which sustains itself and entails an escalating cycle of gradual deterioration. The
solutions that managers adopt only worsen the situation. The reason is that the
solution to stagnation is beyond the logic of the system. This is a solution that
demands transformative change, changes in basic premises, or changes in the
logic activating the cycle of stagnation. We call this type of pattern an
aggravating cycle of stagnation – a repetitive and aggravating cyclical
pattern of organizational behaviors that sustain each other and even
reinforce each other, and that preserve and even reinforce the problem they
want to solve in the first place.
In simpler words, the cycle of organizational stagnation is characterized by a

behavioral pattern which repeats itself all the while getting worse. Those finding
themselves in such a pattern are subjected to a paradoxical situation, when all
their attempts to pull out and solve the state of stagnation only make it worse.
These solutions, in fact, add fuel to the fire. In this manner, an aggravating
vicious circle is generated, and the ones subjected to it find themselves in a state
of increasing helplessness.

Bully-manager, who uses techniques such as intimidation, top-down
communication, negative feedback, and so on, gets the approval and support he
needs to justify his behavior, this being by the ever-growing misbehavior of his
employees. His conclusion is to enhance his behavior, and, thus, he creates a
vicious circle.
Additional example: The aggravating stagnation cycle of IDF (Israeli Defense

Force) stay in Lebanon. Their stay in Lebanon generates an aggravating cycle.
More and more means and efforts invested on IDF’s part lead to the increase of
sophistication on the enemy’s side, and thus, to an increase in the number of
victims. Paradoxically, the more resources IDF invest, the greater the challenge
set before the enemy, who, thus, develops the means to get stronger, and
subsequently becomes more and more skilled and sophisticated.
This entails heavier casualties for IDF, the means required are increasingly
considerable, and it turns out that the solution only exacerbates the problem
generated as a consequence. What started off as sandbags, a small number of
units and simple means, is becoming increasingly complicated. It is no
coincidence that this situation bears the appellation “Lebanese mud.” All the
multiplied efforts to improve the situation only cause it to sink deeper into the
mud. The situation is changing, but from bad to worse.
One more example is the ever-increasing numbers of foreign cheap workers

immigrating to Israel as well as to Western countries. Despite the fact that it
brings ever-growing social problems, and despite the fact that governments want
to decrease their numbers, the fact is that their numbers are increasing and the
resulting problems are getting more severe.
The cycle shows how the continued demand for cheap labor, as a result of little
to no investment in advanced technology or as a result of labor policies, leads to
the increasing number of foreign workers. What started off with Israeli workers
continued with local Arab labor, further to Arab labor from Occupied
Territories, and has now gone to more and more foreign workers. Continuously
bringing in foreign workers implies providing them with accommodation
solutions, bringing in their spouses, and thus, worsening the problem of
foreigners within Israeli society. In this manner, a small problem actually
became a major problem because of the ones who attempted to solve it.
Aggravating stagnation cycles are common to all aspects of life: cycles of
domestic violence or the problem of drug use gradually becoming worse while
the resources invested in its eradication are gradually increasing.
What are the origins, if any, of aggravating stagnation cycles? Why don’t
managers and policy makers see the results of their actions? How can such a
procession of senselessness be explained?
The reason is simple. There is logic, a paradigm, a conception, or a basic
premise, according to which organizational behavior takes form, behind or at the
base of each stagnation cycle. Such a basic premise provides the logic and
justification to the existence of the system, and it was created in the past
according to certain conditions. When such conditions have changed and basic
premises remain unchanged, a cycle of aggravating stagnation emerges. The
truth is painfully simple: Conceptions and basic premises providing logic and
justification to human activities are the product of a temporary situation, and
such time is gradually decreasing in the dynamic environment of today, and
most likely in that of tomorrow. Therefore, as long as the logic upon which
organizational activity is based doesn’t change, the problem of stagnation will be
left unresolved.
The bully leader really believes that most workers are born lazy. He really
believes that only punishment or reward will motivate them. Thus, unless he will
change his basic premise, the aggravating cycle will continue. In the case of IDF
in Lebanon, the basic premise says that the defense of the northern communities
is possible only through the Israeli Security Zone. In the case of foreign workers,
the premise is that Jews shall not be given simple, low-income jobs. In all these
examples, clinging to basic premises entails organizational behavior reinforcing
stagnation. Change of basic premises also implies that IDF can defend the
northern communities within Israeli territory (thus legitimizing striking heavily
behind enemy lines). Change of basic premises also implies technological
innovation in work that requires cheap and abundant labor.
Why don’t managers or parent companies then change their basic premises
when their organizations get caught in a stagnation cycle? How is it possible
that they don’t see that reality has changed and that their basic premises are no
longer functional or relevant?
The reason once again is simple, but painful: Basic premises tend to blind the
ones who follow them. Due to the fact that basic premises define the limits of
our thoughts and perceptions, they lead us to decisions on what is right and what
is wrong, what are the good things to do and what are not. Giving up old basic
premises in exchange for others demands tenacity, original views, and
creativeness. We tend to get used to basic premises and adhere to them until they
become part of the organization’s perception of itself and part of its identity.
Adopting new logic implies recognizing the unsuitability of the old and
admitting to the fact that investment of resources is increasing in vain. In this
manner, an aggravating cycle of inability to admit mistakes, to stop, and to
change directions is created.
The more efforts are made to pull out of stagnation, the less we are willing to
admit to the futility of investing such efforts. When investment is in human life,
difficulty to recognize mistakes is sevenfold. For this reason, many prefer the
bad, albeit, familiar, to an unfamiliar situation, because change of basic premises
onto which new activity is based requires putting oneself into danger and
experimenting, and this sometimes implies uncertainty. It is no coincidence that
change of basic premises is done for the most part by new people or people with
little attachment for current premises.
Conditions sustaining stagnation over time:

• A system sustained by a parent system that is prepared to infuse resources
over time.
• A system which is noneconomic or nonbusiness.
• Absence of courageous leadership with a new vision.
• The price to pay for change based on new logic is perceived as greater than
that of the present.
• The members of the organization are unable to give up, any other
alternative seems impossible to them, and they prefer the current situation.
• The ability to absorb losses or failure is gradually getting worse over time
due to resource accumulation.
• Adhering to outdated perceptions and beliefs due to the great investment in
them up to that point.
• The degree of danger in operating on the basis of new logic is perceived as
greater.

8.2 MANAGING PULLOUT FROM SITUATIONS OF STAGNATION
Pulling out of situations of stagnation requires tenacious visionary leadership
capable of establishing new logic, unifying workers around it, and implementing
it. In order to deal with continuous internal stagnation, it is important to generate
favorable conditions and climate:
• Oblivion – the ability to forget what you know and what you are sure of.
• Attentiveness – the ability to change attitudes in order to absorb and grasp
new ideas.
• Openness – the ability to raise innovative ideas without criticism.
• Difference – the ability to bring out various ideas and establish them
collectively.
• Boldness – legitimizing daring and experimenting.
• Naivety – the ability to start from scratch.
• Innovation – creative thinking that breaks through current conceptual
schemata.
• Open-mindedness – ability to listen to external people who aren’t attached
to old ways.

IN ORDER TO PULL OUT OF AGGRAVATING STAGNATION CYCLES, WE SHALL
PROCEED WITH THE FOLLOWING STRUCTURED PROCESS
• Description of the stagnation cycle: This description constitutes a sort of
overview of our actions and illustrates more clearly how solid the solution
adopted to deal with the problem is.
• Defining the current perception, basic premises, and dominant logic:
Here too it is important to clearly formulate to ourselves “the logic behind
the madness” in order to examine its relevance.
• Examining the situation, whether it can be changed by means of efforts
in the framework of the existing perceptions: Examining the efforts made
so far, as well as their results. Examining the minor benefit from additional
effort. Examining other similar systems and their current situation.
Examining similar situations of the past.
• Forgetting and starting from scratch: Opening everything and being
open to everything. The ability to get out of current patterns.
• Learning: Listening to those with different perspectives, looking outward,
learning how others coped and succeeded.
• Creative thinking: Using creative thinking techniques, assistance from
creative people from various different fields, brainstorming, lateral
thinking, simulation, etc.
• Choosing a new conception in accordance with the current reality:
Defining a new mission and new goals.
• Mobilizing consensus and resources.
• Experimental implementation, examination, and adjustments: Due to
the risk often implied in defining new premises and activity based on them,
partial or experimental implementation is recommended at first.
• Transition to the new method and establishment of the new perception.
• Readiness: Creating the right conditions as well as being prepared for
nonsuccess and the necessity to implement a different logic.
The process described here is a leadership process due to the fact that it demands
leadership abilities that include courage, decisiveness, and ability to go against
the flow, ability to gain the support and the trust of many toward the new
direction, ability to illustrate a clear and attractive direction, and finally, the
ability to fulfill the promise.

8.3 ORGANIZATIONAL CRISIS
The continuation of aggravating cycles of stagnation leads organizations to the
verge of collapse. We call “crisis” a situation in which the choice is either
between collapse or revival, and it is characterized by a constant threat to the
very existence of the organization. A distinction between various types of crises
can be made:
Mission and vision crisis: Crisis that derives from loss of way and lack of
relevance in the mission and goals of the organization. A characteristic example
is crisis in ideological movements, such as the kibbutz movement. A similar
crisis occurs in public organizations, such as the security and defense industries
which, in the past, were public, as being a part of the security system. In such a
situation, the organization operates in order to achieve goals which are no longer
relevant.
Leadership crisis: This crisis derives from lack of leadership, from struggles
at the top of the organization, and from events causing drastic decline in the
functioning of the organization up to a point of crisis. This is a situation in which
the organization lacks a person or a team that will lead toward existing
objectives or new objectives.
Business crisis: Crisis deriving from the fact that the service or the product
doesn’t respond to the needs of the customers. The organization is unable to
compete in the free market, and problems of quality, service, efficiency, price,
and image lead it to heavy losses and to the verge of collapse.
Human resources crisis: Situation in which key people leave the

organization in favor of other competing organizations. These are situations of
lack of manpower or lack of knowledge in critical fields. Lack of excellent
manpower may push the organization down to the verge of collapse.
Transitional crisis: The organization struggles to go from one organizational

situation to another. The natural development of the organization – from a small
and intimate organization to a large, established, and complex organization –
demands suitable and structured managerial preparation. The managers of the
organization fail to carry out changes in the structure of the organization, in the
organization’s culture, and in its management method. The growth of the
organization, thus, becomes an obstacle.
Crisis of disaster and loss: A fatal blow to the organization as a result of

natural disasters, internal malfunction leading to debacle, security attacks,
human loss, etc. All of these factors can destroy the organization.
Success crisis: Crisis emerging as a result of fast success. Success blinds and
numbs the managers of the organization. Complacence, increasing excess fat, or
smugness all lead to the sudden growth of new competitors, negatively affecting
the organization’s customer market.
Crisis of malfunction and fraud: Crisis deriving from producing and

marketing a defective product, not being truthful about a product or service,
attempting to mislead the customers, and deception throughout production and
service. The openness of the harsh and critical communications media very
rapidly brings deficiency or deception to public knowledge. Very soon, the
customers stop purchasing the product, and the business is at the brink of
collapse.
It is essential to remember that “crises come in herds.” In other words, each type
of crisis entails additional types as a result, up to a point where causes or
consequences are not distinguishable. A leadership crisis results in business
crisis, which itself leads to a manpower crisis, and so on. Delay in restraining a
crisis of a different type entails its increasing depth and expansion.
There are organizational characteristics to crisis:

• Chaos, confusion, contradictory instructions, and lack of functioning in the
entire system.
• Uncertainty regarding the near future.
• Emergence of tensions and conflicts.
• Negative selection of manpower. The young and knowledgeable people are
the first to leave the sinking ship.
• Decline of self-image. The members of the organization perceive
themselves or their managers as failures.

• Putting out fires. Intensively working on finding temporary solutions, to no
avail.
• Pressure due to time and living on borrowed time. Everything is done
hastily and without judgment due to a lack of time.
• Accusations and search for who is to blame. Who caused the situation, and
who needs to be punished or dismissed?
• Feelings of helplessness and of no way out; everything that is done doesn’t
lead to the hoped for results.
There are also psychological characteristics to crisis:

• Feelings of anguish toward the future. Fear of collapse and loss of
livelihood.
• Feelings of deep anger, tension, and restlessness. Feelings of deep
frustration due to the absence of a solution.
• Confusion, disorientation, and lack of knowledge. Spreading of rumors and
negative informal communication.
• Repression and denial; introversion. Emergence of evasion and detachment.
• Inward and outward accusations. Searching for who is to blame and taking
frustration out on such factors.
• Nostalgia and longing for the past. Clinging to the past and longing for the
managers of bygone days.
These characteristics make it even more difficult to manage the organization and
its normal activity. They require direct attention in order to ease tension and fear.
Group dialogueue, two-way communication, and decreasing incertitude and
ambiguousness are essential in order to pull out of the crisis.
Why do managers fail to identify and prevent oncoming crisis?
In spite of the prominence of organizational crisis, it quite often reveals itself

belatedly, when recovery is only possible at a considerable price. It is staggering
that knowledgeable and experienced managers succumb over and over to crises.
There are several factors explaining this:
• Lack of user-friendly, up-to-date information systems: up-to-date
information systems are crucial in an era of fast changes.

Ignoring ominous signs: many times early signs of oncoming crisis emerge,
•
such as decrease in sales, customer complaints, etc.
• Lack of up-to-date information and methodical investigation of the
environment, of competitors, and of the market: here too an efficient
information system and a finger on the pulse are essential.
• Decision makers surrounded by yes-men and by people who think like
them: assistants and deputies, associates and friends interested in
embellishing the reality.
• Pride and arrogance, smugness: this impedes decision makers to see reality
for what it is or the dangers of the future.
• Clinging to outdated conceptual schemata, logic, basic premises, and
conceptions.
• Belief that it is possible to deal with crisis through step-by-step changes.
Crisis situations demand major changes.
• Bureaucratic structure, hierarchical structure, mechanical and rigid
structure, complex and complicated structure, lack of structural and
organizational flexibility, encumbrance, and delay in reaction.
• Centralized management: centralized authority at the top of the
organization, one-way communication from top to bottom, lack of ability to
solve problems where they arise.
• Ignoring gloomy prophecies and signs from the edges: those in direct
contact with customers, or those having access to the latest data, among
others, are the ones who reveal sensitivity and courage and give warning of
oncoming failure; however, such warnings are answered dismissively,
belittled, or ignored.
Behavior of managers as a factor in crisis:

An additional characteristic factor leading to delay in response is the behavior of
managers. Quite often, managers are too busy running away from reality or
searching for who is to blame. Typical behavior of evasion is:
• Ignoring the warnings of imminent crisis.
• Attempts to cover up with the hope that the public will forget, since its
memory is short.
• Distortion of reality and its adjustment to current perceptions: “Don’t tell
me what’s happening. I know the truth better than you do.”

• Denying the occurrence of crisis by belittling it. “Your description of reality
is exaggerated.”
• Claiming the transience of crisis should blow over within a short time. “All
in all, the difficulty is only temporary and we are on our way to its
resolution.”
• Relating to past crises and amplifying them in comparison to the present
situation. “As opposed to the crisis we went through during the ’80s, the
current difficulty we are in is a piece of cake.”
Other dysfunctional behavior is searching for who is to blame:
• Searching for who is to blame within the organization.
• Searching for who is to blame outside the organization.
• Establishment of a committee of inquiry and “decapitation.”
• Blame on “force majeure.”
Experience from dealing with crisis teaches that in most cases the situation is
worse than it appears at first, and that it will be exacerbated, inasmuch as dealing
with crisis demands containment and survival actions, which includes cutting
down and removing fat, etc. Moreover, the more we put off dealing with crisis,
the more difficult it gets to deal with it.
Additional characteristics of crises:

“Crises come in herds”; one crisis leads to another, and the snowball begins to
swell.
• The situation is usually worse than it appears at first.
• It will get worse before it gets better; descent is necessary in order to
recover.
• Crisis is the opportunity to start from scratch or to proceed differently.
• Crisis is also an opportunity to operate changes which in different
conditions would be difficult to carry out.
• The more we put off dealing with crisis, the harder it is to solve it.
• Quite often, without crisis there is no change.
• Public organizations can continue operating for years, even in situations of
crisis.

8.4 DEALING WITH CRISES
Dealing with crisis first requires rapid diagnosing intended to slow down and to
stop the bleeding. The aim is to slow deterioration down and to create time and
breathing space in order to lay out a basic recovery plan. Such diagnosing
includes the following elements:
• Defining the nature of the crisis: this is to avoid the propagation of the crisis
in other fields.
• Identifying and assessing the time necessary for slowdown, the amount of
time left for containment.
• Identifying the critical positions where bleeding needs to be stopped. Where
and how crisis can be contained.
• Diagnosing the required change. What nature and depth of change is
required.
• Locating the essential strengths of the system and directing them toward
dealing with the crisis; who can be inducted in the system.
• Locating crucial resources and mobilizing them. Who or what can be
brought in from outside.
• What excess fat must be removed immediately.
What can be done to pull out of crisis:

• Assigning leadership that demonstrates courage, decisiveness, and capacity
for innovation.
• Admitting and recognizing facts: quick learning of the facts and identifying
the characteristics of the crisis.
• Taking responsibility and immediate commitment to necessary adjustments,
including taking products off the shelves, repairing the damages caused by
the company, and compensating the victims.
• Information system and actual worker participation. Emphasis on chances
of recovery and the importance of the workers’ position in the process.
Telling the truth and relating to the workers and to their needs.
• Containing and stopping: removing “excess fat,” rapid diminution of the
system, manpower, assets, etc. Attention to the feelings of the workers in
order to reduce tension, anguish, and uncertainty. Assistance and
preparation of the workers for withdrawal.
• Putting a stop to loss-generating activities: shutting down factories,
departments, ending loss-generating products and services. Focus on
profitable activities, focus on core qualifications, and focus on business.
• Mobilizing time and resources: establishing agreements with funding
sources and other relevant agents in order to find the time necessary for
putting a revival plan together.
• Forming a mission, vision, and a new perspective: integrating managers and
workers in the consolidation of the idea.
• Forming a strategy and an action plan in order to implement the new
perspective.
• Preparing and carrying out worker layoffs, retraining, and career change, as
well as new learning. Attention to those who remain.
• Forming a detailed plan that is in operational stages.
• Transition through stages toward a new situation and its stabilization.
• Examination and adjustment.
As opposed to plans of change in normal times occurring stage after stage, in

situations of crisis, activities must be carried out all at once. This is in order to
shorten schedules, to avoid accumulation of tension and anger, and to strike the
iron while it’s hot.

8.5 CASE EXAMPLES
There are many examples of crisis resulting from human error, attempts of
deceit, defective products, and resulting from levity in following
instructions, regulations, and rules.
The discovery of a journalist that Tnuva, the biggest milk products
company in Israel, illicitly added silicon agents to its milk led the giant to a
serious financial crisis.
The deaths of infants as a result of the removal of vitamin B from
Remedia’s baby formula led the company (infant dairy substitute
importation company) to bankruptcy. The discovery that gas stations
diluted diesel oil into petroleum caused drivers to keep their distance.
The Exxon oil company and its disastrous oil spill where they did not take
immediate responsibility.
What characterizes such companies?

1. Not assuming responsibility and placing blame on others.
2. Waste of time and tendency to cover up with the hope that the matter
will die down and will be soon forgotten.
3. Recruiting public relations representatives to make excuses, to explain
away, and to justify.
4. Keeping a low profile.
5. Indifference toward casualties and blaming others for the damage
caused.
The consequence of all these characteristics is the aggravation of the crisis.

The mistake of all these companies was in their late reaction, in not
assuming their responsibility, in their denial and their blaming others, in not
compensating the victims, and in pursuing their activities as if everything
were in order.
In the 1980s, Koor Industries, one of Israel’s largest business firms, sank
into crisis and bankruptcy. Even though at its head stood IDF Major
General Yeshayahu Gavish, the company was hit by tremendous loss,
amounting to $320 million. The company, which was Histadrut-owned (the
organized workers’ organization which also owned factories), counted
dozens of factories in various fields which didn’t share common activity.
Moreover, the company employed workers through collective agreements
under far-reaching salary terms. The reason seems to be linked to the fact
that the company acted under the banner of their vision of securing the
position of the worker member of Histadrut in the best possible conditions.
The company’s mission was the welfare of the worker and not its own
personal business success.
The company, by way of its management and the nature of its business
structure, did not adjust its activities in time to the changes emerging on the
market. It suited a closed market controlled by Histadrut, with a socialist
economy, absence of competition, and a global open market. Its slow
response and preparation facing the market that was opened to free
competition led it to bankruptcy.
It was the new manager brought in from outside – Benny Gaon – who
rescued the company within 2 years of crisis. The method employed was
simple, but the way to put it into action was difficult:
1. Swiftness of operation.
2. Rapid downsizing and shutting down enterprises and stopping loss-
generating activities.
3. Focus on close core fields and successful enterprises.
4. Buying time by turning to banks to postpone debt payments.
5. Organization for dismissals and selling companies distant from core
business.
6. New terms of employment for workers.
After only 2 years, the new company stood on its own feet, and in the third
year, it started to gain profit.

SECTION 3
Conducting change

Chapter 9
Characteristics of Planned
Organizational Change and Its
Management Strategies
hange management is no longer a onetime proceeding, whether short or
C prolonged. Nowadays, it consists of a permanent managerial activity,
sometimes in-depth and to a large extent, sometimes consisting of improving a
limited aspect. Sometimes the activity takes the initiative, and sometimes it is
responsive. In any case, it is a permanent activity and it constitutes most of the
manager’s duty. Successful change management requires first and foremost
adequate preparation. Planned change is managed according to a clear strategy
that is known to its leaders and workers. The stages and the schedule of this
strategy are also known in advance. Planned change is conducted by a team or
by several teams for which missions and objectives are defined in advance.
Before we clarify the different strategies, we will focus on the prerequisites
required in the management of the process of successful change.

9.1 PREREQUISITES TO INITIATE PLANNED CHANGE
Support and commitment of the manager and of management: Quite often,
managers choose to impose the management of change on junior managers and
carry out the change at the edges of the organization in order to avoid assuming
the responsibility of the process and to avoid destabilizing the entire system.
Successful change management requires the involvement and the responsibility
of senior management, as well as change in accordance with the situation, rather
than in a domain where its execution is convenient and easy.
Worker committee consent and their preparation: In organizations which

count a solid committee, the cooperation of the latter is necessary, as well as the
preparation of the workers for the process in order to avoid strong subsequent
resistance.
Involving agents able to influence change: It is important to obtain the

approval of the parent organization, to reach an agreement with banks, and to
reach an agreement with partners, etc.
Mobilizing resources: Change management requires resources: time,

manpower, financial resources, consulting resources, and space resources.
Leading team: Mobilizing and consolidating a senior team comprised of

diversified people with miscellaneous abilities. This team is able to work in
collaboration and to durably conduct the process of change.
Sequential operating: Commitment of people to operate over time;

consciousness of the fact that in spite of the natural occurrence of ups and downs
in the process, it must be established durably in time and on the basis of minor
successes.
Establishing subteams committed to the process: This involves activity with a

distribution of responsibilities among the involved integral teams, whose job is
to implement changes in specific fields and who are committed to carrying out

the whole process up to implementation.
Performing periodic follow-ups and evaluation: It is important not to wait for

the end of the process, as change processes are prolonged or even permanent.
There are various stages to managing the process of change, and their nature
depends on the nature of the change itself. There are changes which are forced
onto organizations by their parent organizations, by operating receivers, as well
as by shareholders, among others. Forced change can either be within the
process or within the required solution. In such a case, freedom of action of the
change manager is null.
In the opposite situation, the manager initiates change, chooses the process, and
thus, the solution. Between both of these extremes there are different
possibilities. There are managers who initiate changes regularly as they establish
learning processes and examination processes of the systems of the organization
in which solutions emerge. There are managers who initiate changes which are,
in fact, the implementation of “off-the-shelf solutions,” such as TQM, for
instance. There are also managers who don’t initiate changes but are rather
pushed to carrying them out as a result of the emergence of problems in the
organization. In such a situation, the problems have already been subjected; thus,
they already have the liberty in hand to choose the process, but the solutions
must befit the problems.

9.2 PLANNED CHANGE MANAGEMENT STRATEGIES
There are several strategies to planned change management.

1. CHANGE MANAGEMENT STRATEGY FROM THE FUTURE TO THE PRESENT
This approach focuses first on the questions
“Where does the organization want to be?”
“What is the picture of the future we desire?”
“What kind of organization do we want to be?”
“What is our vision?” “What is our mission?”
“What is our business?” “What are our goals?”
“In what direction do we want to develop ourselves?” etc. The first goal is to
create a futuristic picture that we wish to achieve. With such a method, we don’t
work at diagnosing problems, and we don’t work at methodical research of the
past. The basic premise is that there is no point in dealing with what once was,
but rather, dealing with where we want to be. Once a futuristic picture is created,
the establishment of the process to fulfill it begins.
Kotter, in his book Leading Change (1996), detailed the steps of planned change
according to the strategy of going from the future to the present. He described
the following steps:
Step 1. Establishing a sense of necessity and urgency for change. Actions of
explaining and convincing; open communication transmitting data and facts
about the state of the system.
Step 2. Establishing a guiding coalition. Forming a leading team supported by
management and central stakeholders.
Step 3. Developing a vision and a strategy for its fulfillment. Formulating vision,
mission, values, and action methods for their implementation.
Step 4. Communicating vision. Making this vision become the heritage of many.
Step 5. Translating ideas to organizational structures and processes.
Step 6. Implementing and generating short-term triumphs.
Step 7. Improving achievements and generating additional changes.
Step 8. Anchoring the changes within the new corporate culture.
Advantages: The advantage of the approach of management from the future to

the present is in the fact that it focuses on the desired future. It enables gathering
energy and consensus regarding objectives and goals in the management of the
organization. It provides direction for change, and it enables assiduous
examination of whether the process brings the organization closer to fulfilling
objectives or not. This method also implies positive energy and enthusiasm
among its leaders on account of the fact that it implies pursuing a better future
for the company. This strategy deals with positive aspects of change and skips
debating and dealing with day-to-day difficulties. It is more suitable, especially
for strategic change or paradigm shift. It isn’t suitable, however, to step-by-step
change or to change whose essence is mainly improvement and efficiency.
Disadvantages: The major disadvantage of this method is the dedication of a

great deal of time in depicting a futuristic picture at a time when, in a fast-
changing world, much of which being uncertain, the probability of realizing the
aspired future is obviously small. This method implies a large extent of
uncertainty and risk due to changes occurring in the environment, which can
cause the vision to become irrelevant. The difficulty in this method is to involve
all the workers of the organization, whether because in the greater organization it
is hard for the line worker to take part in defining vision and strategy, and
whether because it is of such difficulty to reach an agreement to involve
everyone in the process. Moreover, leading strategy and vision is part of the role
of the leaders at the head of organizations. They usually have a general vision
which they wish to implement. It would certainly be difficult for them to
implement the vision of others.

2. STRATEGY OF INITIATIVE AND INNOVATION
Unlike traditional change strategies dealing with the analysis of environmental
influences on the organization and the necessity to create the ability to compete
in a current competitive market, the strategy of initiative focuses on the quest to
create innovative products, innovative services, or technologies, generating or
arousing dormant and concealed needs, and, thus, creating a new market. While
traditional strategies deal with analyzing current needs and responding to the
needs of the market and the customers, the strategy of initiative deals with
creating and designing expectations and needs. While the origin of change
within traditional strategies is external, in the case of initiative strategy, it is
internal. This strategy is intended for the creation of new branches and new
products, consumption niches, and new lifestyles.
The strategy of initiative and innovation focuses on redesigning needs and

demands and reshaping reality. Unlike the strategy of change management from
future to present focused on depicting a futuristic picture, the strategy of
initiative focuses on innovation and creating new value for the customer in
substantial fields: in products, in services, and in technologies. An example of
this type of strategy was brought by Kim and Mauborgne in their book Blue
Ocean Strategy (2005). The authors of the book used the concept of value
innovation as the goal of change.
The principle of “Value Innovation”

The meaning of value innovation is the initiative deriving from within the
organization or from an entrepreneur, generating both additional value to the
customer and reduction of costs. Value innovation is created when the actions of
the company positively influence its value proposition to buyers. Savings on
costs are made possible through reducing and eliminating the factors upon which
others in the branch compete. The value to the customer rises by producing and
broadening elements that the branch had never offered in the past. Through time,
costs are expected to drop as a result of the amplification of the scope of sales.
Great successes over time are related to the development of new niches, new
branches, new products, and new needs. An example of the creation of new
niches in the automobile industry can be seen in the introduction of the small and
low-fuel consumption Japanese car into the American market, the entrance of the
commercial minivan, and the entrance of field cars that combine family cars
with field cars. This can also be seen in the introduction of mountain bicycles in
the bicycle market and the introduction of active recreational areas for children
in the market of passive-style amusement parks such as Luna Park.
Advantages: Innovative products and services lead to business success due to

the fact that they entail high recompense as long as no competitors have entered
the market. It takes competitors a long time to copy such success. This strategy
goes with curiosity, entrepreneurial energy, and enthusiasm. It sets positive
challenges and a sense of success. It brings out the best of the worker, and the
best among all the workers.
Disadvantages: The level of risk is high; the need to persist with innovation and
not perceive it as a onetime act may cause rapid burnout and exhaustion. It is
difficult but also necessary to keep entrepreneurial workers and to increase the
rewards for their contribution.

3. STRATEGIC CHANGE
This change method focuses on redesigning the vision, the goals, the mission,
and the conception of the organization or of one of its systems. The goal is to
readjust to the business environment, to generate a comparative advantage over
competitors, and to isolate from them. In fact, this method is a derivative of the
strategy of management from future to present. The difference is in the fact that
in strategic change, an organized diagnosis process takes place, following which
a new strategy is determined. Diagnosis is effectuated according to the analysis
of the external environment in which the organization operates: the business
environment, the constitutional environment, the cultural environment, the
technological environment, the political environment, and the communal
environment. Regarding such environments, the analysis is performed by
identifying risks and threats facing opportunities and possibilities for new
operations. This analysis is also effectuated regarding the internal systems of the
organization, according to internal subsystems such as: workers, leadership,
structure, culture, mechanisms, processes, technologies, etc. An analysis of
power and strength compared to weakness and difficulty is performed regarding
each subsystem. According to such analysis, the new strategy of the organization
is determined. (For details on this method, refer to the separate chapter on
strategic change.)

4. STRATEGY OF CHANGE MANAGEMENT FROM THE PRESENT TO THE FUTURE
This approach focuses on the diagnosis and study of the problems of the
organization, its difficulties, bottlenecks, weaknesses, and failures. The basic
premise is that when management will know what the problems are and where
they come from, it will be able to establish solutions in response. With the help
of experts, a diagnosis is effectuated and a booklet containing all recorded
conclusions, as well as action recommendations, is submitted. This booklet
serves as a basis to lay out a change program. Peter Drucker outlined the rational
process of problem solving as a basis to understand the stages of the strategy of
“planned change from the present to the future.” According to this model, the
stages are:
1. Awareness of the need for change or of the emergence of difficulty.
2. Identifying the origins of the difficulty – stage of diagnosing problems
through various different methods and tools.
3. Search for solutions to the difficulty – brainstorming, learning from others,
assistance from experts, etc.
4. Criteria of selection of the best solution – criteria such as cost versus
benefit, swiftness, feasibility of implementation, etc.
5. Choosing the optimal solution or solutions – solutions based on different
proposals.
6. Preparing for implementation – mobilizing an implementation team,
training workers, etc.
7. Implementation – transition toward execution and implementation,
establishing change through rules and regulations, processes and structures.
8. Selection, control, and adjustments.
The approach of problem solving indicates the desired process. The difficulty is
that it doesn’t refer to the necessary action steps for mobilizing and recruiting
workers and stakeholders toward the change and its implementation. A more
global integrative approach is thus necessary.
Advantages: The advantage of the approach of change management from

present to future by means of detailed diagnosis is that it enables management to
establish suitable solutions to the diagnosed problems. It largely ensures
certainty regarding solutions and their efficiency, and, thus, control of the
process. It enables involving many in the process from its beginning to its end,
and therefore, it can lessen resistance. It is flexible in its stages, and it can
possibly be established in accordance with the needs of the organization. Unlike
off-the-shelf solutions, in this case, flexibility in defining the process is
extensive.
Disadvantages: Its great disadvantage is in the time and the considerable

resources necessary for diagnosis. Moreover, the pursuit of the past and search
for reasons and causes for problems does not mobilize energy for change. The
drawers of numerous organizations contain reports, analysis booklets, and action
recommendations which are kept unused. The method is intended especially for
improvements in the framework of current conceptions, and in its essence it is
not meant to respond to problems generated as a result of erroneous perception
or to change at a strategic level.

5. STRATEGY OF CHANGE MANAGEMENT THROUGH “OFF-THE-SHELF-
SOLUTION” IMPLEMENTATION
This method became popular in the past few years. In such a method,
management decides to implement a structured and ready-made management
method, which has already been implemented in various places in the world,
including Israel. Its solutions are ready-made and structured, its implementation
processes are structured, its control and computerization system is ready-made,
as well as its tools and methods, etc. Methods of “Management by Objectives”
(MBO), “Total Quality Management” (TQM), “Management by Constraints”
(MBC), “Just-in-Time Management” (JIT), introducing information systems
such as “Enterprise Resource Planning” (ERP) or “Customer Relationship
Management System” (CRM), quality methods and processes such as ISO,
balanced scorecards, or an EFQM structure quality process (European
Foundation for Quality Management), which are widely used processes for
achieving sustainable excellence, processes such as "Result Orientation",
"Customer Focus", "People Development", and "Continuous Learning", are all
examples of off-the-shelf solutions (for more on these methods, refer to the
chapter “Modern Management Methods”).
With such methods, we don’t effectuate diagnosis or even deal with the question
of where we want to be, but rather focus on introducing other management
methods under the assumption that they will lead to the desired change.
Introducing change is done at the same time as adjusting the method to the
particular characteristics of the organization.
Advantages: The advantage of the approach of management that implants

management methods as off-the-shelf products is that the solution has already
been tested in other places. It comprises ready-made solutions, processes, and
structured tools, and it responds to needs known in advance. In organizations
where the problem is recognized and conventional and there is a ready-made off-
the-shelf solution to it which has already been tested in other organizations, this
method is highly advantageous. The method can spare hesitation regarding what
to do and how to do it. It is possible to see the results of the method in
organizations where it has already been successfully implemented.
Disadvantages: The disadvantage of the method is that it is difficult to

implement off-the-shelf solutions without changing and adapting them to the
particular needs of each organization. Moreover, the solutions are generally the
fruit of non- Israeli corporate culture, and therefore, they are difficult to
implement in the Israeli culture. They imply a considerable extent of rigid
bureaucracy and processes, which entails the establishment of a bureaucratic
system in order to activate the method. It also implies the need for assistance
from experts in the method, guidance, and accompaniment, and thus,
dependence on outsiders is generated. Finally, methods and trends change over
time, and it seems that there are no fixed solutions to any problem.

6. STRATEGY OF CONSTANT IMPROVEMENT
Managing developing change:
This approach is based on the assumption that the disadvantages of the methods
we have mentioned above exceed their advantages. With this method,
management carries out swift and continuous systemic changes, examines the
results of such change all the while in motion, and proceeds with these changes.
In this case, there is no continuous organized analysis of the problems of the
organization; there is no search for perfect solutions. The basic premise is that
changes take place constantly in the organizational environment, part of which
are unknown and part of which are unpredictable in advance. The goal here is
constant and continuous improvement in aspects of efficiency, quality,
shortening schedules, quality customer service, economizing resources of
capital, raw materials, and equipment, process simplification, etc.
For example, instead of gathering a team of specialists who will debate on the
causes of violence in schools or on the causes of road accidents and who will
suggest an overall solution to these problems, the method of developing change
simultaneously deals with a complete set of topics considered to be related to the
problem and constantly examines the extent of progress toward the solution to
the problem. The overall direction is agreed upon, but it is defined in very
general lines, and it isn’t given in-depth and elaborate reflection. The overall
picture is created through motion. It comes into focus as a result of the changes
and not as a detailed and predetermined goal.
Kaizen:
An example of planned step-by-step change which takes place in a planned and
constant manner is the Kaizen method. This method is based on the commitment
of management to constantly improve by utilizing the work of integral teams.
These teams dedicate work hours in order to carry out these constant
improvement processes. Action principles of the process are defined:
• Open and free communication, as well as sharing information
• Change through teamwork
• Self-discipline and worker involvement in the process
• Performing all the while receiving constant internal feedback
• Thinking in terms of measurable results

• Emphasis on quality of product, service, and process
• Thinking in terms of measures, numbers, and data
• Thinking in terms of results for the customer at the next stop
The method operates on three levels:

1. Level of “homemaking”: ensuring tidiness, proper organization of the
workplace, everything in its place, availability of equipment, and security of
the workplace.
2. Level of waste prevention: issues of inventory lack or excess, excess
production, defective products or services, waiting time, production and
transportation methods, excess or lack of resources and equipment, lack of
knowledge.
3. Standardization: performing tasks in the most efficient way possible and
institutionalizing the method.
Advantages: The advantages of the developing management approach are that

changes are carried out quickly and are visible immediately. It is based upon
immediate success, and therefore, generates its own energy for the continuation
of the change. The approach assumes that excess focus on the past or on the
future is a waste of time and resources. It is not possible to accurately implement
the desired future, and searching for the causes of problems is not recommended,
as this too, is a waste of time and resources. The organizational environment
changes rapidly. Thus, there is no time to waste on the past or on the future.
Abilities to continuously change and to incessantly initiate change and
innovation must be developed.
The method both generates and is generated in a culture of constant change and
innovation. It is established upon a “from bottom to top” strategy, and, thus,
enables the involvement and initiative of the workers in the change process. It is
based on more conventional solutions than on ideal solutions which are difficult
to implement. To a large extent, it displays flexibility in the process and in its
organization, and it obliges managers to adopt an integrative style; the manager
assists in the process of change and doesn’t actually deal with its contents.
Disadvantages: The disadvantages of the method are that it focuses on a

“microlevel” and neglects the macrolevel. It produces many ideas and processes
that management struggles to implement. Therefore, the method is likely to
discourage the workers.
7. IMPROVED SOLUTION MANAGEMENT STRATEGY
This method is characteristic of many administrations. It is actually a
nonmethodical method. In other words, managers carry out changes according to
needs emerging from the field. The changes are sporadic; they are carried out
occasionally in different parts of the organization and the systems, without there
being a comprehensive plan and without seeing an overall picture or the
connection between things. There is no systemic perspective, but rather reaction
to problems and response to needs emerging from the field. Unlike other
methods, there is neither planning nor control of the process. It is the reality, and
especially crises, that sets change activity in motion.
Advantages: Response to needs arisen in the field enables people to provide fast
solutions due to a lack of options. In situations of lack of choice, everyone is
aware of the need for change, and, therefore, resistance to change is minor.
Analyzing problems “inflates” and intensifies problems unnecessarily. Why take
care of things that function properly?
Disadvantages: It is clear that the disadvantages of this method exceed its

advantages considerably: treatment of the symptoms instead of the source of the
problem, lack of time to find long-term solutions, negative image in the eyes of
stakeholders, lack of ability to grow, negative climate, and so on.

9.3 CHARACTERISTIC STAGES OF PLANNED CHANGE PROCESS
MANAGEMENT
So far, we have enumerated the characteristic stages of the different strategies.
Some of the common points between all change processes as well as the ways to
manage and conduct them can be summarized and detailed in the following
stages:
1. Preparation
2. Organization
3. Learning
4. Decision making
5. Implementation
6. Institutionalization
7. Testing and adjusting
8. Continuation of development
The following table details the necessary stages and steps:

STAGE MAIN CHARACTERISTIC RECOMMENDED ACTIVITIES
• Assessment of the situation.

• Worker and manager • Activating strategies in order to
preparation. develop awareness of the need for
Initiative of the manager to change and to arouse motivation.
change or awareness of the • Mobilizing the support and
manager of the need for commitment of relevant agents • Circulating maximal information.
change. inside and outside the • Utilizing strategies to lessen
organization. resistance: explanation,
Preparation
• Preparing necessary resources. association, one-on-one
• Decrease of pressure and conversations, involvement.
resistance.
• Forming a team and creating an

open climate of joint work toward
• Choosing the method. alleviating defensive processes.
• Organizing a leading team. • Displaying an optimistic approach.
Organization • Clear and operative definition of
• Preliminary plan.
• Preliminary plan. goals.
• Considering failure as an
inseparable part of the process.
• Learning new things: analytical

skills, possible solutions, problem
• Studying the problems or solving.
giving priority to studying • Diagnosing the maturity of the
possible solutions. organization for change.
• Determining what others do. • Identifying resistance.
Learning • Defining the goals of the • Identifying strengths and
change. weaknesses in the management of
• Defining the place we want to the change.
reach and how we want to be • Identifying the required type of
seen. change, its scope and its extent.
• Developing skills for giving and
receiving feedback.
• Choosing a solution or several

solutions.
• Overall definition of vision
and mission. • Formulating decisions.
• Redefining goals. • Making decisions.
Choice
• Deciding on where to start. • Involving workers in decisions that
concern them.
• Decision on implementation
methods.
• Preparing for implementation.
• Activating interdisciplinary • Emphasis on minor successes.

action teams. • Considering failure as a means to
Implementation • Learning new things. learn.
• Transition in stages to a new • Implementation of one aspect after
situation. the other.
• Reinforcing mechanisms and

skills.
• Activating assistance teams.
• Internal agents as the leaders • Maximal team participation by
of change. delegating authority and tasks.
Institutionalizing change
• Gaining external support. • Examination, evaluation,
• Change becomes permanent. coordination, and increasing
flexibility.
• Using tools such as encouragement
and rewards.
• Examining and evaluating • Developing precise examination

Evaluating results long-term objectives. and evaluation processes.
• Drawing conclusions and • Activating analytical skills and
renewed planning. drawing conclusions.
• Encouraging individuals and teams

• Introducing improvements and to proceed with the change
Continuation of the changes. processes.
development of the • Encouraging initiative and
• Organizational learning.
organization innovation and building a
• Institutionalizing change. supportive climate and reward
system.
Experience teaches that it is not possible to skip any stages due to the fact that
the consequence would be the need to go backward at an even higher price. For
example, unsatisfactory preparation of the process, or unsatisfactory explanation,
or lack of worker involvement will exacerbate resistance and the process will
revert. Therefore, when the organizational situation is not of crisis, introducing
change stage after stage and aspect after aspect is preferable, whereas in a
situation of crisis, where the dimension of time is important and awareness of the
need for change emerges, it is essential to carry out drastic change all at once.
Overall, it can be said that change management obliges setting goals or
objectives or a general futuristic picture without investing prolonged time
resources, channeling efforts for change toward a specific direction, and then
carrying out changes aspect after aspect.
One must remember that change management is not a onetime move. It isn’t a
repeated alternation process of one step forward followed by quiescence. It is a
continuous, nonstop, transformation process, sometimes faster and sometimes
not, sometimes in-depth and comprehensive, and sometimes focused and more
superficial, but always in a process of change nonetheless.

9.4 PLANNED CHANGE MANAGEMENT METHODS
The question of the manner in which change is managed is important in order for
it to succeed. Managing change can be done in several basic manners:
Method A. Change is managed by officials, but without changing the current
organizational structure, thus, meaning double roles. By this method, change is
managed and conducted by a selected team of officials, such as the CEO, the
human resources deputy director-general, and the COO. These people operate in
double roles: they continue to fulfill their formal tasks, and additionally, conduct
the process of change.
Method B. Change is managed and conducted by a parallel structure that is
established in order to manage the change, or, in other words, by removing
people from their positions – usually people at the level of senior management –
and reassigning them to managing change as their main task.
Method C. Change is managed by an external or internal project manager who
is recruited in order to implement change. The change is defined as a onetime
professional project, managed by a project manager.
Method D. Change is managed by an assorted team of management
representatives, committee delegates, and employee representatives from
different departments.
Each method has its advantages and disadvantages:

METHOD ADVANTAGES DISADVANTAGES
• Generates a heavy burden on the

managers.
• It doesn’t require any
• Danger that urgency will lead to
particular organization.
change.
• It highlights the importance
• Renders current management
of change.
Management by existing officials difficult.
• It doesn’t create conflicts
• No focus on change.
of interest.
• Difficulty to get help from
• It is good for prolonged
experts.
processes.
• Danger of dissolution of the
process.
• Requires removing able people

• Focuses solely on change. from their current activity.
• Makes use of resources of • Impairs day-to-day functioning.
time and money for • Generates conflicts with officials.
Moving officials from their regular change. • Generates cumbersomeness in the
roles toward managing change system.
• Focused responsibility.
• Choosing what is most • Takes responsibility away from
suitable. the CEO.
• Endangers the original positions
of outgoing officials.
• Dependence of the organization

• Professional with previous on knowledge and on the process.
experience. • Unfamiliarity with the
External project manager • Focused on a specific field. organization and its culture.
• Suitable for short-term • Learning and adaptation time
processes. necessary.
• Difficulty of authority.
• Facilitates gaining the

support of the workers. • Longer process.
Assorted steering team –
• Involves worker • Difficulty to establish a
management and worker
representatives. consolidated team.
representatives
• Provides a more global • Difficulty to establish consensus.
overview.
It appears that change management by steering teams, also being the senior team
of the organization, is more advantageous in comparison to the other methods.
This is due to the fact that this method generates the commitment of those who
must carry out the changes to their implementation. Separating change
management from current management is likely to entail nescience, lack of
understanding, and lack of commitment of management to carry out change. The
dominant rule here is:
• The more extensive, the more fundamental, and the more comprehensive
the change, the greater operative involvement senior management must be.
• As change becomes the essence of activity of the organization, the greater
operative involvement of senior management must be.
• In a learning organization, in flexible organizations in which change
constitutes their very existence, changes and their management are an
indispensable part of the management process.

9.5 DIAGNOSING THE ISSUES THAT CAN AFFECT THE SUCCESS
OF MANAGING THE PROCESS OF CHANGE
Studying the problems of the organization and its environment, defining these
problems, as well as searching for and examining solutions are not sufficient for
successful change management. Due to the complexity of the process, it is
important to identify the additional issues likely to assist or to delay the process.
Following are additional issues to study and diagnose:
Resistance: Assessing the intensity of resistance, recognizing who is resisting,
their impact on the process, and the characteristics of resistance. (For more
details, refer to the chapter on resistance to change.)
Support: Whether there is support coming from parent systems or support for
change. Whether the solution justifies the effort.
Who the object of change is: The individual, a work team, a department, a
section, the entire organization.
The degree of change required, extent of change: Whether the change
required is of first order or second order.
What we want to change: Whether it is clear to the managers of change what
they want to change: organizational structure, knowledge and qualifications,
relations, roles, etc.
The standpoint of the organization in the process of its growth: Whether
the organization is growing, whether it is at its peak, whether it is withering or
in crisis. What is its level of complexity, and determine whether it is time for
decentralization, for profit centers, and for downsizing.
Current leadership: Whether there is leadership committed to change
management over time.
Maturity for change: Whether the workers and the managers grasp the
importance of change, its goals, the need for it, and even its inevitability.
An example of a simple analysis tool of readiness and maturity of the

organization for change is represented below:
KEY FACTORS OF QUESTIONS TO ASSESS THE KEY FACTORS OF
SUCCESSFUL CHANGE SUCCESSFUL CHANGE AND THEIR IMPLEMENTATION
Do we have a leader …
• who is in charge of the change and who promotes it?
Conducting change (who is • who openly commits to its implementation?
responsible?) • who mobilizes the necessary resources to carry it out?
• who will dedicate his personal time and attention as required for
the completion of the change?
Do the workers …
• understand the reason for change?
Defining the joint need for
change (why implement it?) • understand why it is important?
• understand how to assist change in the short term and in the long
term, for themselves and for the business?
Do the workers …
• understand the consequences of the change in terms of behavior
(in other words, in terms of the transformation that will occur in
Creating vision (how will the their work as a result of the change?)
change be perceived at its
completion?) • have enthusiasm from the results emerging from the
implementation of the change?
• understand how the change will entail benefits for the customers
and for other stakeholders?
Do/Are the promoters of change …

• know who else should commit to the change in order to ensure
its implementation?
Mobilizing commitment (who • know how to crystallize coalition in order to support the change?
else should be involved?) • capable of mobilizing key people in the organization in order to
support the change?
• capable of preparing a matrix of distribution of responsibility for
the implementation of the change?
Do the promoters of change …

Adapting systems and structures • know how to relate the change to the other systems of human
(how must the change be resources such as staffing, training, evaluation, remuneration,
institutionalized?) structure, and communication?
• understand the repercussions of the change on the systems?
Do the promoters of change …

Monitoring progress (how can • hold the means to measure the success of change?
progress be measured?) • plan to measure progress regarding the results of the change and
regarding the process of its implementation?
Do/Did the promoters of change …

• know what the first steps are?
Ensuring longevity of change • prepare a short-term and long-term plan in order to focus
(how can it be set in motion and attention on the change?

• prepare a program to adjust the change as an obligation in
response to future needs?
• build upon minor, apparent, and immediate successes?
Do/Did the promoters of change …

• know where to initiate the change?
Flexibility of the process (where
• know which areas, which aspects, or which people are mature
to start and what if the business
and ready to be the first to move into the process?
gets stuck?)
• go from what is easy to what is burdensome?
• prepare case scenarios of stagnation?

9.6 TYPICAL DIFFICULTIES IN PLANNED CHANGE
MANAGEMENT
Change management demands understanding the characteristics of change
processes. This is in order to manage the process successfully and to mobilize
tools and processes in order to deal with difficulties. Below are the main
characteristics:
The process of change is dynamic, and it is permanent and cyclical. Periods

of conservatism and maintenance of what already exists are likely to be
destructive. Managers must implant this notion and ensure it becomes an integral
part of the organization’s culture. Success in the present does not guarantee
success in the future.
The process of organizational change first takes place in the hearts and
minds of the members of the organization. It takes place at all levels: in
consciousness, awareness, feelings, beliefs, and behavior. Therefore, it is
important to adopt strategies that are directed toward internal change. Change
imposed by superiors, organizational changes, or structural changes in which
personal change is not involved will not withstand. It would be “the same old
lady in a new dress.”
The process of change is complex and multidimensional. It occurs in different

organizational dimensions, it activates changes in close or distant fields, and it
sometimes entails unexpected results. Excess organization and
institutionalization of the process of change management may cause the entire
process to collapse. Minor change at the edges of the organization may set in
motion changes in different systems and may spread to the entire system. At
times, it is important to manage change from a relatively easy place, which will
entail changes in additional systems.
The process of change is achieved by people as individuals. Workers and

managers each relate to the process in a different manner, and one must relate to
each of them in a unique way. A collective and homogeneous attitude to

everyone leads to a waste of energy.
The process of change is an unclear and painful process. Despite the efforts
of management and planning, there will always be passages and aspects of
uncertainty and chaos. Prepare the members of the organization for situations
which have not been previously expected. Be ready for revelations and surprises.
The process of change implies personal change of those implicated, and

implies impact on those participating. Change is possible in different
dimensions: role, knowledge, position, status, etc.
The process of change can occur in various ways. There is no right way. Not
every model or solution which works in one place will work somewhere else.
Process and solution adjustment or establishment of solutions in accordance with
the needs of the organization is necessary.
The process of change includes stages related to one another in an unsteady

and nonlinear manner. It includes a preparation stage, a learning stage, a
planning stage, a decision stage, an implementation stage, and a monitoring
stage. In reality, an interfusion of the stages is possible, simultaneous operations
are possible, operations may repeat themselves, but it is essential that all stages
take place.
A prolonged and slow process of change entails exhaustion and loss of

energy. Such a process of gradual loss of energy and motivation leads to
disappointment, despair, and leads those supporting change to abandon the
system. It is advisable to avoid prolonged processes where the results are not
foreseeable. It is thus important to establish processes implying substantial short-
term achievements on the way toward the changes yearned for in the long term.
Failure in managing organizational change constitutes an additional

obstacle, particularly in the organization’s ability to change in the future. Failure
will remain in the organizational memory, and it reinforces resistance to any
other change. For this reason, it is so important to succeed and to create the
conditions for success.
Today’s solution is tomorrow’s problem. There are no long-lasting solutions.

What is considered as positive change today may be viewed as an obstacle
tomorrow. There are no summits to conquer, and nothing is guaranteed.
Everything is temporary. Make sure this is internalized by the members of the
organization.
Change management also implies the simultaneous management of the

current organization. The day-to-day functioning of the organization must not
be neglected. Paradoxically, allocating all the resources of the organization to
change management may entail its collapse.
Managing the process of change wears out whoever is implicated. A

prolonged and difficult process hastens burnout and exhaustion. Therefore, it is
necessary to pay attention and to reinforce people. Personal attention,
encouragement and support, support groups, vacation and rest are all
fundamental in order to maintain human energy.
A process of change implies ups and downs. There aren’t only successes, and
there isn’t only swift and continuous progress toward clear goals. The managers
of the process must be prepared for moments of crisis and low points, and they
must see in them a descent for the purpose of ascent. This is an opportunity for
self-examination and to examine the process in order to learn.
Anticipation of triumph and quiescence. Change managers quite often expect

to feel “fresh air” as soon as the longed-for change is achieved. However, when
they reach the longed-for solution, it will become evident to them that it is only
one step on the long and perpetual path of incessant changes. They will see that
“conquering the whole mountain” is nothing but “conquering one peak,” around
which are only visible other peaks and valleys, and there is but a brief moment
of elation. Prior awareness and internalization of the fact that organizational
change management is permanent and that there is no perpetual solution, but
rather moments, will lower expectations and prevent disappointment.
The process of change begins at the top. The success of organizational change
is conditioned by the commitment of senior management to the change and to its
leadership. Moreover, change begins with the managers changing themselves,
their work methods, their management style, and the personal example they set.
The tendency of managers to forward the central focus of the change to the
edges of the organization generally indicates their lack of willingness to change.

The following table displays a number of characteristics and difficulties, and
ways to deal with them:
CHARACTERISTIC DIFFICULTIES WAYS TO DEAL WITH THIS
• Accept the “difficult periods” with

patience, knowing that they will pass.
• Allow the workers to express their
negative feelings.
Periods of stagnation,
frustration, and lack of activity • Encourage and support the workers.
The process of are characterized by a sense of • Invite the workers to observe other
change is dynamic, stress and despair. organizations.
permanent, and Change as a permanent process • Organize social events for the team.
cyclical. causing the restlessness of the • Legitimize slowdown while setting
workers, a sense of uncertainty objectives for continuation.
and instability.
• Take advantage of momentum situations
and know when to let go.
• Encourage and motivate the workers in
times of stagnation.
• Prepare intellectual material for the

workers and situations where they can
study this material, such as lectures,
debates, and situation analyses, which will
amplify their knowledge and
The process of Excess emphasis on one aspect understanding of the field of change.
change takes place in at the expense of other aspects.
• Allow dialogue during general assemblies,
four aspects – Difficulty to move onto other in small groups, and different
consciousness, beliefs and values, difficulty to conversations between the workers, which
emotiveness, belief, change habits and to change will enable the worker to deal with his
and behavior. attitude. emotions and to understand where he
stands.
• Help the workers activate new situations
and behaviors, in both working and
learning contexts.
• Relate to workers individually and not as a

group of workers.
• Distinguish between the different workers:
1. Their level of willingness to carry out
Wrongful expectation that the process. 2. The extent of their
everyone understands, is willing, understanding of the change. 3. Their
The process of
and knows how to set change in ability to carry out change.
change is achieved by
motion, and is ready to
individuals. • Direct your expectations at the different
implement it altogether and at
workers in accordance with their stage of
the same pace.
professional development and their
different aptitudes.
• Adjust the change to the pace of progress
and to the style of the change.
• Separate your “personal me” from your

“professional me” and acknowledge
resistance deriving from loss of confidence
and from anxiety.
• Give legitimacy to hard and painful
feelings, calm the workers, support,
encourage, and reinforce them.
Loss of professional confidence, • Try to change your approach and
The process of anger, and behavior of
change is unclear and resistance. perception of change as an obstacle and see
painful. it as a challenge.
Lack of certitude. • Appease stress and assist.
• Be patient.
• Work on successes.
• Remember that it is inevitable but
temporary.
• Remember that any such process entails
personal and systemic growth.
• Increase open conversations, debates, and

analyses in order to investigate and clarify.
In every process of Loss of self-confidence and • Support and encourage individuals and
change, people also professional confidence, teams.
change. confusion, and fear. • Encourage expressions of feelings and
thoughts in order to develop awareness of
different states in which one can be.
The process of • Involve anyone implicated in the process

change directly or in accordance with the degree of impact on
indirectly affects each them, in decision making with regard to
and everyone the different stages in the process.
participating. • Distribute roles and decentralize authority.
• Evaluate the situation of your organization

Not every model suits every in all its aspects; decide where and by
organization, population, or which process to start.
The process of situation. • Plan the objectives for continuation.
change can occur in
various ways. Difficulty to adjust solutions to • Use your considered opinion in choosing
the particular characteristics of the adequate model.
the organization. • Adjust solutions to the unique situation of
your organization.
The process of
change includes Stages cannot be skipped, except • Identify the stage in which the organization
stages that are related in situations of acute crisis. finds itself and operate as required.
to one another in an The stages blend one into the • Plan the activities of the organization in

unsteady and other and sometimes overlap. characteristics of the different stages.
nonlinear manner.
The process of • Find ways to maintain energy by

change implies ups Prepare the leaders for this generating minor successes.
and downs and loss occurrence. • Work on several aspects at the same time
of energy. and go from easy to difficult.
• Implant this notion in the organization’s

culture.
Remember that there are no • Lower the expectations of the team and
Today’s solution is
comprehensive and perpetual those of the members of the organization.
tomorrow’s problem.
solutions. • Make sure not to excite the members of the
organization with comprehensive and
everlasting solutions.
• Dedicate time and resources for the

maintenance of the team in charge of
change.
Managing the process
Dealing with resistance and the • Maintain and protect the team members.
of change wears out
difficulties of others to change • Reward and encourage the team members
whoever is implicated
entails burnout and exhaustion. for successes, and don’t wait until the end
over time.
of the process.
• Allow gradual replacement after a certain
time.
• Prepare the process flawlessly.

Failure in managing • Adjust the process to the conditions of the
organizational change Watch out for failures; make organization.
leads to disbelief and sure the process comprises • Avoid massive and comprehensive
to difficulty to consecutive and prominent solutions which demand a great deal of
introduce change in minor successes. time for their preparation.
the future. • Disperse authority.
• Create a team of conductive leadership.
What else to do and not to do, and how to avoid failure

• Stages must not be skipped: the price to pay would be to revert to more
difficult conditions.
• Don’t go too fast: change demands internalization time and disengagement
from the old.
• The past should not be scorned or abolished: People have dedicated to it
their utmost strength. Put emphasis on its importance in accordance with its
time and relate to it with the respect it deserves.
• Constantly clarify, if possible, what is happening and what is about to
happen: excess incertitude will lead to resistance.
• Prepare the workers for the possibility of secession and prepare the
resources and processes in this manner.
• Pay attention to the state of energy in the process: loss of energy is a sign of
the beginning of cessation.
• Use positive approaches for encouragement and support rather than threats
and intimidation – the latter will arouse resistance.
• Display optimism and confidence in the future: one way or another, many
others will transmit pessimism in the organization.
• Start from what is easy and move toward what is difficult.
• Start from a place for which the solution is obvious.
• Start with the place that is more ready for change on a human aspect.
• Build upon minor successes in order to constantly instill energy and to
avoid desperation.
(Refer also to Spector 2009.)

Chapter 10
Managing Resistance to Change
10.1 INTRODUCTION
Quite often, organizational change gives rise to resistance among the members
of the organization. The reasons for this are numerous and miscellaneous:
rational, emotional, straightforward or concealed, active or passive.
Below are a few of these reasons:
• Fear of the unknown: the results of changes are not unquestionably known
in advance. Uncertainty entails resistance.
• Fear of loss of power, status, position, friends, and stance.
• Fear of loss of remuneration and various bonuses.
• Fear of losing one’s workplace.
• Fear of the need to learn and to devote time to acquiring new abilities.
• Distrust in the management of change, in the process, in the results, and in
the resources.
• Tendency to conformity and to sustain habits.
• Fear of loss of belief, values, and ideologies.
• Fear of loss of personal identity.
The issue of managing behavior appears to be a worn-out and much discussed

issue from a theoretical aspect and from a pragmatic aspect. Because of this, we
still witness repeated and recurrent failures in the management of change within
companies all over the world. Time after time we hear about failed change or
change that took place forcefully and, thus, confronted strong opposition.
What is there about change that makes it so difficult for us to accept it? Why is it
so difficult for managers to manage it? What is the right way to carry it out and

to assimilate it? In order to answer these questions, we must examine the
phenomenon from its various angles: psychological, sociological, managerial,
and organizational. Change management is a complex mission which demands
motivating people toward implementing the plans and ideas of others. This is
where the initial difficulty comes from. Most of us are ready and willing to carry
out changes which we have initiated ourselves, but we will oppose changes that
others will have initiated for us. “Change initiated by others constitutes a
threat; change that we have initiated constitutes a challenge.”
An interesting fact is that although managers today possess high academic
education and are business administration and management graduates, they fail,
time after time, in carrying out changes, or they carry them out the hard way.
Most changes taking place in the different sectors are carried out through
command, or as per professional jargon, “from top to bottom”: change is
enunciated by the manager or by management and is handed down as a task
instruction.
Kurt Lewin, one of the first social psychologists, studied the difficulty in change
and built a simple model based on three stages:
Unfreezing stage – at this stage it is necessary to prepare people and prepare the
grounds for change by way of explanation, training, participation, and
involvement of the workers in the thought processes of change.
Stage of change – the stage in which the change occurs.
Freezing stage – the stage in which change is firmly stabilized by rules and
regulations, redefinition of roles, etc.
The significance of this model is especially in the attention brought to the
unfreezing stage. It is difficult to carry out change without preparing people.
In Lewin’s time, there was very little preparation for change, and when it did, in
fact, take place, it was, in most cases, project-oriented change, or in other words,
change followed by its institutionalization, and so on, when there was an interval
between one change and another. Nowadays, the situation is different. The
environment has become global and competitive; technology urges fast changes,
and the changes themselves take a long time; they are carried out
simultaneously; they are sequential, revolutionary, and multifaceted. For this
reason, the role of managers is to train their workers in advance for such
changes.

10.2 THEORETICAL APPROACHES TO IDENTIFYING THE SOURCE
OF RESISTANCE TO CHANGE
FIRST APPROACH: THE RATIONAL APPROACH

Many managers implicitly assume that the workers are logical and rational
people, meaning that they consider each change from its logical standpoint. Such
considerations examine the advantages and disadvantages for the worker, or in
common language, the worker immediately seeks “What’s in it for me?” in such
changes, or, “What will I gain and what will I lose?” Generally, the worker tends
to exaggerate the price he will have to pay and underrates the benefit he could
gain from the change, and all this in order to remain in the current situation. The
rational approach also supposes that the worker is opposed to change due to the
lack of logic of the change. In other words, the worker doesn’t grasp the reason
for change or its benefits. He believes that the leader of the change is unreliable,
that his motives are impure, and that the process is not right, etc. This approach
assumes that people make choices based on logical considerations.
The worker uses his common sense and knowledge to examine and assess the
change, meaning that he looks for information, facts, and data in order to
examine the change, as well as the advantages and disadvantages it implies for
himself.
What is a managerial inference of this approach?

Explain the “why,” the “how,” and the goal. It means appealing to the common
sense of the worker and to his sense of logic, through explanation, actions of
“selling” change, and proving its requisiteness; providing data on the state of the
organization, on its difficulties, and on the situation following the planned
change. Explanation highlights the logic within the change, its significance to
the organization and its future, and its benefits for the worker. The expertise
required here is mastery of persuasion and selling. The cynics among managers
will adopt persuasion and selling methods to embellish and exaggerate the
advantages of the change facing the current situation and will underrate or ignore
its disadvantages and difficulties.
Without a doubt, Israel’s former minister of finance, Benjamin Netanyahu, is a
master in the practice of such a method and employed it in order to implant
structural changes in the economy. Netanyahu, who operated in such a method
of emphasis on advantages and successes, embellishing them, on the one hand,
and ignoring shortcomings and the many difficulties implied in the change, on
the other hand, was a symbol of change management in such a method.
It is, however, important to remind everyone managing change of the fact that
the explanation and selling method, as brilliant as it may be, by itself, does not
have within its power the ability to entail cooperation and acceptance of the
process of change. Explanation is the most superficial way to make people
internalize the need for change; its impact is superficial and ephemeral, and it
doesn’t conquer the hearts of people for a long time.

SECOND APPROACH: THE PATTERNS APPROACH AND A SENSE OF UNCERTAINTY
The approach on patterns supposes that most people are fixated within patterns
which they acquired throughout their lives in the process of socialization. Such
patterns entail the occurrence of conceptual fixation, on the one hand, and the
ability to function in everyday life on the other hand. These patterns are based on
a hierarchy: patterns of belief and concealed basic premises and values. Those
are the most profound patterns, and they determine our perceptions and our
reality; they lay out the foundations of the logic in our behavior. The second
pattern consists of our thought patterns: how we perceive the world and how we
solve problems.
The third pattern consists of behavioral patterns. Based on this are our day-to-
day habits and the behaviors deriving from our beliefs and our ways of thinking.
Our behavioral patterns enable us to function in our everyday life: they are the
ones to generate logic and order for us; they are the reason for the stability in our
lives; they induce our sense of security; and they guide our behavior.
Each and every one of us has hidden beliefs and premises, even if he is not
religious: how to succeed in life, the nature of people, the character of men
versus that of women, who is a good worker, what motivates the workers, etc.
We act within and in accordance with such premises. Our patterns were created
in this manner throughout our entire lives, and often quite painfully, years of
learning and experiencing were dedicated to these patterns. Famous researcher
Thomas Kuhn coined these patterns “paradigms,” and he claimed that they don’t
solely exist within each and every one of us, but also in each and every
organization. According to his claims, organizations also have patterns of
thought, beliefs, secret basic premises, and values that enable their members to
function accordingly and to identify with the organization. From this standpoint,
each change consists of change in concealed basic premises, in beliefs, in ways
of thinking, and finally, in our operational habits. Change implies stepping out of
the security zone, of order and old logic, and going toward a new situation of
uncertainty, insecurity, and chaos. This is similar to the process of migration
from one country to another: abandoning a complete set of beliefs, values,
norms, culture, and life habits – and transitioning to a country in which life
patterns are completely different. States of lack of orientation entail feelings of
uncertainty and resistance.
This is especially the case for ideology-based organizations. In this case, the
basis of belief is the strongest barrier facing change. There is no room here for
rational explanation or for persuasion and selling, which don’t get down to brass
tacks. Here, we are talking about dealing with belief – new paradigm versus old
paradigm; originating an alternative approach on belief, and gaining support to
leadership processes.
Ideologies don’t always rise and fall by the force of violent revolutions, but
rather by gathering believers, partners in the new faith, through a process of
peaceful leadership. Organizations also change beliefs and perceptions: from
focus on the product to focus on the customer, from focus on the organization
and its profit to focus on the environment and on the community.

From the standpoint of change management and decrease in resistance, it also
implies focus on changing uncertainty to certainty; in other words, formulating a
clear, alternative paradigm. Workers who will have detailed knowledge about
what is expected of them in the process of change will be less resistant to it, and
their fear and apprehension facing it will decrease. Transitioning from job to job,
task to task, and from place to place – these will result in strong resistance
without sufficient prior preparation and sufficient familiarity with the new
situation. It is easier to move from one country to another when one already
knows the language, when the workplace is assured, and living accommodations
are set up in advance.
In terms of organizational change – it is easier to go from one situation to the
next when the new situation is known and less amorphous.
The transition from one workplace to another, from one job to another, from one
place to another – all these transitional changes can be easier to experience once
we are prepared and know the new place.

THIRD APPROACH: THE APPROACH OF “OWNERSHIP” OF CHANGE
This approach, of the school of thought of humanistic psychologists and those of
interpersonal relations, claims that people are committed to ideas, initiatives, and
actions when they themselves have participated in their conception. “Change
that we initiate constitutes a challenge for us, and change that others initiate
always constitutes a threat to us.” This approach attracted many supporters,
both in its theoretic research and in its everyday life investigation. Most research
shows that worker participation and involvement in decisions regarding their
future or their job leads to an increase in their commitment to carry out such
decisions. The latest research shows that the more the worker feels that he is
involved and participates in the process and in decisions regarding him in the
change, the less he will resist the change, and the more he will support it.
Consultants, deputy managers, and others know that in order for your supervisor
to accept an idea that you have formulated, it is necessary to act in such a
manner that he will think that he is the one who actually came up with the idea.
The research illustrates that, indeed, changes imposed from the top without
worker participation or involvement will encounter resistance and attempts to
impede them. However, the reality shows that many managers of many
organizations still utilize the approach of imposing change as an order from the
top. It seems that in situations of economic recession or unemployment – the
workers are afraid to resist lest they be dismissed, and, thus, prefer to bite their
tongues, to whine quietly to themselves, and to carry out the change against their
will. The consequence is introducing change at the cost of embittered workers,
who will wait for the first opportunity to get back at their managers.
The following model shows the link between the degree of participation of the
workers in the process of change and the impact this has on them and on their
attitudes, on their commitment to the change, and on the extent of such
commitment. Divulging information has little impact on the attitude of the
workers as it consists of a low level of association, which is related especially to
commitment to change on the condition that it “will give me something.”

THE LINK BETWEEN THE DEGREE OF PARTICIPATION AND THE DEGREE OF
COMMITMENT TO THE PROCESS OF CHANCE
All in all, it can be said that the more the change directly concerns a certain
group within the organization, the more involved this group must be in the
process. Moreover, it is preferable that this group carry out the change rather
than an external team. Involving workers in the process doesn’t only serve for
the establishment of commitment to the process and to solutions, but also for its
simple pragmatic value. Today’s workers generally possess knowledge and
expertise in their field of business, and it is, therefore, advisable to take their
opinions and suggestions into consideration regarding changes directly
concerning them.

From a managerial standpoint, the message is clear, however, time-demanding
and difficult to put into practice due to the involvement, or lack thereof, of the
workers in the process of change. The genuine significance of the participation
of the workers in the process, as well as the great difficulty to adopt this
approach, is their involvement the entire way, from its beginning to its end, and
their participation in all the stages:
• Diagnosing and defining the problem.
• Determining the goals of the change.
• Bringing to light directions regarding possible solutions.
• Choosing the solution.
• Choosing the leading team.
• Choosing the process and the method.
• Implementing.
• Monitoring and adjusting.
In day-to-day reality, workers are involved in the process of change only in its
final stages, but it seems that it is too low a level of involvement. If this is the
case, what can be done?
First of all, where fierce resistance occurs, the leaders of such resistance who are
likely to hinder the change should be involved in each process, and it is
preferable to incorporate them in the leading team. Things that we can see from
here (conducting change) we cannot see from there (the attitude of the workers).
Second, the workers must be involved as much as possible in every process,
even if this is done by their representatives, or by keeping the workers informed
and by using explanation from the beginning of the process. In a small
organization, a complete process of worker involvement can be established. The
time required to involve the workers will only be saved at the cost of failure of
the change if it is imposed upon the workers.
The approach of ownership of change implies a different method regarding the
process of change. Instead of carrying out each change in a “from top to bottom”
method, it is necessary to go by the opposite method, “from bottom to top.” With
such a method, the managers of the organization enable the workers and the
teams of workers to formulate ideas for change, improvement, and innovation;
they encourage them to plan and to manage these ideas and to include
management in their implementation. Such a reversed process of change will
enable managers to sense what their workers feel on a daily basis.
Ideas for improvement voiced by the workers are not new. Quality circles,
quality teams, and learning organizations, among others, were put into practice
in many organizations. However, they are delimited by what is permitted and
what is prohibited, and they focus more on improvements rather than on
significant changes. They are centered, efficient, controlled, and organized by
the top. The time has come to break out and to be more daring. Today’s workers
are aware of the problems of the organization. They are familiar with them, and
they have ideas on how to make it better. Empowering workers still remains only
as a theory in the daily standard of living of many organizations; however, the
fast processes of change required nowadays convey this as a real-life notion.

FOURTH APPROACH: PSYCHOBIOLOGICAL APPROACH
This approach focuses on the human nature of people and their emotions in
terms of negative sentiments and feelings accompanying the processes of
change. Unlike the other approaches, this approach assumes that human nature is
shaped in periods of stability, and that most of the life of the rational human
being was spent in tribal life and in the practice of hunting. It has been claimed
that human beings have lived on earth for several million years (some say 2.5,
others say 4.5), and during all those years, changes did not all occur in the course
of life of only one single individual. The experiences he went through were
related to threats and natural catastrophes which occurred suddenly and did not
permit prior preparation; therefore, there is something natural and biological in
human behavior seeing threat in change or in the awareness of change. The
biological process takes place in the following order:
1. Awareness of expected change awakens an animal instinct as warning
against danger.
2. At the second stage, feelings of fear, anxiety, and incertitude are awakened.
3. At the third stage, the brain comes into activity and a thought process on
how to prevent harm begins.
4. At the fourth stage, the action of hindering and preventing change takes
place.
The uniqueness of this approach is in the diminished space for rationality in the
process of change and understanding the source of resistance. Indeed, part of the
important choices in the lives of human beings, such as choosing a life partner,
friendships, and a place to live, among others, are based more on feelings than
on logic. This approach highlights the fact that all change management and
resistance management methods rely on the common sense and logic of workers.
However, paradoxically, relying on common sense and logic only intensifies
fear, shock, and a sense of uncertainty.
Research has shown that a process of change is similar to a process of coming
out of mourning:
• Disregard and repression – the change will not be carried out by itself.
• Shock and dismay – the change is about to be carried out.
• Anger and fury – why weren’t we involved?!
• Fear and anxiety for the future – what will happen to me?
• Self-pity and nostalgia – where have the glory days gone …?
If there is no personal attention or aid from the outside assisting the individual in
disengaging from the old, he is likely to get stuck in a state of self-pity, to blame
external factors for such a situation, and to remain in a state of continuous
mourning. All changes demand that the individual disengage from what is old,
and such a separation is essentially emotional and painful. In order to go through
with it, the individual needs a comforting, loving, and empathetic hand, and that
is the skill required from managers who set significant changes in motion in their
organizations. Moreover, the feelings of workers which have not been responded
to from the beginning are likely to become negative. What begins as fear and
uncertainty will become anger, fury, and violent outbursts if they are not taken
care of as soon as possible.
It can be said that resistance to change is characterized by deep and intense

emotional manifestations. However, emotional expression is generally concealed
by rational expression. Workers who resist against change will express their
anger or their anguish on seemingly rational grounds, but all logical explanation
that will be provided by management will not appease their minds. It is, in fact,
the opposite: The more the manager persists in his attempts to explain the
benefits of change, the more the anger, the anxiety, and even the aggressiveness
of the workers is intensified. Only allowing the expression of feelings and
sensations and creating conditions for rational explanation will appease their
minds. It is important to remember that people in states of anguish are not open
to learning new things.
Negative feelings that have not been responded to or that have not been taken
care of only become increasingly difficult to deal with during the process of
change:
• Fear and uncertainty
• State of anger and outward outbursts
• Frustration and taking anger out on oneself
• Frustration, state of helplessness, and misery
• State of nostalgia and search for “those glorious days”
• Apathy or lingering embitterment
• The consequence is that the worker is embittered, frustrated, morose, and
lacks motivation and energy.
The transition from phase to phase occurs when the previous stage has not been
responded to or taken care of as required.
(On emotional resistance, refer to Doorewaard 2003.)

The managerial inference to this approach is clear – change management must
include attention to the emotions and feelings of the workers. As a matter of fact,
in such difficult moments, the workers need to express their emotions; they are
in need of an attentive ear and a comforting and empathetic hand. The belief of
managers that through explanation it will be possible to obtain the willingness of
workers for change doesn’t prove itself to be effective, and certainly not when it
is the only way to manage resistance. In fact, explaining change may increase
apprehension and fear, rather than reduce them. In a lecture given by the
manager of a large company on a change that he was about to introduce in the
company, all his middle managers attended. As the lecture went on, shock and
speechlessness, as well as panic and fear for an unclear future, gradually
increased. The only way for the management teams to deal with shock, fear, and
feelings of uncertainty was to establish the team as a supportive team, which
would meet once a week with a social worker in order to emotionally deal with
the expected change.
In the past few years, the managerial approach to emotions has been gaining
more ground. Daniel Goleman’s research on successful managers indicates the
importance of emotional intelligence in motivating the workers. Bass and
Avolio’s research on transformational leadership also highlights the importance
of the emotional side in leading people to excellence and to durable change. The
evacuees of Gush Katif lacked the embracing arms of Israel’s leadership, but
nonetheless, the latter did enable their quiet departure from their houses due to
the fact that the evacuation was performed by soldiers and the police force,
which learned how to relate to the pain of the evacuees. It is the duty of the team
manager and department manager to relate to their workers individually, to
reveal empathy and attentiveness to their distress, and to reach out to them with
open, comforting, and protective arms. Teams that are open to support and to
discussion can also be useful.

FIFTH APPROACH: THE APPROACH OF RESISTANCE AS A MANIFESTATION OF
PERSONAL BARRIERS
This approach sees in resistance the expression of barrier mechanisms of the
individual – his beliefs, his personality, his culture, etc.
Barriers of perception: perception of the reality as black or white, perception

of problems in a limited way, perception of reality as based on stability and
order, perception of permanence, perception of slow development.
Emotional barriers: fear of taking risks, tendency to be judgmental, lack of

patience, apprehension of uncertainty, fear of any change.
Cultural barriers: prohibitions (taboos), values and norms supporting stability

and order, clinging to tradition, to rituals, and to symbols related to the past.
Cognitive barriers: excessive use of rational thinking, using research and

surveys as the main way to solve problems, scorn for intuition and imagination.
Learning barriers: fear of new and threatening information and abstention from
it, limited communicative ability, learning as gathering knowledge, lack of
ability to “learn how to learn,” difficulty to absorb information contradicting
current perceptions, difficulty to get out of current paradigms.

Not all the workers are cut out from the same cloth. Not everyone is resistant,
and not everyone is resistant for the same reason. It is, therefore, up to the team
manager to optimally analyze and observe what the source of resistance of each
worker in the team is, and to relate to it accordingly.

10.3 DIMENSIONS OF RESISTANCE
Analysis according to depth and intensity of resistance
The different patterns generating resistance can also be characterized according
to the dimension of depth:
Dimension of depth of resistance in its different levels: beliefs, emotions,
thoughts, behaviors.
Dimension of beliefs: This is the deepest dimension of resistance. Change in

mission and vision, change in organizational ideology, and change in corporate
culture all affect the deepest levels within the members of the organization. This
dimension consists of a significant part of the identification of the members of
the organization, and, therefore, resistance to this type of change is the most
intense. The more significant the importance of the organization’s ideology, the
more intense resistance of this sort will be.
Dimension of emotions: Resistance to change emerges as a result of what is

perceived as aggrieving patterns of affinity, identification, friendship, and
belonging. In this case, its expression is especially emotional, and it is
manifested as negative feelings, part of which are revealed, and part of which are
concealed; part of which are directed outward, and part of which are directed
inward: fear, uncertainty, anger, grief, introversion, self-pity, nostalgia,
aggression, frustration, restlessness, etc. This level, though not as deep as the
previous one, is still profound and difficult to deal with because it cannot be
dealt with through explanation and persuasion. (For more on the standpoint of
emotions in the process of change, refer to: Kübler-Ross 1969.)
Dimension of thoughts and understanding: This is the cognitive dimension.

The change negatively affects the customary patterns of thought and logic.
Resistance comes from rational grounds.
The change is perceived as an erroneous, misleading, and negative process that
doesn’t lead toward success. Resistance is against the method, the solutions, and
the way problems are defined. The change is perceived as wastage and
disadvantageous for the workers, who try to delay it through seemingly logical
arguments.
Dimension of behaviors: Resistance to change emerges as a result of what is
perceived as negatively affecting behavior and habits. Resistance is manifested
by behavior causing the change to fail. This behavior may be legitimate or
illegitimate: strikes, protest rallies, demonstrations, acts of violence, etc.
Resistance can also bear the character of passive behavior, such as: breaking
contact, withholding information, noncooperation, and deliberate indifference.
The division according to dimension of depth is somewhat artificial. In most

cases, there is a link between the different levels, and resistance can appear
simultaneously in several dimensions. Nonetheless, it can be said that resistance
emerging from change in organizational ideology will result in resistance at all
levels: emotional, cognitive, and behavioral. In this manner, it consists of the
most difficult resistance to deal with. All in all, resistance at one specific level
will lead to resistance at the levels below. As far as the intensity of resistance
goes, it seems that the more resistance originates from belief and ideology, the
stronger and the more severe overall resistance will be.
A slightly different approach on the depth of resistance and the source of its
strength comes from Abraham Maslow’s model.
According to this model, there is a hierarchy of human needs. There are low-
level and basic needs, and there are high-level needs. When a low-level need is
adequately satisfied, the need right above it is awakened. Below is a
categorization of needs according to Maslow:
1. Physical needs: hunger, thirst, and sex.
2. Safety needs: security of existence, source of sustenance, physical security.
3. Social belonging needs: need of love, receiving support, friendship, and
identification.
4. Needs for respect: need for acknowledgement, status, respect, and esteem.
5. Needs for personal fulfillment: need of personal expression, realization of
abilities and aptitudes, fulfilling personal goals.
According to this model, resistance to change comes from what is perceived as

affecting the ability to satisfy human needs. The more lower-level needs and
more basic needs are perceived as negatively affected, the more intense the
resistance. Change that is perceived as a threat to the workplace, a threat of
dismissal, or a threat to salary will result in severe resistance. When the change
does not affect the ability of the worker to satisfy basic needs, resistance will not
be as tough. Workers will stop a factory from operating if their salary or their
work conditions are negatively affected.

Managers must know and expect that negatively affecting the lower levels of
needs will generate obvious and violent resistance.
Reducing wages or degrading work conditions are likely to result in strikes or in
a prolonged violent struggle. Workers who have an alternative job or fair
compensation that will satisfy their basic needs will tend to resist change less. It
is, therefore, important that managers make use of all the possible available ways
at their disposal to manage the different types of resistance detailed so far. Of
course, prior adequate preparation for termination of employment and providing
the necessary tools and options to reasonably find an alternative job may
facilitate the acceptance of the change by the ones forced to leave the
organization.
Regarding change which implies affecting beliefs and values, it is possible to

deal with such resistance only by way of leadership and, thus, setting alternative
beliefs and vision to replace the existing ones, including new values. Moreover,
it is important to make the efforts to appreciate and glorify past beliefs and their
relevance in terms of the past. It cannot be said that what was in the past is no
longer relevant, but rather, what is relevant out of past perceptions is to be taken
and combined with the new vision and beliefs. New ideology which is
intertwined with past ideology and respect for the past can even slightly facilitate
leaving behind old beliefs. Determination and belief in the justice of new
perceptions are required. If indeed the new way proves to be better and
especially more meaningful, change of perception toward the new one will
occur.
Analysis of resistance based on the dimension of time

Another analysis model is the one categorizing the different types of resistance
according to their dimensions – emotional, cognitive, and behavioral, as well as
the dimension of time. Based on this model, resistance can be categorized
according to its past, present, and future orientation:
• Resistance deriving from a positive approach toward the past – values,

attitudes, self-image, personal identification, investing in the past, threat on
worldview, difficulty to disengage from paradigms.
• Resistance deriving from a present approach – distrust in the process, in the
ability to carry it out, unfairness, undermining position, role, power, and
influence; desire to influence and to participate in the process.
• Resistance emerging from a future approach – assessment of the results of
change, of verifiability, anxiety, and fear of change in roles and positions
within the organization.
According to this model, the most severe resistance to change derives from the
approach on the past. The past is the source of identity, the source of a world of
values and personal identity. It is, thus, the most difficult to deal with.
Resistance deriving from the present requires actions of explanation, persuasion,
and clarification of the advantages of the change. Such action is irrelevant for
dealing with resistance deriving from the past.

EXPRESSION OF RESISTANCE
Resistance can be categorized according to additional dimensions:
1. Passive resistance versus active resistance
A worker can resist against change through passive behavior, such as
noncooperation, deliberate indifference, lack of motivation, abstention from
initiative, etc. He can otherwise operate actively by writing articles, mobilizing
the media, strikes, protests, appealing to court, obvious sabotage in the
organization, etc.
2. Straightforward resistance versus concealed resistance

The worker can operate against change in a straightforward or concealed
manner. Concealed resistance includes, among other things, acting “behind the
backs” of managers, concealed political action, acting incognito, surreptitious
mobilization of the resistance of others, etc. Straightforward resistance can
include all resistance which at first sight seems to be clearly displayed.

It appears that it is preferable for change managers to deal with straightforward
resistance rather than with concealed resistance, or active resistance rather than
passive resistance inasmuch as what is visible to the eye is easier to take care of
and to deal with. It is, therefore, preferable to make concealed resistance become
straightforward resistance, through discussion and diagnosis.
Resistance as an expression of support to change

A different approach to resistance to change is the perception of resistance as
an expression of support to it. The starting point is that the members of the
organization quite often understand in their heart of hearts that without change,
their organization, the source of their livelihood, is likely to collapse. Workers
today are conscious and sense the world revolving around them. They grew up in
a period of time when changes, innovation, and surprises were a matter of
routine. They see and feel, along with the managers or the heads of the
organization, the problems and the dangers, and they are aware of the need for
change. The different expressions of resistance are, in fact, expressions of
support:
• Expression of desire to actively take part in the process.
Expression of desire to influence, to utter opinions, suggestions, and
•
solutions.
• Willingness to format life themselves.
• Demonstrating interest in the workplace.
• Concern for the future of workplace and livelihood.
• Feeling that we know better than others what needs to be done and what can
be done.
Perceiving resistance as an expression of willingness to influence and to

participate allows a positive approach for managers and displays
understanding toward resistance. Rather than adopting opposite steps,
threats, and coercion, it is preferable to make use of such manifestation of
resistance as an impetus to support change. This is done through actively
incorporating the ones resisting in the process. The managers who strive for
successful organizational change must involve the workers in all of the
stages of the process, not as passive pupils, but as adults able to genuinely
contribute to the substance of change and to the method for its execution.
Organizational factors influencing resistance

The nature of change and the nature of the organization have impact on the
degree of resistance. In public organizations or in ideological organizations, in
social movements, in nonprofit organizations, or in nonbusiness and
noncompeting organizations, resistance to change will be much greater than in
business organizations. The reason for this is simple: There are no factors that
force them to change. As long as the parent organization continues to infuse cash
or as long as there are budgets enabling their existence, mechanisms activating
change are not generated. Managers who initiated change in order to improve
efficiency will encounter fierce opposition, all the more so regarding more
extensive changes.

10.4 IDENTIFYING RESISTANCE AND OPPONENTS TO CHANGE
In any process of change, there will be workers and managers at different levels
of support or resistance to the process. It is of crucial importance to diagnose the
different teams (or the individuals) based on their support or their resistance to
the process, as well as the sources of their resistance. This is in order to enable
change managers to deal with this occurrence at the beginning of the process and
throughout its entire course. To put off dealing with the resistance or to ignore it
will cause the ones who resist to act at the right time and to wait for the right
moment to put a stop to the process.
Diagnosis will include the following things:

• Identifying the different teams and people according to their degree of
support and resistance.
• Identifying the number of people in the different teams.
• Analyzing the quality of the ones resisting, their influence, especially of the
strong ones, on the other members of the organization and on the success of
the process of change.
• Identifying the reasons for resistance and its source.
• Identifying concealed resistance.
The following diagram shows the distribution of the members of the

organization according to the extent of their support to change. (diagram 7)

It is advisable to actively incorporate in the process of change the fierce
opponents who can have impact on the success or the failure of the process and
who are necessary to the continuation of the functioning of the organization,
whether these opponents are straightforward or concealed. Experience indicates
that their incorporation reflects their desire to have impact on the process; it
generates a positive approach regarding change, and in any case, their resistance
comes out in the open and is, thus, possible to deal with.

It is especially essential to identify and incorporate the one or the ones resisting,
who can cause the change to fail due to their political power or due to their
indispensability in the success of change, either because of the existing
information in their possession or because of their role. “Things that can be seen
from there cannot be seen from here,” meaning that in conducting change, a
broader approach is necessarily required, as applies to government leaders who
become more moderate in their positions, in comparison with others who present
themselves as members of the opposition.
diagram 7

10.5 SUMMARY: WAYS TO DEAL WITH RESISTANCE
Preventive approach method. The first and most basic way to deal with
resistance is with the preventive approach. Corporate culture, organizational
climate, as well as organizational values and norms perceiving change as a
natural part of the life of a successful organization must be generated. Managers
must assimilate to the corporate culture the importance of fast change,
innovation, creativity, risk taking, and fearlessness to reach new situations, and
they must reward behavior correspondingly. Furthermore, acceptance alone of
the need for constant change isn’t enough; it is also important to take pleasure in
change. In other words, rather than seeing only necessity in change, it can be
seen as a challenge, dynamism, experience, and a source of pride. Organizations
will, thus, succeed in mobilizing workers able to enjoy innovation and changes
and will be able to operate in obscure and vague situations.
Managers must therefore act as coaches, ensuring the workers internalize the
belief that fast change is the best way to succeed in an open, global, and
competitive world, that change is a permanent process, sometimes minor and
sometimes major, sometimes clear and sometimes ambiguous, and its results
sometimes expected and sometimes not. They must ensure their workers
assimilate the conception that change is not a repeated alternation of one step
forward followed by quiescence, but rather a permanent, dynamic flow.
Accepting change as a natural process will make it easier for all the members of
the organization to successfully deal with their competitors and to generate an
advantage of flexibility. Originating a corporate culture of change, dynamism,
innovation, and creativity implies establishing a system of supportive reward,
elaborating rituals and symbols, legends of success, heroes of change, values and
norms entailing a culture of change and innovation.
A slightly different approach is that of the learning organization. Peter Senge
(1994) suggests, in his book The Fifth Discipline, to continuously engage in
examining the basic premises that guide the activity of the organization and to
change such premises through joint learning. He highlights the importance of
learning and drawing conclusions as a means for continual change.
In the complex reality, organizations and managers will find themselves

conducting change without the prior support of their workers and without a
culture of change. These managers make use of the following methods to
deal with resistance:
1. Explanation and public relations:

Making use of a variety of different tools and means of communication in order
to explain and persuade; preparing the workers and training people by means of
data about the company and its difficulties; enabling a positive approach on the
process and its results; detailed explanation on the process, the method, and the
goals; emphasis on the advantages and benefits for everyone; implicit threat on
what would happen if we do not change; using data and experts to represent the
objective reality.
2. Participation and involvement:

Involving the workers as much as possible in the entire process of change;
incorporating the workers in teams conducting and implementing change;
allowing the workers to participate in the process from beginning to end;
creating a favorable atmosphere for the participation and involvement of the
workers in the change.
3. Diminishing uncertainty:
Specifying the change and making it unquestionably certain; sharing information
and free communication; preparing workers for change and for its
implementation; detailed description of the characteristics of the change and its
future outlook regarding each worker; prior familiarization of each worker with
his role and his new position; personal approach with regards to reducing
uncertainty and clarifying each worker’s position in the change.
4. Attentiveness to feelings and displaying empathy:

Creating organized and involved teams in order to allow the members of the
organization to express their fears, frustrations, and different emotions and
responding to them; allowing many to voice their opinions and suggestions for
change; identifying workers in states of anxiety and lack of functioning;
displaying empathy toward the feelings of the workers; one-on-one conversation
with the team manager; establishing trust and loyalty with the workers.

PROBLEMATIC APPROACHES TO MANAGING RESISTANCE
1. Distribution of bonuses and rewards: Compensation in exchange for
agreeing to move into the process; salary and bonus supplement before, during,
and at the end of the process; gratitude, praise, and use of prestige and status
benefits for those mobilized in the process as well as for supporters; assurance of
material rewards, bonuses, and promotions for supporters. This approach is
problematic because it creates a precedent based on the fact that workers agree
to changes only if they are rewarded.
2. Coercion and punishment: Straightforward punishment (suspension,
dismissals); concealed punishment (transfer, delay in promotion); enforcing
orders and regulations; use of threats and intimidation; use of formal authority to
carry out change without consulting with the workers or without involving them.
3. Belligerence and politics: Using manipulation, techniques of divide and rule,
generating crisis; use of give-and-take techniques, bringing allies close and
dismissing adversaries.
4. First we’ll change, and then we’ll explain: Quite often, managers introduce
new information systems or technologies without involving the workers and
without informing them. Their assumption is that the workers will adapt to the
change through lack of choice in the matter and will cooperate. The consequence
is that the workers will do everything in their power not to cooperate or to cause
the system to fail.
There is a common denominator to all these methods: they create a dangerous

precedent which entails a difficult atmosphere, distrust, anger, embitterment, and
desire to leave.
Advantages and disadvantages of these methods and the ways to use them
In order to deal with profound changes, second-order changes, changes that
arouses severe resistance coming from the past, resistance due to an offense
against beliefs, ideology, and values, it is necessary to adopt a personal approach
and to allow participation and involvement, methods enabling the workers to
voice their feelings, their fears, grief, nostalgia, and frustrations. It is necessary
to make use of discussion groups in which the climate is receptive and open,
enabling free expression of emotions, especially to mourn the past and disengage
from it. It is important to show respect for the past and to establish rituals of
disengagement and homage toward it. It is also important to find the connection
between the past and the future and put emphasis on this connection. It is
important to incorporate the good and customary things of the past in the change
program and to highlight them.
The use of discussion groups is also important in order to deal with resistance in
which deep feelings of anger, fear, and frustration emerge. Small discussion
groups in which the climate is of openness and receptiveness enable free
expression and a sense of attentiveness and understanding of needs and
emotions.
It is important to remember that the use of methods of explanation and public

relations is not efficient when people are in a state of fear and defensiveness.
Relying on common sense and reasoning doesn’t work either in the case of
tempestuous emotions preventing attentiveness and learning. Moreover, in
states of fear, tension, and anger, the use of explanation techniques can only
intensify resistance. The workers will perceive this as manipulation or
irrelevant utterances.
Nonetheless, the use of processes of involvement and attentiveness as a way to

diminish resistance is also disadvantageous. Such processes are time-consuming
and demand the prior preparation of the ones leading the discussion, as well as
the ability of attentiveness, receptiveness, and taking the opinions of the workers
into consideration. Any attempt to skip such processes is likely to impede the
introduction and implementation of change to reach the desired results, and even
entail endless new problems.
Explanation and public relations techniques in small groups or in large forums

have proved to be efficient in dealing with first-order changes, changes arousing
resistance deriving from the present. Resistance of the workers related to the
process and to the suggested solutions can be dealt with on rational grounds.
Here too it is important to involve the workers both in the process and in the
establishment of solutions. The more involved they are, the more they identify
and are committed to the change. The explanation must include clarifications of
the reasons for change, its goals, its management methods, the method enabling
each one to be able to take part in the process, and especially how each one will
benefit from the change. Expected difficulties, as well as the fact that the change
requires the involvement of everyone in the process, are not to be concealed.

Approaches of threats and intimidation, use of political manipulation,
punishment, or the stick-and-the-carrot method – all of these may prove to be
useful in the short term, but in the long term, they will result in more loss than
benefit. Such approaches gradually become part of managerial culture, of the
managerial style, of communication, and of management itself, and in such
conditions the managers will struggle to build a system of work relations based
on trust in the long term. Moreover, such approaches are internalized in the
memory of the workers and in the assumption that change is a regular process in
organizations nowadays, and then later on in the life of the organization,
suspicion, dysfunctional behavior of “scratch my back and I’ll scratch yours,”
cliques, and centers of power will intensify. There is no discrepancy, nor can
there be, between corporate culture of change management and corporate culture
of day-to-day life; they blend into one another, and they are internalized among
the workers.
The dialogue approach is applicable to situations of conflict and deep gaps in

worldviews and in basic perceptions. It is bound to constant learning of genuine
attentiveness, the ability of maximal openness, the ability to be empathetic, and
the ability to get out of self-contemplation and to put oneself in the place of
another. It consists of slow and prolonged dialogue whose purpose is to generate
new shared insight. The method requires professional guidance, preliminary
learning, and time. From this perspective, the method is suitable for periods and
situations that enable a profound process of such sort. Ideological changes, basic
changes in ideological systems, bringing groups of opposed ideology together –
this is the type of conflict for which dialogue is an adequate method.
It is important to know that in reality, there is no clear separation between the

different types of resistance. Each person carries within a different combination
of the different types, but it is, however, possible to say that resistance generally
appears in rational forms of expression behind which intense emotions are
concealed. Workers and managers will bring forward endless reasons why there
is no need for change or why change is not advisable. Usually, fears and anxiety
are concealed behind such claims. It is, therefore, important to use techniques
that enable emotions to come out, management techniques respecting the
expression of emotions and honoring the past.
The ones who wish to introduce change are most likely to hear all kinds of
pretexts which are, in fact, a disguised expression of resistance. Preliminary use
of such pretexts by change managers are likely to reduce and to dull resistance.
Below are 25 excuses not to carry out change:
• We’ve tried this in the past; it won’t work.

• Our organization is different.
• It’s too expensive, too complicated, too big.
• We don’t have time for this; maybe when we’re more available.
• Our organization is too small for this.
• The workers’ committee will not agree to this.
• The workers will never agree to this.
• This change will increase overhead expenses.
• We’re actually in favor of change; we’ve always changed, but …
• It’s a good idea, but it’s unrealistic.
• We haven’t budgeted this.
• Let us sleep on it.
• Why change? Things work here, more or less.
• Where did you get such an idea from?
• Let’s establish a team to examine the idea.
• Has anybody else tried this before?
• He’s the one who’s going to teach us what to do here?
• It could work in another department, but not in mine.
• It’s impossible, impractical for us.
• We’ve heard that it doesn’t work for others.
• We don’t have the strength for changes; the only thing necessary here is …
• It will only get us into a mess.
• Tell us what the problems are and we’ll deal with them ourselves.
• This change will destroy us.
• We’re not opposed to it; we’re just not sure that it’s what we need.

10.6 EXAMPLE QUESTIONNAIRE
EXTENT OF SUPPORT OR
DIMENSION QUESTION NONSUPPORT OF THE
STATEMENT
Emotional
This change makes me feel anxious
resistance
This change makes me feel anger
This change makes me feel uncertain
This change gives me hope for innovation and

change
This change makes me feel enthusiastic

regarding the possibilities for the future
Cognitive
The goals of the change are unclear
resistance
In my opinion, the change process is illogical
The ones conducting the change are not

suitable for the task
The solution that has been suggested to us isn’t

good for us
This change will not solve our problem
Resistance This change is in contradiction with everything

due to belief I believe in
The values forming the foundation of the

change contradict my values
In my opinion, this change will destroy us and

everything we believe in
We actually have to reinforce what we believe

in, not change it
Behavioral I think I’ll abstain from taking an active part in

resistance this change
I won’t be in your way, but I also won’t help

introducing the change
I’m interested in taking an active part in the

change
I’ll get more workers on my side to try to have

more influence so that they don’t carry out this
change

Chapter 11
Organizational Politics and the Process

of Change
his chapter deals with assessing the place of political culture and political
T behavior in organizations. Political cultures in organizations can have a
negative impact on the way the workers feel and on the ability of the
organization to efficiently achieve its goals. Nonetheless, it is usual that human
organizations cannot be without the slightest political behavior, and the question
is, to what extent is such behavior of common practice, when does it contribute
to organizational success, and when does it impede success? In this chapter,
emphasis shall be on the position of political behavior within change processes
and within the success of implementation of change.
Political awareness and political behavior can be of assistance to the leadership
conducting change – research shows that successful leaders are those who
indeed have political awareness. However, political processes can also become
an obstacle. This depends on the extent of the ethical foundation, as well as self-
restraint on the utilization of political aspects in processes of change.

11.1 DEFINITIONS
What are organizational politics?
Organizational politics constitute organizational behavior whose aim is to attain
power by way of individuals or groups in order to control resources, and with the
purpose of assuring desired results for these individuals and groups. The
resources can be of different types, such as knowledge resources, status and
power resources, reward resources, and security resources. The desired results
can be obtaining employment security, rewards, and privileges.
Other definitions can be added, such as:
• Informal organization of groups and individuals in order to obtain control of
resources.
• Organizational behavior based on interdependence and give-and-take
relations.
• Organizational behavior guided by the interests of individuals and groups,
and it is incompatible with, not to say in contradiction with, the benefit of
the organization and the achievement of its goals.
Managers who make abusive use of organizational politics perceive the reality as
a battle arena in which there is no room for weaklings. The reality consists of
enemies and allies, competitors and partners. Relationships are perceived as
winner-loser rapports. Organizational politics actually constitute a corporate
culture based on values and norms of “scratch my back and I’ll scratch yours,”
placing the interests of the group or of the individual over those of the
organization. Interpersonal relations are characterized by “give-and-take”
relations, and the customary norm is loyalty to those of power and authority.
The characteristics of organizational politics are: lack of trust in who doesn’t
belong to our group of interest, preserving and withholding information from
enemies, and perceiving the organization as founded upon rival groups against
whom it is necessary to fight. The typical consequence of this type of culture is
unethical behavior.
Researchers with a background of studies and research in the field of political

science highlight the political characteristics of all human systems, and they
perceive such characteristics as “natural” and necessarily present in human
systems. They emerge from the following basic premises:
• Organizations are political systems – they are founded on groups of
interests, cliques, managerial oligarchies, struggles for power, status, and
privileges.
• Groups of interest and individuals have their own goals which are not
compatible with those of the organization.
• As a result, organizations are systems of constant conflicts, conflicts of
interests, and lack of harmony.
• Organizational change always disrupts the delicate balance and immediately
arouses conflict and struggles of interests in order to maintain strength,
power, and status.
• Change will be grasped as change in status, in power, strength, and
influence of individuals or groups, and as a conflict between the groups in
favor of change versus conservative groups.
Theory of Shadows
This theoretical approach, originally from political science research, assumes
that there is a revealed and enlightened side to every organization, as well as a
dark side, either beside or behind it, partially concealed, a sort of shadow that
goes with the revealed side. The revealed and enlightened side is the formal
domain of the organization. This is the structured domain, the procedures, the
rules, work processes, control processes, maintenance of quality, and evaluation.
This is the stated and written activity, allegedly operating in harmony to achieve
the goals of the organization. The dim side, the shadows implied in
organizational activity, is the inwardly concealed side. Here, behavioral
processes take place, their purpose being to accumulate influence and power in
order to achieve personal goals. Informal communication, decisions influenced
by interests, acquiring influential connections, establishing groups of interests –
these, among others, are done under a guise of working for the benefit of the
organization, when, in fact, behind it is concealed a long shadow of political
activity.
The theory of shadows relies upon assumptions regarding the human incentive in
organizational activity. This approach highlights the striving of people to obtain
benefits for themselves and to reduce costly consequences for themselves. The
individual is perceived as driven by activity that is profitable, beneficial, and
purposeful. Therefore, as long as the members of the organization sense and
perceive correspondence between organizational activity, goals, achievements,
and resources of the organization and their own personal benefits, the less their
actions are political. When the organization is successful, it also empowers,
rewards, and promotes its workers, who, thus, don’t need to operate in
opposition to its goals. Therefore, as long as the members of the organization
feel that the organization operates to achieve goals that don’t correspond to
theirs, the more political activity intensifies.
What are the sources of political power?

How do members and managers of organizations attain their power of influence?
What leads a certain person to operate according to the instruction of someone
else? A number of models developed by researchers in the field (for example:
French and Raven 1959) bring to light the sources of organizational power
according to the following categorization:
• Legitimate power – Power deriving from the formal status of someone in a
particular function. Power that is given to someone whose duty is to instruct
those subjected to his authority on what to do and how to operate.
• Power of knowledge – Power deriving from specialized required control
over knowledge and information. Authority imparted to a person on account
of the knowledge or information he has in his possession, which is
necessary to others in order for them to optimally perform their tasks.
• Economic power – Power deriving from control over financial and
economical resources, providing the person in charge of them with the
ability to reward and penalize. Such power causes the subordinates to wish
to be close to or to have affinities with the person in power in order to
increase their benefits and diminish their losses.
• Physical power – Power deriving from control over military power,
personal physical strength, and the potential of physical threat through
coercion over someone else.
• Exemplary power – Power deriving from conceptual and spiritual authority.
Spiritual leaders and ideological leaders instruct others the way to go and to
operate.
• Power of charisma – Power deriving from superior qualities, whether real or
imaginary, attributed to someone who, thus, becomes a person of high
influence surrounded with many people under his leadership.
• Power deriving from connections and contacts – The contacts of the person
in power are of high influence. The ability to create relationships of interest,
friendships, or family ties enables the establishment of a connection with
resources that are necessary to others.
From an ethical point of view, the question is whether the man in power makes
use of such for the benefit of the success of the system or in order to magnify
and maintain his power over time. Is his power utilized for the growth or for the
belittlement of his subordinates’ importance? Does the person in possession of
knowledge use his power to withhold knowledge from others, or does he
perceive such knowledge as a resource available to many?

11.2 THE DIFFERENCE BETWEEN A POLITICAL MODEL AND A
RATIONAL MODEL
There is a fundamental difference in the observation of a human system from a
rational viewpoint and from a political viewpoint. The rational viewpoint implies
that organizational behavior is characterized by actions and conduct that are
aimed at the organization’s best interests. On the other hand, the political
viewpoint highlights relations based on conflict and power as well as lack of
consensus regarding the goals of the organization. Below are detailed the
differences between both approaches:

RATIONAL MODEL
• Homogeneous goals – the members at every level of the organization have
common goals toward which they operate jointly and in coordination.
• Central power and control – power is in the hands of professional managers
who operate on a basis of professional considerations for the benefit of the
organization.
• The process of decision making is organized and rational – considerations
for solving problems and finding solutions are guided by logical thinking
and for the benefit of the organization.
• Regulations and norms are written, stated, and observed – consensus and
internalization regarding work methods both in a formal and informal level.
• Systemic information processing methods – information is processed in a
logical form; information is transparent and accessible to anyone who needs
it.
• Clear relations between the means and the goals – the means to achieve
common goals are known and accepted.
• Decisions are guided by cost and benefit considerations and optimal
selection.
• All the different internal systems operate in full coordination and
collaboration, by understanding that it is the best way to achieve common
organizational goals.
• Organizational processes of quality, control, reward, and so on, are carried
out on a rational scientific basis.
• Ideological emphasis on efficiency and effectiveness as the logical way to
achieve the goals of the organization.

POLITICAL MODAL
• Pluralistic goals – groups of individuals, internal systems, and departments
of the organization have different goals and interests which aren’t
necessarily related to the overall interest of the organization.
• Power and control is dispersed among individuals and informal groups; it is
common not only among the formal high echelons but throughout the entire
organization.
• The process of decision making is subjected to pressures of interest,
alliances of interested parties, friendship considerations, and personal
considerations.
• In every organization there are conflicts of interest. This is a natural
occurrence stemming from human nature.
• Unclear information processing methods – information is not necessarily
shared by all; information isn’t usually transparent, and since information
constitutes power, it can be accumulated by individuals or serve personal
interests.
• The relations between means and goals are not agreed upon in advance, and
they are not known to all. The question on whether the means justify the
ends or whether the ends justify the means is disagreed upon.
• Organizational decisions are guided by bargaining and games between
interests and groups of power to prevent situations of loss.
• Organizations are, therefore, characterized more by their conflicts between
the groups of interest than by internal harmony. (Refer also to Butcher and
Clarke 2008.)
Research that was conducted in the United States with the participation of 400
managers showed that these managers largely agree with the following claims:
• Organizational politics are common to most organizations.
• Managers must be good at handling politics in order to succeed.
• Organizational politics play a more and more important role as one moves
upward in the organization.
• Politics can negatively affect organizational effectiveness.
This research, among others, testifies on the importance that managers attribute
to political aptitudes and on the fact that managers perceive political behavior as
a part of organizational activity in every organization.
Political action methods are numerous and diversified, part of which being
revealed and most of which being concealed. And indeed, analysis of these
political action methods indicates a large number of options. Below are a few
examples of political tactics to gain power:
• “Give me and I’ll give you” – in order to purchase a new machine, the plant
engineer brings professional support that the CEO wants, in exchange for
the CEO’s approval of the engineering project that the engineer wants.
• “Scratch my back and I’ll scratch yours” – you will not operate to
undermine my power or to impinge the resources of my department, and in
exchange, I will not undermine your power or the resources of your
department.
• Alliances – the IT manager and the plant engineer join forces to convince
the CEO to purchase a new information system.
• Acting for the benefit of senior authority – the purpose: acquiring support
and supportive connections for the future.
• Control over information – providing crucial information to close friends
and concealing it to enemies in order to accumulate status or power.
• Control through means, assets, and symbols of status – a large and plush
office, luxurious car, innovative equipment that isn’t available to others.
• Power play – conducting struggles either concealed or out in the open in
order to obtain power, by way of controlling resources at the expense of
others.
• Creating networks of contacts – establishing connections and relations as a
means of power for the future.
The political structure of many countries and the lack of democratic tradition at
the government level enhance the politics at the organizational level, such as:
• Central regime maintaining resources in its reach and lack of sufficient
resources at a local level.
• Central political governing which both manages and owns public
organizations.
• Boards of directors of governmental companies assembled through political
appointments.
• Party centers disposing of too much power and influence over many aspects
of life.
• Municipal authority is by nature founded on a political basis, as its
managers are nominated through party elections.
• Dependence on a person or group in power, such as the employees’
committee.
• Interpersonal friendships coming from a long common military service,
youth movements as well as norms of friendship in business.
• Lack of tradition in proper public authority.
• Lack of respect toward written regulations, rules, and procedures.
• Lack of personal example of elected officials.
• Lack of significant control, enforcement, and penalization mechanisms.
• Lack of ethical leadership conducting change in public organizations.
• Incertitude and vagueness regarding common goals.
• Vagueness of ethical values and norms of behavior.
• Vagueness of legitimacy of the means employed to achieve goals.

11.3 NEGATIVE ASPECTS OF POLITICAL ORGANIZATIONAL
BEHAVIOR
It seems that the negative aspects in the sustenance of organizational politics
exceed the positive ones. Many negative points can be enumerated. Below are a
few negative aspects in political culture:
• Establishing rival coalitions rather than cooperating coalitions.
• Aggressive conflicts instead of constructive conflicts.
• Manipulation of people leading to a lack of trust.
• Flattery and docility toward the person in power, leading to the concealment
of crucial information and to the impediment of genuine feedback.
• An atmosphere of threat and fear rendering task completion difficult for the
workers intensifies their desire to leave.
• Using power and aggressiveness entails aggressive counterreactions.
• Winner-loser solutions – the consequence is embitterment and hope for
revenge.
• Territorial defense – maintenance of functions and departments, as well as
their unnecessary amplification.
• “Scratch my back and I’ll scratch yours” – give-and-take relations.
• Hiring workers or managers on an irrelevant basis.
• Promotion based on contacts rather than on aptitudes.
• Concealing information from rivals.
• Hiring relatives and friends to work, not based on proper procedures.
• Preference for friends and for “our own men.”
• Fictitious tenders tailored in advance.
• Prominence of symbols of status.
• “Analyzing” positions and roles for personal power purposes.
• Dividing benefits among friends.
All of the above are similar behaviors which negatively affect the ability of the
organization to function, and they lead to a waste of resources, a waste of human
energy, impacts the organization’s strength, impacts the organization’s image,
and impacts the organization’s ability to withstand competition and to endure
difficult times.
Outward political behavior

Political behavior can be divided based on behavior directed at external
stakeholders and behavior directed inward. So far, we have focused on the
behavior directed inward, but there is, nonetheless, political behavior directed
outward – toward various stakeholders, close or distant. The objective of
political behavior directed at external stakeholders is to obtain resources,
connections, and confidence in the sustenance and the success of the
organization, through political methods. In this manner, it emerges from the
assumption that the ends (the success of the organization) justify the means
(political behavior). Nevertheless, outward political behavior is also meant to
obtain resources, confidence, publicity, prestige, and status for the one who
adopts such behavior. And in this case, there is no doubt that this behavior is not
ethical. The characteristics of such behavior are:
• Preference for suppliers and service providers not based on procedure, nor
is it for the benefit of the organization, but rather, based on political
considerations.
• Tailored fictitious tenders that are meant to provide justification for giving
priority to close relations.
• Work with consulting firms; consultants provide service not according to
business standards.
• Creating give-and-take relations with local and national politicians.
• Providing bonuses, gifts, and benefits to stakeholders that are not directly
related to the organization, but are of relevant political influence.
• Associating one matter to another when there is no rational business
connection between them.
• Financial support for political figures and for their political competition
beyond what is authorized by law.
It seems that it could be difficult for managers to separate outward from inward
political behavior. Therefore, it is recommended to maintain ethical norms, both
inward and outward.

The consequences and results of political behavior
Most research on the impact of Perceived Organizational Politics (POP) show
many negative aspects of it, especially on the working force. A recent study
summarizing all the research on perceived organizational politics (POP)
concluded the following:
1. POP negatively affects the workers’ commitment
2. POP negatively affects workers’ satisfaction
3. POP negatively affects workers’ performance
4. POP increases turnover
5. POP enhances a sense of unfairness
6. POP increases workers’ stress
7. POP increases the negative image of the organization as perceived by the
stakeholders (refer to Matthew et al. 2008).

11.4 POLITICAL CULTURE AND ORGANIZATIONAL CHANGE
Ultimately, organizational politics practiced over time become the corporate
culture – an organizational climate in which the workers sense and understand
the “proper” game rules in the organization. Behavior firmly determines
behavioral values and norms, as well as symbols of status – the entire
infrastructure essential to corporate culture. Such corporate culture becomes a
double-edged sword to the organization in times when carrying out changes is
necessary.
It isn’t surprising that changes in business and public organizations encounter so
many difficulties.
What are the negative aspects of a political corporate culture in change

processes?
• Implanting change by force, threats, and political manipulation, as well as
divide and rule, are likely to permeate the organization with a negative
corporate culture in the future.
• An approach of winners and losers, conflicts, coalitions, the good versus the
bad will shift the process toward negative spheres.
• The approach of “bribing” groups of power, like the workers’ committee or
opinion leaders, to gain support to change.
• Using power and threats against those in opposition arouses aggressiveness
on the latter’s part and causes the organization to roll toward incessant
conflicts.
• Change carried out by force, threats, and manipulation entails embitterment,
feelings of revenge, and desire to leave.
• The process of change itself affects the results of the change: a transparent,
ethical, and participatory process leads to implementation of the change
without lingering past grudges.
• The process of change will reflect the results of the change: a process of
change characterized by politics will lead to implementation of change itself
characterized by a political culture.

What are the positive aspects of organizational politics in change
management?
The answer to that question is complex. Indeed, it is natural for individuals or
groups to operate for the benefit of the group or for their own best interests.
Struggles between departments and sections or functionaries on resource
distribution, on allocating people to budgets, on layoffs, among others, are
legitimate struggles as long as they are carried out in ethical and legitimate ways,
and as long as the common motive is the benefit of the organization, not just the
benefit of the group.
It is natural that our friendly relations, our friendships, and our families will
influence our preferences. Nonetheless, what is natural in everyday life human
behavior is not legitimate in organizational life. The only prerequisite to judge is
the ethical code of the organization. Not only must the goal be legitimate and
agreed upon, the means to achieve such a goal must also be ethical. Surely,
without connections with external stakeholders, it is not possible to succeed.
Does establishing contacts have to be on a basis of “Scratch my back and I’ll
scratch yours” or “One hand washes the other”? Such practices in companies or
in countries in which we never would have imagined are legitimate and
customary. The only measure in which political behavior is positive is in the
code of ethics of the organization and in observing the laws and regulations of a
country. Without an organizational code of ethics, it is unclear which action is
legitimate and which is illegitimate. It is only when clear and precise rules of
“dos and don’ts” have been defined and when full consensus has been reached
regarding the legitimate means to achieve goals that political activity is lessened.
Therefore, activity aiming at obtaining power, confidence, and strength at the
level of the individual, at the level of the group, and at the level of the
organization is legitimate as long as it is ethical in its goals and in its methods,
for the benefit of the organization and its success.
The conclusion regarding change management is making wise and ethical

use of political behavior:
• Make sure that the change you are carrying out is for the benefit of the
success of the organization and not for political purposes only.
• Integrate the opponents in the process; include their leader in the leading
team.
• Establish a team conducting change in which you trust.
• Include your direct opponents in the team.

Establish a supportive coalition based on the extent of willingness of people
• to operate for the sake of the change.
• Constantly expand the supportive coalition without promising anything in
advance.
• Acknowledge and involve external stakeholders, for they are the ones who
have the resources, the power, and the capacity to assist in or to impede the
success of the change.
• Explain to everyone the action method and the action principles of the
change process.
• Make sure that there is congruence between your management values and
the change process.
• Search for win-win rather than win-lose solutions.
• Allow and nurture constructive conflicts founded on content and solutions,
rather than on personal struggles.
• Establish a code of ethics that also relates to organizational changes.
Conclusion regarding the behavior of managers and workers in a political

culture
Political behavior based on ethics is possible and recommendable for every
worker who believes that he has the aptitudes, the abilities, and the knowledge to
contribute to the organization and to its success more than how such success is
made possible for him in the present moment, this being by reaching centers of
influence in the organization. Behaviors will base themselves upon ethical
behavior in processes, means, and goals:
• Invest in people and in contacts, in assistance, support, and attentiveness.
• Elaborate a unique field of activity – establish and guide development,
thinking, and learning teams.
• Be loyal to the central system – be its loyal delegate. Invest efforts without
keeping a monetary score.
• Don’t wait for someone to promote you or think that things will happen on
their own. Operate toward your advancement by accumulating knowledge
and contacts.
• If you consider that you deserve monetary recompense, or credit, or a
reward of any kind, don’t hesitate to ask.
• “Cast thy bread upon the waters” – generate long-term commitment of
others to yourself.
• Seize opportunities – get ready to appear at the right time and the right
moment and prepare your contribution (during a meeting, a gathering, an
event, in the process of solving an incident).
• Sell yourself at any opportunity – talk about yourself and the things you
have done. Don’t be shy.
• Always keep yourself up-to-date – know when a position is made available
and when someone or something is needed.
• Learn to be assertive and avoid being aggressive or passive.
• Don’t think about what people will say all the time and don’t try to satisfy
everyone.
• Don’t originate problems; originate solutions, proposals, and positive
initiatives.
• Learn and specialize yourself constantly – broaden and amplify your
professional and personal competences.
• Aspire to be the best in a domain that is essential to the organization –
generate the dependence of others on yourself and make yourself
indispensable.
• Increase your centrality – operate toward attaining a central position that
constitutes a junction of information and connections, both inward and
outward.
• Increase the extent of your flexibility – broaden and enrich your role. Be
ready to be more flexible in duty, in place, and in time.
• Broaden the extent of your prominence – publicize and sell yourself and the
organization. Write and speak. Build connections and bridges.
• Increase the extent of your relevance – be a guide for newcomers, provide
services and information, ask to participate in important meetings.
• Operate all the while observing human values and in view of the belief that
your actions befit the welfare of the organization as well as your own.
• Always remember, you can fool some people sometimes, but you can’t fool
all the people all the time – make sure you have genuine backup for the
things you say and do.
If you have courage, initiative, and the will to take part in rectifying the
corporate culture of your organization, operate toward taking part in the
formulation, assimilation, control, and observance of a code of ethics in your
organization.

11.5 ORGANIZATIONAL POLITICS QUESTIONNAIRE
If you wish to test the power of organizational politics in your organization,
fill out the following questionnaire:
(Indicate your response by a circle around the corresponding number.)

Key: Sum up your results by adding up the numbers you have circled.

80–100 Excellent – organization operating in a rational form according
to essentially business considerations.
60–80 Good – organization in which there is a certain extent of
political considerations.
40–60 Needs improvement – organization that largely operates on the
basis of a political culture.
20–40 Requires radical change – organization based on political
behavior oriented toward unethical activity.

Chapter 12
Conflicts and Ways to Their Resolution
12.1 CHANGE ACCELERATES THE OCCURRENCE OF CONFLICTS

The political approach presupposes that change processes lead to conflicts. This
is due to the disruption of the fragile balance in the organization and the
disruption of the equilibrium between the different elements inside it. Every
change entails reorganization of individuals and groups, both formal and
informal, the protection of their sources of power, as well as the protection of
their interests. Moreover, change constitutes a catalyst to improve and to
generate new advantages for the individuals and groups who try to improve their
position. What everyone fears is to lose influence, resources, status,
remuneration, and employment security. From this standpoint, emphasis is more
on the ways to deal with conflicts, and less on planned change processes and
dealing with resistance.
Organizational change generates conflict, not only due to its impact on the
fragile balance of resource distribution of power, status, and security. It also
affects the network of interpersonal relations, the positions, and the perceptions
of individuals and groups, as well as their values and ideologies. In processes of
change, members of the organization immediately look for people who share
their opinions, their impressions, their beliefs, and their positions. In this
manner, groups that combine together their position either in favor of or against
the change are created. Conflict is thus immediately originated as an inseparable
part of the process of change.
The premise of the political approach is that management processes conducting

planned change, such as involvement and participation of the workers in change
processes, information transparency as well as information sharing, attentiveness
to the fears of the workers, conducting change according to stages that are
planned and known in advance, those, among others, will not solve the latent
conflict in the very essence of the change. Therefore, in many cases, we witness
the attempts of management to conduct change that will immediately be
confronted by the workers and their committees organizing themselves to take
active measures (sanctions, strikes) in order to prevent the change. The attempts
to introduce changes in the status of teachers in Israel or the attempts to
introduce competition in the electric distribution system or in the public
transport sector always come across workers and their committees organizing
themselves to prevent such change.
In organizations in which workers are permanent and unionized through a

professional union, in which the workers have a committee or a strong and
militant delegation, it is obvious that carrying out changes will be difficult
without the approval of that committee or without reaching an agreement on
remuneration and compensation for the change. This applies to public or
governmental organizations, as well as powerful organizations (electric
companies, port authorities, teachers), whose workers are permanent, their rights
are fixed by collective agreements, and they have power and influence over the
capacity of the entire economy to function. However, as long as the leadership
in organizations, whatever these organizations, public or private, business or
service, continues to apply changes, to conceal the intentions of the change,
and to proceed with change by force, the more the opposing force intensifies,
and the more turning to external agents and employing formal means such as
lawsuits, arbitration, or negotiations through representatives becomes
inevitable.

ADVANTAGES AND DISADVANTAGES OF THE CONFLICT
Conflicts are advantageous if they are managed on the basis of game rules that
are known and agreed upon, and when the two sides are willing to solve the
conflict through conventional methods and for the benefit of both sides.
Below are a few of the advantages of these conflicts:
• Learning is promoted through exposing unresolved issues.
• Problem solving is promoted through exposure of such problems.
• Alertness and awareness of what takes place in the public or organizational
field are promoted.
• Prospects of self-criticism and reality examination are promoted.
• Releasing emotions and aggression is permitted.
• Clear public manifestation of stance is permitted.
• Redistribution of power and resources among the family, the organization,
and the community is promoted.
• Knowledge development is promoted: thesis-antithesis-synthesis.
Naturally, conflicts also imply many disadvantages:

• Misunderstandings and distortions in communication.
• Cessation of cooperation between departments and people.
• Improper functioning and nonfulfillment of assignments in order for the
opponent to fail.
• Waste of resources – duplicity of activities and tasks.
• Waste of emotional and social energy.
• Shattering organizational and conventional frameworks.
• Danger in the very existence of a social and organizational framework.
• Communication taking the form of violence and aggression.
• Climate of noncooperation.
• Difficulty to manage the organization in situations of long-lasting conflicts.
• Organizational paralysis and hindrance of growth and development.

12.2 METHODS FOR SETTLING CONFLICTS
According to the approach presented in this chapter, conflict resolution can come
from various approaches:
• LAWSUIT
• ARBITRATION
• NEGOTIATION
• MEDIATION
LAWSUIT – defined as a legal procedure in accordance with the law by means of

a judge, a plaintiff, and a defense. Proof of guilt will lead to a verdict as per the
evidence brought to the judge, and deciding on a solution will be based upon
state laws. Appealing to a court of justice for labor issues or for other issues is
done in accordance with a constitutional process assisted by a lawyer, when both
parties bring forward arguments to the court, supported by documents and
evidence.
Expected advantages of this approach:

Statutory decision of a formal third party.
Preacceptance of the authority of the court of both parties.
Irrevocable judgment after appeal.
Objectivity of the judge and his nonparticipation in the conflict.
Disadvantages of this approach:

Whatever the outcome, business relations are impaired, sometimes irreversibly.
Proceeding in a formal, sometimes threatening, atmosphere.
Long-lasting process due to the right to appeal and judgment prolongation in
Israel.
Formal solution and agreement forced upon one of the parties.
Winner-loser solution.
ARBITRATION – the parties ordain a third party, accepted by both as objective

authority to make a decision regarding the strife between them, and both parties
precommit, in writing, to accept his ruling. Arbitration takes place when the
arbitrator hears the arguments of each party separately and searches for a
solution that, in his opinion, will respond to the needs of both sides. The
arbitrator doesn’t have to be subjected to the laws of documented proof and
evidence, and he refers to principles of natural justice and to his reasoning and
experience in order to determine his judgment. His decision can also receive
legal authorization from court, and it is practically impossible to appeal against
his verdict.
There are many disadvantages to this process:

The very use of a third party as the one ruling constitutes a disadvantage in the
acceptance of the decision by the losing side.
The parties do not try to reach an arrangement or to find a solution acceptable to
both of them. There is no process of dialogue but rather focus on the solution
“brought forward” by the third party.
Advantages of the process:

Short and fast.
Bypasses obstacles related to interpersonal hostility.
Practical when the parties are incapable of sitting together to talk.
Practical when the parties don’t need to maintain long-lasting relations in the
future.
NEGOTIATION – the parties try to reach an agreement on controversial issues

through direct dialogue between them or through representatives of both parties.
The parties operate toward identifying the points of dispute, finding common
interests, moderating disputes, and finding a solution based on a win-win
principle. Negotiation demands the ability of each party to get past
misconceptions of the other, to be attentive to the needs of the other, and to find
creative solutions to resolve the quarrel.
Negotiation is advantageous as a conflict resolution method:

It is cheap and direct.
It enables privacy, preventing external interferences.
The parties have full control of the process.
It enables to maintain relations.
It potentially enables joint profit.
Negotiation also presents many disadvantages:

It is saturated with misconceptions of one party regarding the other.
It often gets stuck due to persistence of extreme positions.
It is based upon manipulative tactics taken from the political world.
It deals with possible solutions rather than with the root of the problem.
It often ends up with winner-loser solutions or with compromises that plant
seeds for future conflicts.
MEDIATION – voluntary proceeding to conflict resolution through a neutral third

party who doesn’t have full arbitration authority. The mediator assists the parties
in reaching an agreement on a solution through direct dialogue between them.
Mediation is done in the presence of an expert in mediation processes. The entire
process is managed by the mediator through an attempt to bring each party to
understand the positions of the other, its needs, its motives, and the source of the
conflict. The mediator does not voice his opinion on the matter in dispute, and he
doesn’t propose solutions. The gist of his role is to lead the parties toward
finding a solution that will be acceptable for both of them and that will deal with
the root of the dispute, while resolving it in the long term. Mediation is a process
of mutual attentiveness and penetrating the conflict in-depth while neutralizing
feelings of hostility and anger. There are no tactics or manipulations in
mediation, as they are neutralized by the mediator. The mediator works at
drawing positions closer to one another, at reestablishing trust and building
relations that will enable future collaboration. Mediation is a relatively short
process that unfolds within a few meetings limited in time, and the conclusions
drawn in the process are given legal effect.
The disadvantages of mediation are rather few in number in comparison

with the other methods:
It requires genuine agreement to participate in the process.
It requires a joint face-to-face meeting of those in dispute without the
participation of representatives or delegates “on their behalf.”
It demands from the parties to be attentive to each other and to behave open-
mindedly and flexibly, and to willingly accept each other.
There are many advantages to mediation in comparison with the other

methods:
It relates to human relationships and rehabilitates them.
It fits the solution to the needs of the participants. It obliges the parties to
implement the solution.
It is simple, understandable, and clear.
It implies direct involvement of both sides without arbitrators.
It maintains privacy and confidentiality.
It establishes win-win solutions.
It is cheap and fast compared to trials and lawyers.
It provides a useful tool for conflict resolution in the future.
It deals with the root of the problem and attempts to resolve it.
It establishes the possibility for future collaboration.
Summary: This chapter presents a different approach from the ones presented
previously regarding organizational change. In those chapters, managerial
approaches founded on the involvement and participation of the workers in
change processes, on transparency and two-way information in the process of
change, on the integration of opponents in the management of change, and on
attention and sensitivity to the feelings of the workers, among others, were
presented and examined extensively.
In this chapter, other additional approaches on organizational change

management have been presented. The preferential way of all these approaches
is mediation, for it enables maintaining relations and joint work despite opposite
conceptions and interests. Nonetheless, managers must acquire skills not only in
mediation, but also in directing negotiations, due to the fact that these practices
are essential to handling conflict situations that are likely to arouse processes of
change, or when the other methods could neither prevent their emergence nor
lead to their resolution.

12.3 QUESTIONNAIRE DIAGNOSING BEHAVIOR STYLE IN
CONFLICT SITUATIONS
INSTRUCTIONS
Imagine that differences of opinion or conflicts arise, or that negotiations
develop on a controversial issue between yourself and another person. How
would you operate in such a situation?
Below are 30 pairs of statements describing conflict resolution methods.
You must choose one statement (a. or b.) out of each pair of statements that
represents the reaction that you would have and circle your response.
1. There are cases where I pass on to others the authority and the
responsibility of solving problems
Rather than discussing the issues that we don’t agree on, I try to
highlight the issues upon which we share the same opinion.
2. I try to find a compromise formula.
I try to deal with all matters and problems that concern us both.
3. I generally unflinchingly stick to my goals.
I would try to reconcile the other side, to take their feelings into
consideration, and to maintain proper relations between us.
4. I try to find a compromise formula.
Sometimes I renounce my desires in favor of those of the opposing
side.
5. I often ask for the help of someone else in order to find a way to
solve the problem.
I exert myself to do everything possible in order to prevent
unnecessary tensions.
6. I exert myself to avoid incommoding myself.
I try to do everything in order to triumph.
7. I try to put off dealing with a problem until I can make myself
available to consider it thoroughly.
I renounce certain points in order to achieve accomplishments
regarding other points.
8. I generally unflinchingly stick to my positions.
I try to go over all issues and problems in a manifest and open
manner and “to lay my cards on the table.
9. I exert myself to do everything possible in order to prevent
unnecessary tensions.
I try to do everything in order to triumph.
I try to find a compromise formula.
11. I try to go over all issues and problems in a manifest and open
manner, and “to lay my cards on the table.”
I would try to reconcile the other side, to take their feelings into
consideration and to maintain proper relations between us.
12. I sometimes avoid taking stances that are likely to entail differences
of opinion.
I will allow myself to stick to some of my positions.
13. I propose intermediate solutions: something between my views, and
I propose intermediate solutions, something between my views and
those of the opposing side.
I push toward the acceptance of my positions.
14. I present the other with my views and request that they present their
views to me.
I exert myself to prove the logic and the advantages of my positions.
15. I would try to reconcile the other side, to take their feelings into
consideration and to maintain proper relations between us.
I exert myself to do everything possible to prevent tensions.
16. I exert myself not to hurt the feelings of the other side.
I try to convince the other side that my positions are advantageous
and of high value.
I try my best to do everything possible to prevent tensions.
18. I will accept that the other keep their positions if I come to know
that this will cause them great contentment.
I am willing to accept part of the positions of the other side if they
are willing to accept part of mine.
19. I try to go over all issues and problems in a manifest and open
manner, and “to lay my cards on the table.”
I try to put off dealing with a problem until I can make myself
available to consider it thoroughly.
20. I try to clarify the differences between us without delay.
I try to reach the solution that will give the fair combination of
profits and losses to both of us.
21. In my approach of negotiation, I try my best to take the other side’s
desires into consideration.
I always tend to hold open and direct discussions on the problem.
22. I try to find intermediate solutions between my positions and those
of the opposing side.
I relentlessly express and emphasize my desires.
23. I am often concerned about fulfilling both of our wishes.
There are cases where I pass onto others the authority and the
responsibility of solving problems.
24. If the position of the other side appears to be very important to
them, I would try my best to go in that direction.
I try to get to situations in which we can solve the problem between
ourselves by reaching a compromise.
25. I exert myself to prove the logic and the advantages of my positions.
I exert myself to take the other side’s desires into consideration.
26. I propose intermediate solutions, something between my views and
I almost always search for the way to satisfy both our desires.
27. I sometimes avoid taking stances that are likely to entail differences
of opinion.
I will accept that the other keep their positions if I come to know
that this will cause them great contentment.
I often ask for the help of someone else in order to find a way to

solve the problem.
29. I propose intermediate solutions, something between my views and
I feel that differences of opinion are not necessarily worth troubling
ourselves with.
30. I try my best not to hurt the feelings of the other side.
I always let the other side participate in all aspects of the problem so
that we can reach a solution together.
Result summary: In the table below, circle all the a’s and the b’s as you
have done in the questionnaire. For example: if you have circled answer b
in the first question, you then must circle the letter b in the first question in
the table. After that, add up all the letters you have circled in each column
and write down the total in the bottom boxes of the table. Finally, enter the
results in each column as per the model inscribed at the bottom. The highest
grades will indicate your tendency in conflict management.

QUESTIONNAIRE – RESULTS SHEET

In the following diagram, a model of different styles in dealing with
conflicts is presented. The horizontal arrow indicates the intensity of the
participative approach, where one understands the needs of the other side
and is willing to put oneself in the other person’s shoes and to demonstrate
empathy even toward rivals. The vertical arrow represents the strength of
the confronting position, the quarrelsome position of the individual who
wishes to force himself on to the other side and to come out with the upper
hand. The model allows you to examine your behavior in situations of
conflict and to learn how to manage conflicts according to “problem-
solving” characteristics.
Now, tally up the grade you received in each of the four styles and write
down the grade in each style in the following model, in the corresponding
box.
The highest grade represents the conflict management style that

corresponds to yours. If you are far from the problem-solving and win-win
style, learn how to manage conflicts in a more constructive way.

Chapter 13
Tools and Methods to Diagnose

Organizational Problems
hange management can start with studying and diagnosing, identifying,
C defining, and finding suitable solutions to organizational problems. In this
chapter, we shall examine three focal points to study and diagnose problems and
opportunities for change, and, thus, present models which assist managers in
identifying points in which problems and malfunctions are generated. The
methods to study and diagnose are diverse and varied and their utilization
depends on the budgets available for the project, on the degree of vagueness and
lack of knowledge of the organization’s problems, on the willingness of the
organization for thorough exposure, and on the will to be familiar with these
problems and to deal with them.

13.1 METHODS AND TOOLS FOR ORGANIZATIONAL LEARNING
AND DIAGNOSING
Quite often, the process of change starts by studying and diagnosing problems.
This sort of process enables one to choose suitable solutions and to establish
them. Studying problems can be done with the help of consultants, or by
consultants/experts alone, or by professional agents within the organization. The
tools at the disposal of the analysts are numerous:
• Examining numerical data on the financial results of the organization:
Examining the quantitative and numerical data in the different fields of
activity; analysis of financial reports, annual reports, data on sales, profit,
and cost accounting – all of the above are intended for assessing the
financial situation of the organization, the developing trends regarding its
financial achievements, the extent of criticalness of its financial situation,
and the chances of recovery. Moreover, data regarding human resources,
such as employee turnover, absenteeism, malfunctions, safety violations,
etc., can also be examined.
• Using surveys: The use of surveys testing the stance and opinion of
customers, workers, managers, and stakeholders is intended to examine
problems from a relational standpoint and from an attitude standpoint.
Surveys on customer satisfaction regarding loyalty to the company or to the
product, surveys on the attitude of the workers regarding motivation,
commitment, and satisfaction – all of these enable one to accurately identify
problems in order to find solutions. Surveys enable one, in a structured
form, to identify different problems as well as the set of factors that are
linked to the emergence of such problems.
Schools use surveys to examine the stance of parents regarding their
involvement in the school, for purposes of student feedback on teachers, to
examine the attitudes of teachers, teacher burnout, etc. Business
organizations make use of surveys to examine customer satisfaction and
commitment, worker satisfaction, turnover factors, customer satisfaction of
a specific product, etc.

• Passive and active observation: Thorough and professional observation
based on preliminary preparation can provide data which could not be
obtained otherwise, as, for instance, visitation and observation according to
different guidelines or collaboration as a member of the organization. This
approach is more anthropological, and its orientation is to acquire
knowledge of the indiscernible strata of the organization, such as:
management style, communication methods, norms and values, and
informal conversations. The active participation of an outsider for a certain
amount of time may provide a great deal of information, in the sense that
“an occasional visitor sees all faults.” Organizational consultants observe
what is occurring within the organization in order to enrich their knowledge
of it. They have several options for observation:
Concealed observation: the one being inspected is unaware of the
observation. For instance, restaurant critics who inspect the quality of the
food and the service. In such a method, the reality can be examined without
being affected by the presence of the observer.
Overt observation: The presence of the observer is known to the observed,
and sometimes he may even assist in his own inspection. The disadvantage
of this method is that the presence of the observer directly affects the
behavior of the one observed.
Participant observation: With this method, the observer becomes part of the
organization for a certain period of time, the workers around him being
unaware of this. In this manner, he has the possibility to acquire close-up
and in-depth knowledge of the observed organization. The observer
prepares all the fields to inspect and everything that can be learned from
such fields.
Example: inspecting the workers in their dining hall: examining the
interaction between the workers and the managers; inspecting the
lavatories: examining the level of maintenance of cleanliness and aesthetics;
inspection of the manager’s office and observing its organization and its
furnishing arrangement: examining the extent of his importance and his
managerial style.
• Individual interviews and group interviews:

Structured interviews of the members of the organization, its managers,
interviews with customers, suppliers, and the agents related to the
organization can provide valuable information on how the interviewees
perceive the problems and the strengths of the organization. Questions
about failures, problems, and weaknesses, and suggestions on how to
improve the situation can give clear insight on the problems and even
classify them according to their level of importance. An interview can be
structured or open-ended, personal, or grouped. It is preferable to conduct
semistructured interviews, in which the interviewer has several topics
previously prepared according to a certain model in order to cover a variety
of aspects in the life of the organization within a short time. Interviews
require expertise in terms of ability to diminish the interviewee’s distrust
and concern lest what he says be held against him when receiving feedback
from management.
Interviews provide a great deal of subjective information, but their
disadvantage is mainly in the difficulty to quantify the answers. The
required time for an interview is about an hour, and it should be held in a
quiet place free of interruptions. It can be carried out face-to-face with one
single worker, but in some cases, groups of workers can be interviewed, on
the condition that the atmosphere between them is free and fearless.
The interview first focuses on a number of positive and strong points of the
organization, and then goes to the domains requiring change and
improvements. Then the interview goes over to different predefined topics,
according to the model the interviewer uses. (The models will be detailed
further on.)
• Structured processes for defining problems: Through the training

department, human resources, or an organizational consultant, middle
managers, as well as teams and workers, can be trained to perform self-
diagnosis, whether it’s about the problems of the members of the
organization performing the analysis, or whether it’s about the organization
itself. This method spares the need for external consultants, and therefore
promotes the idea of the organization becoming a learning organization.
With such a method, the organization selects a team of interviewers or the
team in charge of change, and, thus, learns and familiarizes with a diagnosis
model that is suitable to the organization. Subsequently, the members of the
team learn how to interview, to formulate summaries, and to assemble them
into structured feedback.
• Comparison with leading organizations in the field (benchmarking):

With such a method, the team in charge of change learns who the leading
organizations in the field are, and what innovative processes the
competitors have implemented. The team focuses on studying the solutions,
the processes and methods, the products and services of the leaders in the
field and in similar fields. After selecting an innovative procedure, a
learning process to adjust the procedure to the organization and, thus, its
implementation, is carried out. The fact that other banks copied Bank
Hapoalim’s method of personal banking is a good example. Another
example is how competing companies copied the method of direct
insurance from the initial company.
• Use of “soft” methods: Many consultants make use of “soft” and creative
methods to enable the members of the organization to express their feelings
and perceptions regarding the organization. The consultant asks the
interviewees to use metaphors, drawings, and flashcards to describe the
organization. With such a method, the members of the team illustrate the
organization together according to their perception. They describe it by use
of animals as a metaphor and choose illustrated cards to describe how they
feel in the organization. By use of newspapers, as well as drawing and
writing tools, they cut out pictures and drawings and build a collage
depicting the organization.

THE USE OF DIAGNOSIS GUIDELINE MODELS
In order to study the problems of the organization, change managers have at their
disposal different models that guide the ones carrying out the diagnosis on what
to observe, what to analyze, and what to focus on. These models also indicate
the importance of congruence or incongruence between the different factors as
the source of problems.
The different models concentrate on three different focal points:

1. Intraorganizational focal point
2. Extraorganizational focal point, meaning the environment and its impact
3. The different groups that are related to the organization and that influence
its functioning

13.2 INTRAORGANIZATIONAL-FOCUSED DIAGNOSING AND
LEARNING
Studying the internal problems of the organization requires the use of a guiding
model; however, the questions are: What should be observed? What are the
factors affecting the success of the organization?
The natural tendency to examine the activity of each department of the
organization separately will reveal that organizations are constituted of
departments related to one another by complex connections and are dependent
on one another. It will also reveal and that permanent processes and patterns of
activity are what relate them to an open and dynamic system. It is therefore
necessary to describe the organizational processes interrelating all the systems
and members of the organization, and thus, to attain congruence and adequacy in
their activity. The first model for such an examination was developed by M.
Weisbord (1976). According to him, the organizational environment comprises
six organizational subsystems. Diagnosis is based on the analysis of how these
six subsystems function.

WEISBORD’S DIAGNOSIS MODEL (1978)
Weisbord’s model focuses on six organizational subsystems:

Goals and objectives: The diagnosis focuses on examining the relevance of
the field of operation, the goals of the organization, the type of customers, the
type of products, its uniqueness, and the niche of the organization. It also
focuses on the strategy to achieve these goals; whether goals and objectives
have generally been defined, whether they are known and internalized by the
workers, whether they are relevant and adapted to the changes in the
environment, and whether there is congruence between these goals and the
other systems in the organization.
Management and leadership: Here, the diagnosis focuses on management

style and its adequacy to the situation of the organization, the extent of present
leadership, complementary management team, the functioning of management
and the board of directors, examining the decision-making process, the extent
of worker participation, and involvement in the decision-making processes.
Organizational structure: This requires examining the structure and its

suitability to the needs of the organization and the environment; the extent of
flexibility of the structure, its suitability to the size and complexity of the
company; the extent of required decentralization or centralization. Learning
and adaptation skills are examined, as well as open and multidimensional
communication, the flow of information within the system and between the
system and its environment, role distribution and cooperation between units,
the extent and quality of teamwork in the organization, organizational
flexibility and role flexibility.
Relationships: Examination and diagnosis regarding the presence of an

organizational culture and climate of openness and receptiveness, relations of
trust, encouragement, trial and error. A climate of relationship within the units
and within the organization is also examined, as well as support and acceptance
of different people’s ideas.
Rewards: What are the motivation and reward methods of the organization?
What are the material rewards, the other existing bonuses? What are the other
worker motivation methods? Are intrinsic motivation factors used in the
organization? Does the organization devote time and resources for worker
promotion and development, participation and involvement, interest and
variety, authority and responsibility?
Auxiliary mechanisms: Here, the presence and the functioning of methods of

control, inspection, evaluation, the use of surveys measuring satisfaction,
procedures, regulations, safety, and quality maintenance mechanisms are
tested.
Structures, equipment, and technology: What is the quality of the physical

variables, the extent of innovation, maintenance, and use of up-to-date
advanced technology, examination of equipment and the necessary means to
obtain results, testing the quality of the work environment?

Environment: The relation between the organization and the environment.
(Refer to the analysis of the environment further in this chapter.)
A similar model, although somewhat different, was developed by the American

firm McKinsey in the 1980s. This model was the basis of analysis of outstanding
organizations in Peters’s and Waterman’s book In Search of Excellence (1982).
In this model, there is an additional dimension which consists of shared values.
The model is called “The Seven S’s” due to the fact that its dimensions all start
with the letter S:
Structure: functional and organizational structure. To what extent is the
structure of the organization suitable for the needs of the company and enables
flexibility, is fast changing, and achieves goals and objectives?
Strategy: strategy, goals, mission, and objectives. To what extent are the goals
clear and agreed upon? To which extent are they known and internalized? Are
they suitable for the growth needs of the organization?
Skills: abilities and aptitudes, knowledge and learning aptitudes. To what extent
do the workers have the knowledge, the aptitudes, and the ability to develop and
learn?
Staff: team and teamwork. To what extent does the company operate with
teams? Is there evidence of teamwork? Is there a presence of organizational
teams involved in development, problem solving, and quality improvement?
Style: What is the management and leadership style? What are the decision-
making patterns? Is there individual and grouped autonomy, the presence of
leadership?
Systems: What are the production and service systems, performance processes,
mechanisms of quality, control, and inspection? How are the core processes of
the system carried out? What is the quality of processes of quality and service?
Shared Values: What is the corporate culture? Do the values, norms, and
organizational climate support the ability to change and the ability of creativity
and innovation?
The model is presented in the following diagram:

13.3 DIAGNOSING AND LEARNING FOCUSED ON THE
ORGANIZATION’S ENVIRONMENT
Assiduous examination of the changes in the environment is also essential for
seasonable changing. Identifying trends, new technologies, competitor initiatives
– those, among others, constitute crucial information for the organization and its
ability to stand ground in the competition. Analysis of the environment is carried
out through constant search for possible immediate threats and constant search
for existing, random, growing opportunities. Learning and examining can be
done according to a number of models:

1. ORGANIZATIONAL ENVIRONMENT MODEL
This assiduous examination is based on a model of the different domains of the
organizational environment which includes the following aspects:
1. Political environment – This environment includes government policy,

pressure groups, political organizations for the creation of political action
groups, different stakeholders, the power and interests of the stakeholders, etc.
2. Sociocultural environment – This includes changes in values, in expectations,

in trends, in norms, behaviors, and lifestyles of different groups within the
population. It also includes demographic characteristics, the socioeconomic
characteristics of the customers and the workers, and the changes in this domain.
3. Constitutional environment – Laws and regulations that must be implemented

in domains such as labor rights, quality of the environment, quality regulations,
standards and procedures.
4. Technological environment – This includes technological changes of

instrumentation, automation, information, hardware and software, innovations
and inventions.
5. Economic business environment – Market characteristics, competitor

characteristics, market share, positioning versus market segment, financial
situation, inflation, relations with banks, etc.
6. Labor market – Unemployment, existence of adequate and available

manpower, extent of the power of the union, work relations with external
stakeholders. (Diagram xx)
Analyzing the environment according to these aspects is done at the relevant

level: local, regional, national, and global.

DIAGRAM OF THE ENVIRONMENTS

2. MODEL OF THE ORGANIZATION’S RESOURCES
In this model, the environment is studied according to the examination of the
resources necessary for the organization to operate:
Manpower – examining the needs of the workforce of the organization and
examining the environment and its ability to respond to such needs.
Technology, appliances, and automation – examining the possible sources,

current innovations, availability, and cost versus benefit regarding the use of
automation and new technology.
Capital – studying the existing possibilities and the possibilities to obtain

investment capital or operating capital to finance current activity; agreements
with banks, investors, etc.
Information and knowledge – examining current knowledge required for the

activity of the organization, gathering information on the environment,
maintaining and using such information in order to make decisions.
Structures and location – examining the location of the organization, possible

existing structures, building versus leasing, physical layout of the structures,
interior design and layout.

3. ENVIRONMENTAL PROCESSES MODEL AND ITS CHARACTERISTICS
According to this approach, managers must analyze the environment according
to occurring processes:
Extent of certainty versus uncertainty in the relevant environment of the
organization – Number of domains where uncertainty is present.
Extent of stability or instability in the environment – Price stability, customer
stability, stability of the field or of the product.
Extent of growth or decline in the field of business – Is the product or the field in
growth or in decline?
A tempestuous environment versus a calm environment.
Extent of competition in the field of activity – many competitors, tumultuous
competition versus few competitors.
Extent of technological innovation in the field in contrast with the extent of
conservatism.
Complex environment versus simple environment - Many systems connected to
the organization by complex ties versus few ties and few systems.
High centralization versus low centralization – Extent of control of a number of
agents on the resources of the environment.
Extent of hostility versus extent of favorableness – To which extent do central
factors of the environment favor or even support activity?

4. ANALYZING THE ENVIRONMENT ACCORDING TO THE DIFFERENT INTERRELATED
GROUPS WITHIN THE ORGANIZATION
In such a method, the threats and opportunities within the changes that occur in
the different groups related to the organization are investigated. This is in order
to enable the managers of the organization to make decisions regarding the
change in nature of relationships with such agents. The different groups are:
Customers – Characterizing the customers of the organization, examining the

processes they go through, examining their satisfaction, examining the
expansion, reduction, or focus on customer segments, and examining the nature
of the relationship with them.
Competitors – Gathering intelligence, studying and tracking competitors. Who

are the competitors? Which of them constitute a threat and what would be such a
threat? What are their characteristics, their orientation, their strategy, their
strengths and weaknesses? What can we learn from them?
Suppliers – Suppliers as a source of information on what is happening in the

market, and, thus, as a topic in which changes can be examined: examining the
relationships and the contracts with suppliers; examining mergers, partnerships,
or disengaging from supplier subcontractors.
Partners and owners – What do they expect? What do they want, or what are
they planning?
Marketers and distributors – Constant examination of distribution and sales

channels in order to grasp market trends, along with improvements of the
capacity to change in this domain. The nature of relationships and contracts are
to be examined as well, incorporating them into the organization or hiring
contractors; employing distributors in large or small numbers.
Shareholders and the board of directors – Examining the expectations of the

shareholders, of the members of the board of directors, and of consumers;
examining the functioning of the board of directors.

Below are several options to manage changes related to the listed groups:
1. Bringing in or taking out strategy – complex considerations versus ability
to control.
2. Merger, taking control, acquisition or partnership strategy – if you
cannot defeat him, join forces with him.
3. Competition strategy – working with a number of groups in order not to
depend on a unique supplier or distributor.
4. Combined strategy – combining different strategies in a partial manner.
The following diagram shows the connections between the management of the
organization and the external teams related to its operation:
The point of contact between the organization and its immediate environment

ANALYSIS OF THE RELATION TO STAKEHOLDERS ACCORDING TO A POWER AND
INTEREST MODEL
The relation to stakeholders is conditioned according to a model representing the
extent of their power to influence decision-making processes and the resources
at their disposal, on the one hand, and their interest in the organization and in
exercising their power, on the other hand. For instance, the government may
have great power in terms of its ability to operate toward a certain organization
by allocating resources or by being involved in its management, but has,
nonetheless, no interest to be involved in its management. Below are the model
illustration and its implications:
The model indicates a direction of operation conditioned by the two parameters

of the model. The higher the power and the interest in the organization of the
stakeholder, all the more advisable it is to include and involve him.
Points of contact, relations, and friction with the groups directly related to the
day-to-day functioning of the organization are important to study and identify.
This is where daily problems are generated and immediate threats and risks, as
well as immediate opportunities, are present. The direct link between the
customer and the salesman, between the supplier and the production department,
between the distributor and the salesman is a point of expected friction;
therefore, open communication and rapid diagnosing are important in order to
quickly solve problems.

13.4 DIAGNOSING AND RESTRUCTURING ORGANIZATIONAL
STRATEGY
Strategic change management is a continuous and methodical process of
determining organizational goals and a business strategy to achieve them
through constant methodical examination of the environment of the organization
and its internal abilities. The process develops the capacity to identify the
sources of strength and weakness of the organization, threats looming over it,
and opportunities that it chances upon at random in its business environment.
The goal of this process is to periodically determine the policy, modus operandi,
and the allocation of the required sources in order to attain the objectives of the
organization in the long term. The strategic management process includes
defining the fields of activity of the organization and its product portfolio, and
yet, its main purpose is to eradicate barriers and definitions and to initiate new
processes meant to guarantee the survival or even the growth of the organization.
Unlike the previous managerial approaches, this approach focuses on the
congruence between the organization and its environment, and the significance
of such congruence in achieving its objectives in the long term. (On the method
and its implementation, refer to Porter 2000.)
1. The process is intended to generate congruence between the organization

and its environment.
2. The managers are responsible for carrying out a structured and future-
oriented thought process.
3. Focusing on vision, on mission, on defining the core of the organization and
on the goals derived from all of the above.
4. Designing and implementing the strategy to enable the achievement of these
goals.
5. Combining long-term projects with operational short-term projects.
6. Combining creative thinking with the establishment of breakthrough
strategies.

13.5 STRATEGIC DIAGNOSIS PROCESS
This diagnosis method is based on internal and external processes of analysis,
and their initials are: SWOT – Strengths and Weaknesses (internal),
Opportunities and Threats (environmental).

1. DIAGNOSING THE INTERNAL ENVIRONMENT OF THE ORGANIZATION IS DONE
ACCORDING TO THE INITIALS
SW Strength: identifying the fields in which the organization presents
advantages and capabilities, their establishment, their reinforcement, and their
utilization in order to generate an advantage over competitors.
Weaknesses: identifying the weak points and internal limitations and finding
solutions to diminish or isolate them.
Internal environment diagnosis is done according to one of the models that were
mentioned in the chapter on diagnosis, such as the S7 model. It is also possible
to use other models that would cover the functioning of the internal subsystems
of the organization, for instance, the strengths and weaknesses in the following
aspects:
• Leadership and management – to what extent are leadership as well as an
effective management system present?
• Vision, goals, mission – to what extent do the workers internalize the
system of goals, vision, and mission of the organization?
• Corporate culture – to what extent is there a clear system of norms and
values supporting vision implementation?
• Teamwork and team relations – to what extent is there a system of proper
work relations and teamwork?
• Communication and decision making – to what extent is communication
open and are the workers involved in decision making?
• Knowledge, capabilities, and worker motivation – to what extent do the
workers possess relevant knowledge, are skilled, and committed?
• Technology, equipment, and structures – are there suitable facilities,
technological systems, information systems, equipment, and structures?
• Human resources processes – are there regularity and efficiency of
processes, such as: absorption, financing, recruitment, stationing,
rewarding, training, and development?
• Core processes and qualifications – to what extent are core processes
relevant to the environment?
• Products and services – to what extent do the products and services
provided to the customers correspond to their needs and expectations?
• Processes of evaluation, control, and quality – to what extent are the
processes qualitative and efficient?
• Value-adding processes – what are the marketing, advertisement, sales,
manufacture, accommodation, and development procedures?

2. DIAGNOSING THE EXTERNAL ENVIRONMENT OF THE ORGANIZATION
This diagnosis is done according to the initials OT.
Opportunities: identifying the new opportunities and possibilities in a changing

environment.
Threats: identifying the possible threats and dangers in the environment.
The analysis of the business environment of the organization is also done

according to a structured model in which there generally are six dimensions.
Their initials are also easy to remember: PESTEL.
Political: the influence of the political, governmental, regional, and local

systems on the activities of the organization; identifying the sources of influence
and power, political groups, the local municipal council, different departments
and their political structure.
Economical: the characteristics of the market, competitors, the cost of capital,

financing, relations with banks, the economic situation of the state, inflation,
price stability, etc.
Social – social and cultural environment: values and trends, customer

expectations, socioeconomical characteristics of customers and workers,
customer culture, the characteristics of the community in which the organization
operates.
Technological: innovations and inventions, information technologies, hardware

and software, renewals and innovation in automation, materials, teleprocessing
systems, control and computation management systems.
Ecological – ecological and communal environment: the community’s

expectation of communal activity and social responsibility; the influence of the
ecological environment and its requirements for quality and observance of
environmental quality regulations.
Law: the influence of laws and regulations within the organization regarding
work relations aspects, labor rights, maintaining standards and quality, safety
rules, fair trade laws, fair consumerism, etc.
Analyzing the environment and its influence on the organization’s activity is

done regarding its immediate environment – the mission environment. This
environment includes the customers, the suppliers and the marketers, and
moreover, the direct competitors. (For a more detailed study of the environment,
refer to the chapter on study and diagnosis.)
The strategic management process is presented in a general diagram as follows:

13.6 STRATEGIC MANAGEMENT – OPERATION ORIENTATIONS
Strategic management usually focuses on generating an advantage over
competitors in two manners:
1. Strategy of competition
2. Strategy of cooperation
Researcher Porter suggested a typology of competitive strategies which is

divided in three:
1. Overall cost leadership: The strategy focuses on generating an advantage
over competitors regarding the sales of products and services of similar quality,
but at lower costs than those of the competitors. Such an advantage is achieved
by way of changes focused on optimization, shortening schedules, proper
utilization of manpower, etc. Taking activities across to China enables many
companies to reduce costs and to compete with local manufacturing companies.
2. Differentiation: The change is intended to create a distinction or
differentiation between the company’s products and services and those of its
competitors: different products or services, different design or positioning of the
product. The automobile industry tries to manufacture cars of unique designs;
fast-food companies try to distinguish themselves from others through
distinctive design, etc.
3. Focus: The change is intended to generate distinction by way of focus on a
certain market segment or on a certain line of products. Harley Davidson
manufactures motorcycles designed for classic motorcycle amateurs. Certain
companies approach upper market segments by means of luxury brand names.
We suggest another change strategy which can be added to Porter’s typology:

Diversity: Another change strategy can be added to this typology: Change
strategy focused on creating a broad range of products, including providing
service for this range of products in a specific field. Strauss (dairy product
company) merged with Elite (chocolate and coffee manufacturer) and created a
large range of products. It thus generated an advantage in size and diversity and
reduced the risk of downfall of certain products.
Other researchers suggested slightly different typologies:

The change focuses on quality: The company generates an advantage over its
competitors on the market through products and services of quality. The service
and the product are of high quality standards.
The change focuses on service: The company has a fast quality service network
that efficiently responds to all customer calls. Customer care is the advantage of
the company.
Leader in innovation: The company generates an advantage over its
competitors through innovative products at the forefront of technology, novelty
in existing products, etc.

13.7 SUMMARY
DIAGNOSTIC ISSUES
The use of different diagnostic tools and models is intended to provide
information on the organization on the following aspects:
1. Domains in which the organization is strong, is in a positive situation, is
successful, and obtains excellent results.
2. Aspects requiring improvements; aspects in which the current perception
works, but within its framework, it is necessary to improve what needs
rectification; the gap between what exists and what is desired, and solving
problems in order to close it.
3. Aspects requiring basic change. The gap between what exists and what is
possible; change of paradigm, change of conception, second-order change;
redesigning the process or the method.
4. Congruence between the system and the organization. Collaboration between
subsystems, responding to the needs of stakeholders.
5. Congruence between what is stated and what is done.
USE OF FINDINGS
1. Organizing the information for methodic feedback – information is organized
according to strong domains, and domains requiring change. It is organized
according to issue: management, structure, communication, etc.
2. Transferring feedback to the team in charge of leading change – joint
discussion and agreement on the findings, joint search for solution methods.
3. Feedback to the workers – presenting feedback to the workers after having
been examined by management. The workers voice their opinions and ideas for
change.
4. Agreeing on the necessary solutions and changes.
5. Action plan.
6. Implementation.
The study of the problems of the organization focuses on identifying the

problems in the internal organizational systems and problems of congruence in

their activity, on threats and opportunities in the environment of the
organization, and on its relationship with its immediate environment, namely,
with the different groups related to its ongoing operation. Diagnosis serves as a
basis and a reference point for solutions and suggestions for change. For this
purpose, the diagnostic summary is thus examined and discussed by the
organization’s management, which then establishes an action plan to implement
the selected solutions.
Diagnosing and studying the problems of the organization obliges preliminary

preparation to process the findings, or in other words, establishing a methodical
layout of change management, including budget and additional means. It also
obliges prior willingness to accept the fact that there are problems in the
organization which need to be taken care of. Without these two prerequisites, an
additional thick booklet defining the problems of the organization and action
recommendations will be left in the drawers of the managers without ever being
used.

Chapter 14
Working with an Organizational

Consultant and Measuring the Success
of Change
Appealing to consultants in the process of change.
any change efforts are carried out with the help of consultants. In many
M large organizations, internal consultants are employed, whose field of
expertise is to guide processes of change, while other organizations are assisted
by external consultants in such a process. The advantages of the consultant are in
the introduction of a comprehensive systemic approach to the process of change,
and in external observation without being involved in what takes place, which
enables the team conducting change to obtain feedback on its work methods.
The consultant, as an expert in organizational processes and approaches to
organizational change, brings invaluable experience in his work of guiding
organizational change processes in other organizations, and he doesn’t take
responsibility for the change efforts, but rather leaves that in the hands of the
management team. His responsibility focuses on guiding the learning process
and the proper execution of the stages of the change through emphasis on worker
involvement in the process.
Organizational consultants possess knowledge in the field of behavioral
sciences. They acquired theoretic knowledge during their academic studies in
fields of organizational behavior, in psychology, in organizational psychology,
in sociology, in political sciences, anthropology, social psychology, social work,
and community development, and they possess supplementary knowledge in
fundamental fields such as economy and business management. Organizational
consultants are associated with the consortium organization to which belong
consultants who obtained first and second degrees in the field of behavioral
sciences, and have done successful systemic work with various organizations.

14.1 THE ORGANIZATIONAL CONSULTING PARADIGM –
ORGANIZATIONAL CONSULTING AND ORGANIZATIONAL
DEVELOPMENT
The organizational consultant bases the essence of his knowledge and expertise
on the field of study known as organizational development. Organizational
development is the practical domain of organizational behavioral sciences and
management; it is based on theories, models, strategies, and techniques focused
on planned change of human systems. Organizational development brings out
from the different fields of behavioral sciences the various topics and aspects
related to planned change in organizations, from a personal as well as from a
systemic standpoint. Organizational consultants complete their academic
specialization with the study of the field of organizational development upon
which organizational consultancy is based. Cummings (2009) summarized a
number of characteristics of the principles of organizational development:
• It highlights the processes and observation of systems as learning systems.
• It relates to change processes as a fixed learning process.
• Its perspective is systemic: it sees organizations as complex systems.
• It is based on an approach of interpersonal relations, participation, and
involvement.
• It implies the commitment of management to change.
• It is managed by a change agent who guides the change in progress.
• The change is planned, but flexible and adapted to the situation.
Organizational consultancy is based on the values underlying the field of

knowledge called organizational development, and they include:
• Implementation of values and norms based on humanistic psychology,
interpersonal relations, and human resources within management.
• Participation and involvement as much as possible as an essential value for
success.
• Openness, open communication, trust, and empathy.

• Growth, learning, development, and gaining strength.
• The importance of the worker in success.
• Values of ethics and honesty.
• Contribution to the environment and to the community.
Promoting thought and practice in the field of planned change and worker
development is of great importance for organizational development:
• Initiated change – constant development and its management methods.
• Developing leadership and managing people.
• Developing change models and theories.
• Developing tools, methods, and techniques for change.
• Developing tools to diagnose organizational problems.
There are two consultancy patterns:

The educational pattern – in this pattern, emphasis is on assisting the process
of change. The consultant is an expert in the field of behavioral sciences and
learning patterns. The essence of his role is to guide and direct the change teams
in the advancement of the process in a continuous manner. The responsibility of
diagnosis, of defining the problems, the solutions and the goals are all in the
hands of the client. The consultant can assist and even carry out the diagnosis,
but the choice of what to deal with and what to focus on is entirely up to the
client. The emphasis in consultancy is on providing continuous feedback, which
is intended for further learning, and on observing and studying, all the while
performing. The consultant brings to light concealed processes or disregard for
important issues. He transforms processes of change into organizational learning
processes, and in this manner, he enables the organization to build mechanisms
and abilities of rapid self-transformation for the future.
The remedial pattern – the pattern of expertise. In such a consultancy pattern,

power and responsibility are in the hands of the consultant. The consultant is an
expert in diagnosing and providing remedy for ailment. He performs diagnosis
with his own tools and methods, and he recommends the required solution and
the method to implement it. The remedial pattern includes consultants who are
experts in certain solutions or experts in certain substantial fields, such as
experts in marketing, experts in computerization, among others. The remedial
pattern can be efficient in the short term. It can lead to fast change when the
problem is technical or when the solution is structured and known. The essence
of its limitations is in the fact that it doesn’t develop the organization’s personal
abilities of self-transformation.
These patterns can be seen on a continuum rather than as two antagonists, as

shown by the following diagram:
Educational Model
Remedial Model Low dependence on the
High dependence on the consultant. The authority
consultant. Authority and and the responsibility for
responsibility for diagnosis, diagnosing problems and
solution, and implementation clarifying the solution and
methods are in the hands of the the ways to implement it are
consultant. in the hands of the
organization.
The diagram shows that combined approaches are also possible. Many
consultants in the field of behavioral sciences nowadays also specialize in
implanting specific changes, such as implanting TQM, and therefore, it is
necessary to examine the abilities of the consultant and his experience in
implanting changes in similar organizations, both in domain and in content, as
well as in the domain of the process.
Just as there are two consultancy patterns, there are also two fields of
specialization of organizational consultants.
1. Field of organizational development and organizational consultancy –

guiding and advising the internal leading team of the process of organizational
change. Personal consultancy for managers in the process of change and guiding
changes in the different levels of the organization:
1. At the level of the workers’ and the manager’s role: enriching and
redesigning roles, redesigning the roles of management, defining roles,
designing the manager’s management style, etc.
2. At the level of the team and the department: diagnosing problems within the
team, consolidating the team, developing the team, developing open
communication within the team, etc.
3. At the level of the field of activity: reorganizing the marketing field,
consolidating procedures and the structure of roles within the human
resources department, etc.
4. At the level of the organization: guiding and advising in the process of
systemic change, such as redesigning organizational vision, adjusting
corporate culture as support to organizational vision, structural changes and
changes of perception. Adopting innovative management methods,
evaluation methods, human resources processes, absorbing and adopting
new technologies, information systems, etc.
2. Field of training – Intraorganizational training taking place either in the

organization itself or outside the organization. Training the teams and officials of
the organization itself or training officials of different organizations in the field
of behavioral sciences. Just as for organizational consultancy, there are several
different levels of training:
• At the level of the worker or the manager – developing skills, knowledge,
and aptitudes for task completion, such as managing time, evaluating the
workers, self-management, communication skills, team management skills,
developing leadership, motivation abilities, etc.
• At the level of the team – consolidating teams, developing teamwork,
values within the team, cooperation and open communication within the
team, organizing tasks in the team, etc. Leadership, developing and
managing teams, internalizing the values, vision, and culture of the
organization, improving the quality of service, personal empowerment, etc.
• At the level of the field of activity – internalizing processes, shaping
positions and values in certain fields, such as assimilating quality service,
absorbing a new information system, assimilating new evaluation, or
performance systems.
• At the level of the organization – absorbing and understanding systemic
changes by way of learning. Learning and internalizing a new corporate
culture, learning a new organizational structure as well as structure of roles.
The uniqueness of training is in the fact it focuses less on imparting knowledge

by simply passing on information, and more on learning from experience, real
occurrences in the field, role playing, internal observation and reflection deriving
from experiences in the present and in the past.

14.2 CONSULTING PROCESS
The characteristic stages of the process of consultancy by an external consultant:
1. First contact: The client makes initial contact with the consultant; clarifying
the will of both ends to set the process in motion and reaching mutual accord.
2. Introductory meeting: The consultant meets with the client for an introductory
interview. The consultant is acquainted with the client, the organization, and its
problems in a basic and superficial manner. The client is acquainted with the
consultant, his experience in the field requiring assistance, as well as personal
acquaintance and clarification of the ability to work conjointly. The client
investigates additional consultancy alternatives and selects the consultant.
3. Conjoint decision on conjoint work: Both sides decide on personal adaptation
and ability to work conjointly.
4. Work contract: The contract details in writing who the client is who is
conducting the change and working with the consultant, the terms of
consultancy, and the payment methods. It details the role of the consultant and
the role of the client, the work method, the dates and times of meetings,
responsibility for production as well as organizing people, equipment, and
location, who manages the meetings, and how responsibilities are divided
between the consultant and the client.
5. Building a leading team (client): Joint work on building a team in charge of
leading change and considerations on selecting people.
6. Informing every concerned party from the beginning of collaboration with the
consultant: Presenting the consultant to the workers and explaining the domain
of change and the work method.
7. Studying and diagnosing the field in which change is required or working with
the team in charge of change on defining the goals of the change and depicting a
desired futuristic picture: Interviewing workers and officials, observation and
inspection, examining data and preparing surveys.
8. Feedback to management and to the leading team: If diagnosis is carried out,
it is translated into strong points and points requiring change and improvement
in accordance with topics and fields.
9. Feedback to the workers: Transmitting information on the results of the
diagnosis to the workers. The ones who were interviewed would also like to
know the results of the interviews.
10. Working with the team on the possible solution directions: Either by
involving the workers or in stages: first the leading team, and then the workers.
11. Guiding the leading team in the field of the participatory process: Constant
thoughts on how, when, and where to involve the workers in the process.
12. Joint work on the selected solutions: Shaping solutions by way of worker
involvement and the involvement of the team in charge of change in the
solutions.
13. Building a team for implementation: Implementation of the proposed change
by teams of workers. It is advisable that whoever needs to change also carry out
the process of implementation.
14. Required training and learning: Training and learning in order to acquire the
skills, aptitudes, knowledge, and attitudes necessary to carry out the change;
adapting the corporate culture to the new situation and assimilating it through
training and learning.
15. Implementing changes: Implementation of the change and transition to the
new situation, either in stages or simultaneously, from what is easy to what is
tedious, from what is ready and mature to what is less ready and less mature,
generating rapid minor successes.
16. Inspecting and adjusting: Monitoring performance and the benefits from the
change.
17. Ceremony upon completion of the change and disengaging from what is old:
Organizing a ceremony upon completion of the process, giving public
appreciation and credit to those who conducted and contributed to the change.
Announcing the new accomplishments, homage to the past, and disengaging
from it in a clear and suitable ceremony.
18. Disengagement.

HOW TO CHOOSE A SUITABLE ORGANIZATIONAL CONSULTANT
Choosing a consultant depends on a number of factors.
The type of change to be carried out. For change focused on a professional or
technological solution, or in order to implant structured change, it is preferable
to obtain help from an expert in the content of the change, closer to the remedial
model. This is when the organization is capable of self-transformation.
The scope and extent of change. For in-depth comprehensive changes, it is
recommended to obtain assistance from a process consultant closer to the
educational model. This is due to the fact that in such a situation, learning as
well as rigor in structured and participatory processes is of great importance.
The organizational ability to manage change independently. The higher this
ability, the more advisable it is to obtain assistance from a process consultant.
Keep in mind that the work is done by a specific person. The size of the
consulting company, seniority, and reputation do not ensure success. Choose a
consultant whose experience in the past with other similar organizations can be
counted on. Check where he has worked and what the results of his work were.
Examine a number of consultants and select the best among them. The chemistry
between the consultant and the client is also very important.

THE CONTRACT WITH THE CONSULTANT AND THE WORK COLLABORATION
METHODS
Working with a consultant starts with acquaintanceship with him. It is important
that trust and chemistry be generated between the team in charge of change and
the consultant. It is thus important to familiarize with and to understand his work
methods as well as his standpoint in the process of change, and to agree upon
such.
It is important to summarize in writing the terms of work, work methods, dates

and times of meetings and their frequency, confidentiality of the project and of
the information on the organization, and payment methods.
Payment can be done by the hour, by full days or half days of work, global
payment for the whole project or as a part of the financial results directly
deriving from the project. This all depends on what management chooses.
(For more on the field of organizational development, refer to, for example, the
classic book by Bennis 1969, and Cummings 2009.)

14.3 HOW TO MEASURE THE SUCCESS OF CHANGE
The success of change can be measured in different ways. Our recommended
division is to observe success through two different approaches. The first one is
the output approach, and the second one is the input approach. For each
approach, different aspects of success measurement can be represented. This
division is presented as follows:
The input approach – Success is measured through changes of processes,

positions, values, action norms, efficiency, either reinforcing or transforming
what exists.
Dimension of efficiency – The change leads to improvement of the efficiency of

resource utilization in the optimization of work processes. Doing things more
effectively; doing more (products, quantities, quality) with less (time, workers,
expenses).
Dimension of prestige – The change leads to the reinforcement of the

organization’s position in the eyes of stakeholders. The brand name of the
organization is stronger, and its image in the eyes of workers and customers has
improved.
Dimension of survival – The change leads to the better capacity of the

organization to adjust itself to the environment and changing conditions; its
ability to survive and to grow has improved.
Dimension of beneficiaries – The change leads to the strengthening of

connections, satisfaction, and commitment of external and internal stakeholders.
Reinforcement and intensification of worker and customer satisfaction and
commitment.
Dimension of values – The change reinforces or changes central values and

manifestations in the day-to-day life of the organization, and thus, improves the
ability of the organization to grow.

The output approach – Success is measured through the achievement of
quantitative goals and improvement or change in results. It is a matter of
quantity and numbers. Student achievements, number of customers, profit, etc.
The dimension of purposefulness – The change leads to the redefinition of the

company’s goals, its strategy as well as the achievement of goals, and the
implementation of the organization’s strategy at a higher level.
The dimension of goals – The change attains the previously set objectives in
quantitative and measurable terms without negatively affecting other goals of the
organization.
Dimension of resources – The change creates a new position enabling or

increasing the resources available to the organization for the purpose of its
growth.
Dimension of products – The change leads to changes or improvements in the

quality of the products, in the introduction of new products on the market, in the
innovativeness of the products in such a manner that they can be quantified and
measured.
Dimension of market – The change leads to an increase of market share, new

customers, better positioning on the market, increase of income, profit, and other
financial results.
In the day-to-day reality, managers define change in terms of output and results.
However, the model presented above indicates the fact that at times, the
achievement of the goals of change may have other negative consequences, or at
least may delay necessary changes. For example, a change that leads to a new
product through an old and inefficient process or in a problematic cultural
climate delays the goals of the entire change as it is hoped to be carried out.

SECTION 4
Restructuring the Organization

Chapter 15
Designing a Corporate Culture

Supporting Innovation and Change
he concept of “corporate culture” is a relatively new concept in management
T sciences. Researcher Schein (2010) was one of the first to define the
characteristics of corporate culture and its importance in understanding
organizations. The starting point to this is the traditional anthropological
research which studies human behavior in tribes and ethnic groups. The
researcher uses observation tools and participatory observation in order to
investigate the values, norms, rules of behavior, rituals, celebrations, and
customs. The purpose is to understand human behavior within a group, what
motivates its actions, the hierarchical structure, and social ties. This starting
point also serves the researchers of corporate culture and climate of public
organizations, business organizations, modern communities, and societies.
Understanding the organization’s culture helps understanding the organizational
behavior of its members.

15.1 DEFINITIONS AND CHARACTERISTICS
WHAT IS CORPORATE CULTURE?

Corporate culture is an ensemble of concealed basic premises, beliefs, values,
norms, common conventions of a certain group of people, in a business
organization, a public organization, community, or a department in the
organization. Corporate culture is openly brought to light through rituals,
celebrations, symbols, legends, heroic stories, as well as stories of failure,
heroes, and villains, and constitutes the moral foundation onto which the
organization is based. Organizations both create their corporate culture, and
import culture from the environment.
Corporate culture is indispensable to understand human behavior in
organizations, and it has major impact on the ability of organizations to function
optimally, to change, or to avoid changing. Researchers Johnson and Scholes
(1999) described corporate culture as a web of processes and structures
surrounding the basic premises, beliefs, and values of the members of the
organization. According to this approach, corporate culture is founded upon
beliefs and values, from which derive or are brought to light the stories and
legends passing from generation to generation within the organization, the
symbols and symbols of status, such as dress, the appearance of the place, the
physical layout of the place, the customary management style in the organization
affecting the relations between workers and managers, the organizational
structure methods – for instance, a bureaucratic structure or a structure that
flows, as well as control and reward methods.
Johnson and Scholes define corporate culture as a web of organizational

behaviors based on the organizational paradigm deriving from it – the basic
beliefs and values which the members of the organization adhere to. The
routines are “our way to do things here.” The rituals are the processes that repeat
themselves in their own particular way, such as training processes or evaluation
processes, and so on. The members of the organization tell stories about the
glorious past, about crises, traumatic events, etc. Control and reward systems
express what is important to the organization, and management style affects
relations within the organization and organizational climate, which constitutes
part of the culture. The formal structure and task distribution emphasize, once
again, what is important to the organization and “how we do things.”

CULTURAL WEB ACCORDING TO JOHNSON AND SCHOLES (1999)

REVEALED AND CONCEALED CHARACTERISTICS OF CORPORATE CULTURE
Corporate culture is based on revealed and concealed characteristics. The
concealed ones are those within the minds and hearts of the members of the
organization. They are the basic premises of the members of the organization
and its managers regarding their interpretation of the reality around them (“our
way to success goes through hard work”), the values which the members of the
organization believe in, customary behavioral norms, social conventions, and
taboos and beliefs regarding the way to succeed. The revealed characteristics are
those visible to the eye of the onlooker: the way the workers dress, status
symbols, rituals, stories, myths, management style, control methods and decision
making, and worker reward processes. The following diagram clarifies the
position of the culture in the structure of activity of the organization (diagram 8):
diagram 8

THE IMPORTANCE OF CULTURE
Corporate culture is important due to the fact that it comprises qualities directly
related to organizational and business success or failure:
Identity – identity transmits to the members of the organization “who we are and
what characterizes us,” and enables them to have a clear sense of identity.
“Unifying cement” – enable identification with the organization and its values,
and in this manner, it provides a sense of belonging.
Orientation – shows the worker the orientation of activity and its
appropriateness; what are the right things to do and the wrong things to do, what
is good and what is bad, what is correct and not correct, who are the good ones
and who are the bad ones.
Uniqueness and source of pride – this is what indicates to the members of the
organization “how we are different from the others, what we are better at than
the others.”
Problem solving – how problems are solved in the organization and “how we do
things here.”
Logic – what is the logic behind all our actions? Why do we do things in the
methods and the manner we have adopted?
What is important to us – what are the things that are important and dear to us,
and what are the things that are less important to us?
What is our way to success – what is success in our eyes, and how do we fulfill
our mission?

STATED CULTURE VERSUS FULFILLED CULTURE
The importance of corporate culture to the life of the organization and its
contribution to its success is known and familiar. Accordingly, many managers
invest considerable resources in developing defined norms and values and
putting them into memos, in keys sentences carved into key chains, on desks,
and on shirt lapels. Many visitors in business or public firms are aware of the
fact that the moral and normative policy of the company is displayed on the
walls and on the clothes of the workers: “the worker is our most valued
resource,” or “the customer is important to us,” etc. All of these are written
statements, the stated culture of the organization: the values, philosophy, beliefs,
and behavioral norms that are declared and put into writing.
It is, however, important to bear in mind that the customer is not interested in
statements and slogans, and what counts to him is the actual behavior of
workers, literally meaning the fulfilled culture – the culture as it manifests itself
in the day-to-day life of the organization and as it is perceived by its members
and stakeholders.
Stated culture which isn’t actually fulfilled in the day-to-day life of the
organization becomes none other than slogans devoid of content. Many schools
adhere to a written policy stating “educating teens, each one in his own way,”
but in reality, 40 students sit in a classroom and all study similar material which
is delivered the same way for everybody.

STRONG CULTURE AND WEAK CULTURE
The distinction between strong and weak culture is important because it
diagnoses the extent of influence of corporate culture on the behavior of the
workers and the managers. A strong culture is characterized by the absence of
gaps between statements and actual daily action. The values and norms,
statements and slogans are indeed fulfilled in the day-to-day life of the
organization, and the workers and managers have assimilated them and sustain
them in their work life. The second aspect is the prominence of the culture,
meaning a strong culture can easily be defined, it can be named, and each
member of the organization is familiar with it and with its values. In a strong
culture, the different stakeholders can easily identify the values and norms of the
organization and act accordingly. It doesn’t yet define the type of culture, and it
can comprise different characteristics from one organization to another. For
example, prominent bureaucratic characteristics which exist in the military or in
the police force, or a strong character of kinship which exists in systems like
kibbutzim or elementary schools.

THE ORIGINS OF THE CULTURE
There are several origins to the formation of corporate culture:
The past of the organization – the pioneers or the entrepreneurs who established
the organization and who have sealed their mark into it for many years. They are
the ones who seemingly brought the values and norms, decision-making
processes and managerial style from their personal legacy. The fact that the
culture was assimilated at the beginning of the establishment of the organization
is interesting because of its long-term repercussions, especially when the culture
is strong. For instance, kibbutzim that were established by German immigrants
are to this day characterized by a culture of order, organization, and European
culture, affinity to classical arts, being introverts, etc. Kibbutzim established by
South American immigrants are characterized to this day by values and norms
typical to those countries: joie de vivre, flowing, flowing organizational
structure, little order and discipline, and less rigor on long-term results with
emphasis on life in the present.
High echelons of the organization – the managers of the organization or its

owners, officials and secretaries, consciously or unconsciously foster corporate
culture according to their outlook. They bring along their previous experience,
the values and norms they have acquired throughout their lives, as well as their
worldview regarding “how to do things.” Sometimes they carry out structured
organizational processes to assimilate values and norms supporting success.
They initiate processes in which goals, values, and behavioral norms are defined,
and they initiate workshops and processes for their assimilation.
Senior workers of the company – the senior members of the organization

acquired and generated organizational norms and processes which formatted
their work environment. They create a department or team subculture in order to
generate unification for the team and the normative behavior of its members.
Quite often, such a culture stands in contradiction with the organization’s culture
in order to separate the department from the other departments. Many examples
can be given, such as, for instance, the team culture of the veteran rifle squadron
in the infantry brigade in the military which generates norms and rituals in
opposition with the military norms of the entire military force, or the culture
generated in sales departments which flows more freely in comparison with the
organized culture of the manufacturing department.
Here too it will be difficult for the manager to carry out change in corporate
culture without associating those workers in the process. This will require an
attitude of respect toward such culture and taking out the good and combining it
with the new.
New workers – they bring to the organization values, norms, and perceptions
which are naturally influenced by the environment in which they were brought
up. The culture of young people is more characterized by technology, a fast
pace, swift adaptation to innovation, initiative, and rapid fulfillment. The ability
to eradicate negative values and norms preventing organizational success is
possible in this case at an early stage due to the fact that at the stage of sorting
and hiring, it is still possible to select workers following norms and values
compatible to the needs of the organization. Oppositely, young people are also
the force which can lead a cultural revolution, and managers can, therefore,
associate them in the process, granted not by trampling the old culture, but rather
by combining the old with the new.
External environment – without a doubt, in Israeli culture, its influence is on

internal corporate culture for better or for worse. It permeates through the
absorption of new young workers and through stakeholders coming in contact
with the organization: suppliers, customers, contractors’ workers, and temporary
workers. There are positive characteristics to Israeli culture that managers will
want to adopt, but there are also negative characteristics which managers must
eradicate.

WHAT IS THE DIFFERENCE BETWEEN CORPORATE CULTURE AND ORGANIZATIONAL
CLIMATE?
Organizational climate – refers to a given situation, subjective, related to

feelings and behaviors of the members of the organization, and refers to aspects
of the social environment as it is perceived by the members of the organization.
The climate is a complementary product of the culture.
Corporate culture – refers to the structure of the foundation of the organization,
its latent roots, behavioral norms, beliefs, and basic premises shared by the
workers of the organization.

15.2 MODELS AND TYPOLOGY OF CORPORATE CULTURE
Many researchers dealt with diagnosing different types of corporate culture. The
models below clarify the types of corporate culture and the differences between
them. These models enable people to diagnose the culture supporting change and
the culture that prevents change or that doesn’t relate to it.
C. B. Handy’s model (1993)

Handy suggested a typology comprising four types of culture:
Power culture – dominance of an individual or of a group making decisions and
operating in a centralized manner. They are powerful and influence
considerations or political considerations.
Role culture – tangible and rational structure, clear role distribution, stability.
Task culture – task-oriented approach, joint work on projects, emphasis on
accomplishments.
Person culture – culture of relationships and emphasis on the member of the
organization and his needs.
Deal and Kennedy’s model (1982)

Deal and Kennedy suggested a typology of four types of culture, but their
characterization is slightly different from the previous model:
Tough-guy macho culture – masculine culture, rigid and mission-oriented.
Achievements are immediately rewarded, high risk taking, rapid feedback
cycles. The police force, the entertainment industry, and advertisement are
examples.
“Work hard–Play hard” – organizations in which everybody works hard, but the
climate is of fun and joy, low risk, and quick feedback. McDonald’s, Mary Kay,
and even high-tech organizations are examples.
“Bet-Your-Company” – high risk, major investment, and long-term profit. High
risk and continuous feedback. This culture characterizes giant corporations such
as Boeing or crude oil companies.
Process culture – emphasis on processes, low risk, and slow feedback. Banks,
insurance companies, public organizations.
These two models don’t directly deal with innovation and change, but rather
indicate the importance and value of risk taking and long-term investment in
products and services.
Hall’s model (1995)

Hall’s model is based on two axes: responsiveness axis – fast or slow, and the
extent of assertiveness – high or low.
Hall’s model indicates the existence of culture characterized by the ability of

quick responsiveness and high assertiveness, a culture setting new challenges for
the workers of the company, foreseeing the future and encouraging autonomy of
the worker.
Robbins’s model (1996)

Robbins’s model is based on seven types of cultures:
Culture of innovation and risk taking – emphasis on values, norms, and
processes encouraging entrepreneurship and innovation from the bottom.
Culture of detail and precision – culture emphasizing the importance of quality
and rigor concerning small details, as in the German culture and corporate
culture manufacturing electronic and medical products at a high level of quality.
Culture of output and results – culture emphasizing market share, profitability,
output, and efficiency.
Culture focusing on people and relationships – culture of kinship, open
communication, warm relations, absence of hierarchy.
Culture of teamwork – emphasis on a consolidated team, belief in success
through teamwork.
Culture of aggressiveness and machismo – masculine culture, aggressiveness
and offensiveness in marketing, in advertising, and in relations with
stakeholders.
Culture of organization, order, and stability – emphasis on obedience, hierarchic
organizational structure, clear definition of roles, meticulous procedures and
paperwork.
This model diagnoses a type of culture highlighting the need for initiative,
innovation, and risk taking, which are essential to organizations who wish to go
through processes of change successfully.
Sckokz, C.'s model (1987)

This model is based on five types of cultures:
Stable culture – orientation toward the past, avoidance of risks.
Reactive culture – orientation toward the present, minimal risk taking.
Anticipative culture – orientation toward the present and recognized risk taking.
Exploring culture – orientation toward the present and the future, high risk
taking.
Creative culture – orientation toward the future, and risk taking as normal
activity.
Scholz adds another aspect of culture supporting innovation and change – the
dimension of time; orientation toward the future and risk taking as a routine
typical to our times.

TYPOLOGIES DIAGNOSING CULTURE AT A NATIONAL LEVEL
Hofstede’s model (1991)
Hofstede’s model is based on research conducted among the workers of IBM in
different countries all around the world. The model brings to light the following
criteria distinguishing between different national cultures:
The gaps of power and status – a culture characterized by large gaps in power,
status, and economic power versus a culture emphasizing the importance of
equality among people.
Individualism versus collectivism – a culture emphasizing the importance of
individualism, freedom of the individual and his rights (United States, for
example) versus a culture emphasizing the importance of the family, the clan,
the tribe, and collectivity (kibbutzim, for example).
Masculinity versus femininity – the extent to which there is equality between the
two sexes, the value of exteriorized feelings and emotions, flow and harmony as
exist in Scandinavia, versus a masculine culture emphasizing inequality,
aggressiveness, dominance, and introversion of emotions typical to Israel.
Endurance in situations of uncertainty, order, and disorder – the extent to which
the culture is characterized by structured processes, order, organization, written
rules, and regulations reinforcing the individual’s security versus a flowing
culture in which there aren’t too many structured processes, written regulations
and procedures, and structured frameworks.
Time orientation – long term and short term, the extent to which people are
living in the moment and are indifferent to time versus a culture in which people
plan time and determine long-term goals and objectives.
Adler’s model (1997)

Adler’s model completes Hofstede’s, with additional types of distinctions:
Approach on the nature of people – the extent to which culture perceives good or
evil in the nature of people from their adolescence.
Relationship to the environment – the extent to which society accepts and lives
in harmony with the environment versus domination and exploitation of the
environment and its development.
Individualism versus collectivism – the extent to which society values
individualism versus collectivism.
To be versus to do – a culture which stresses living the moment and passivity
versus an ambitious and proactive culture.
Relationship to the dimension of time – focus on the past and on tradition versus
focus on the present and on the future.
Relationship to space and living areas – exploiting territory and living in limited
space in comparison with the importance of open space.
The model distinguishing between national cultures indicates the differences in

the approach to change and innovation. Enduring situations of uncertainty,
relationship to time and action, and to belief in the ability to format the
environment of our lives – all of these are values contributing to the
transformation ability of organizations.
CAMERON AND QUINN AND THE CORPORATE CULTURE DIAGNOSIS MODEL (2006)
Cameron and Quinn built a simple model enabling one to diagnose corporate
culture. The model is based on a typology similar to that of Handy, whose
advantage is in the ability to include elements from each model reviewed above.
The model is built upon two dimensions: the dimension of attention of the
person at the head of the organization – inward (to people or to the
organization), and the dimension of structure of organizational processes –
flexible, open and flowing versus structured, stable, and monitored. According to
this model, the researchers detailed four types of cultures:
Clan culture: A place in which it is enjoyable to work, people are open with one
another, there is a sense of extended family, people are not indifferent to one
another, there aren’t many rules and procedures, and information flows freely.
The management style is paternal, associative, and instructive, worker
development and growth is important to the managers, belief that success is
related to human resources, high trust, and commitment, and there is a deep
respect for tradition and the past. Success is measured through the satisfaction of
the customer as part of the family, and, thus, through the satisfaction of the
worker. Harmony, teamwork, and participation in all processes of the
organization are of high importance. It appears that such a culture is typical to
small nascent organizations, voluntary systems, and public organizations, such
as elementary schools, and so on.
Hierarchic culture: The workplace is characterized by high-level structuring in

all the domains of the organization. Procedures are clear and formal, managers
are characterized as coordinators and organizers, emphasis is on efficiency and
economy, success is measured through the customers’ trust in the organization
and its products, and the extent of quality and meticulousness of the product is
great. Execution of orders is rigorous, and work is done by the book; uncertainty
is prevented. Organizational climate is serious and quiet. Emphasis is on the
notion that everything is under control and works smoothly.
Market culture: Culture of achievements, output, and results. Everything is

aimed at generating profit, increasing the market share, and business activity.
There is an unwavering will to succeed, to achieve, and to surpass competitors.
The image of success is important, goals are clear and translated into
quantitative objectives, worker performance evaluations are taken and rewards
are given for adherence to objectives. There is a stressful climate and a sense of
lack of time. Competitive prices are established in order to conquer markets and
to triumph over competitors. Management style is characterized as operational,
centralized, and competitive. This culture is typical to organizations finding
themselves in competitive markets and in a tumultuous environment, such as
banks and firms in the food industry.
Culture of adhocracy: This is characterized by dynamism, entrepreneurship from

all parts of the organization; individual autonomy; risk taking; and flowing
structure based on heterogeneous interchanging teams. Turnover; risk taking;
will to be at the forefront of knowledge and technology; daring; will to innovate
and to change reality, to be the first ones on the market with innovative products;
organizational learning; innovative, entrepreneurial and creative leaders. The
worker knows the goals of the organization, communication is open, information
is accessible, and each person in the organization is committed to innovation and
entrepreneurship. The structure flows and changes. Teamwork and individual
work occurs at the same time. There is a search for new knowledge in the
environment, awareness, and sensitivity to the progress of science and
technology in the environment.
The model is as follows:

Cameron and Quinn developed this model in order to enable the members of the
organization and/or its management to diagnose their organization’s corporate
culture in order to reach an understanding of the existing culture and of the
desired one. For this purpose, they divided each box into a measuring scale and
developed a questionnaire enabling individuals to identify gaps in the perception
of the current culture and to reach an understanding of such a culture as well as
the desired one. This is done through the results of the questionnaire brought to
light in the diagram. The basis of understanding corporate culture is that all the
types of cultures constitute 100 percent of the corporate culture of a specific
organization. In other words, the organization’s culture is a combination of four
types of cultures, as each type of culture constitutes a certain fraction of the total
100 percent, and each organization consists of a different combination.

Diagram A – culture of innovation and change typical of high-tech and starting
organizations
Diagram B – culture of results and hierarchy – banks, for example

Clan culture – voluntary groups, elementary schools, kibbutzim

CORPORATE CULTURE AND ORGANIZATIONAL EFFECTIVENESS, INNOVATION, AND
CHANGE
Cameron and Quinn’s approach enables people to define the combination of
different cultures supporting success. This depends on the nature of the
organization, its goals, and the nature of the market in which it operates.
However, in any situation, it has to be a combination in which one certain type
of culture stands out and supports the other types. In other words, the desired
diagram will appear as a pointer signifying the dominant culture, with slight
broadening at its basis indicating the other additional cultures. This is, in fact, a
strong culture, which external as well as internal stakeholders can easily grasp.
An equalitarian combination is brought to light in the form of an equilateral
quadrangle, implying a weak culture. Workers will struggle to function in a dual
culture. A narrow-based indicator signals a dominant culture lacking important
complementary characteristics of the other cultures. For example, a culture
which is entirely hierarchic will lead to a lack of innovation and difficulty to
obtain results due to the fact that the essence of its activity is preserving the
organization and its stability. Moreover, its workers will be frustrated,
dissatisfied, and unmotivated. This also applies to a clan culture. Lack of
emphasis on structure, order, and importance of obtaining results will shorten the
life of the organization in the long run, in spite of the pleasant atmosphere.
Therefore, the recommended combination should be based on a prominent
culture of one type, and complementary characteristics of the cultures of the
other types. For start-up organizations or for small, nascent organizations
operating in a competitive market and whose goals are to bring out new products
and new services on the market, a pointer comprising a combination indicating
toward an adhocracy culture is more appropriate. However, emphasis on such a
culture will entail difficulty with regard to the feelings of the workers who need
teamwork and a supportive familiar climate. This also applies to an
achievement-oriented culture: excess emphasis on development and on
innovation is risky due to the fact that the time it will take the product to reach
the market, as well as its cost, will not enable the subsistence of the organization.
This also applies to the minimal need for order and organization in order to
prevent absolute chaos. For example, companies such as 3M and Gillett and
Rafael are successful organizations who assimilated a combination of such sort.
(Refer to later examples.)

15.3 CULTURE, INNOVATION, AND CHANGE
Each organizational change includes change in values and behavioral norms.
Radical change also alters the basis of corporate culture, and for this reason, its
role is important in processes of change. It can be both a barrier and a defense
against change and innovation or a platform bearing the change.
As previously mentioned, corporate culture can assist change, but it can also
hinder it and thus, stress the importance of stability and conservatism. The
following characteristics are those of a managerial culture preventing change and
innovation:
• Relate distrustfully to each proposal for efficiency or change coming from
the bottom.
• Ensure the need for long and complicated authorization processes.
• Allow many to inspect proposals.
• Adopt a centralized managerial style.
• Do not ever praise suggestions or successes coming from the bottom.
• Establish a developed control system.
• Establish a centralized, hierarchic, and bureaucratic structure.
• Increase paperwork.
• Search for who is to blame in all failures.
• Avoid conflicts on real and relevant issues.
• Transmit to the workers the notion that “the way we do things is always the
best way and the only way.”
• Do not reveal your cards in hand.
• Don’t ever forget that you are the one at the top, and that you know
everything better than those below you.
As opposed to the approach above, beliefs, values, and norms supporting change
can be enumerated:
• Openness of management and encouraging innovation, optimization, and
change proposals coming from the bottom.
• Ability to accept conflicts on real, relevant issues.
• Willingness to “put the cards on the table” and discuss sensitive issues.
• Support in risk taking of everyone in the organization.
• Positive approach and encouragement of the errors of entrepreneurs.
• Positive approach to experiments.
• Rewarding workers for innovation.
• Resource dispersion among the departments of the organization for
development purposes.
• Swift decision-making methods.
• Structure that is flexible, dispersed, and not bureaucratic.
• Reinforcing and developing managerial style.
• Rotation of roles.
• Mixed teams of cogitation and innovation.

CORPORATE CULTURE CHANGE AND ASSIMILATION
In order to establish a culture supporting innovation and change, it is necessary
to manage an organized process.
1. Diagnosing the characteristics of the existing culture – by means of
diagnosis tools such as questionnaires and interviews, the culture can be
identified as it is perceived by the workers, the customers, and the
managers.
2. Diagnosing the gaps in the perceptions of the existing culture as well as
their origins – it is important to examine whether there is congruence
between the interviewed perceptions. Absence of congruence indicates
either departmental cultures differing from one another or a weak culture
difficult to define and whose characteristics are difficult to grasp.
3. Agreement on the existing culture and its characteristics – debates and
discussion between the interviewees regarding the characteristics of the
existing culture.
4. Decision on the desired combination of cultures supporting the company’s
vision and mission – joint decision on conventional values and norms
supporting the company’s vision and mission.
5. Translating the values and norms into reality and behaviors – workshops
and working in small groups to establish processes, organizational
structures, action methods, and evaluation methods deriving from the values
and norms.
6. Implanting change – through involved teams of workers and managers
according to topic and field.
7. Expressing the culture through symbols, logos, rituals, and rewards.

15.4 EXAMPLES HIGHLIGHTING VALUES AND NORMS OF
INNOVATION, ENTREPRENEURSHIP, AND CHANGE IN
SUCCESSFUL COMPANIES
Intel Israel – in the article published in the monthly magazine Human Resources
(a monthly Israeli magazine for HRM managers), Intel’s CEO Dov Frohman
details the values and the norms important to his company:
• Excellence
• Creating maximal challenge
• Openness and constructive criticism
• Constant improvement and change
• Quality, accomplishment, and desire for achievement
• Encouraging risk taking
• Open and efficient communication
• Leadership and personal example
• Adherence to commitment
• Simplicity
On the page that Elbit Systems Ltd. (a high-tech global company) published for
its customers, it details the company’s values and norms as follows:
• Full response to the needs of the customer
• Unconditional quality
• Loyal, professional, and rapid service
• Including the customer in everything
• Personal responsibility facing the customer
• Adherence to objectives and reward for such
• Authority delegation
• Cooperation
• Teamwork
• Initiating continuous processes of improvement and change
Case Example: Rafael Armament Development Authority in Israel (from a

presentation in a lecture given by the company’s former CEO, Mr. Giora Shalgi)
The vision of the firm is: Courage and innovation is defined as the core central
value of Rafael. In order to stand at the forefront of technology and develop and
manufacture advanced products at an attractive price, the company decided on a
transition to a culture of innovation, entrepreneurship, and change. The
characteristics of this culture are displayed below:
1. Fostering a high level of freedom, allowing the lower levels to voice ideas
and criticism without hierarchic barriers.
2. Emphasis on open teamwork in a win-win atmosphere, without
compartmentalization of factors, preventing averting essential information
from the workers.
3. Open communication and information enabling the workers accessibility of
relevant information.
4. Supporting the workers who wish to change fields of practice, through the
assumption that coalescence of disciplines constitutes a source of new
ideas.
5. A culture that encourages admitting mistakes and that knows how to deal
with failures.
6. Contributing to innovation is defined as a reward objective at the level of
divisions.
7. Supporting innovation constitutes one of the tasks upon which managers at
all levels are examined.

POLICY SUPPORTING A CULTURE OF INNOVATION
• If the worker is valued as a professional and suggests an idea in his field of
expertise, and in his opinion it could contribute to the objectives of the
division in which he works, it is necessary to let him inspect the idea in a
preliminary examination, even if his superiors think otherwise.
• There shall not be budgetary limitations for the preliminary examination of
the idea.
• The chief engineers and the assistant director general of Research and
Development, who hold the budget for R&D, are to back up such initiative
(there is special budgetary allocation for this purpose).
• We encourage each division to develop groups to support innovation in
order to generate conditions and a supportive atmosphere for creative
thinking.
• We encourage “discussion forums” between divisions on any topic that a
group of people identifies as important for the future of the organization.
• Innovation is not only technological. We encourage innovation in all
dimensions contributing to the organization.
• Individual and collective reward mechanisms.
• Anyone who fails, on the basis of risk taking that was properly thought
through and taken care of in a professional manner, wins acclaim and
encouragement.
• Lesson learning constitutes part of the process of organizational learning.

ESTABLISHING INTRAORGANIZATIONAL GROUPS OF INNOVATION AND
ENTREPRENEURSHIP
a. Innovation circle and inventive momentum
Goals:
Encouraging creative thinking and creating a framework for idea
implementation.
Constituting a supportive framework and feedback to the teams who implement
ideas.
Guiding principles:
Openness, focus, mutual support, commitment, equality.
b. Leonardo da Vinci circle
Goals of the circle:
Encouraging innovation of the missile division. Developing ideas for new
products.
Searching for solutions to new problems.
Finding use for new technologies.
Mutual inspiration and transmission of knowledge.
Nature of activity:
Voluntary participation over time.
Biweekly meetings.
Reporting:
The activity of the forum on its ideas will be published once every quarter for
management. Putting forward suggestions to implement promising ideas.
Club bulletin.
Reward and protection:
The activity of the club is under the incentive and under the protection of the
division’s management. Holders of successful ideas will be personally rewarded.
c. “Cultivators” circle
The establishment of cultivators includes workers of exceptional creative
capacity capable of inspiring their environment with new fruitful ideas. The
cultivators work full-time or part-time in accordance with the following rules:
By defining the role of the cultivator:
• The cultivator is free to operate on any topic he chooses; he is released from
operational pressure of persuading others to share his opinion.

The cultivator is free to choose the environment in which he will work in
• order to provide him with a supportive environment.
The status of the cultivator will be examined once every certain period of time,
and the prolongation of this status is conditioned by how the head of the division
evaluates its contribution.
d. Network of the leaders of innovation

It is designed to support the sprouting of systemic ideas. Each member of the
network will be identified in his field of expertise and will be an associate to the
pool of minds that will be located in the Info-net. The number of members of the
network nowadays amounts to 150, and everyone is free to join on the condition
that they are willing to support professional advice when requested by one
member of the network.

15.5 CORPORATE CULTURE IDENTIFICATION
QUESTIONNAIRE ACCORDING TO E. CAMERON AND R.
QUINN, 2006
Below are six questions with regard to corporate culture diagnosis. For each
question, there are four characterizations of different types of culture. In
order to characterize the corporate culture of your organization, you shall
distribute 100 points between each one of the four types of cultures
according to their value in your organization.
1. The main characteristics of the organization

C The corporate culture is characterized by the openness of people, a
sense of extended family, open communication, and warm relations.
A The corporate culture is characterized by entrepreneurship,
dynamism, and innovation. There is freedom of expression of new ideas,
encouragement of risk taking, and personal initiative.
H The corporate culture is characterized by emphasis on procedures,
formalities, hierarchy, order and discipline, and clear regulations.
M Emphasis is on skill, competition, and ambitiousness, as well as the
importance of completing missions, output, and results.
2. Leadership in the organization

M Leadership demanding output and results; the leader stresses the
importance of quantitative achievements.
H Leadership stressing the importance of order, organization,
procedures, control, and efficiency, operating within organizational
structures, dealing with adjustment and improvement of what exists.
C Participatory and democratic leadership, delegates authority, and
stresses the development of people and teamwork.
A Entrepreneurial leadership, takes risks, pushes toward innovation,
and allows freedom of creativity and initiative of the team.
3. Organizational unification
H What unifies the organization are the formal procedures, rules,
discipline, and order. Stability and routine are very important. The structure
and roles are clear, and they constitute a basis of normal functioning of the
organization.
C What unifies the organization are loyalty and commitment,
interpersonal relations and teamwork. The organization is characterized by
a positive and easygoing climate, open relationships, and worker
satisfaction. The customer is considered as a part of the organization.
A What unites the organization are focus on innovation and change,
on the will to be a source of imitation for others, to be the first in innovative
products or in innovative processes and technologies.
M What unifies the organization are the emphasis on labor
productivity, quality and level of performance, adherence to objectives and
goal achievement, aggressive marketing, and quality service to the
customer.
4. Corporate culture
A Highlights dynamism and will to constantly withstand new
challenges; learning through experimenting and making mistakes, flowing
organizational learning, reward for innovation and initiative.
M Competitive and oppressive culture saturated with conflicts,
emphasis on the importance of triumph, management by objectives and
results, endless work. Communication is mainly from top to bottom, and
feedback is negative.
C A culture of trust and openness, positive atmosphere, participation
and involvement of the team, direct contact with the customer.
H A culture emphasizing permanence and stability. The expectation is
in completing clear tasks and procedures. Constant effort is made to
reinforce behavioral norms and to rigorously carry them out.
5. Success criteria
M Market share, scope of sales, adherence to plan, satisfied
customers, leaders in the market.
C Worker satisfaction, worker development and learning, teamwork,
concern for people.
A Introducing innovative products and services on the market, use of
technological methods, innovative systems and methods.
A Efficiency, adherence to plan, adherence to schedule, stability, and
regular flow of the system.

6. The values to which managers adhere
H Values of obedience to authority and to senior echelons, importance
of order and organization toward success, importance of seniority, ranking,
stability, and its preservation.
A Values of personal initiative, freedom of action, risk taking,
uniqueness, freedom to change, importance of change and dynamism in the
life of the organization.
M Emphasis on competitiveness, hard work, performance, and
ambition, importance of supervision and inspection of the workers, the
managers decide – the workers perform, monetary reward and punishment
according to performance.
C Values of cooperation, authority delegation, work relations,
satisfied worker, decentralized power.
Result summary
Report the grade you received for each of the four types of culture on the
straight line for each letter with a dot. After you have reported all four dots,
connect them with straight lines in order to obtain a trapezoidal shape.
The desired shape will show a trapezoid as a pointer toward the desired
type of culture, with the supporting characteristics of the other different
types. (See the broken lines in the diagram above.) A narrow indicator
shows excess focus on one type of culture; an indicator whose base is a
straight line will show once again the absence of one supporting culture.
The direction of the pointer is conditioned by the type of organization or
department, but in any case, the combination of the four dimensions must
be under the dominance of one of these types. It seems that as far as change
and innovation are concerned, a pointer pointing to the upper right corner is
advisable, as sketched in the diagram.

Chapter 16
Developing the Internal Ability of

Innovation and Entrepreneurship
"New ideas come from the origination of diversified ideas and their
categorization. For this reason, categorization processes will only succeed
on the condition of diverseness. Creativity and innovation grow on grounds at
the limit of chaos, on grounds of disorder and waste."
Hannan and Freeman, Organizational Ecology, 1989, p. 149

16.1 THE IMPORTANCE OF INNOVATION
Organizational innovation is a partial yet critical aspect of the ability of
organizational transformation. Peter Drucker, in his article “The Discipline of
Innovation” published in Harvard Business Review (2002), claims that
innovation is the very center of entrepreneurship.
Organizational innovation provides organizations with advantages over their
competitors, and the process of organizational change, thus, becomes initiated
and not forced. Innovation leans on a corporate culture and a managerial style
that generate a comfortable climate encouraging its growth, and it constitutes an
infallible means for the increase of profit and market share of companies.
Research recently conducted in the United States (Globes Magazine, 8.7.1999)
showed that investments in products and services which can be defined as
innovative brought a 57 percent investment yield, in contrast with an average
capital return of only 16 percent from investment in fields which aren’t
innovative. A research that was conducted by Professor Negroponte from MIT
University shows that 80 percent of the financial results arise from 20 percent of
the products, those being innovative products (Peters 1999).
Organizational innovation is the main road to entrepreneurship and
breakthrough. It makes organizations become full of vitality and essentialness,
and it pushes people to use their abilities and imagination for the benefit of the
company. Innovation is a source of pride and imitation for others, and it entails
preeminence and superiority on the market as well as a positive image for the
company. Nevertheless, in an era where everything is still open and boundaries
are permeable and unclear, innovation will be advantageous as long as all
development and information related to it is rigorously maintained.
Confidentiality is the name of the game, and developing defense abilities as well
as preventing theft and copy is crucial.
There is a difference between innovation and invention, despite the proximity in

meaning of the two terms. Invention is the narrow domain of discovery, new
patents or new technology, and innovation is the broad notion of improvement
and constant renewal, and its purpose is implementation and fulfillment.
Invention is a small, albeit, important part of innovation. Innovation also
includes the implementation, financing, marketing processes, as well as the
process of change facing the market, and it is rather more interlinked to the
pragmatic search for business and marketing opportunities. On the other hand,
technical invention or the processes constitute only a small part of the entire
process. For example, the Chinese were the first to discover paper, gunpowder,
and printing, but they hadn’t succeeded in making them products of high
demand and comprehensive use. This was done by Western capitalistic society.
The goal of innovation is to create new game rules, or in other words, creating
products, services, or organizations that will change the rules of the game. This
provides an advantage over time due to the fact that it takes time for the
competitors to reorganize themselves for competition purposes. The significance
of innovation is not about doing things better than the competitors, but rather
surprising them by originating new game rules. Most companies concentrate on
small improvements of existing products and services, but this only yields minor
increases in profitability. The reason for this is the exaggerated focus on the
customer and his needs. However, the customers are not capable of predicting
future trends, nor are they capable of voicing their opinion on something they are
not familiar with. Therefore, innovation doesn’t come from recognition of
customer needs, but rather from the creative minds of the workers dispersed
throughout the organization who are confronted with problems and find
innovative solutions to them.
Despite the impression that innovation is identified with small companies and
start-up companies, most developments and successful products are produced
within the framework of large companies or even giant corporations. The
company regarded as the leader in the field of innovation in the United States is
3M, in which innovation is not only the fruit of development units, but also the
heritage of every worker. They are not only properly rewarded for their
inventions and innovations, but also receive encouragement to proceed in their
efforts more and more, even if their ideas are not always well received. The
policy is to generate many ideas and innovation under the assumption that within
these many ideas are a few that can possibly be implemented. Each one of the
60,000 products of the company was thought of by regular workers (refer also to
Brown and Ulijn 2004).

16.2 STAGES OF INTRAORGANIZATIONAL INNOVATION
DEVELOPMENT
Six stages in the process of innovation can be identified:
Vision – growth of a preliminary idea of a marketing opportunity for a product,
service, or technological development.
Incubation – ripening process of the idea and its translation into a substantial
basis for the likelihood of adoption and use.
Preparation – mobilizing support, resources, and required authorizations.
Materialization – building a prototype and receiving feedback from investors
and potential customers.
Development and adjustment – serial production and introduction on the
market, advertising and marketing, constant adjustment.
Stabilization – taking the measures to ensure the long shelf life of the product or
service.
It is important to stress the fact that the first stages focus on the marketing
possibilities prior to mass production.
Michael Robert (1995) enumerates seven characteristic positions of companies

restraining innovation and causing their own degeneration:
1. The will to protect “yielding cows,” and the fear that innovation will
negatively affect the main source of income of the company. Each company
has a product or service yielding the essence of its income, but the will to
protect it entails blindness facing competitors and the market, which already
works at developing innovative competitive products. Due to the attempts
of IBM to protect their main frame computers at all costs, which were their
main source of income, they lost sight of the development of the personal
computer by competing companies. The irony is in the fact that IBM was
actually the company that developed the first microchip of the personal
computer, but shelved its development out of the knowledge that it would
eat away at their main product. Thus, the company missed a business
opportunity only because of its will to protect its “milch cow.”
2. The belief that the market is saturated and no longer has room for growth
and innovation. This approach constitutes a belief that is incompatible with
the actual developing reality. Major changes have occurred in supposedly
saturated fields. This applies to the industry of footwear in which
companies develop innovative quality products in special market segments,
as applies to the bicycle industry, and as applies to every area and field.
Administrations convincing themselves that the market is mature and
doesn’t have room for innovation cease to search for opportunities and
cease to rejuvenate. They start to search for opportunities for products that
are not related to the core of the organization and thus, bring destructive
results upon themselves.
3. The belief that the company sells rudimentary products which don’t give
room for innovation. This belief also is baseless. Company products
become rudimentary products only if the company is convinced that these
products are as such. However, even for rudimentary products such as bread
or milk, there are endless developments and options for innovation, if only
the market is split and divided and unique needs are responded to. The
company doesn’t change its products into rudimentary products.
4. The belief that initiative and innovation originate only in small companies,
and that large companies reject risk taking and producing new products.
The reality, however, is otherwise. Innovation and creativity are also
present in large companies, such as Intel Digital, which are known as being
companies that are highly capable of innovation. The corporate culture and
the expectation from each worker to be an entrepreneur develop and elevate
the ability to innovate.
5. The belief that innovation depends on the inborn skill of outstanding
individuals, and, therefore, when there are no such people in the company,
there is no innovation. Innovation is not related to inborn skill, but rather to
a managerial approach and to the institutionalization of processes
encouraging innovation. 3M doesn’t include outstanding individuals, but
rather workers and managers who were given the proper conditions and
tools to innovate.
6. The belief that producing innovative products is too dangerous. Indeed,
innovative organizations take risks, but these are calculated risks. Such
organizations adopt methods that diminish risks as well as processes that
enable choosing between different alternatives.
7. The belief that innovation demands considerable resources. Innovative
companies find the necessary resources for innovation by reallocating them.
Four more characteristic beliefs restraining innovation can be added to Robert’s
list:
8. The belief in the stability of the market and the product. The belief that the
success of the product or service will last over time and that there will
always be a market for a certain product.
9. The belief that it is possible to unlimitedly improve the product or service in
an incremental manner. This belief doesn’t generally have anything it can
rely upon either. The shelf life of a product is gradually getting shorter, and
the advantage goes over to the innovators and revolutionists. There is a
limit to the capacity to improve a product or a service.
10. The belief that any development or innovation can be copied at lower costs
than its actual development. This belief can quite often be correct, but its
price in the long term is higher than its benefit. This approach degrades the
basic inherent instinct of successful companies and oppresses the inherent
capacity for innovation in managerial style and in corporate culture.
11. The belief that innovation and development are an issue for experts and the
job of the Research and Development department. Innovative companies
instill within each of their workers the need and the power to innovate, and
good ideas come from every level of the organization. They are, in fact, the
ones who come in contact with customers and with the business
environment, and in the case of marketing or manufacturing malfunctions,
they are the ones who are able to propose creative solutions.

INNOVATION BY WAY OF SEARCHING FOR OPPORTUNITIES
Innovative organizations instill within their workers the necessity and the ability
to learn from changes either occurring in the environment or inside the
organization, and to turn them into opportunities for innovation. Among those
can be counted:
Unexpected successes within the organization itself or within competing

organizations. Sudden or temporary success should be considered as a learning
source and not as a random deviation.
Unexpected failures in the organization and in those of others. Rather than

searching for who is to blame and condemning them, innovative companies learn
from their failures and manage to find peace out of violence. The probability of
error in a world of uncertainty is gradually increasing, but it also provides
freedom and space for initiative and innovation.
Unexpected events in the environment. Apple’s announcement of the arrival

of the personal computer took IBM by surprise. The company could have either
ignored it and proceeded with developing its product or developed its own
personal computer. Fortunately, it chose the second option.
Faults and weaknesses. In every system, there are faults, bottlenecks, and
stages of weakness, among others. All of these entail opportunities for creative
thinking and searching for innovative solutions.
Changes in the rules of the game. Governmental deregulation, encouragement

of high-tech companies, central support in certain branches, and changes in the
health industry, for instance, among others, constitute an opportunity to enter
new niches and to innovate.
Technological changes. Introducing satellite telecasts, innovative

communication technologies, mobile phones, new materials – all of these
constitute a basis for their integration to innovative products and services.
Rapidly growing fields. The growth of the Internet as well as the growth of the
fields of health and ecology attract innovative organizations into surfing and
riding the wave of growth by means of additional innovative developments.
Cultural changes. Changes in recreation and leisure habits among the younger
generations and elderly generations or change in trends and in norms constitute a
business opportunity for innovation. The trend of 4X4 vehicles and field trips,
the health food trend, and alternative medicine, among others, constitute a
convenient platform for innovation in such fields.
Demographic changes. Changes in age characteristics, origin, sex, level of

income, residence, as well as recreation and consumption habits inspire ideas for
new products and services that will respond to such changes.
Merging of technologies. Combining different technologies may produce a new

product or service. The combination between communication systems,
computers, the Internet, as well as sales and finance bodies, can provide a new
user-friendly system.
New inventions and their utilization. New patents from the laser industry, in
the field of biology, cell, and neuroscience research are the basis and the
opportunity to combine them into new products.
Trends taking shape in the future. The future is already here and shows signs
in things that are already in development and taking form. All it takes is
observation and examination. Constant examination of developing trends for the
future in every field can constitute an excellent basis for innovation. The rise of
the Chinese market, the development of trade through the Internet, the trends in
the field of the global market and in the banking field, the increase in life
expectancy, increasing mobility, the diminished importance of location, these
trends, among others, can constitute a basis of thought on reorganization and
innovation.

INNOVATION IN WHAT?
Innovation comprises different types:
1. Coming out into the market with a new product which has not previously
been on the market, turning an invention into a product. Products and
services of this type generate a new reality and open broad horizons for
additional products and services, new professions, and entail increasing new
needs, and in this manner, they originate a new developing market. The
telephone, computer, television, radio, or alternately, Prozac or Viagra, are
a few of the many examples known to all.
2. Revolutionary change in an existing product or service. Here, we are not
dealing with constant minor improvements, but rather with change which
brings new quality to the product or service. Miniaturization processes, for
example, create new quality for products. The transition from the personal
computer, and following that, the laptop computer, is a characteristic
example.
3. Combining technologies or processes, which generate something new and
different. The combination of laser light technology with electro-optics and
computers generates a different firing system, of a quality differing from the
old one. The combination of cellular communication systems with
computers and television generates a new teleprocessing system.
4. Adding knowledge components to an existing product. Making an existing
product more ingenious. Adding friendly bacteria into existing dairy
products in order to ease digestion or using environmentally friendly
packaging that is easily disintegrated are a few among the many examples.
5. Upgrading an existing product or service by way of changes originating
new quality. Gillett is a company that is known for its innovation in a
domain in which it is seemingly difficult to innovate, and that, nonetheless,
succeeds in introducing regularly renewed shaving appliances into the
market.

EXAMINING THE PROFIT ABILITY OF NEW PRODUCTS
When a certain opportunity for a new product has been identified, it is necessary
to assess the profitability of its development. The analysis of profitability will be
based upon the three following factors:
1. Cost versus benefit:
Labor costs, materials, equipment, research, marketing, time, legal consulting,
patent registration, advertising, implementation, pilot.
Benefit from market share increase, return on equity, profit, image, satisfaction,
loyalty, quality, motivation and growth.
2. Extent of congruence of the product or service with the overall strategy of

the company: Experience teaches that opportunities that did not correspond to
the strategy and core of the organization did not work out over time.
Management must, therefore, determine which products, customers, market
segments, and geographical markets it intends to focus on in the future.
3. The extent of difficulty in implementation:

This will be determined through an analysis of the changes that the company
may need to carry out in the following fields: organizational structure, processes
and methods, new aptitudes, manufacturing capacity, sales methods, distribution
methods, technology, knowledge, financing, laws and regulations, reward
methods, raw materials, customer service, corporate culture, and managerial
culture.

16.3 INNOVATION AS AN INSEPARABLE ELEMENT OF
CORPORATE CULTURE
As previously mentioned, the culture of the organization is the logical basis for
all its activity; for this reason, there is a corporate culture that encourages
innovation and one that doesn’t do so.
Following are a few among the different factors encouraging organizational

innovation:
• Deep belief in the importance of innovation as one of the main means of
success of the organization over time. The belief in the ability of each
person in the organization to be a source of innovation, and setting up the
resources and processes to substantiate the idea.
• Encouraging trial and error. Learning from failures and mistakes and
avoiding searches for who it to blame. Encouraging curiosity, risk taking,
and developing a reward system that encourages innovation.
• Encouraging minor innovation as major innovation. Instilling the perception
that small can also be big or inspiration toward something big.
• Implanting the perception that innovation is a matter that concerns each and
every one in the organization, and not only the people at the higher levels or
in the development department. Establishing the belief that everything
depends on the people.
• Instigating interdepartmental meetings and meetings between different
officials for breakthrough thinking, new initiatives, problem solving, and
change proposals.
• Flat and dispersed structure in which each unit and individual has the
possibility, the resources, and the conditions to innovate.
• Research and development exists everywhere and at every level. Allocate
processes and means for developing entrepreneurship everywhere. Absorb
curious workers, not necessarily the ones who toe the line, “strange”
workers, and such who think differently.
• Structuring diversity and variety in teamwork, either by assembling people

from different disciplines or by assembling people of different views or
different personality traits in order to attain unique results and to generate
synergy.
• Transition toward leadership of inspiration, reinforcement, and emphasis on
vision and uniqueness. Discarding a style of command and instruction or of
rule and regulation observance.
• Acquiring innovativeness. Innovation contrasts with gaining control;
mergers and acquisitions broaden the product portfolio and render
management more difficult. The strategy must therefore be of acquisitions,
but also of innovation, skills, and original ideas. That is exactly what large
successful companies do. They purchase small start-up companies that are
nothing but ideas, skills, and innovativeness.
• Developing the learning skills and competence that goes beyond existing
thought patterns and turns toward alternative thought patterns. Developing
and instigating skills of creativity in everyone. Developing the ability to
disengage from existing paradigms and to search for other more functional
ones.
• Developing continuous mechanisms of information gathering, learning, and
investigating what is happening in the external and internal environment,
and making use of events and trends for innovation. Attentiveness to the
outstanding workers, listening to ideas that arise from the edges.
• Transition to a learning organization. The organization that carries out
constant learning, open communication, and transparent information to all.
An organization in which everybody continuously learns within assorted
teams how to do the right things better yet.
• Corporate culture and organizational structure based on focus on the
customer, service, and quality, as well as excellence as leading values.
• Management at the verge of chaos. Excess order and bureaucratic
processes, such as in hierarchic and bureaucratic structures, can oppress
innovation. Innovation needs freedom, space, and situations of uncertainty.
It needs a fast pace in decision making and quick attention to the
unexpected. Therefore, excess institutionalization of development and
creativity is, in fact, likely to weaken it. It is therefore necessary to combine
small points of uncertainty into the organizational structure and decision-
making processes, especially at the edges of the organization, at the point of
contact between people and the environment, where the process of
innovation generally emerges and occurs.
• Structuring rituals instigating initiative and innovation. Nurturing myths of
innovation heroes, incorporation of new workers through training and
learning the values of the organization, as well as internalizing the
importance of innovation. Combining innovation into the statement of the
vision and the objectives of the company.

16.4 HOW DO THEY DO IT? EXAMPLES OF SUCCESSFUL
INNOVATIVE ORGANIZATIONS
An example of an outstanding company in terms of innovation directly related to
financial success is 3M (refer to Kanter, Kao, and Wiersema 2002). While in
many companies, innovation constitutes an important part of their strategy, in
this company, innovation is the strategy. The slogan that everyone internalizes is
“At 3M, we live by our ingenuity.” The company focuses on innovation and not
on improving the existing products or on imitating the products of competitors,
and thus, lowers the risk in broadening its range of products, which amount to
about 50,000. Each year the company invests seven cents to a dollar in
innovation, and by 1995, it reached a sum of $883 million. Paper stickers as
memos, laptop computer monitors, plastic lenses, reflectors, and noncorrosive
Scotch-Brite pads produced from recycled plastic bottles are a few examples of
the company’s products.
How they do this:

• Recruitment and selection processes: Attracting and absorbing creative
and imaginative people in the company.
• Organizational climate: Generating a work environment and a climate that
present challenges. Elaborating an organization and processes that don’t
interfere with people’s capacity to think and produce.
• The future is already here: Keeping up-to-date regarding only customer
needs is not enough; predicting future needs is also carried out in the
company.
• “Going into the customer’s kitchen”: The company places its workers
into the companies that are actually its customers in order to be closely
familiar with their needs and to provide rapid response to problems.
• 15 percent solution: The company allows every technical worker to
dedicate 15 percent of their time to developing a project of their choice.
They can do this in any way and in any place they see fit.
• Established mutual knowledge transmission teams: The company
assembles forums of workers from different fields in which problems and
challenges are presented and forefront knowledge is assimilated with the
help of external experts. Workers are transferred from place to place in
order to generate mutual knowledge transmission and learn from one
another.
• Management toward creativity: The company relates to failure as an
opportunity to learn. Managers learn to stimulate creativity and innovation
when every idea in development stages gets an opportunity to prove itself.
• Decentralized structure: There are 45 divisions in the company operating
as independent units. Each unit has its support systems required for
innovation.
• Setting innovation objectives: The objective: 30 percent of the company’s
sales will be those of new products that will have been manufactured within
the last 4 years.
• Prizes and rewards: Rewarding innovation consists of salary raises and
professional advancement. Moreover, there are homage prizes and
ceremonies. Once a year, the company organizes a festive ceremony in
which valuable prizes are granted to the individuals and the teams whose
new products reached sales of five million dollars. In 1995, 43 teams
received such a prize.
• Innovation grants: Workers whose ideas don’t correspond to the products
of their units receive a special development grant from the company. New
ideas which are not in the domain of products but rather in the domain of
management, organization, and nontechnical fields also receive a special
grant from the company.
Following is the definition of vision as per how the company defines and instills
it within its workers: “We want to be the most innovative company in the
world. We expect from our people to make our vision a reality in everything
they do. The most flexible and high-standard objective is to constantly change,
in order to anticipate business and technology. Our vision is what motivates
our enterprise.”
3M (The story of 3M as told by Kanter et al in their research and the book
Innovation, 2002)
More on the company’s approach voiced by one of its managers:

“3M advances as an acrobat on the tightrope of innovation… Our success can
be ascribed to our ability to attract toward us and absorb creative and
imaginative people, and to the creation of a challenging environment… an
organization that doesn’t impede people to think and produce, and that grants
rewards which contribute both to their sense of self-value and to their bank
accounts. We synchronize all this thanks to our determination not to be
content solely by updating ourselves regarding our customers’ needs, but
rather in our ability to FACE their needs.”
David Quinn, Development CEO, 3M
In Tom Peters’s interviews and discussions with successful managers (1994),

there have been many allegations and quotes in which managers stress the
importance they give to innovation, creativity, and change:
“The only productive asset of Microsoft is human imagination.”
“Organizational learning is a motto from the ’90s. The motto of the oncoming
era will be organizational oblivion. This is because the problem is never how to
put innovative thoughts in your mind; it is getting the old ones out.” (D. Hock,
founder of Visa)
“Companies will need to focus more and more on ‘the top row’ – innovation.”
(P. Georgescu, IMR CEO)
“Mistakes and failures are the result of trial and error, which are themselves a
source for innovation; it is therefore not necessary to suffer from mistakes; they
must be encouraged.” (CEO from Silicon Valley)
“If you count among you two people who think the same exact thing, dismiss one
of them. Why would you need duplicity?” (J. Krause, CEO of Chicago Bulls)
And finally, Bernard Shaw claimed that truth starts with blasphemy, whereas the
Austrian philosopher Ludwig Wittgenstein wrote that if people didn’t do silly
things sometimes, nothing intelligent would ever be done.

16.5 INTRAORGANIZATIONAL ENTREPRENEURSHIP
Innovation and change growing from the bottom rely upon creative power and
on the capacity of innovation and initiative of the workers. Developing a climate
and a culture that encourage worker initiative will lead to an abundance of ideas
and initiatives, which are likely to generate new business initiatives. There are
many advantages to initiatives coming from workers: They are based on
organizational reality and on close knowledge of the organization’s needs, and
they bring out energy and enthusiasm to the organization from the ones engaged
in such initiatives. Entrepreneurship creates a rapid comparative advantage at the
level of controlled risk. Unlike innovation focused on products, services, or
innovative technologies, entrepreneurship focuses on a new and complete project
resulting from internal initiative.

WHAT IS INTRAORGANIZATIONAL ENTREPRENEURSHIP?
Entrepreneurship is based on internal creativity leading toward innovation,
meaning the creation of either new business inside the organization or initiatives
of the workers of the organization in order to generate something new.
Intraorganizational initiative is based on an entrepreneur or on an entrepreneurial
team which is either organized by management or organizes itself in a voluntary
manner, to implement an internal innovative project, leading the organization
toward a new niche, a new market, or a new product.

WHO ARE THE INTRAORGANIZATIONAL ENTREPRENEURS?
One type of leadership style is an entrepreneurial style. This person is creative,
enthusiastic, has little patience for bureaucracy, kindles excitement, and knows
how to enrapture others into implementing the project, by way of his enthusiasm
and his beliefs. Entrepreneurship is not solely an innate characteristic. In order to
develop, it needs a supportive and encouraging atmosphere and supportive
space, especially comprising the right people, climate, and resources. Unlike
managers engaged in preserving and improving what exists, entrepreneurs
always search for new ways to do things.

ADDITIONAL CHARACTERISTICS OF ENTREPRENEURS
An entrepreneur seeks opportunities, wants to produce new things, to improve,
and to change. He has the desire to leave his mark and to take risks. He has the
ability to defy the beliefs and values in the organization and to establish a
coalition of supporters. He has his own personal vision, he is able to convince,
and he has the ability to urge processes, to stimulate devotion and commitment
to the project that he elaborated.

WHAT DOES AN INTRAORGANIZATIONAL ENTREPRENEUR NEED?
Entrepreneurs require freedom of action, the possibility to make fast decisions,
indulgence regarding failure, and acceptance of the fact that they choose
themselves – they see themselves as initiative leaders even when it isn’t their
formal role. It is part of their character. Moreover, they need preliminary
financing, professional assistance, time resources, space, knowledge, and finally,
cooperation and coordination between different agents.

BARRIERS FACING INTRAORGANIZATIONAL INITIATIVES
Traditional organizational structures, hierarchic culture, order of procedures and
obedience, slow decision-making processes, business indices as exclusive
criteria, immediate result indices, predetermined planning processes, unfair
reward systems, conservative financing policies, skepticism, and climate that
doesn’t encourage change coming from the bottom – all of these take the wind
out of the entrepreneur’s sails and “turn him off.”

DIFFICULTIES IN THE DEVELOPMENT OF INTRAORGANIZATIONAL INITIATIVES
A process which is quite often conducted in a different manner than the
customary processes within the organization.
An idea pops up in the minds of entrepreneurial workers, but they need a

supportive and encouraging climate such as fast decision-making processes and
use of “noneconomical” criteria in decision making regarding the support of the
project.
The risk that the entrepreneur will lack managerial ability. Entrepreneurs are
quickly “turned on,” but at times they are quickly “turned off” as well.

DEVELOPING INTRAORGANIZATIONAL INITIATIVE: CONCLUSIONS
Complementary and supportive team: It is advisable to establish around the
entrepreneur a small team that can work with him and that will complement his
qualities. Entrepreneurs are generally good at raising ideas and motivating
toward their initial implementation, but they are not as good at activating a team
of people, at methodic management, or at maintaining organization and order.
Intraorganizational entrepreneurs have little patience for bureaucracy, and
therefore, fast decision-making procedures are critical.
Policy and creation of a supportive climate: A leadership policy which perceives
growth originated from the bottom as of utmost importance for success; the
belief of the leaders that there are burnt out entrepreneurs within the organization
who expect adequate conditions for the revival of their prime.
Leadership growing from the bottom: Entrepreneurs are like leaders who give
rise to innovative ideas. Their success is also related to the possibility to become
project leaders and to obtain a formal entrepreneurial leadership position within
the organization.
Belief in ideas and not only in numbers: Successful initiative is related to the
entrepreneur’s competence and determination, to the support he gets and to the
team assisting him. Ideas that demonstrated good economic feasibility according
to economic research have backfired, not because of miscalculations on the
economists’ part, but rather because of the fact that the person who was at the
head of the project wasn’t suitable for the assignment.

16.6 CASE EXAMPLES
THE FAILED INITIATIVE OF THE MUSIC-PLAYING POTTY

In 1992, I was chosen as secretary of a large kibbutz (a small commune of 2,000
inhabitants in the center of Israel) that was in deep economic crisis. The factories
belonging to the kibbutz collapsed due to the fact that they were established
upon an old industry and outdated products: A foundry that operated with
outdated technology, a natural juice factory that went bankrupt due to the fact
that the orchard lands in Israel were taken over for housing areas. It also had a
carpentry workshop for children’s furniture that didn’t withstand the competition
against cheap imported furniture. Its agricultural program was barely profitable,
and banks were pressuring toward change and the reimbursement of an
increasing debt. This led me to rethink the economic structure of the kibbutz and
its reestablishment based upon the initiative and entrepreneurship of the
members rather than on the decisions and initiatives of the kibbutz’s
administration. I wrote on the kibbutz’s bulletin, I spoke at meetings, I sent
explanatory pages on my policy, and I appeared at home discussion groups.
One day, a young kibbutz member who had just finished a trip around the world
and who had recently heard my speeches entered my office. He asked for 10
minutes of my time and laid out before me an initiative that he requested to
implement in the kibbutz: a musical potty which is activated when the baby wets
it. This product was meant to make the process of diaper weaning easier for both
parents and children. The young man asked for a small amount of money to
produce a prototype of the potty. I was excited about the idea. It seemed like an
attractive and innovative idea, one that was bound to succeed economically, but I
immediately understood that it was my duty to pass the decision on to the
secretariat, to the economic committee, to the council, and to the assembly. The
kibbutz member told me that he was waiting for approval of the project and
asked when he would receive a response. I told him I would do my best to
arrange a secretariat meeting the following day and provide a preliminary
authorization – a green light for the project.

During the meeting, I found myself on my own. The kibbutz’s economist
demanded a business plan before pursuing any further discussion. The
manufacturing coordinator demanded a market study before discussion. The
society and culture coordinator claimed that he knew that boy since childhood
and that he was not capable of carrying out such a project because he hadn’t
even finished high school. Others claimed that it was impossible to make a
decision regarding the matter at that moment and that debates had to proceed in
the appropriate institutions.
At the end of the meeting, the young man called and asked what had been
decided. I managed to stammer something in response. The boy replied, “I guess
you don’t want or aren’t ready for this. I don’t have the energy or the patience
for all of your committees.” Two days later, he announced that he was leaving
the kibbutz.
Currently, he is a successful businessman. He found an investing partner, came
up with a patent for the product and for similar products, such as a musical potty
with several melodies to choose from, or a musical plate for birthday cakes
among others, and he markets these products all around the world.

THE SUCCESS OF THE “MY DREAM HOME” PROJECT
Determined to pursue my way, I continued pushing my ideas. With some
difficultly, I managed to pass forward a few initiatives, but the atmosphere had
gradually begun to change. The manager of the nursing home decided to take in
external patients at the home’s expense, the physiotherapists opened the facilities
to external clients, and the manager of the swimming pool began receiving
external members.
One day, Udi, a creative young man with an entrepreneurial personality, showed
up at my office. At that time, he had just returned from a mission in the United
States, where he had seen amusement facilities in large galleries for small
children. Unlike amusement parks like Luna Park, in these amusement facilities
the children could play and entertain themselves in an active manner. Udi laid
out before me the project that he wished to set up in the kibbutz’s empty movie
theater (the kibbutz had built a new modern auditorium), and I got excited. The
project seemed to be suitable for the kibbutz. It could become a source of
income for the members of the kibbutz, and it had major chances to succeed
since in that same year there weren’t enough recreation spaces for small
children.
Udi requested investment amounting to 80,000 shekels to finance the project in
order to alter the old movie theater for the accommodation of hundreds of
children and parents, air conditioning, carpets, parking lots, etc. We would
receive the installations and games free of charge from companies that were
interested in advertising their products. The kibbutz, whose revenue cycle
amounted to around 150 million shekels, had the minimal required amount.
Nevertheless, I cooled down as I thought about the exhausting process I would
have to go through for approval. Moreover, the empty movie theater was meant
to be turned into the kibbutz’s library, archives, and a memorial space for the
casualties of Israeli wars, and I was about to ask to build a commercial project
there – true blasphemy.
During the secretariat meeting on the subject, everything repeated itself:

Demands for the business plan, feasibility studies, methodical decisions,
criticism of Udi’s personality, etc. This time I did things more cleverly. I knew
that for the project to succeed, the creative and entrepreneurial Udi had to be
partnered with someone capable of managing a project and capable of managing
people. We convinced two girls to join the founding team, and we mobilized
people for a vote. That time, instead of undergoing a long series of decisions, we
mobilized young members that would come and vote for the project at the
general assembly.
At the assembly, two groups stood facing one another. The veterans and
traditionalists perceived the introduction of a commercial project in the space
that was designated to accommodate a spiritual and cultural center as dishonor to
the sacred values of the kibbutz, and living off of commerce rather than from
production was perceived as trampling the foundations of the kibbutz economy.
Facing them stood the young members of the kibbutz and the partisans of change
who constituted a small majority. The vote approved the project by a very small
majority. “My Dream House” project was set in motion and became an
overnight hit. At that time, the kibbutz had a positive cash flow and a very
profitable project. Five years flew by, and soon, competitors established
themselves and even imitated the project.

16.7 QUESTIONS TO TEST YOUR INTRAORGANIZATIONAL
INNOVATION AND ENTREPRENEURSHIP
The facts:
What is the value of the assets and creative abilities in the organization?
What proportion of your income do your new products constitute?
To what extent is creativity productive in your organization?
Try to count at least half a dozen creative initiatives that have arisen lately in the
company, in a department …
Who deserves credit?
Whose initiatives were they? Who brought them to discussion?
Who supported them?
Who promoted them up to the final stage of implementation?
Were the discussions important to the process?
Opportunity:
In which conditions and at which opportunities did the initiatives arise?
Where did they arise from?
Were they originated in reaction to a specific challenge? Who set such a
challenge?
Were they originated in reaction to the activity of a competing company?
Were they originated in reaction to a state of emergency, to necessity, or to some
other unexpected event?
Were they originated thanks to the methodical planning of the company which
was intended to encourage them?
Planning:
If you have identified an initiative that was originated as a result of methodical
planning, try to isolate the factors in the method which contributed to its
emergence.
Research and mobilization factors (hiring workers, consultants)
Shape of the organization (work environment, work relations)
Pedagogical elements (professional training in the workplace, sabbaticals,
intellectual exercises, etc.)
The stick-and-the-carrot method (bonuses, peer pressure, status, advertisement,
etc.) Technological factors (information networks, communication systems)
Leadership (involvement of the CEO)
Economic factors (investing in the development of abilities to produce ideas,
grants)
Locating:
Map out the development of a few creative initiatives, from the initial step,
through the informal project, the formal project, and finally up to its
implementation as something of value to the company.
Pay particular attention to methodical barriers, inspection points, obstacles, and
breaking points. Pay attention to human factors (jealousy, enthusiasm,
consciousness/nescience, support, competition)
What do you know about the culture and work processes of your competitors?
Of companies known for their creativity?
What do you know about the most creative company in the branch?
How do you ensure general awareness regarding innovation in the branch? Trade
shows? Magazines? Advertisements? Customers? Information networks?
During the process of studying the competitors, did you come across clues
regarding what could determine future competition between you and them?
What unique characteristics of your company would enable it to produce in a
unique, continuous, and effective manner?
People:
Do you know who the major talents in your company are? What motivates
them?
To what extent have you succeeded in identifying, acquiring, developing, and
training talented people in the past?
How many prominent, creative, talented people have you lost this year? What do
you do in order to fill their position?
Who is responsible for hiring workers? The manpower department only?
Is the reinvention process of the company diversified enough to the extent that it
allows everyone to express opinions?
What, if anything, is missing in your employee recruitment process? When and
how do you intend to solve the problem?
And finally, for those who insist on preventing innovation within their
organization, following are a few suggestions on how to do so via management.
(Do not take the following ideas too seriously and please view them with
skepticism.)
Make sure innovative suggestions and ideas drag through long approbation
processes as much as possible, and through the entire organizational hierarchy.
Ensure and encourage recurrent inspection of every new idea.
Consider problems as a sign of failure and as an opportunity to search for who is
to blame. Rigorously maintain your ability to control and supervise everything;
make sure everything is constantly measured.
Relate to information and knowledge in secrecy and do not spread it out.
Always stay on the safe side.
Increase the use of threats and inspections, and do not praise or encourage
initiative, especially those coming from the periphery of the organization.
Organize and arrange the organization so that everything is done at the right
place and everything is clear and methodic.
And most important, never forget that you belong to those at the top, who know
the business better than anyone else.

Chapter 17
Redefining Corporate Vision
17.1 INTRODUCTION
This chapter deals with a change strategy from future to present; redefining
corporate vision in accordance with the wishes of the company’s owners,
managers, and workers, their will, and their perceptions.
Successful organizations over time are organizations which have a vision, clear
values, and beliefs constituting a sort of magnet or compass that focuses the
organization’s activities toward their implementation. Successful organizations
have a philosophy and a worldview that guide and orient their activities. Such
corporate worldview is built upon layers ranging from general and abstract to
focused and pragmatic. Such organizations are seen as successful economically
and financially, their achievements exceeding sixfold those of similar
organizations without vision. A research conducted on the financial results of
visionary companies in comparison with those of similar nonvisionary
organizations discovered that one dollar invested in the stock market in 1926
obtained a yield of $415 in 1990; the same dollar invested in a regular business
firm obtained a yield of $955 in 1990, whereas in visionary companies of similar
fields, the same dollar obtained a yield of $6,356 (Collins and Porras 1994).
The vision expresses the dream, the yearning, and the aspiration of the
organization for the future. It expresses the spirit of the organization and its
conceptual standpoint. The vision is the anchor, the central idea around which
the organization operates and around which are integrated the members of the
organization. The vision gives a positive meaning and constitutes a source of
strength and energy for corporate action. It is a source of inspiration, enthusiasm,
pride, and belonging. The vision is also a sort of North Star, a dream, an
expression of yearning and aspiration which could never be fully realized. Its
uniqueness is in the fact that it serves as a powerful engine operating toward its
own fulfillment. The Zionist vision, for example, set in motion a full movement
for its implementation in almost impossible conditions. The kibbutz vision, the
vision of the Hebrew language, the vision of a united Europe, the vision of
democratic Arab countries, among others, are renowned examples of the power
of vision and its impact on its believers.
There are visions that were stated and not fulfilled, both in organizations and in
human societies, such as Ben Gurion’s (the first Israel prime minister) vision of
the Negev Settlement, the vision of the Israeli fighter aircraft, the vision of world
peace, etc. Visions are not realized and do not constitute a center of attraction
when leaders don’t succeed in relating them to the hearts of people, when they
are too distant, and when they do not respond to genuine needs. Visions are
destined to become a thing of the past when the environment, the era, and the
context in which they are generated change. Giving up an outdated vision is
painful and ruthless or it levies a heavy price for its believers to pay. Just as it
elevates them to peaks of satisfaction, motivation, and meaning of life, it is also
likely to bring them crashing down to desperation, frustration, and bitterness.
In a chaotic and fast-changing world, the vision gains new meaning. Vision is
not something comprehensive and eternal that its believers adhere to for the rest
of their lives. Vision, rather, constitutes a sort of intimate dream of organizations
at a certain period of time; it is the product of a certain given context, and it has
to change as the circumstances change.
Such change demands, inter alia, new psychological and mental abilities from
the members of the organization. Nowadays, more than in the past, the ability
to identify oneself, to disengage from former identification, and to adopt a
new one is necessary. Transformational leaders are endowed with the ability to
persuade the members of the organization to disengage from an outdated vision
and to adopt a new vision without going through endless suffering. Such leaders
are endowed with a double ability: to depict an exciting vision, to connect people
to it, and to instill within them the belief in their ability to implement it.
Corporate vision is phrased in the form of a simple sentence or a few simple
sentences that are easy to remember. Positive examples from the business world
are, for example, the vision of Stef Wertheimer to bring advanced industry to
export and quality population to the Galilee region, Walt Disney’s vision to
build a magical world of fairy tales, and the vision of Nokia to connect people
(“Nokia, connecting people”).

The fact that many companies nowadays engage themselves in redesigning their
vision and internalizing it among the workers is related to the intensification of
competition between companies in any field, on the one hand, and to the
increasing demand of the customers to receive added value which responds to
the unique needs of individuals and groups, on the other hand. In order to
withstand such competition, companies must find themselves a unique niche,
then define and clarify for themselves and for their customers why it is actually
worthwhile to choose them. Moreover, in the last years, awareness of the
importance of quality of products and their innovativeness has risen, and all of
this urges organizations to reaffirm their distinction and uniqueness each time.

17.2 VISION STRUCTURE
Corporate vision is built upon several levels: from the simplest general level,
which are the sentences themselves of the vision and the mission, up to the more
substantial levels, of values and strategy.

FIRST LEVEL: THE VISION
The vision is a key sentence which concisely defines the essence of the business.
The vision is a partially realizable dream, a statement to the world of a positive
message. Its meaning includes who we want to be and what our supreme
ambition is.
Example: building together the most magical place in the world – Disney.

SECOND LEVEL: THE MISSION
The mission constitutes the answers to the questions: what is the purpose of our
existence, what is our vocation, what is our goal? What is the meaning of what
we do, what is our statement to internal and external customers, what do we
want to do?
Example: We make people happy – Disney.

THIRD LEVEL: CORE COMPETENCY
This mission answers the questions of: what is our field of expertise, what do we
focus on? What are our core competencies, what are we better at, and how are
we different from others?
Example: Disney defines their core domain as show business rather than
entertainment. Disney’s expertise is in putting together gigantic shows in which
each worker has to play a part. He or she is not dressed in work clothes, but
rather, in a costume, and the entire process takes place on an elevated stage and
its huge basement – the resting place of the actors. Disney doesn’t have
customers or visitors, but rather, an audience of guests that comes to see a
perfect show.

FOURTH LEVEL: BELIEFS, VALUES, AND BEHAVIORAL NORMS
The values and norms express the company’s position regarding the
implementation method of the vision. What are the behavioral criteria according
to which we will achieve our vision and mission better than others? The values
are expressed toward the workers, the customers, the suppliers, as well as other
relevant stakeholders. The values answer the question of how.
Example: Disney defines a number of values, especially in the domain of

service, such as: smile, courteousness, rigor on performance according to
instructions.
A study of successful companies’ basic values reveals that there are a few
different sets of values according to topic:
1. Service-oriented values: courteousness, customer satisfaction, excellence
in service, customer centrality.
2. Quality-oriented values: quality of the product or service, reliability,
constant quality improvement, total quality.
3. People-oriented values: autonomy and entrepreneurship, development,
promotion, security and reward, quality of life, constant learning,
association and involvement, teamwork, sense of kinship.
4. Values oriented toward learning, innovation, and change: tolerance for
mistakes, encouraging initiative and risk taking, ambition to be at the
forefront of knowledge and technology, encouraging enterprise and
initiative, constant changing.
5. Values of ethics and morals: integrity and honesty, observance of business
ethics, confidentiality.
6. Community-oriented values: contribution and responsibility toward the
community, social responsibility and business responsibility.
7. Values oriented toward the quality of the environment: aesthetics,
preserving and developing the environment, preventing contamination.
A short analysis shows that there are different groups of people toward whom
these values are directed. They are the customers, the members of the
organization, the suppliers, the community, and the environment. Even if, within
the goals of the organization, business objectives and economic success is
apparent, this aspect is not stressed in the values and beliefs. The reason is
simple. Profit and financial success are a result of vision-oriented human activity
based on values. They are, as for themselves, not a cause but a consequence.
The choice of values by organizations seemingly depends on their field of

business. Companies whose field of business is service put emphasis on the
values related to the importance and the centrality of customer service. Those
whose field of business is the production of knowledge-oriented products stress
the importance of learning and innovation. Companies who operate in the field
of mass production highlight reliability, fostering workers, quality, and price.
Organizations such as schools stress the importance of the pupil as an individual.
Nevertheless, in an era of change and uncertainty, organizations must implant
among their workers the importance of values related to knowledge, learning,
flexibility, innovation, and change. In this manner, the ability, the legitimacy and
the importance of constant reexamination of everything are internalized in the
corporate culture. This assists in the ability of rapid organizational change.
Following is an example displaying the vision ensemble as leading and orienting

the activity of the organization:

The vision guides organization
Vision is built in such way that each level supports the next. The mission
supports the vision, uniqueness supports the mission and the vision, and the
values provide normative support to the vision, the mission, and uniqueness. The
day-today behavior of the workers provides a pragmatic manifestation of all the
above statements.
In the existing reality, these concepts intermingle with one another.

Organizations state their mission or vision in one or in a few clear sentences
which include the aspects mentioned above, no precise distinction having been
made between dream and mission.

17.3 EXAMPLES OF VISION AND MISSION STATEMENTS OF
SUCCESSFUL COMPANIES
Nokia: We connect people.
Boeing: To lead in aerospace advancement, aviation pioneering.
Johnson & Johnson: We exist in order to ease pain and disease.
Motorola: We exist in order to honorably serve the community by providing
products and services of excellent quality at a fair price.
Disney: We want to create the most magical place in the world.
We exist to cause happiness for millions.
We operate in the field of the entertainment world.
An example of a broad definition of vision and mission was suggested by

Tnuva’s CEO at a presentation of the company’s action plan of year 1998–1999.
Tnuva is the largest food corporation in Israel. Definition of the core business:
Tnuva specializes in various types of fresh, chilled, and frozen foods, through a
partial or full chain of manufacturing, marketing, and distribution operations
between the farmer and the retailer.
The mission:
• To serve the welfare of the farmers, the consumers, and the shareholders.
• To lead the market of fresh and frozen foods toward modernization, quality,
and image on a world level.
• To sustain a joint and protected system with groups of stakeholders,
including the environment.
• To nurture human resources “so that regular people will do unusual
things.”
Another example is the definition of vision and mission of Coca-Cola.

Vision: As the world’s largest company in the world, we refresh the world.
Mission:
• Coca-Cola quenches the world’s thirst by developing soft drinks, both
sparkling and not sparkling, of excellent quality, and with profitable
systems and methods for the production of soft drinks, which create value
for our company, for our partners, and for our customers.
• We exist in order to create value for our shareholders, on a long-term basis,
by setting up a business that raises the value of the company’s brands. That
is also our ultimate commitment.
• In the process of value creation, we succeed or fail on the basis of our
abilities to operate for the benefit of the main assets owned by the company,
which are:
• Coca-Cola – the strongest brand name in the world, along with other
valuable brands.
• The most effective and expanding distribution system in the world.
• Satisfied customers who enjoy substantial profits from the sales of our
products.
• The workers, whose sole responsibility is to build the foundations of this
enterprise.
• Our abundant resources which must be divided intelligently.
• Our global leadership, particularly on the beverage market, and in the
business world as a whole.
Another additional example of vision and mission statement has been brought up
from the field of education. Here too, excellent managers lead progressive
educational systems by way of intensive work on redefining vision and mission.
The following example is that of a community school:
• Our school develops democratic processes and integrates a humanistic,
holistic, relevant, and experiential system of values.
• The school constantly focuses on team development, developing academic
programs, community integration, and integrating maladapted children.
• Our North Star is the growth of people: students, teachers, and parents.
As previously mentioned, there are companies who change their vision and
mission due to changes on the market. An example of this is the high-tech
company in Israel, Elbit.
Elbit changed its mission due to changes on the market of security products. It
went from a company specializing in the field of electronic defense systems to
combining systems of other different disciplines in order to create a new
product. The former mission and vision were defined as follows:
• To offer supportive quality products and services that can solve the
customer’s problem within the scope of the technological forefront of the
computer industry.
• To grow, all the while maintaining the leading position in Israel, and one of
the worldwide leaders in building computer-embedded systems.
In the new stage, the definition changed:

• Elbit’s business is to improve the effectiveness of existing security and
military systems by introducing multidisciplinary technologies that will
upgrade such systems and place them at the scientific and technological
forefront.
Clalit Sick Fund also changed its mission and vision due to the opening of a
health fund market enabling free selection for patients. From a sick fund whose
vision was to provide treatment for policyholders that were members of
Histadrut, it changed its name to “Clalit Health Services.” Members,
policyholders, and patients are nowadays known as “clients and associates,” and
the mission is “prevention services and health under the joint responsibility of
the service and the client.” Emphasis has moved toward quality, professional,
available, and quick service. The opening of the market to competition [took its
toll], and the leaders of the sick fund managed to come to their senses in time.
The story of the factory “Matar – irrigation accessories” is an example of an

organization that did not change its mission with the changes occurring in
the environment.
Matar was a factory that manufactured irrigation accessories made from brass
and aluminum by casting. The factory was practically the unique supplier of
such products and thrived as long as the irrigation method in agriculture was
grounded on aluminum pipes and perforated iron pipes produced by a machine
made of brass, which was itself manufactured by Matar. The factory supplied all
the joints for pipes and faucets.
At the beginning of the 1970s, a new invention appeared: plastic irrigation
systems. The factory’s management carried out discussions on the definition of
its mission and its field of operation. The threat still seemed distant, but renewed
brainwork was necessary regarding the factory’s future. Two options lay before
management: the first one – defining the field of operation of Matar as a factory
that manufactured complementary accessories made from aluminum and brass
by casting; the second option – defining its field of operation as manufacturing
irrigation accessories, which meant moving toward plastic irrigation accessories.
The factory chose the first option, and thus, sealed its fate. The plastic irrigation
system took over the tumultuous market.
The kibbutz factories that began manufacturing such a system became the most
profitable factories and still are to this day. Matar degenerated and underwent
many crises, and in 2005, it went bankrupt and was shut down. All of its
employees were laid off at an advanced age, and they were forced to search for
new jobs. It turns out that the lack of ability to see the prospects of a new
invention, exaggerated adherence to the old world and the lack of ability to
disengage from it, the belief that what has succeeded until now will succeed in
the future, absence of farsighted leadership, and exaggerated resistance to
change – all of these were factors in the collapse of the factory.

17.4 CHARACTERISTICS OF EFFICIENT VISION AND MISSION
A supposed vision must be exciting and challenging, but it must also be related
and connected to deeds and action. Those are the characteristics of vision:
vocation and efficient values.
• Vision must not be too abstract, too distant, and impossible to achieve.
• Vision must, for the most part, come to be realized in the present, and not
remain as an idea to materialize or an ambition for the future.
• Statements or intentions for the future are of no interest to the customers of
the organization. • The customers come to purchase products or to receive
service from organizations that accomplish in their day-to-day life what
they declare in their statements.
• The vision is the result of the leadership process that involves the workers
in its design.
• Each worker assimilates the vision and brings it to realization through his
day-to-day behavior.
• The vision must be formulated in short and simple sentences in such a
manner that they can easily be remembered and internalized.
• The vision phrases must be internalized within the hearts of each member of
the organization and must provide inspiration and significance to their
actions.
• The absorption of new workers is bound to a socialization process:
internalization of the values and vision.
• The vision must be formulated clearly and precisely so that it will be
possible to examine the extent of its fulfillment.
• It is advisable that vision formulations undergo participative processes in
which all the members of the organization can voice their opinion and
wishes.
• The values and the vision must be tested by the target audience toward
which they are directed. Appealing to customers, to the members of the
system, and to the community constitute an inseparable part of the vision.
• Vision and values are destined to be periodically and fundamentally
reexamined. As long as this is an inseparable part of the organization’s
activity and culture, it will be easier to carry out.
• There must be congruence between what is stated and what is done, and
between what is revealed and what is concealed. There must be consistence
and rigor in their day-to-day fulfillment.

SUMMARY: THE IMPORTANCE OF VISION
• Vision orients the actions of everyone and focuses them in one unique
direction.
• Vision gives meaning to actions. Workers do not perform meaningless
activities, but rather contribute to a better world of better quality.
• The vision makes the difference. It distinguishes between companies that
wish to shape reality according to their vision and companies who imitate
reality or who sit passively within the existing reality.
• Vision enables the organization and its members to go through difficult
periods. In such times, the vision constitutes a reason to go on and to
operate toward achieving an important goal.
• Vision is a source of motivation, pride, and belonging for the organization.
It motivates toward its implementation and enables workers to feel proud of
being a part of an operation that gives meaning, not only to them, but to
their customers as well.

17.5 PLANNED CHANGE PROCESS OF CORPORATE VISION
Generally speaking, the strategy for vision definition presented in this chapter is
a planned change management strategy from future to present. There are a
number of possible processes of vision creation and its reexamination with this
strategy.
Process of growth from bottom to top: With this method, which characterizes
relatively small public organizations such as schools and service organizations or
small innovative business organizations, the vision, mission, and values are
originated at the bottom by way of personal and professional work. Workers, as
individuals, learn to define for themselves ideological perceptions and personal
vision and to formulate them. Teams learn to be familiar with, to examine, and
to define organizational values and vision. In participative processes, we
examine commonalities and differences and try to reach an understanding and
create an agreed-upon system of values, beliefs, and vision.
Leadership process permeating from the top to the bottom: With this
method, the manager or management establishes the vision and formulates the
values as a result of personal work or teamwork. Thoughts and ideas permeate
the bottom through written documents, organizational training, supportive
mechanisms of corporate culture, personal examples, reward systems, as well as
work and performance methods based on these values.
Process of repeated cycles and dialogue: This is a complex process which

includes the two above-mentioned methods. The job can be done simultaneously
at all levels, both on a personal and organizational level. Constant dialogue takes
place between the different levels, in which points of agreement as well as
disparities are identified. With a climate of openness and attentiveness,
organizational learning takes place, and its results constitute the organizational
vision, beliefs, and values. Managers and workers sustain open dialogues
regarding their ideological positions in order to jointly establish the vision.
The earlier the method involves all the workers in the process, the more they
identify, and the more committed they are to the outcome. The price to pay is in
the dedication and investment of effort, time, and mobilization of expertise for
learning processes and financial resources.
Organizational characteristics can also affect the nature of the process. Large
organizations in which there is a large professional gap between management
and the workers will encounter difficulties to carry out comprehensive
participative processes. In relatively small organizations in which there is no
professional gap between managers and workers, it is advisable to make use of
participative processes.

17.6 EXAMPLE OF THE PROCESS OF FORMULATING A VISION, A
MISSION, AND NEW BELIEFS
This example was taken from work on the redefinition of the corporate vision of
a company that imports medical equipment and safety equipment in the
workplace. Until 2005, the company focused on importing such products, but in
the last years, the changes that occurred regarding the demand for quality of life
and safety, not only in the workplace but in other places as well, led the
company to redefine its vision and mission. Below is the structure of the vision
and its definitions:

THE VISION OF GAZIT CORPORATION
Our vision:
We operate together in order to protect the lives of workers in Israel and to
save the lives of the wounded.
Our specialty:
We provide a variety of quality solutions of knowledge and services based
on innovative technology, with the purpose of preventing injuries at work
or at home and treating patients in Israel.
Relations with suppliers:

We perceive suppliers as strategic partners in our past, present, and future
path toward the implementation of the vision and mission of the
organization.
Our guiding values:

We believe in values of honesty, reliability, personal attention, service, as
well as stable long-term relationships, and we implement such values.
Customer relations:
We provide all of our customers with professional solutions through long-
term personal contact availability, innovation, and flexibility.
Our relationship with the workers:

We sustain close work relations, and together we build a supportive,
intimate system which develops, promotes, and preserves our best workers.
We believe in the importance of identification, involvement, and
participation of each worker in the goals and values of the company. We
promote and greet initiative and innovation coming from each and
everyone in the organization.
Uniqueness of our products:

We provide our customers with leading brands at the forefront of
technology, which are produced within the most restrictive norms.

All of these constitute our way of life and how we act in our day-to-day
life.

REDESIGNING PROCESS OF THE COMPANY’S VISION
The company’s management decided on redesigning the vision as well as on a
complete and precise formulation of all its elements. This is due to the
impression that the market in which the company operated had undergone
changes, the customers’ expectations had changed, and finally, new strong and
cheap competitors whose products were mainly from the Far East, thus, of low
quality and at a low price, had entered the market. Management also sensed that
the existing vision was not clear enough and no longer reflected the wishes of
the company and its desired characteristics. The company chose a consultant to
work and assist in the entire process, from redefinition up to translation of the
vision into action.
Introductory meetings, contract signatures, and clarification of action methods
came about. Agreement was made on who would lead the process on behalf of
the client. It was agreed that a team of five members of management would be
the leading team, among which the deputy director-general was chosen to lead
the entire process.
The first meeting of the leading team was intended for a joint study of the vision
and its importance, examples of successful companies, a short tutorial film, and
agreement on the structure of the vision. Each participant received homework: to
think about the uniqueness of the company and its advantages over other
companies, possible fields of activities, etc.
The next three meetings dealt with the company’s strengths, its unique fields of
activities, and defining the different sentences constituting its vision. Most of the
discussions focused on an attempt to reach an understanding and a vision that
would express what the company wanted to be, and thus, to implement it in its
own unique way.
Additional meetings were arranged in order to formulate difficulties and
weaknesses preventing the company to implement its vision or gaps between
what existed and what the vision expressed. The document that was prepared
was organized according to the aspects impeding the implementation of the
vision, and it discussed the gaps between what was stated and what was hoped
for.
At that stage, the team had in its hands two documents: one document discussing
vision, and another discussing the gaps, difficulties, obstacles, and weaknesses
that were to be changed in order to implement the vision. At that point, the team
started taking action, along with all the members of the organization.
1. The documents were presented to all of the workers and were transmitted to
them for their review. The documents were written in an open manner, enabling
everyone to add or to subtract a sentence, a word, or a topic.
2. Group leaders prepared discussions and suggestions of all the members of the
organization. The meeting was intended to prepare discussion groups under the
direction of two internal group leaders, one from management and the other a
line worker.
3. One full workday was given for all the employees of the company – at the
expense of work – in miscellaneous discussion groups (from various
departments) which were intended to arouse, to change, and add words,
sentences, and topics to the vision document and to the difficulties document.
Each group summarized their suggestions onto two large sheets of paper. After
discussions, an assembly was arranged in the auditorium where each group
presented the things it had written down. One of the team members presented
their ideas and the written comments were heard. The day was accompanied by a
short tutorial film on the importance of vision to the life of the company, as well
as a festive meal to open the meeting.
4. The consultant and the steering team decided on assigning a representative of
each work group to the steering team in order to design and finalize the
company’s vision and the ways to deal with the malfunctions impeding its
implementation.
5. A few more meetings with the expanded team took place, at the end of which
the vision document was composed, and the malfunctions needing adjustments
were summed up.
6. The documents were thus presented to all the workers at a general assembly.

IMPLEMENTATION STAGE
In order to turn the vision into a work plan and to change whatever required
change, mission teams were chosen. Each team focused on a specific aspect. For
example:
• Translating the company vision and mission into changes in products,
services, and market segments.
• Changes in management methods through learning, training, and personal
coaching.
• Changes that would allow an innovation and creativity impulse of the
company’s workers.
• Changes in the domain of services.
• Changes in the domain of human resources processes.
• Changes in the relations and in the collaboration between departments.
• Changes in organization regarding suppliers.
• Assimilating the new values of the company.
• Moreover, each department took upon itself to commit to internal changes
in accordance with the new requirements of the vision.

Chapter 18
Establishing a Flexible Organization
ne of the ways to build growing organizations that are durable over time is
O to build them as systems of high resilience capacity. In a tumultuous,
competitive, uncertain, and chaotic environment full of vicissitudes,
organizations which are capable of rapidly adjusting themselves to new
situations hold an advantage. This chapter deals with two aspects of
organizational flexibility: the aspect of those employed in the organization and
the structural aspect of the organization.

18.1 MANPOWER FLEXIBILITY
The most customary approach is flexible manpower management, in which
focus is on how workers are employed and on the methods of communication
with them. Moreover, the approach focuses on the workers and on the managers
themselves and on their flexibility capacity. Instead of workers employed
through a collective contract or through a permanent contract until retirement,
the organization employs workers in different forms of employment flexibility.
This enables quick change in the following situations:
• The ability to rapidly downsize in situations of economic slowdown or in
periods of recession.
• The ability to absorb advanced technologies which can replace people
quickly.
• The ability to integrate workers rapidly in peak situations or in periods of
overload.
• The ability to rapidly transfer activities from place to place.
• The ability to work during nonregular hours in accordance with market
requirements.
• The ability to employ workers who are interested in working part time or
flexible hours or from home.
• Better management capacity of a system comprising few workers that are
members of the organization.
It is possible to see who the flexible workers are according to their type of
contract.
Contractors’ workers – Outsourcing enables transferring activities under the

authority of the organization to contractor companies specializing in different
fields. The workers belong to contractor companies which provide service in the
requested field; for example, cleaning operatives or guards, dining-room staff
and specialized workers stationed accordingly.
Contractors – Taking activities out of the organization and transferring them

somewhere else generates a new type of worker, the contractor himself.
Obtaining manufactured products from Jordan or China, or transferring
computer systems or bookkeeping to an external company generates a new type
of worker: contractor company managers.
Subcontractors – Contractors who provide subservices to the organization such

as, for instance, a dining-room operator, computer system operator, holding
company manager, etc.
Workers under personal contracts – Transferring workers from a situation of

permanence to a personal contract enables the organization freedom of action in
defining alliance with the worker as well as easily terminating the agreement
with him, while detailing the rights and obligations of the worker.
Workers under limited temporary contracts – A personal contract limited in

time enables the organization freedom of action and constant absorption of new
young workers. By El-Al flight attendant working under personal temporary
contracts for 5 years enables a continuous absorption of young workers and,
thus, prevents the need to move them to a permanent contract.
Temporary workers – Workers that the organization hires for a fixed period of
time, generally from the labor exchange, to perform seasonal jobs. There are also
temporary workers who perform professional tasks for limited periods of time.
Seasonal workers and casual workers – Workers who are called in from home
or from work to another place to fill a specific seasonal position. This is typical
for workers in the field of agriculture.
Stationed specialized workers – Stationed workers are members of specialized

service organizations, and they are stationed in another organization to provide
professional services, such as in the field of information system maintenance, for
example.
Freelancers – Independent workers in an organization who provide a certain

service, such as consultants in professional fields.
Consultants – Owners of agencies providing consultancy in professional fields

on the basis of fixed services.
Telecommuting workers – Workers under a personal contract who work from
home or from another country, through a communication network. Another way
to analyze flexible manpower is according to the type of flexibility, rather than
the type of contract.
Functional flexibility – Workers who are capable of performing various tasks

and who can relatively easily go from one task to another.
Flexibility in work hours, seasons, and holidays – Workers capable of

working shifts and hours on demand.
Numerical flexibility – A group of workers that can rapidly be enlarged or

reduced.
Flexibility of workplace – A worker who can easily and rapidly be moved from
place to place inside the organization, its different branches, or worldwide.
Personal resilience – Flexible workers who are capable of changing and who
enjoy changes, challenges, and learning new things.
Rotating workers – Rotation between tasks enables flexibility for surrogating.
Organizations will compile a combination that is adequate to the reality in which

they operate. Such a combination will always include workers having the
knowledge, skills, and aptitudes necessary to preserve and develop the core of
the organization. These workers are called core workers.
Core workers – They are employed under long-term contracts, having the
knowledge, skills, and qualifications which constitute the organizational core
processes. They are professional workers, and without their expertise and
experience, the organization could not subsist. For example, a restaurant chef, a
food chemist specialized in the domain of food organization, a development
expert, computer expert, a worker in charge of maintenance of unique
equipment, an excellent professional manager. Those, among others, are
employed under special contracts, and they are difficult to replace.
Permanent workers – These are the fields in which collective agreements and

workers under permanent employment still exist. These fields are gradually
diminishing, and nowadays, they exist especially in the public sector as well as
in business corporations that in the past belonged to Histadrut (the Israeli
Workers’ Union) or to the government, where it is still habitual to employ
workers under a permanent contract.
Nevertheless, they are gradually decreasing in number due to the fact that even
in the public sector, the tendency has gone over to employing temporary workers
or contractors’ workers for the same reasons mentioned above.
The different types of workers now can be indicated according to their distance
from the core (diagram 9).
Flexible manpower is divided according to employees who are members of the
organization and employees who aren’t members of the organization. Core
workers are workers who have the knowledge and expertise necessary for
sustaining the mission and uniqueness of the organization. After them are the
workers under personal contracts who work either in the organization or from
home. The more distant group of workers who are members of the organization
are those who work part time, casual workers, and temporary workers. The
employees who aren’t members of the organization are also categorized
according to their distance from the core. The closest ones are workers from
manpower agencies and contractor companies working in the organization, and
finally, contractors and subcontractors who work with the organization. The
most distant are contractor and subcontractor companies who operate for the
organization but from outside, consultants and independent workers.

diagram 9
The advantages of this method are clear, but it also implies quite a few
limitations and difficulties. They are:
• Inequality in advancement possibilities: For permanent workers, there
generally are career development and advancement possibilities available.
For manpower agency workers or temporary workers, there is no such
possibility.
• Inequality in remuneration and salary: This also applies to employment
terms, salary terms, and additional remuneration.
• Inequality in learning and professional development: This also applies to
the possibility of participating in professional specialization, seminars, and
training courses.
• Dissimilar involvement in decision-making processes and receiving
information: Contractor workers and temporary workers are not kept up-to-
date regarding essential information which is delivered to permanent
workers. This also applies to involvement and participation in decision-
making processes.
• Lack of employment security: Employment of workers under personal
contracts, temporary contracts, or through manpower agencies and
contractors is likely to generate a constant feeling of lack of employment
security. The worker is concerned regarding his future in the company.
• Worker commitment: Employees whose workplace is not secured feel the
lack of employment security and are likely to constantly search for other
employment alternatives. A sense of limited commitment on the employer’s
part generates limited commitment on the employee’s part.
• Fairness: Differences in employment contracts between employees at the
same workplace and in the same positions are likely to generate a feeling of
lack of fairness. A bank teller who works in a bank branch as a temporary
worker alongside another worker under a permanent contract with better
terms is likely to get an impression of unfairness, thus affecting his
motivation.
• Frustration: The method is likely to lead to a feeling of frustration deriving
from injustice, unequal opportunities, and deprivation.
• Stress: The method is likely to increase the feeling of stress in which the
worker finds himself due to constant fears facing dismissal, or constant
hopes for a promotion, or changes in his contract.
• Heterogeneity in the workplace: The fact that there are employees under
different contracts in a certain branch or workplace, some of whom are
manpower workers and some of whom are under long-term personal
contracts, generates managerial difficulties.
• Difficulty to control: Managing workers who work from home, as well as
managing contractors who are neither inside nor close to the organization,
originate control and communication problems.

MANAGING FLEXIBLE MANPOWER
Flexible manpower is advantageous regarding the organization’s ability to
change only on the condition of proper management. The challenge facing
branch, team, and department managers is major – how to consolidate and
motivate such a heterogeneous team of workers.
• Clarify mutual expectations upon commencing work – personal
conversation in which the manager explains his expectations and his
approach on managing people in general and particularly, temporary
manpower. Attentiveness to the expectations of the worker along with
mutual accordance of expectations.
• Equal treatment for every worker – regardless of the type of employment
contract or the original employer, it is important to treat every worker in an
equal manner.
• Equal remuneration for equal performances, regardless of the type of
contract.
• Provide the possibility of involvement and participation in decision-making
processes.
• An important aspect to the worker is the issue of remuneration. It is
advisable to equalize, insofar as possible, the work conditions of workers
who perform equal tasks, regardless of their original employer.
• Preserve workers by consolidating teamwork and a sense of collaboration –
regardless of the worker’s source of employment, it is advisable to see
everyone as members who participate in the team’s development activity, in
team meetings, and in its consolidation.
• Warm and personal attention to every worker – personal and equal attention
on the CEO’s part to every person on the team.
• Clarify the importance of the job and each worker’s position in the process,
including sharing information with each member of the team and involving
everyone in decision-making processes concerning the team’s work.
• Clarify the vision, the goals, and the culture of the organization. It is the
team manager’s job to make sure that each member of the team internalizes
the vision of the organization and its values, regardless of his original
employment.

18.2 STRUCTURAL FLEXIBILITY
Another form of organizational flexibility concerns organizational and functional
structure. Bureaucratic or hierarchic organizations, in which control is
centralized, encounter difficulties to change. Role definition is rigid, decision-
making processes are long, and paperwork and minimal communication generate
slowness in the ability to respond. Moreover, a worker in a bureaucratic system
feels like a screw in a complex and cumbersome machine. In such a situation,
the worker’s motivation, willingness, and ability to initiate innovation and
increase efficiency are almost nonexistent.
Bureaucracy that clings to a culture of order and discipline, compliancy to
procedure, and minimal expertise implies progressing in such a manner entirely
intended to abstain from change.
The difficulty to change is even greater in public bureaucracy, which is
characterized by activity based on public budgets, thus, not dependent on income
generated from customers and not standing in competition with competitive
systems. In fact, their customer is a “prisoner,” for he doesn’t have a choice but
to employ their services. In such a situation, there is no motive for improving
efficiency or for innovation; it is actually quite the opposite. In bureaucracy, the
prevalent culture is of hierarchy, and the system will operate with everything in
its power to prevent change and innovation.
The characteristics concerning the lack of ability of bureaucratic systems to
rejuvenate and to change can be summarized in the following points:
• Innovation and change are a threat to the balance and stability of a
bureaucratic system, which will, therefore, operate against it.
• Innovation and change are likely to reveal the fact that part of the workforce
is superfluous, and, therefore, the workers will oppose them.
• Public bureaucracies employ workers under permanent or long-term
contracts. In such a situation, the worker has no reason to agree to change or
to initiate change.
• Long decision-making processes and complicated paperwork prevent
entrepreneurship and motivation toward change.
• Bureaucracies tend to enlarge their workforces. The reason for this is that
the workers or the managers have no personal interest in overloading
themselves with extra assignments. They would rather take in an additional
worker whenever a new or additional assignment pops up.
• Managers have interest in increasing their number of subordinates due to
the fact that it is the only way for them to acquire power. In this manner,
more and more people do less and less.
• Since the customer is not the source of income for bureaucracy, his
satisfaction or his loyalty does not constitute a motive to improve the
efficiency of the service.
• Promoting workers on account of the principle of seniority is likely to entail
what is described as “the Peter principle”: people rise to the top and reach a
point at the limit of their competence.
• Bureaucracies are abundant with managers, and their overhead expenses are
high. This group of people, which enjoys better terms of employment along
with little responsibility, has no reason to improve the system.
• This also applies to the individual worker. He has already organized his
position in such manner that not too many assignments and responsibilities
will be imposed on him. In any case, he does not get monetary benefits or
prestige from such tasks, thus, has no reason to undertake change. He is, in
fact, more likely to have more to lose from it.
The only driving force of large and complicated public or business bureaucracies
is leadership. Transformational leaders are capable of carrying out changes in
bureaucratic systems, but such movement goes against the flow and against most
prospects. The difficulties concealed in the very nature of bureaucratic systems
are major, and in order to carry out change despite the existence of such
difficulties demands a lot of courage, willingness to sacrifice a career, and to
fail. These individuals show determination and an ability to motivate people in
forlorn situations.

FLEXIBLE STRUCTURE
A flexible structure includes characteristics which enable one to change and
respond to the challenges of the environment. In such a structure, there are
characteristics that motivate people toward constant change and the ability to
change rapidly. This structure is established “from bottom to top,” meaning that
the “foundation brick” is the worker and his inherent incentive to seek new
challenges, to find interest in his work, and to be an independent entrepreneur
who enjoys the results of his work rather than only his fixed salary.
The second “course of stones” is the autonomous team who operates freely
toward a common significant and challenging goal. What motivates this team is
the constant quest for improvement and change, and the innovation that it brings
to the organization not only gives it credit but also association to business
success. This also applies to the department, whether it is the purchases,
manufacture, logistics, or sales department. Each department needs autonomy
and the possibility to set objectives of efficiency improvement and innovation,
and to enjoy its results.
A structure diagram would appear as follows:

At the top of the pyramid stands a leadership team that operates consistently and
continuously to create and assimilate within all the workers a corporate culture
and reward processes that encourage autonomy and innovation from each worker
and group within the organization. This team leads autonomous units starting at
the level of the worker, up to the level of the organizations associated in the
system. Therefore, its role is not to manage these units but rather, to improve and
encourage their autonomous management. By the very nature of such an
organizational system arises the role of those standing at its head to lead the
system. In other words, to continuously work at the general strategy of the
system, at strategic and systemic thinking, and to invest the resources
accumulated from the activity of the autonomous units through a systemic
approach, without depriving those who initiated and led to success.
A flexible structure must base itself on measurable, quantitative business indices.

It must withstand competition with other systems toward the hearts and purses of
the customers, external and internal. The structure must be as simple as possible,
with limited hierarchy, limited managerial staff, and low overhead expenses. To
this will be added a corporate culture characterized by values and norms of
entrepreneurship, constant innovation, risk taking, reward, and credit for those
who implement it. Evaluation and feedback processes are essential in order to
measure achievements and performances, and to introduce tools to control and
assess whether there is a risk of excess paperwork and bureaucracy, and for this
reason it is necessary to search for ways to carry out constant and direct
feedback and simplify control and evaluation processes.

STRUCTURES BASED ON THE PRINCIPLE OF AUTHORITY DELEGATION TO THE
INDIVIDUAL, THE UNIT, THE DEPARTMENT, OR TO THE SUBSIDIARY ORGANIZATION
One of the principles of a flexible structure is the principle of authority

delegation, meaning impartation of responsibility and authority to a subsystem (a
worker, a department, or an entire organization) without the involvement of the
manager above it.
Responsibility – the actual full definition of the task, the “ground” onto which
the subordinate operates, assignments, resources, obligations, expected results,
and concern for task completion.
Authority – the right to make decisions in any field of responsibility without

needing approval from above.
Delegating authority means taking on coincident responsibility and authority.

“The more extensive the responsibility, the more extensive the authority.”
Most managers bestow responsibility on their subordinates, but they have

difficulty bestowing authority. They fear that if they do so, they lose their own
power and monitoring capability, but workers who are given responsibilities that
don’t include the corresponding authority will constantly feel frustrated.
The following diagram illustrates the occurrence of lack of congruence between

responsibility and authority (diagram 10).
A worker who has been given low responsibility and low authority will behave
small-mindedly.
A worker who has been given high responsibility but low authority will feel
frustrated and will feel like a “sucker.”

diagram 10
A worker who has been given low responsibility and will take upon himself high
authority will be called “a slave who reigneth.”
Only the worker who has been given high responsibility and high authority will
behave with a “cando attitude.”
The obvious conclusion is that “there are no small-minded workers; there are
only managers who create small-minded workers.”
This also applies to teams, departments, systemic units, or regional groups.
Obviously, the worker should not be forced to obey without any option, but
rather, the suitable workers should be chosen for the job. The workers should be
trained and developed in such manner that they are able to take authority and
responsibility onto themselves.
Another aspect in this matter is the issue of control. Delegating authority doesn’t
mean managers withdrawing from their duty to control, and it is therefore
necessary to carry out informal control through informal conversations and thus,
formal control in an orderly and structured manner in team meetings or through
computerized control mechanisms.

THE DIFFERENCE BETWEEN AUTHORITY DELEGATION AND EMPOWERMENT
Authority delegation focuses especially on decision making. Empowerment
applies to an entire set of aspects of the worker’s job, including training,
involvement and participation, career development, integrating knowledge
teams, learning and development, autonomy on duty, work enrichment,
professional challenges, performances, etc.
The highest stage of authority delegation and worker empowerment is in

their becoming entrepreneurs, originators of improvement and change,
motivators toward innovation. Most workers today are professionals of high
professional and academic education who know more about their job and are
experts in their field. It turns out that the ones at the top know less and less about
what happens at the bottom, and vice versa. For this reason, it is preferable to
allow the workers freedom of action to initiate innovation and change and to
make them become project managers to the level of the field.

STRUCTURE OF PROFIT CENTERS AND COST CENTERS
Another form of flexible structure is that of profit and cost centers. In such a
structure, all activity of the organization becomes business activity implying
customers, internal or external, and it is measured on the basis of financial
success. Cost centers are the very departments or activities living on budgets.
Each unit receives a budget and markup to manage itself independently, to
divide the budget among its activities as it sees fit, and, thus, to increase it by
way of additional business activity.
A profit center is an autonomous unit that has customers, and its activity derives
from its financial success. Bank branches, gas stations, airline company
branches, shops belonging to a chain, hotels belonging to international
companies – all of these operate as profit centers and as independent units. The
profit center method generates an internal mechanism that necessarily implies
increasing the efficiency of the system due to the fact that it is measured on a
basis of business, and it must live off of its income. When income is lower than
expenses, the responsibility of balancing is imposed upon the manager. Every
worker has interest in improving himself in order to achieve profit and improve
the system, inasmuch as the alternative is shutdown or dismissal.
The advantage of the method is in the fact that loss-generating activity shutdown
does not cause the whole system to crash. A failing and loss-generating bank
branch will be shut down without causing further damage to the whole company,
a failing gas station will get reinforcements without this affecting the entire
system. Flexibility is extensive, and the failure of one subsystem does not affect
the remaining systems.

EXAMPLES: THE TRANSITION OF KIBBUTZIM FROM “BRANCHES” TO PROFIT
CENTERS
Up to the 1990s, most kibbutzim (small communes in Israel) were organized in a
system of agricultural branches and industrial enterprises. For each branch or
factory, a coordinator was chosen for a limited term by an assembly of members,
and, in fact, the farm and its branches and also the factories were all under the
direction of the central economic committee and its manager, who determined
the investment scope, where the money would be invested, and in what. The
branches were run by the branch coordinators with no real authority, and the
workers were permanent, meaning it wasn’t possible to dismiss them and the
workforce was not to be reduced. The workers of the different branches were
allocated by the central system, by way of a work roster and a task coordinator.
The kibbutz’s treasurer managed the finances, which were transferred from
branch to branch, or from the branches to the kibbutz, as required. Moreover, the
calculation method of the results of each branch was based not on genuine salary
expenses (due to the fact that salary payment was not habitual in a kibbutz, but
rather, an equable budget for everyone), but rather on what is called in kibbutz
jargon “dues for a day’s labor,” which is determined according to the kibbutz’s
livelihood and divided among the workers in the manufacturing branches.
Since the living expenses of the kibbutz were very high (as the services were
provided to the members according to needs, or more precisely, according to
requirements and pressure), the dues for a day’s labor were also very high, much
higher, in fact, than the daily wages of a worker in a competing factory or in a
competing branch in the city. In this manner, all the production branches were
required to sustain the equable calculation for every worker in the highest
business activity.
On the other hand, the service branches of the kibbutz, which were labor
intensive, didn’t function on business calculations. The basis of their activity
was a given budget that was not according to the capacity of the kibbutz, but
rather, according to the needs of the members. In this manner, a highlevel
nursing and health system, large dining halls, sports facilities and a theater,
advanced gardening systems, etc., were established. In such a situation, it wasn’t
a coincidence that most kibbutzim stood time after time on the verge of
economic crisis which only governmental aid could prevent. Only in the 1990s,
with the suspension of government support and after the collapse of most
kibbutzim, a major change occurred, being the transition of each unit on the
kibbutz to autonomous business conduct, without there being any difference
between service units or business units. The first operation was to separate
business activity from the community and to move all activity toward
autonomous profit centers. The unit coordinators were given the liberty to
choose people, managers were chosen based on proven qualifications, and
external managers were appointed. A board of directors was appointed for all
large-scale activity. A salary for each position was determined according to
market rates.
Service branches were opened to external customers, and they too became profit
centers. At that moment, the tide had turned. The kibbutz as a community started
to live off of the income of the branches and was forced to adjust its standard of
living to the genuine reality. The result was dramatic: a reduction of 30 percent
in consumption expenditure, a reduction of 50 percent in managerial overhead
expenses, and continuous growth of income from profitable activities. And loss-
generating activities were shut down.
The price to pay for delaying change was a heavy one. Members of senior age
were dismissed from their jobs and forced to search for another source of income
while not having sufficient academic education or training to do so. A drastic
decline in the level of public services was recorded, and the branches that once
had been the pride of the veterans were shut down. However, the process
enabled the transition toward the economic independence of kibbutzim. Ever
since such changes occurred, a constant rise of the standards of living of
kibbutzim, as well as a seemingly constant decrease in debt, began, and
economic growth was recorded. Moreover, the transition to independent units
enabled many members to launch small businesses and enterprises and become
independent business owners. The energy of many members that had been
extinguished with the old system broke free with the new system.
Tom Peters (1994) presents an extreme approach regarding organizational

structure based on the autonomy of the individual and the team:
1. Can you imagine a company without central management? Or a giant
corporation with only two intermediate levels? Do you have the courage to
admit that most intermediate levels don’t add value?
2. Are you capable of imagining your organization entirely built around pairs,
triads, or foursomes that manage themselves on their own?
3. Do your business units have courage? Do they have their own character?
4. Are you obsessed with constant accumulating changes (which is all right as

long as it happens) or with reinvention (good) or with constant reinvention
(even better)?
(p.69)
He also adds:
“The dismantling the organization in order to stimulate enthusiasm, creativity,
and symbiosis with the customers, can be taken another step further …
entrepreneurship in every function. Turning the workers up to the very last one
into ‘businessmen’ is not a daydream … just as a dissolved company goes far
beyond a decentralized company, an organization comprising entrepreneurial
businessmen also goes far beyond authority delegation.”
(p. 75)

Chapter 19
Managing Mergers and Acquisitions
ne of the methods for structural changes is to merge with another company,

O to acquire another company, or to take control of it. The goal is usually
growth, expansion, and generating a major advantage, as well as entering new
markets and introducing new products. However, research indicates the
difficulty and the risk implied in this method. More than half of mergers fail to
attain their strategic objectives (refer to Ashkenaz 2000, for example); the hopes
put up in mergers by those carrying them out don’t always come to realization,
and in most cases, the hope to reduce costs, for instance, is dashed. And yet, why
do companies continue to operate structural change through mergers and
acquisitions? The reason for this comes from the many possibilities concealed in
such a process.

19.1 MAIN CAUSES FOR MERGERS AND TYPES OF MERGERS
• Generating magnitude, abilities, and power: Controlling or leading on
the market, as well as generating an advantage in order to be the leader. The
advantage is in the action possibilities in all fields of business activity, and
it manifests itself in the ambit of activity and in the ambit of response to the
needs of the customers.
• Cost reduction: Mergers enable activity on the basis of existing overhead
expenses. When there are people, facilities, and equipment that are
unutilized or utilized to the maximum, mergers will enable better utilization
of such resources.
• Creation of a variety of products and services: Merging with a company
whose products complement or broaden the existing product portfolio.
• Creating a complete and diversified package: Merging in order to create
a complete package of services, such as in the field of tourism, weddings,
events, etc.
• Acquiring knowledge and controlling exclusive knowledge: Merging,
taking control, or acquiring is quite often done in order to gain exclusive
knowledge, rather than investing in its development. Microsoft or Teva
(global pharmaceutical company) purchase companies in order to acquire
knowledge, rather than equipment or an organization.
• Acquiring financial solidity: Strategic partnership between a company and
an entrepreneur or an investment associate generates new possibilities for
the development of the organization.
• Acquiring a market: Mergers can take place due to the fact that every
company wishes to acquire the market of another. This is done either in the
form of hostile takeover or in a manner of cooperation.
• Joint development of a unique product: Companies merge either fully or
partially and temporarily in order to develop a complex product. This is
how different industries produce Merkava tanks (Israeli first-line tank) and
how companies united to build the European Airbus.
• Diminishing competition by absorbing competitors: Removing rivals
from the market is also a typical reason to merge. Elite, a large chocolate
and coffee firm in Israel, absorbed several companies such as Lieber,
Vered-Hagalil, ZD (companies producing sweets and coffee), and more,
incorporating them in order to diminish competition in the candy industry.
• Penetrating world markets: Merging with a foreign company or an
international company provides an advantage in the entrance to world
markets with existing products. The partial merger between Osem (food
producer) and giant corporation Nestlé, or between Tnuva (milk products)
and Yoplait unrolled new possibilities for the Israeli companies.
A merger is a good idea provided that it generates a new advantage or synergy;

it is beneficial for both of the merging companies in the sense that it generates
something positive, beyond the simple linkage between the two companies.

MERGER POSSIBILITIES BETWEEN COMPANIES
Backward mergers: Mergers with organizations or companies situated behind
the merging organization in the value chain. This type of merger includes
acquisition or merger of a factory with a company that supplies the raw materials
or with a company possessing franchises in the production of raw materials. The
aim may be to secure raw material supply and to control their costs.
Forward mergers: This includes mergers with companies or organizations

situated ahead of the merging company on the value creation chain. A factory
merges with or acquires marketing channels or a chain of stores selling its
products when its aim is to secure direct accessibility to the market or to the final
consumer.
Sideways mergers: Acquisition of a similar competing company or

organization; acquisition of a different organization in order to complement
products; acquisition of products and services of other organizations. The aim
can be to diversify products, to exclude competitors, etc.

MERGERS ACCORDING TO THE TYPE OF PROCESS
Rivalry: absorption of a small company by a large company.
Merger: creating a partnership between companies similar in size or in power.
Salvation: a company comes to aid another company confronted by difficulties.
Hostile takeover: owners or investors decide to unite two companies or to take
control of them.
A typology can be defined in accordance with the way the merger is

managed after resolution.
For example:
Robbing and looting: a large company takes control of a smaller one with the
intention of acquiring a product or a market, and, thus, replaces its entire
operations, strategy, culture, and marketing systems.
Dismantlement: the company that is acquired is large and complex, and a
merger entails its disassembly into smaller elements and their assimilation in
existing departments.
Amity: the merger is done on the basis of partnership when each company
maintains its character and nature, its culture, its workers, and its work methods.
Wedlock: a merger of genuine partnership, mutual integration of all systems
into a single joint system.

19.2 DIFFICULTIES AND MERGER FAILURE FACTORS: THE
HUMAN ASPECTS
1. Cultural difficulty: The main difficulty and the primary cause for the failure
of mergers is merging different cultures into a new integral culture. British
company Rover was acquired by the German company BMW, but bringing
together the German culture of order and discipline with the British patriotic and
conservative culture caused the project to fail.
Corporate culture manifests itself in all organizational aspects, such as
managerial style, behavioral norms, work processes and methods, daily
procedures, reward and evaluation methods, as well as control methods, etc. In
fact, organizational activity is the result of the manifestation of corporate culture.
Israeli workers, from Israeli companies that are acquired by European
companies, deeply feel the change of corporate culture in all aspects of their
activity.
2. Difficulty related to roles: The second difficulty is in the role system. It is,
however, natural that each side wishes to preserve its managers and workers.
The struggle on roles and their manning constitutes a wide scope of conflicts and
crises. When the two merging organizations are equal in power, the primary
tendency will be to reach a compromise. In practice, as time goes by, each side
will try to keep its people and key functions, and in this manner, overhead
expenses will remain overinflated. Struggles on positions and functions can
entail conflicts and excess input of energy into such conflicts, and only rigorous
previous preparation can prevent or reduce the impact on the success of the
merger.
3. Structural difficulty: The tendency in mergers is not to penetrate the

structural system, but rather, to leave that for a later stage. The result is an
unwieldy system in which departments are duplicated and the process of
communication and decision making is complicated. A flexible, efficient, and
skillful organizational disposition requires in-depth ingression of all the
organization’s functions and their action methods. There is a natural tendency on
both sides to maintain not only their people but also departments and
organizational structures. Compromises lead to a complicated structure that
renders organizational activity difficult and impedes action flexibility, process
efficiency, and rapid decision making.
4. Lack of security: The fourth difficulty is the sense of security of the workers.
Workers whose managers have left or have been dismissed feel as though they
have been “orphaned,” and all the credit and prestige they have had in the past
has faded away. At that moment, there is nobody left to appreciate them; they
are “left without a father.” The consequence is a tendency of the workers of
every organization to congregate and to create opportunities to be closer to one
another. At meetings or in the dining hall, they will tend to sit together and get
together in other social contexts.
5. Tension, stress, and animosity facing the other organization: Mergers are
quite often perceived by workers as suspicious, and they get into a state of
tension, fear, and stress in periods of incertitude regarding their future. They
tend to ascribe to the other organization negative characteristics, intentions to
take control, and to originate a situation in which they do not belong and in
which their past status will be lost. They fear, and in many cases, rightfully so,
changes in their employment contracts and deterioration of their terms of
employment. Such a situation entails the workers to focus their attention on the
present and on a negative feeling regarding the merger as well as the other
company.
6. Loss of ability to implicate oneself in the future: A merger consumes a lot

of energy directed at carrying it out. Creating genuine partnership and a new,
united, and consolidated organization takes a long time. In situations where the
merger is not thoroughly but only technically dealt with, focus on present
problems can last a long time. Moreover, due to the fact that workers and
managers are preoccupied with finding their place and their future in the
organization, most of the energy is invested in present survival. Most workers
are not available to deal with future growth and development, either on a
personal or organizational level.
7. Difficulty to identify: Identification with a new system takes form only after
a long time. Workers identify with their organization only after years of work
and only once they feel like they belong to it. Such identification is created at the
same time as long and profound processes of proper management of the workers
and establishment of a system of values, norms, and relations. It can take many
years for a worker to find his place and sense his importance in the system.
In times of mergers, the identification framework is broken. The workers will
have difficulties disengaging from the past and from the framework they were
accustomed to, and they will first feel alienation from the merging system,
estrangement from it, and sometimes a sense of superiority, or, on the contrary,
inferiority.
8. Tendency to leave: Resignation of highly capable and professional workers

and managers. Mergers are characterized by periods of chaos, uncertainty, and
successive changes. Such a situation thus entails the tendency of “the good ones”
to abstain from dealing with the situation and to search for secure positions in
other organizations. Such resignation is typical to the workers who feel that “the
other” side is gradually taking over the company, and that their position in the
future is unclear or that “their” people have left. Such departure is like a
contagious disease and the resignation of an appreciated senior worker is likely
to entail the departure of his workers or colleagues. The ones who don’t leave
are preoccupied with who is thinking about leaving and who has left.
9. Trust burnout: It is natural for the trust of the workers in the intentions of the
other company to wear out, and quite often, they become paranoid as far as they
and their intentions are concerned. Workers often reveal skepticism and
cynicism regarding the other organization. The laboriously established trust in
daily operations and processes is worn out. The merger makes it difficult to
fulfill previous promises, and by its very nature, it changes processes, roles,
statuses, evaluations, and remuneration methods. Workers become suspicious
regarding promises and allegations which they interpret as unfeasible. They tend
to feel frustrated, deprived, and neglected.
10. Negative impact on the psychological agreement: The psychological

agreement consists of all mutual expectations of the workers on their employers’
part, and of the employers on their workers’ part. It doesn’t consist of a written
legal contract; it rather comprises the expectations and subjective perceptions of
each side regarding the nature of their relations, obligations, and rights. The
agreement constitutes the basis onto which trust, satisfaction, and motivation are
established on the workers’ part, as long as it is fulfilled. Mergers are likely to
undermine this psychological agreement due to the fact that the worker feels that
his expectations, rights, status, and position in the organization are no longer
stable. During the long period of the merger process, the fate of this agreement is
unclear, and its nature in the future is also unclear. This also causes a feeling of
frustration and negative impact on the workers’ functioning.

THE PERSONAL PROCESS IN MERGERS AND ACQUISITIONS
The impressions and behavior of the workers undergo a process of
transformation in accordance with the merger process. The following table
details the merger stages and the corresponding impressions and behaviors of the
workers:

Research on failed mergers suggest a number of characteristics:
1. The direction of the merger comprises representatives of both companies. It
is not focused, and it deals with compromises and internal politics, renewed
distribution of roles, and preserving personal interests, and it ignores the
needs of the workers, the managers, and the customers in the interim. A
leader for the merger is missing, which is an indispensable role.
2. Leaving the interested parties in the dark: Lack of relation to human
processes taking place among the workers, managers, and customers.
Abstaining from dealing with feelings of fear for the future, struggles
regarding position, customer questions, and feelings of incertitude,
emerging thoughts on departure.
3. Lack of focus on the good workers indispensable to the joint company: A
successful merger demands immediate identification of the workers and
managers that are essential to the joint organization, relating promptly to
their needs and requirements, diminishing their uncertainty regarding their
future in the company, and preventing their early escape.
4. Impact on customers: Mergers are characterized by periods of customer
neglect and an increase in customer complaints due to supply errors, terrible
service, and customers having nowhere to turn to. It is actually in times of
mergers that the customer and his needs should be taken into consideration.
5. Neglectfulness in the establishment of a new shared culture: Mergers imply
profound understanding of the corporate culture of both parties, its source,
and its advantages, and they demand joint workshops in order to establish
and assimilate the new culture.

MERGERS, ACQUISITIONS, AND CORPORATE CULTURE MALFUNCTION
What seems to be the major difficulty, and maybe the major obstacle, in a
merger comes from attempts to merge different cultures. The cause of failure of
over 50 percent of mergers emerges from cultural malfunctions. Just as for forms
of mergers, there are also a number of different possibilities here:
Cultural pluralism – both cultures can coexist if they have common values and
norms.
Merging cultures – each side renounces a part of its culture in order to create a
new joint culture.
Takeover – one culture takes control of the other, which in practice is

annihilated.
Merging cultures implies combining the positive aspects of each culture in terms
of supporting a joint strategy and the ability to put it into action in the day-to-day
life of the organization, and giving up on the negative practices, values, and
norms. To do this, the culture of both sides must be analyzed regarding all of its
aspects:
• Revealed and concealed values and their manifestation in the day-to-day
life of the organization.
• Managerial culture and its impact on managerworker relations.
• Heroes and villains within the culture, what they symbolize and what they
transmit to the workers in the day-to-day life of the organization.
• Myths and stories that each side tells the younger generation and their
significance to the day-to-day life of the organization.
• Taboos, ceremonies, and rituals that each culture includes and how they
come to realization.
• Symbols of status that each side maintains (managers’ cars, privileges, etc.).
The joint team of both companies will examine the findings and will hold a
conjoint workshop to identify and choose a culture based on positive processes
and values from each side, in accordance with support of the organizational
strategy. A strategy of innovation will obviously require a culture supporting
innovation, among others. Once the culture is chosen and defined, the team will
then translate the values and norms of the management culture into
organizational structures and processes.
Several difficulties in every field of activity of the organization can be
enumerated, deriving from the very nature of the merger, such as designing a
new vision, mission, and perceptions, defining a new strategy, establishing a
system of shared values and norms, establishing mechanisms and procedures,
homogeneous evaluation and remuneration methods, establishing common work
processes, establishing an organizational structure and a new set of roles,
establishing a leadership and management staff and conventional decision-
making processes, etc. These are all part of the planned process of merger
management, without which the success of the merger would be rendered
difficult. For this purpose, leadership that will conduct the change by way of a
joint team of representatives of both merging companies is necessary.
Teva, a global pharmaceutical company, has accumulated a great deal of

experience in merging with other companies. The conclusion of the vice
president of human resources that has arisen from such experience is as follows:
Maintaining relations in order to lessen anxiety and incertitude
Honesty – reliable information
Demonstrating understanding of worker issues Diminishing political behavior
Dealing with dismissal and external reassignment in a proper manner
Providing information regarding “the other” company
“Mergers and acquisitions, according to Teva” (Haim Benjamini, vice president

of human resources, excerpt from a lecture in the annual Israel Human
Resources convention, 2006)

19.3 NECESSARY STAGES IN MERGER PROCESSES
The research on the preferred process for a successful merger is presented below
(refer also to Aiello and Watkins 2000).
Enterprise – exploratory actions of both parties, preliminary mutual

acquaintance, examination of advantages and difficulties in the merger, full
disclosure (due diligence) of the financial situation, the situation of the company,
the resources, the abilities, and all the relevant aspects essential to the merger.
Decision – leadership decision to launch the merger upon agreement of both

sides when advantage or emerging lack of options are perceived in the merger.
Organization – choosing a leader to conduct the change and a team combining

both organizations to manage the process.
Forming action teams of various disciplines – simultaneous work on

professional fields and on human organizational fields.
Learning – each side studies the other in depth, teams from each side inspect the
other organization in order to familiarize and learn; exposing secrets, resources,
abilities, and the financial situation to the other side.
Keys to success – determining keys to success, game rules, agreed-upon guiding

principles, and communication with the workers.
Preparation for implementation – the teams study the aspects and prepare
proposals on how to interlink departments and fields.
Depicting the overall picture – the steering committee adapts the teams’ work,
creates a complete picture, and approves the overall plan to be set in motion;
decisions on voluntary resignation and preparation for severance.
Integrating workers in the process – assimilation and involvement by way of

workshops of intermingled teams.
Preparing the transition – action plan to prepare for a smooth transition,

organized dismissal process, deciding on common procedures, work processes,
culture, structure, functions, rewards, etc.
Transition – the physical transition to a new location, unification of activities

and functions, transferring people, technologies, and equipment.
Dealing with what is left behind – selling or leasing all property and equipment
that are not necessary.
Examination and adjustment – plan versus performance, gaps between the

ideal and reality, along with adjustments toward the desired situation.
Renewed development – working toward making the merger become a genuine

unification and toward creating synergy; reestablishment of vision and strategy.
Large companies have proven that it is possible to merge large companies in

as short a period as 12 months from the day the merger decision has been
made (for example, the merger between HP and Compaq took exactly 12
months).

19.4 LEADERSHIP AS A GUIDE TO SUCCESSFUL MERGERS
Research on successful mergers indicates the importance of the leader chosen to
manage the project (Ashkenaz and Francis 2000). The research which studied
the mergers of large companies in the United States summarizes its findings:
Managerial experience and mental maturity – the person leading the merger
is a representative of the larger company; he was a senior manager, has abundant
managerial experience, is mature and well-liked, and has proven in the past his
ability to lead, to motivate, and to bring a comprehensive project to realization.
Disassociation from other duties – the leader of the merger is released from all
of his duties and focuses only on his new task.
Free mobility – the leader of the merger can move freely, inspect, and meet with
every worker, manager, or department in each of the merging organizations.
Ability to form a team of representatives – the leader or the merger forms a

steering team comprising senior representatives of each organization. The team
itself has undergone a period of consolidation and approval regarding the action
methods and the principles of the merger.
Achieving foreseeable results within a short period of time – task orientation

and proof that it is possible to obtain foreseeable results within only 3 months'
time.

THE RESEARCH FOUND FIVE CHARACTERISTICS OF SUCCESSFUL MERGER LEADERS
1. A person who knows the acquiring company in-depth. A senior manager
having abundant experience and knowledge of what the expectations from the
merger are and what the capacities of the acquiring mother company are.
2. A modest person who doesn’t need praise, who is capable of operating with
determination and meticulousness facing the requests for compromises, and who
is capable of connecting with people and being empathetic. He is able to make
the managerial style more flexible in accordance with the needs and
requirements of the merger.
3. Someone who can cope with situations of chaos: Mergers imply a natural state
of uncertainty. There is disparity between the plan and the reality due to the fact
that a period of cerebration and planning is necessary before implementation.
4. A very responsible person who doesn’t need to be spurred or to be told what

to do: Successful merger managers work hard for a period of at least 8 months.
They are characterized by an internal motivating force, the will, and
determination to operate, and a high drive toward success.
5. A person of high emotional intelligence. The merger process necessarily

entails problems in human aspects: Anxiety and fear of workers regarding the
future, uncertainty, power struggles, prestige, etc. In such a situation, it is
necessary to allow the workers to continuously communicate and to voice their
feelings, and notwithstanding, to progress with determination.

THE ABILITIES OF THE LEADER OF THE MERGER CAN BE SUMMARIZED IN THE
FOLLOWING LIST:
• Designs a new vision and strategy for the joint organization.

• Generates synergy out of the merger.
• Manages the process all the while integrating and involving the workers.
• Protects the interests of the shareholders.
• Maintains contact with the market.
• Diminishes the fear and uncertainty of the workers.
• Relates to the need of the workers from both sides to disengage, to mourn,
and to disconnect from the past.
• Displays honesty – reliable and transparent information.
• Demonstrates understanding toward the concerns of the workers.
• Dissuades political behavior.
• Deals with dismissal and external reassignment in a proper way.
• Provides information regarding “the other” company.
• Exemplifies fairness in the process and in decision making.
• Displays determination in the process and swiftness of performance.
• Pays attention to the following stage – to substantiate the goals of the
merger.

STRATEGIES TO CARRY OUT MERGERS
Ashkenaz and Francis’s research also pointed out the use of one or more of the
previously mentioned strategies as contributing to the success of the merger:
• Pressing increase of speed: increasing planning efforts, speeding up
implementation, pressing rapid decision making, monitoring adherence to
objectives and to schedule.
• Planning out success: assisting in the identification of essential business
synergies, managing projects leading to success within a maximum of 100
days, organizing selection of the best methods from each company.
• Creating social relations: making use of a “roving ambassador” between
both companies and the different spheres, of someone who absorbs and
resolves “brewing storms” and conflict outbursts, thus, relieving the worker
from pressure and negative feelings, interpreting, and understanding each
culture and creating synergy between them.
• Creating organizational structures enabling collaboration: forming a joint
framework and joint teams, establishing a control plan, and following the
progress of the teams.

19.5 ISSUES TO DEAL WITH IN THE MERGER PROCESS
The following table details the central domains of action, from both human and
leadership aspects, in periods of mergers:
THE DOMAIN ISSUES TO BE EXAMINED AND DECIDED ON
• What is the strategy of each organization?

• What is the vision of each organization?
Core vision and mission of the
• What is the field of expertise and the strength of each
business, strategy, and overall
organization?
perception of the essence of the
business • What are the long-term and short-term objectives of each
organization?
• How shall we produce synergy in creating shared views?
• What are the cultural characteristics of each organization?

• What are the customary norms?
• What are the positive characteristics of the culture?
Corporate culture
• What are the problematic characteristics of the culture?
• How shall we take what is good from each culture and merge
them together?
• What is the existing structure in each organization?

• What are its advantages and disadvantages?
Organizational structure and role • What can be changed, and what can be left as is?
structure • Shall we create a homogeneous or nonhomogeneous structure?
• What are the essential roles in the merger?
• Who is suitable for what?
• What are the processes of each organization in association with

planning, budgeting, control, performance evaluation, and
quality assessment methods? Decision-making processes,
Work processes information flow?
• What are the processes that can be merged without changes?
• Which processes require change and reunification?
• What can be learned and implemented from each organization?
• Who is essential to keep and who to dismiss?

• How to prepare for a proper dismissal process?
• Establishing new career developments.
Human resources
Human resources • Skills and abilities that need to be learned in order to merge.
• How can the departure of the good ones be prevented?
• How can we diminish fear and uncertainty among the workers?
• Who is suitable to head the merging organization?

• Who will fulfill management positions?
• Who are the good ones on each side?
Leadership and management
• What are the decision-making patterns on each side?
• What is the managerial style of each side?
• What is the shared managerial approach?
• How shall we pass on messages and information to the workers?

• What type of information shall we pass on to the workers?
Communication
• How shall we establish open and reliable communication?
• Who will do this?
• What are the expectations of the managers of each side

regarding the merger?
• What is the incentive of each side in the merger process?
Expectations and impressions
• How does each side perceive the other?
regarding the merger
• How shall we diminish suspicion and animosity?
• How shall we operate in an atmosphere of trust and hope for
synergy?
• What are the information systems in use?

• How does information flow within the organization?
• How is it kept?
• Who has access to information?
Information systems, information
• Which system is the most efficient?
technology, technologies
• What needs to be added, changed, and replaced?
• What technology is required for the merger and which type?
• What already exists?
• What is necessary?
(Refer also to Aiello and Watkins 2000, and to Mainrad 2005.)

Chapter 20
Development of Knowledge
Organizations
his chapter deals with the process intended for change in organizational
T capacity in domains such as knowledge and learning, when the goal is to
obtain a comparative advantage through the development of the knowledge,
skills, and aptitudes of the workers. The second stage in change is making this
process of knowledge development become an organizational process that also
includes learning capacities at the level of the team and the organization, and not
only at the level of the individual worker. In this chapter, we shall present three
approaches: the approach of intellectual capital development, the learning
organization approach, and the approach of organizational learning.

20.1 DEVELOPING INTELLECTUAL CAPITAL
Management of knowledge and intellectual capital was first developed in the
1980s by the Swedish insurance company Skandia. The company worked at
developing ways to calculate more accurately the value of companies in which
knowledge is the central element but doesn’t appear in the existing accounting
calculations. The company nominated a knowledge manager, who, with the help
of a team, began developing methods, tools, and processes to develop the
intellectual capital of the company. Ever since the subject was developed, many
books and research have been published regarding the positive relationship
between intellectual capital and organizational innovation (refer to Brooking
1996, for example). Annie Brooking found that business organizations only
make use of a small portion of the knowledge and intellectual potential of their
workers.
Intellectual capital is the denomination that includes all intangible assets

enabling the company to function, and that lays the foundations for rapid
innovation and change. Intellectual capital includes the following elements:
1. Market assets – Deriving from the company’s relations with the market
and with its customers. Brands, customer loyalty, rights, specific
agreements, and excellent distribution channels. These ensure an advantage
over competitors.
2. Intellectual property – Knowledge, trade secrets, copyrights, patents,
design and development, trademarks. These constitute the legal mechanism
protecting the company’s assets.
3. Human assets – Individual and collective knowledge within the minds of,
and belonging to, the workers. Collective expertise, ability to solve
problems, ability of improvisation and creativity, leadership and managerial
competence.
4. Infrastructure assets – Technologies, methods, and processes enabling
unique functioning. These include managerial and organizational culture,
structured methods for risk assessment, satisfaction, data storage and
extraction methods, use of Internet and intranet.

KNOWLEDGE MANAGEMENT
Knowledge management is one element of intellectual capital management, and
it is built upon four levels corresponding to the levels of the organization.
Conceptual knowledge and knowledge pertaining to belief – the vision, the
mission, the thinking patterns, and the basic premises of the organization.
Processual knowledge – knowledge of systems and methods, processes and
approaches for problem analysis, decision making, and finding solutions.
Pragmatic knowledge – knowledge of the facts and decisions necessary for
daily routine task performance.
Automatic knowledge – knowledge leading to automatic activity or activity of
habitude.
Intellectual capital management includes the following seven actions:

1. Identification and diagnosis – identification includes the intangible assets of
the organization and the extent of their use for the optimal functioning of the
company.
2. Policy development – the unexploited intangible assets are made available to
the company.
3. Control and inspection – documenting the existence, the quality, and the
value of intellectual assets.
4. Storage – elaborating knowledge bases and user interfaces, nurturing
knowledge in a continuous and methodical manner, training a team for
knowledge base management, and training the members of the organization for
the exploitation of such knowledge.
5. Protection – establishment of all types of mechanisms for the protection of
the intellectual assets of the company.
6. Development and innovation – encouraging creativity and innovation
everywhere and making ideas become reality; investing in knowledge, in the
development of organizational learning, and turning the entire organization into
a learning organization.
7. Distribution – creation and use of the accumulated knowledge for the
improvement of the performances of the company as well as for its revival.

IMPORTANCE OF ORGANIZATIONAL MEMORY
Organizational memory is a backlog of historical organizational knowledge that
must be identified, gathered, and preserved. In an era where knowledge is in the
minds of workers who are very frequently changed and replaced, it is essential
that such knowledge be passed on into the memory of the company and be used
in situations repeated in the future.

20.2 THE LEARNING ORGANIZATION
A slightly different approach is that of the learning organization. This approach
highlights the importance of the ability of organizational learning as well as the
use of the knowledge accumulated within the organization and its environment,
and finally, turning this knowledge into wisdom that is exploited in order to
achieve organizational success. In this case, emphasis is on the ability to absorb,
to process, to store, and to exploit information for the goals of the organization.
People in learning organizations continuously improve their ability to obtain the
results they really want to achieve, nurture new thinking patterns, and
incessantly learn how to learn together.
A learning organization is capable of changing its behavior in accordance with
new knowledge and discoveries. Therefore, learning organizations are
characterized by high self-awareness and find themselves in processes of
constant internal and environmental investigation. Such an organization includes
both a significant process of experimenting and the ability to observe such a
process and to perform self-contemplation and meaningful self-analysis of the
way in which such experimenting takes place.
In learning organizations, continuous learning is common knowledge to all,
including managers. It takes place within individuals and work groups, mixed
width groups comprising departments at the same level, as well as heterogeneous
length groups comprising workers and managers ranging from bottom levels to
top levels. Members of the organization learn about the correlation between
operations and systems, complex processes and possible results. There is
maximal transparency, information is relevant to broad fields of activity, and it is
not limited to one element or another or to the improvement of a limited system.
The approach is methodical, and emphasis is on methodical learning, which
becomes an inseparable part of the system itself. Its purpose is continual
innovation and change.
In learning organizations, every activity and process is a basis for learning and
drawing immediate conclusions. Learning, conceptual openness, experimenting,
and flexibility are central values, and emphasis is on focusing on processes –
how we do things and how we think them through – rather than only on results.
Learning organizations accumulate knowledge and experience, which they
utilize for decision making. They establish methodical processes of investigation
and drawing conclusions, both from processes and from results, and they sustain
learning mechanisms and forums. There are advanced technologies for learning,
up-to-date information systems accessible to all, a homogeneous computer
system, and an intranet system enabling free conversation between everyone in
the system. Moreover, there are control, evaluation, and reward mechanisms that
encourage organizational learning.
One of the important books on the subject is The Learning Organization, by
Peter Senge (1994), in which he summarizes the following:
1. Systems thinking – Developing the ability to see and to focus on the whole, on
thinking patterns, and not only on parts.
2. Personal mastery – Commitment of the workers to learn and to develop
themselves over time. The organization’s resources, as well as lifelong learning,
are enabled for this purpose.
3. Mental models – The ability to understand, to control, and to continuously
change conceptual schemes. The ability to learn and interpret the reality based
on different basic premises; the ability to rapidly abandon old conceptions.
4. Shared vision – The capability to constitute shared images of the future,
generating the commitment and the mobilization of everyone for their
realization.
5. Team learning – Learning that generates synergy; the ability of the team to
interact freely and openly. Open communication, shared transparent knowledge.

20.3 ORGANIZATIONAL LEARNING
The information revolution in the past years has lead to significant change in
organization and management methods. The knowledge component in products
and services is gradually growing, whereas the material component is gradually
diminishing. Knowledge is becoming organizational power and provides a
competitive advantage. More and more books on knowledge management,
intellectual capital, and learning organizations are published and accumulate
knowledge on learning, organizational learning, and knowledge management as
a new means to manage innovation and constant organizational change.
Organizations establish user-friendly information systems to all: organizational
memory, an intranet system, processes and tools for the development, the
exploitation of knowledge in order to innovate and change, and a function in
charge of managing knowledge in the organization are present (see for example,
Senge, The Learning Organization, 1994).
Organizational learning and the learning of workers and managers are an
essential part of the process of introducing organizational change, as well as the
development of innovation and organizational dynamism. It consists of a means
for change in knowledge, in skills, and in the positions of managers and workers,
with the purpose of befitting them to planned change, as well as constituting the
knowledge basis toward reorganization or toward a source of growth of new
ideas and innovation. Successful companies are those who constantly generate
new knowledge, rapidly distribute it within the organization, and implant it in
the hearts of their workers. Knowledge, thus, becomes a resource in decision
making, in originating new business opportunities, and in innovation.
Following are a number of different goals to training, organizational learning,
and self-development:
1. Adjusting the knowledge and the aptitudes of the workers to the situation or
to existing positions.
2. Developing knowledge and aptitudes to promote workers or managers to
existing positions – senior positions or others.
3. Learning in order to keep up-to-date in new technologies and knowledge.
4. Learning and acquiring knowledge and aptitudes for the purpose of planned
change.
5. Learning in order to inculcate innovation and the ability to change
continually.
6. Organizational learning as an integral part of the culture of the organization
and ways to revive it.

IMPLANTING CHANGE BY WAY OF ORGANIZATIONAL LEARNING
Organizational learning is a system of principles, activities, processes, tools, and
structures at the level of the individual, the team, and the entire organization that
enable and even encourage the organization to utilize to the fullest and to
incessantly enrich the knowledge and experience accumulated. A learning
organization is characterized by a culture, a climate, and a management style
encouraging innovation and change in a methodical manner over time.
Organizational learning is directly related to innovation and to business success.
Collins and Porras’s research (1994) on successful companies over time and on
their characteristics found a direct relation between organizational learning
mechanisms that were developed in such organizations and business success
indices. Additional research on the connection between innovation and
organizational learning and business success showed similar findings (Cohen
and Prusak 2001). Organizations that persisted in and focused on organizational
learning improved their performances in an impressive manner.
A learning organization is marked by a number of important characteristics, such

as:
1. Organizational learning constitutes an inseparable part of the overall
organizational strategy.
2. The vision and mission include learning values.
3. There are values of constant joint learning.

4. Management processes are implemented, generating a managerial culture
which enables quick response and decision.
5. There are mechanisms that encourage learning, investigating, as well as trial
and error at the level of the individual, the team, and others collaborating.
6. There are structures as well as responsibility and authority patterns which
enable and encourage entrepreneurship and innovation.
7. Priority and emphasis is given to the continuous development of learning.
8. There is a planned backlog of organizational knowledge as well as
established organizational memory which enables user-friendly access to
all, as well as utilization for additional learning, improvement, and change
in organizational effectiveness.
WHAT IS ORGANIZATIONAL LEARNING?
Organizational learning is the knowledge produced by the members of the
organization as a result of their interaction, which, thus, becomes wisdom when
it is exploited in order to achieve the goals of the organization. There are four
elements to organizational learning: the levels of learning, types of learning,
learning skills, and the goals of learning.
Levels of learning: There are three levels of organizational learning: the level of
the individual learning in the organizational context, the level of the learning
team, and the level of learning of the entire organization. Individual learning
relates to one’s abilities to change aptitudes, skills, knowledge, positions, values,
and beliefs by way of new experiences, autonomous learning by means of
advanced technologies, internal insight, and observation.
Team learning relates to the reinforcement of knowledge, aptitudes, and abilities
that are the result of the interactions between the members of the team. Overall
organizational learning relates to the growth, change, and innovation of concepts
by means of organizational activities and processes.
Types of learning: learning cycles and systemic learning.
Argyris and Schön (1996) highlight the development of skills and learning
processes of the individual as an organizational learning basis. According to
their approach, there are three types of learning cycles: single-loop, which is
learning focused on locating deviations and their correction. The double learning
cycle, double-loop, focusing on diagnosing the causes for such deviation and on
the ways to correct and improve, and a triple learning cycle, deutero-loop,
focusing on understanding the organizational basic premises that caused the
deviation to occur.
“Systems learning” is a term that was coined by Peter Senge (1995) in his book
The Learning Organization, and it focuses on constant redesigning of the
organization by developing the learning skills of the individual and the team.
Learning takes place through the development of specific skills in order to reveal
and understand the correlation between organizational components and different
organizational processes that influence learning and the use of such skills. The
members of the organization examine their own learning methods, the beliefs
guiding such learning, and their organizational results, and they learn how to
learn otherwise.
Learning skills: Organizational learning skills include systemic thinking skills,

diagnosing abilities and understanding the influence of mental organizational
models on learning, the ability to jointly establish a shared vision, the ability to
learn in a team and to manage genuine dialogue, and the ability to learn from
organizational experiences and from the basis of organizational memory.
The goals of learning: The goals to organizational learning can be set

sequentially, starting from socialization goals, meaning adapting the individual
to the organization by means of learning processes; then, through goals to
improve processes, products, and services based on the existing organizational
perception; finally, learning directed at basic change of organizational
objectives, its goals, and its activity methods. Organizational learning, whose
purpose is socialization, focuses on learning the current situation, on deepening
and reinforcing existing values and norms, and on acquiring aptitudes and skills
in order to blend into and maintain what exists.
Organizational learning, which concentrates on constant improvement, focuses
on processes and tools intended to generate a state of continuous improvement of
the efficiency of the organization, as well as the quality of its performances and
its functioning.
Innovative learning focuses on organizational innovation and creativity, and on a
review of the foundation of values and norms that limit innovation and
creativity.
Learning directed at comprehensive and constant transformation focuses on
examining the goals of the organization, basic premises, and organizational
conceptions that impede or prevent the organization from undergoing quick
revolutionary changes.
These learning goals do not annul one another, and there is no antagonism
between them. It is, in fact, the opposite. Organizational learning must include
all approaches and goals all at once inasmuch as they are essential to the
subsistence of the organization over time. The dosage among these approaches
changes in accordance with the situation of the organization and its position in
the business environment.
An example of the differences between learning for reinforcement purposes and

innovation and change purposes is brought forward in the following table:
MAINTENANCE LEARNING
MAINTENANCE LEARNING
The purpose of learning is to fulfill

The purpose of organizational
constant examination of values and
learning is to maintain the existing
action methods of the organization
system and to preserve the way of
compared with its competitors.
Basic premises thinking of management.
Unexpected events in the business
Unexpected events in the business
environment are perceived as
environment are perceived as
opportunities to improve learning
“interfering” with learning processes.
processes.
Agreed upon and defined in advance, Agreed upon only at the level of general
Goals of learning structured, and only slightly objectives, but change and develop
changing. constantly.
Extent of learning Narrow and particular Integrative and interdisciplinary
The objectives and contents are Individuals and teams (organizational,

“ordered” from superiors and interdepartmental, or multidisciplinary)
determined by a small number of are involved in identifying needs,
people. defining objectives, and establishing
Design and plans.
implementation Learning is based on methods and
tools that are customary within the Learning is based on existing methods
organization and that have been and tools as well as new ones, as per the
tested in dealing with familiar extent of their suitability to deal with
situations. changing situations.
Limited involvement of the members Full involvement of all the members of

of the organization, whose level and the organization is an essential condition
Level of involvement
scope derive from current needs and for a “frontal view” and for suitability
objectives. for changes.
MANAGING INNOVATION AND ORGANIZATIONAL CHANGE BY WAY OF

ORGANIZATIONAL LEARNING – FOCUS POINTS OF CHANGE
• Generating a corporate culture and a climate encouraging constant personal

organizational learning. Establishing values and a reward system
encouraging personal organizational learning, risk taking, learning from
mistakes, and drawing conclusions continually.
• Developing leadership that both learns and nurtures learning. Leadership
that is capable of self-contemplation and changing its approach to learning.
Leadership that develops learning methods and tools.
• Choosing workers possessing learning abilities and capable of mental
flexibility. Developing accessible learning methods and tools. Developing
thinking skills, problem solving, and decision making in unconventional
ways.
• Institutionalizing an up-to-date and user-friendly learning and feedback
system. Developing the ability to understand and interpret environmental
processes and their influence on the activity of the organization. Ability to
gather, preserve, and develop information and knowledge.
We can distinguish between two different methods of change management of

this type: planned change and developing change.

PLANNED CHANGE
1. Initiative and decision to launch the change.
2. Establishing a steering team to conduct the process.
3. Participation of the members of the organization generating commitment to
the process.
4. Establishing change teams throughout the organization.
5. Learning – the change teams study learning approaches and methods.
6. Diagnosing – the change teams diagnose in their field the failures and the
advantages in the existing learning methods that motivate or that hinder
learning for innovation and change purposes.
7. The teams, with the help of the members of the organization, develop
alternative ways to improve and to make changes in organizational learning
methods.
8. The steering team and the organization’s management decide on
implementation methods.
9. Examination and evaluation.

DEVELOPING CHANGE
In this process, the organizational teams of the organization, including
management teams, learn how to learn together and how to develop and turn
knowledge into wisdom. The beginning of the process takes place step-by-step
in accordance with the preparedness of the teams. It begins from the top and
gradually spreads out throughout the organization and slowly becomes a part of
the organization’s culture. Planned diagnosis is not performed; emphasis is
rather on the future, on changing learning methods and the means for such
learning to take place, and on the manner in which we want the system to
operate and to function. Emphasis is on the continual search for better methods
and techniques for organizational learning.
In such a method, organizational change in learning methods simultaneously
goes with change of the organization itself.

20.4 WORKER DEVELOPMENT AND PERSONAL LEARNING
Organizational change starts in the minds of people, and it, therefore, first
obliges personal change of each member of the organization. Such change,
particularly basic and comprehensive change, includes the following levels:
• Change in beliefs and values: the organization changes its vision, its goals,
and its objectives.
• Changes in patterns of identification and connection: the organization
changes the structure or the strategy in order for it to attain its objectives.
• Change in knowledge and understanding: the organization changes its mode
of operation.
• Change in abilities, aptitudes, and skills: change in functions and
technologies.
• Change in behavior patterns.
In the last few years, emphasis on the success of the organization, its prosperity,
and its ability to innovate and to change has moved toward the individual
worker. Managers pass on more and more responsibility and authority to
workers, management echelons are diminishing, and the organization is
becoming flatter and flatter. The worker is expected to be entrepreneurial and
innovative, and the responsibility of learning and the ability to change has gone
over to him. Managers work at reinforcing and providing inspiration to the
workers. They generate a new managerial style, and they establish a corporate
culture encouraging learning and personal growth directly related to the goals of
the organization and its ability to rejuvenate and to grow.
In this manner, the necessary changes that we have enumerated above go down
to the level of the individual worker and his personal responsibility. Personal
learning, as well as productive training periods both inside and outside,
substitute academic studies outside the organization as an integral part of the
essence of the role of every worker.

TRANSITION FROM TRAINING TO LEARNING
There is a difference between training and organizational learning. The process
of learning begins by gathering data and processing it into information,
knowledge, and finally, insight, which constitutes the ability to put this
organizational knowledge into action, for improvement, change, and innovation
purposes. Organizational learning doesn’t only take place in certain periods of
time or in certain places, but rather, and particularly, as part of the day-to-day
activities of the organization. Organizations develop rapid learning processes,
absorb information systems available to all, and introduce homogeneous
computer systems to operations, which enable simple communication and
knowledge development among different parts of the organization, with the
intention of extracting existing knowledge and developing new knowledge
within teams in order to generate new ideas and to develop new business
opportunities.
Organizational training in its traditional sense is provided by the training

department. It usually focuses on learning skills, such as time management or
project management, among others. It prepares workers for existing functions,
and it focuses on inviting specialists to give lectures on their theories. The final
product of training is generally acquiring a certain level of expertise for task
completion, and it is especially focused on the present, on knowledge
acquisition, but not on its application.
In many organizations, training takes place in study classrooms, and it is
distanced from the daily operations of the organization and its future needs. Due
to the fact that it is, as mentioned, under the responsibility of the training
department, the responsibility of learning itself is taken away from the direct
manager or the worker himself, for they are the ones who really know what is
required and how to do it. Therefore, there is no relation between learned
knowledge in one place and its application in order to facilitate change and
innovation in the workplace itself.
Even learning processes are limited due to the fact that they aren’t carried out
within and out of the current activity of the organization, and there is no
sufficient attention to the unique learning style of each worker.

FROM MAINTENANCE TRAINING AND LEARNING TO NURTURING AND INNOVATIVE
LEARNING
For those reasons, successful organizations go toward processes and structures
that encourage organizational learning, where the purpose and results are to seize
business opportunities for success, innovation, and ability of fast change. Below
are some recommended processes:
Passing on the responsibility of learning to the worker and the manager

simultaneously: Learning constitutes an integral part of the duty of everyone,
and their incentive comes from the bottom, from people themselves as
individuals and teams. The organization establishes a culture and a set of
rewards and makes resources and tools available to all in order to implement
such competence. The organization develops learning tools as well as tools to
gather information and to process it into knowledge. The organization enables
easy accessibility for everyone to information banks in order to facilitate
learning and decision making. It integrates learning activities in all the activities
and functions of the organization. It reinforces and encourages different types of
learning, and it adjusts these activities to the strategic orientations of the
company. For instance, marketing and sales workers can access existing
databases and information banks in order to learn and to draw conclusions.
Learning linked to business results and their dramatic improvement: Learning is
linked to the business results and to the strategic plans of the organization, and it
cannot be dissociated from the business reality. Emphasis is on the near and
distant future, and the aim is measurable change.
Learning oriented toward growth and innovation: Learning highlights

contemplation of the future, examines processes and methods, norms, values,
basic premises, and revealed and concealed aspects that affect present results and
prevent innovation, change, and optimal achievement of the goals of the
organization. Workers and managers learn how to learn and how to see the
reality. They learn how existing conceptual schemes prevent learning and
innovating, and, thus, how to do things differently, each and every one in his
own unique way. Innovation and the ability to change, thus, also become the
responsibility of the individual worker.
Subsistence of supportive mechanisms enabling learning: The organization

must make available to those learning time resources, budgets, tools to measure
results, as well as accessible and user-friendly sources of information, such as an
available knowledge and organizational experience repository, knowledge
source guides, the skills and experience of the members of the organization,
intraorganizational and extraorganizational learning sources guides, sets of tools
and methods suitable to the variety of types of knowledge and learning styles,
time and space for learning, and its implementation as part of current work
activities, etc.
Personal learning agreements: The transition to continual learning implies a

transition toward a personal contract detailing the skills and unique knowledge
that the worker must apply in order to adhere to his objectives. The contract will
indicate the learning topics, its methods, and its place, and how it will contribute
to the business results of the organization. Each worker gets a unique learning
contract, in which are stated: business objectives, the required abilities and
knowledge, the gaps between what exists and what is desired, the required
learning, its implementation methods, and measuring its results.
Developing learning tools and means that will enable autonomous learning:
In order for everyone to learn in a unique and continuous manner, the
development of tools and means that will enable such learning is required. It is
important to make the means available within the time frame and the scope
necessary to all. Such tools already exist nowadays, and among them are
technologies, software and educational software, information networks,
information banks, intranet systems, and guides to knowledge and information
sources both inside and outside the organization.

ROLES OF THE TRAINING DEPARTMENT – TRANSITION TO THE LEARNING AND
KNOWLEDGE DEVELOPMENT DEPARTMENT
According to the approach that is presented here, the traditional role of the
training department also changes. Nowadays, it focuses on the creation of a
cultural infrastructure and on organizational processes that enable and encourage
autonomous learning. Training concentrates on building tools and developing
processes to evaluate the present level of knowledge, on establishing an
intraorganizational information network, on identifying learning needs,
establishing learning and information guides, and on training the workers to
identify, locate, and to communicate with information sources, both through the
network and face-to-face. It focuses on providing everyone with the ability to
learn autonomously.
The learning department is focused on the learners and enables people in the
organization to apply and develop their hidden potential in an independent and
unique manner that is suitable to them. This is all in relation to the goals of the
organization and to its growth and change requirements. In addition to this, it
employs a variety of learning methods, and it reinforces the idea that learning
constitutes an investment that is directly related to the business results of the
organization, out of the fact that it produces and develops knowledge that is
essential not only to the survival of the organization but also to its growth and to
its regeneration in the future.
The following table summarizes the approach on the transition from a training
department to a learning department:
CRITERION TRAINING DEPARTMENT LEARNING DEPARTMENT
Service-oriented and reactive

function. Proactive business associates.
Basic
paradigm Learning through structured, People learn in different oriented and spontaneous
oriented, and organized programs. ways. Biased learning.
Instructor/mentor.
Goals of the Information transmission. Knowledge creation.

unit Learning scopes. JIT learning.
Product of the
unit Information. Knowledge.
Individual learning.
Training.
Formal training programs.
Learning Operative learning projects. Learning partnerships.
Workshops and seminars.
methods Learning by means of computers.
“Learning programs catalog.”
Learning by means of information networks.
Informal learning.
Role of the
Professional instructors and Every worker of the organization as a source of
training
mentors as sources of knowledge. knowledge. External sources as needed.
department
External consultants as additional Consultancy and guidance in learning processes
and its
sources of knowledge. and in identifying learning sources.
characteristics
How the
company Expenses.
Investment.
perceives the Waste of time at the expense of
field of work. Combining work activities.
training
(Source of the table: Gordon, S., and others, “The New Challenges of Those in
Charge of Training in the Organization,” Status, Feb. 1999, Hebrew)

Chapter 21
Building Network Organizations
21.1 BACKGROUND OF THE PHENOMENON

The information and communication revolution is generating a worldwide
communication system, which sets in motion various new forms of organization
of development, as well as change of the form of organizations that we are
familiar with. These new forms, such as the flattening of the organization, the
generation of maximal internal flexibility, the focus on core activities and
shifting other activities out of the organization, as well as a decentralized
structure – are especially oriented inward, inside the organization.
In relation to the environment, organizations take actions such as mergers,
collaborations, joint projects, acquisition and partnerships, all this in order to
generate a major advantage. Local and global companies stretch themselves out
into network structures, as well as different forms of organizations based on
reticulation principles, and rapidly rise and spread out.
We are now standing before the following phase: the creation of an aggregate of
these forms of organization into a network structure of connections between
units, people, and activities, spreading out unto unlimited scopes. A network
includes small interlinked units in various different forms toward widespread
organization. “As small as it is big, as big as it is small.”
It appears that the network form of organization demonstrates stamina and high
success capacity in the new conditions of the environment. Those who don’t
integrate themselves into this revolution and who don’t adjust their structure to
the networked global village, it seems, will not survive. Below are the stages of
the revolution:
• The capacity of the silicon chip, which is becoming increasingly smaller in
size, on the one hand, and its capacity to store information getting larger, on
the other hand, enables rapid processing and rapid transmitting of
information to any place in the world, even by small enterprises.
• The personal computer, which is increasingly perfected, and the Internet
enable global business connection.
• Optical fibers increase the transfer capacity of information.
• Commercial satellites enable fast communication.
• The development of internal and external communication networks
facilitates communication between organizations.
• The Internet enables easy connections for everyone, with everyone, and
everywhere, and generates infinite information banks accessible to all.
• Computerized graphics, scanners, and artificial simulation enable image
transfer and sophisticated communication.
• Commercial use of laser beams.
• Magnetic cards and the possibility to effectuate transactions via global
communication networks.
• The creation of a global economy and commerce based on global
communication, information, and finance networks.
• Interlinking information, communication, and business systems to global
integrated systems that every individual and organization can easily connect
to.
• Considerable growth and markdown of the transportation system.
• E-mail, long-distance calls and meetings, global information systems,
money transfers via electronic channels.
• The cellular phone and its integration in global computer systems.
The results of such revolution have gone a long way: the prices of means of
communication have dropped, the speed of information transmission has
increased, the value of the geographic location of the manufacturer or the
customer has decreased, and most important, all the different parts of the world
have been connected to a widespread and complex communication network. At
the present moment, it is possible to carry out operations at the time and place
best suited to competition requirements. A company in Singapore employs
capital from Taiwan in order to produce phone systems in China intended for the
American market, all the while using Israeli science and sea transport on ships
under the Panamanian flag. Manufacturing, services, commerce, and capital
services are becoming global. The global village is connected to an unlimited
communication network.
In this manner, the revolution also led to a revolution in organizational forms of

companies and organizations, when associations gradually replace rigid and
permanent structures. Organizations downsize and concentrate on activities in
which they hold a prominent advantage. They originate through different
methods a ramified system of connections with suppliers, manufacturers,
distributors, sales representatives, knowledge workers, and specialists. They
establish themselves as a network of autonomous units and create their own
internal network that links all of the units together, both inward and outward.
They reduce the number of permanent workers and move toward personal
contracts with their workers. The workers themselves build a network of
contacts and agreements and work for different organizations at the same time
under varying contracts. The organization no longer constitutes a home, or a
family, or a place that provides security over time for the worker, but rather, a
certain place of professional occupation, at a certain period of time, and that can
be done from outside the organization at different hours.
In the new originated situation, it isn’t a coincidence that the number of

networks in all fields and their dispersion around the world has increased at a
dizzying pace. The McDonald’s chain is spreading at a fast pace, into tens of
thousands of units stretched out around the world. Other networks are growing
in all fields of services and manufacture: fashion houses, the food industry,
electric appliances, “DIY” products, tourism, hotels, furnishings, etc. Similarly,
this also occurs in the field of services, in which education networks, academic
studies, tourism, and information services, among others, grow. The network is
becoming a fast-spreading form of organization due to the fact that this method
holds an advantage in an era of incertitude and fast changes.
In this chapter, we will focus on the growth of networks that are not under
central ownership, but rather, comprise independent partners. It is a unique form
of organization that provides an answer to the successful activity of small
systems facing large organizations.
A network is not a combination of two or more organizations into one large

organization, and it isn’t the product of mergers and takeovers or partnerships
between organizations. All of these methods, as well as other similar ones, are
intended to create size: market share increase, investment capacity increase,
manufacturing capacity increase, sales, etc.
The significance of a network consists of the binding points and the connections
between them, which can include people, teams, units, and systems. Networks
don’t constitute a connection between activities in order to generate an
advantage in size, but rather, links between units and activities that maintain
their independence in order to create a paradoxical organization: “as big as it is
small,” meaning a form of organization holding advantages that are generated as
a result of the creation of size, while at the same time also holding the
advantages that exist in the small organization. It is a system of connections and
agreements that generates a network of independent activities, whose purpose is
growth from the bottom and distribution of financial results between the partners
of the network, the autonomous units, and not only to central ownership.

21.2 CHARACTERISTICS OF A NETWORKED ORGANIZATION
The traditional organization is founded upon hierarchy, subsequent activities,
and central management. Network organizations are rather founded upon the
example of the activity of the brain – many autonomous activities that take place
at the same time, without central control, generating collective patterns in
unison. The Internet organization, which every year counts millions of additional
subscribers and millions of associates and suppliers, is developing, growing, and
is managed as a network, as an assemblage of parts and autonomous activities
interlinked through complex connections that influence one another. Each part
reacts to changes in its environment and functions independently. There is no
central command in a network and there is no hierarchical chain of command. It
is based upon units within units, like a ramified system based upon infinite
subsystems, themselves based upon subsystems, up to the most basic system –
individual action. It doesn’t have defined limits, as it is based upon networks
within networks.
In the Po Valley, the operating networks belong to small business owners in

fields such as confection, wood, and tourism, among others. With the support of
central governance, a communication network and an information system
connecting owners of small businesses counting an average of five workers was
established. Businesses that specialize in the field of confection, designers,
fabric manufacturers, small sewing, and handicraft workshops collaborate
together and create a network of complementary activities related to the best
designers, fashion houses, and fashion shops in Europe.
In Israel, in the Galilee region, small business owners in the field of tourism are
associated with a network that offers a variety of services and products under
one unified brand name to visitors coming from outside the area. Cabin owners,
artists specialized in pottery, painting, and ornamental objects, spiritual
therapists and guides, restaurant owners, and tour guides, among others, are
joined together into one information network and create a regional entertainment
and accommodation network in which each activity supports and encourages the
other, and the success of one unit supports the others. Kibbutz guesthouses have
united into their own accommodation network and established a common
marketing, advertising, sales, and training system, this being without affecting
the absolute independence of the partners.
Below are a number of basic principles of networks:

Autonomy of the different parts
In a network structure, units operate independently for their survival and
success. In order to do this, they collaborate with other independent units for the
benefit of all the partners. The nature of the relationships can be diverse:
franchising, subcontracting, focused collaboration contract, etc. The field of
these relationships is also diverse: different parts manufactured by different
manufacturers in different places are assembled together into one complete
product. Complementary activities such as development, production, marketing,
financing, and sales are carried out by specialized organizations, and they
contribute to service or to the production of a finished product for the customer.
Absence of central control

Complex systems established as a ramified network of autonomous units and
activities cannot operate under central control. Scientists tried to build a robot
that walked on four legs, and they assembled it with a central brain that would
supervise and direct its movements, but all attempts failed. When the robot was
built with a small brain in each leg, with simple movement commands adjusted
to the other legs, it could move without any problems. In the human brain, there
is no small center that supervises and controls the rest of the parts; they
themselves create the relationships between them. The intelligence of the
network is spread out among its parts, and what is common to all is the overall
policy, values, action coordination, as well as leadership. Its success is the result
of cooperation between specialized units that learn and develop within their
field, which generates synergy, innovation, and creativity that grow in the course
of the process.
Parallel processing of information

Unlike hierarchic organizations in which activities and decisions are carried out
according to a certain order and under central regulation, in network
organizations, information is processed in a parallel manner, and activities and
decision making are also effectuated in this manner. With parallel processing of
information, many groups can operate simultaneously based on the information
in their possession, while taking into account what is taking place in the other
parts. Kodak was able to shorten by half the time required for the development
and the production of its Polaroid camera. It did so by way of parallel and
combined activity and all units of the company through an internal information
and communication system available to all units.

NUMBER OF BASIC CHARACTERISTICS OF NETWORKS
The network is established upon independent units under the ownership of a
promoter or a private business owner or under the ownership of the members of
the unit themselves. The success of the business constitutes the success of the
promoter, being fully independent in the current management of the business.
The central system possesses a strong brand, a unique product, or service which
it has put under legal protection, and therefore, the central system bestows
concessions to the promoters who wish to take part in and who benefit from the
strength of the brand and the network.
The central system grants entrance to the promoter in the network through strict
protection of the brand and its characteristics. It verifies that the promoter has
the qualifications, the competencies, and the motivation to protect the brand and
to manage it properly.
The daily management as well as the ownership of each unit is in the hands of
the promoter and not in the hands of the central system. He is the one who
recruits and manages the workers. There is no connection between the
autonomous units that operate on a uniform basis of shared vision, ideology,
organizational processes, and characteristics of the network.
The network operates according to the principle of “Let small deal with small,
and big deal with big.” In other words, the central system carries out activities
that the autonomous units cannot do themselves because of their size. Therefore,
it will carry out, on behalf of these autonomous units, costly operations, such as
advertisement and marketing, bulk purchase of raw materials and equipment,
training, interim financing, etc. The independent promoter will carry out current
management, recruit workers, will manage them, and will ensure the profitability
of the business. A certain percentage of revenue will go to the central system.

21.3 TYPES OF NETWORKS
Networks, just like organizations, can be divided according to the extent of
autonomy of their parts. In this manner, at one end of the spectrum are situated
centralistic networks under defined central ownership such as certain hotel
chains, and at the other end are situated networks of autonomous activities
without central control like the Internet. They can also be divided according to
the nature of their activity. On one side of the network are networks that
specialize in a focalized domain such as fast-food chains, and on the other side
are networks of complementary activities such as a network of regional tourism
activities. In the center of the spectrum are situated networks under joint
ownership specialized in complementary fields such as a chain of office supplies
and services, food chains that also include confection products, footwear, and
household appliances. These chains are themselves linked to a network of
suppliers and manufacturers under special contracts which generate broadening
circles of contacts.
Below are different types of networks.
Division according to the extent of ownership centralization:

1. Networks under central ownership specialize in a defined field, and whose
units are semi-independent. The units are in partnership with another agent
or under full ownership of the network’s owners, and they are managed by a
managerial agent when each unit operates as a profit center.
2. Networks under central ownership whose units are independent and operate
by a franchising method either fully or partially. The concessionaire
purchases the right to use the brand and pays the network owners fixed fees
according to conventional business indices.
3. Networks of fully independent units which are not under central ownership,
but rather under the joint ownership of the units that they comprise.
Guesthouse chains in kibbutzim are a typical example of collaboration
between similar autonomous units that are associated with a network for
marketing, advertisement, and sales purposes.

Division according to the extent of centralization of products and services:
1. Networks that specialize in a defined field. Fast-food chains that specialize
in cheese-based or hamburger-based products, chains that specialize in
confection and fashion, hotel chains, etc. Networks of this type are
characterized by rigorous protection of the brand, of the uniformity of the
product or the service, of the physical aspect, and the use of technologies
and processes. A service or product that is provided in one of the network’s
units is identical to that provided in another unit of the network.
2. Network specializing in a variety of products in a certain field. The chain
Ace Buy-and- Build sells a large variety of products in the field of home
renovation and maintenance. IKEA specializes in furnishing and in
household ornaments. Cosmos specializes in selling food products,
household appliances, confection, electric appliances, footwear, cosmetics,
health products, as well as a variety of fast foods, all in the same facilities.
Here too, the uniformity of physical appearance, organization, work
methods, and products is rigorously maintained.
3. Networks of complementary activities. Hosting and tourism networks that
provide a variety of services such as lodging services, food, arts, culture,
tours, health, alternative treatment, etc. Here, businesses in complementary
fields dispersed in a certain area are united in order to meet the various
different needs of the customers.
Division according to ownership:

The network that is most familiar to us and common nowadays is a network of
units under central ownership that establishes new units according to central
considerations of cost versus benefit. Decisions are made by central
management, and the developing network nowadays may become a different
network in the future. It is a network of small existing units that are joined
together to establish a network of independent partners. The creation of its
infrastructure is done by a promoter, as happened with the Internet, or by
directed operation of central institutions, as happens in different areas in Israel or
in other parts of the world. Below are the major differences:
REGULAR NETWORK INDEPENDENT NETWORK
Hierarchic network Flat network
Under central ownership Under the ownership of all the members of the network

Franchising or partial partnership Full partnership
Most returns are in the hands of the

owners of the network and its Most returns are in the hands of independent partners
managers
Decisions, goals, and

implementation methods are carried Decisions, goals, and action methods are defined by the members
out by owners or the network’s of the network
management
Operates according to profitability Operates in peripheral areas with the purpose of regional
considerations and is therefore development, promotion, employment, and profitability for small
located in population centers promoters. Operates via the Internet as a regional network
Growth is initiated from the top Growth is initiated from the bottom
The network grows and develops by The network develops through connections between existing units
the establishment of new units and through constant integration of new partners
Ensuring uniformity in all aspects Ensuring uniformity of aspects that are agreed upon
Use of resources according to cost versus benefit considerations Use and

development of the resources of the network’s environment
The following diagram shows the basic differences between three types of
organizations:

21.4 ADVANTAGES AND DIFFICULTIES IN NETWORK
MANAGEMENT
THE ADVANTAGES OF THE NETWORK ARE IN ITS DIFFERENT FORMS

Generating a large system and a small system at the same time – a system that
has advantages of largeness in resource allocation and an advantage of smallness
in its management.
Generating a simple system and a complex system at the same time – from the
standpoint of the independent unit, the organization is simple. It is easy to
control, easy to change, to familiarize with, and to solve problems. From the
standpoint of the central system, the organization is complex, owning several
units that must be provided with constant service and raw materials, inspection,
training, and advertising.
1. The network can perform activities of high cost that it doesn’t allow the
individual unit to perform itself. The association of independent units
generates a major advantage in the following fields:
• Joint advertisement that promotes the network’s services and products
• Shared marketing system that markets all the products and services of the
network
• Joint training activity and concentrated attention to human resources
• Every independent unit serves as a source of information and sales for the
other units
• Shared quality control system. Rigor on reliability and quality
• Conjoint mobilization of capital for development purposes
• Ability to employ advanced computer systems
• The network can reach special agreements with suppliers and service
providers due to its major advantages
• Joint order management, establishing an order processing center, and an
order management system in each unit and for each unit
2. A network has high adaptation capacity, its structure being flexible and able
to survive over time. The transformation of a certain part, its death or its
exit from the network, doesn’t cause the network to crash, but rather makes
it possible for others to join.
3. Errors and mistakes are made in the autonomous units, which prevents
major mistakes from being made.
4. Networks have the capacity to learn and grow due to the fact that learning is
done in places where knowledge is available – in the units themselves. By
way of collaboration, combined development activity is originated, and
each unit has a motive to grow and develop due to the fact that success is
intended for subunits. Profit and prosperity are intended for the units, not
only nor especially for central ownership.
5. Networks enable activity, initiative, and innovation in every unit, since it

doesn’t need central approval or to wait in line for sequential decision
making.
6. Networks have the ability to spread out upon global spaces and to exploit
geographical advantages as well as advantages of expertise, among others,
without being a complicated giant organization.
7. The network is established upon units and activities that are specialized and
that hold an advantage in their field. Therefore, combining these activities
together generates synergy and a competitive advantage.
8. The network has the possibility to offer a large variety of complementary

services and products to customers. In this manner, it saves the customers
time and effort and generates an advantage over traditional organizations.
9. The network enables and encourages specialization and innovation in end

units, where knowledge is available.
10. The network enables small business owners that specialize in unique fields

to associate with complementary units and, thus, to generate size and to
obtain a large variety of customers. In this manner, it enables them to
successfully deal with giant organizations or financiers.
11. The network is designed for the success of the end units. Most of the profit
is accumulated in the units which the network comprises, and since there is
no central ownership, the profits that are accumulated in the units are
relatively large and constitute an additional motive for constant
improvement and innovation.
12. The network is “as small as it is large.” It creates a large system that spreads
out onto large surfaces, and it, therefore, counts a large number of
customers, but this system comprises small, independent, specialized units.
In this manner, it holds advantages of both largeness and smallness.
13. The network generates an attribute of “more brings more.” A satisfied

customer of one unit becomes the customer of the rest of the units. It
increases the scope of activity of each one of its units and, thus, spurs its
own development.
14. The network provides a sense of security to the individual business owner
and enables him to focus on quality, development, and innovation, rather
than on daily survival.
15. The network increases the number of employees. The increase of scope of
activity increases the demand for manpower and also propagates toward
activities related to the services of the network, and, thus, needs additional
manpower.

DISADVANTAGES OF THE NETWORK
1. Just as the success of the network contributes to the success of all its units,
the failure of one unit may negatively affect the credibility of all the
partners in the network in the sense that the connection between the units
operates both ways. Therefore, it is important to maintain credibility,
quality, and the excellence of service in advance.
2. The establishment of a network of independent partners requires

overcoming barriers and resistance of the existing business owners to
collaborate with the others. The transition from competition over a
customer toward sharing the customer demands preparation or a crisis
situation that leads to the recognition and the willingness to establish a
network.
3. The establishment of a network of independent partners demands the

encouragement and assistance of a third party. Preparing the ground,
managing the connection process, mobilizing the resources for a
homogeneous information infrastructure, establishing the regulations of the
network and its work methods, these, among others, demand the assistance
of a professional agent.

21.5 NETWORKS – EXAMPLES
Networks, as an organizational form, rapidly develop in all aspects of life. The
reason is that this form of organization can grow and succeed in difficult
conditions of competition, in situations of uncertainty, and in conditions
demanding fast change. The fact that they are established as paradoxical systems
that simultaneously combine simplicity with complexity, as well as smallness
with largeness, enables them to prosper in a dynamic era.
In the business field, McDonald’s is a chain known to all that holds a strong fast-
food brand name and grants franchises to entrepreneurs all around the world.
The chain possesses thousands of branches spread out all around the world, all of
which are characterized by uniformity of appearance, food, and service, with a
certain strategy of adjustment to the local preferential taste and local conditions.
For this reason, the chain in Israel sells kosher food and grilled hamburgers.
Networks in the business sector are situated in all fields, such as, for instance,
chains like Fox or Benetton in the field of confection, or in the food domain;
chains like Domino’s Pizza or Pizza Hut, etc. In the field of tourism, the Hilton
hotel chain. In the field of education, the ORT network of schools, which is
famous for operating unique schools all over Israel. Each school is managed
independently as a profit center. However, study programs and teaching methods
are homogeneous. In the field of household products: the Ace Buy-and-Build
chain. Gas stations: Dor Alon, and more.

“AL-QAIDA” AND “HEZBOLLAH” AS SUCCESSFUL NETWORKS
The most famous network in the world nowadays is the terror network Al-Qaida,
a global organization established upon autonomous cells, under the leadership of
local leaders. Contact between local cells is quite unstable, if not nonexistent.
What holds the network together is total adherence to the central ideology as
well as operation according to the rigid norms of the organization: asceticism,
clandestine operations, willingness of life sacrifice, and fanatic belief in justice
of cause. The glue that holds the connection between cells is of ideological
nature, which manifests itself with the presence of charismatic leadership
representing the ideology. The operation strategy is clear to all the members of
the network and the cells: terror operations against Western targets through life
sacrifice. The success of the network facing bureaucratic organizations of
powerful resources proves its advantage in the modern era.
The example of the organization of Hezbollah as a network is also interesting. It

is very similar to the form of organization of the Al-Qaida network, in the sense
that here, too, the unifying glue is extremist and fanatic ideology embodied by a
charismatic leader. The network is established upon local independent cells that
operate independently in accordance with ideology and agreed-upon action
norms, and it, too, successfully stood against the complicated bureaucratic
system of IDF in the Second Lebanon War.

“MONDRAGON” AS A SOCIAL AND ECONOMIC NETWORK
Another example is the Mondragon network based in the Basque area in Spain.
The network was founded by a spiritual leader who believed in the notions of
equality and fraternity, along with free market and society. The leader visited
Israel, studied the advantages and disadvantages of the kibbutz movement, and
reached the conclusion that the network’s companies and the private life of the
citizen must be separated.
Nowadays, the network includes about 130,000 companies that are based upon
cooperative organizations, as well as dozens of business, consumer, and
educational member organizations that are managed as independent units
belonging to the members of each unit. The terms of admission into the network
are through the companies in one of its organizations. The network counts
industrial plants, consumer organizations such as supermarkets, schools, banks,
and medical practices. Each unit is independent and connected to the network
through ideology and uniformity of conduct.
Mondragon also holds a central bank system that provides convenient loans to
cooperatives, investment in new enterprises, and interim financing in difficult
times. In situations of collapse of one of the cooperatives, the network is
engaged in finding employment for the workers in one of its other cooperatives
in the area. The success of one of the cooperatives enables an increase in the
number of members of the network by integrating workers in the companies.
The network possesses its own university and a training and education system as
per its ideological principles. Each member wanting to join the network must
undergo training and study the network’s principles and values, and must declare
his acceptance of its principles.
The education and training center provides instruction and training services in
professional, business, and ideological fields. Service workshops, manager
development workshops, and workshops in professional fields constitute a part
of the duties of the training center.
Moreover, the network’s strong ideology is based upon the most equalitarian
human society possible and is based on a free market of cooperatives that belong
to their very own workers. The salary gap between workers and managers is very
small, and the cooperative’s profits are distributed among its members. Each
cooperative has an absorption committee that hires new members and selects
managers for limited periods of time.
The network is very successful; its members, as well as its member cooperatives,
are increasing in number. The members are highly motivated to succeed due to
the fact that by being members of a cooperative, they benefit from the results of
its success.

NETWORK OF INDEPENDENT PARTNERS
In the last years we have witnessed the phenomenon of network creation
originated from the bottom; in other words, by joining forces, or by creating
partnerships between entrepreneurs who own similar or complementary
businesses and who operate in the same geographic location. Small business
owners discover that they don’t have the capacity or the power to compete with
the giants who operate in their field, and they, therefore, associate with other
competing or complementary business owners in order to create a network of
independent partners.
Zimmer (Bed & Breakfast) owners in small villages establish zimmer networks
under a shared brand name, kibbutz hotels create networks of kibbutz
guesthouses, promoters who work in tourism services in the Galilee in the
lodging domain, in food, health, alternative therapy, and art, among others, join
forces and establish a network of independent partners under a uniform brand
name. In this manner, they generate an advantage of size, enabling them to put
joint marketing and advertising into effect, to recommend the services of others
in the network to their customers, or to pass customers on to one another, in the
case of excess supply, etc.
The establishment of a network of autonomous units under the ownership of

associates requires assistive prerequisites:
1. An entrepreneurial body; for instance, a central regional or governmental
authority that is aware of the importance and the need of assistance in the
establishment of such a network.
2. A crisis bringing different business owners together to organize themselves
into structures of association rather than competition.
3. The existence or the acquisition of a computer system or a communication
system that connects all of the partners into one network for information,
orders, acquisitions, and functional purposes.
4. The willingness of different promoters of similar or complementary fields
to allocate a small portion of their resources in order to establish the
network and to set it in motion.
5. Willingness to share knowledge with others, to operate for the sake of
others, knowing that they do this as well. Trust in the partners and in their

intentions.
6. The willingness of the partners to enter a process of learning, building, and
joint work at establishing the network, its action principles, as well as
everything else required for its activation and success.

SUMMARY
The Internet network is proof that it is possible to establish a network of minor
and major Web site owners, private or public, without centralized management,
when all independent units are committed to operate according to values and
conventional norms. The Internet is a network in which it is possible to move
around freely from place to place. It is managed by promoters who manage their
Web sites themselves when the links between sites are both direct and indirect.
The network holds major advantages in its ability to operate in a rapidly
changing environment, to be open and unlimited, complex and competitive. The
fact that it combines advantages of largeness with advantages of smallness
provides it with the ability of high durability. Its ability to grow smaller or larger
without affecting its components at all gives it major advantages.
The network is established upon the enterprise of the individual, whose success
also constitutes the network’s success. In this manner, a strong motive for
achievement of every promoter or member is generated, as the success of his
unit constitutes his success and not that of the central system. It is established
upon processes whose level of risk is low, and based upon the mutual assistance
given by every promoter to the other promoters.

SECTION 5
Formation of Exemplary and Durable

Organizations

Chapter 22
Built to Last
hat is the structure that assures durability and success over time? Much
W research and books that were published in the last decade concentrated on
this question and examined the attributes and characteristics of successful
companies over the course of time. Unlike the traditional research that dealt with
problems and failures, this research focused on successful companies over time.
It should be mentioned that the life expectancy of multinational companies that
were listed in the Fortune 500 list was between 40 to 50 years, and that a third of
the companies that had been included in this list in 1970 did not again appear on
the list by 1980. They disappeared, merged, or were crushed. Peters and
Waterman’s research (1982), or recently, Collins and Porras’s research (1994),
De Geus’s research (1997), and Collins’s research (2001) on successful
companies over time indicate the fact that these organizations have certain
characteristics in common, sometimes even opposite or complementary ones.
These are organizations that have within them a sort of paradox, which is, in
fact, what enables success over time in a changing, chaotic, and crazy world.

22.1 OUTSTANDING COMPANIES
In 1984, researchers Peters and Waterman performed a comprehensive survey to
identify 75 outstanding companies in the United States. The criteria were as
follows: business success over time as well as employee and worker satisfaction.
After these companies were identified, the researchers conducted an in-depth
examination of the common characteristics of these companies which made them
excellent. The findings of the research were published in a book named In
Search of Excellence (Peters and Waterman 1982). In the book, the researchers
summarize their findings as per the following dimensions:
Action orientation and quick performance – the prevalent norm in these

companies is “do, adjust, try,” meaning emphasis on finding and putting fast
solutions to problems into effect while experimenting and taking risks through
the work of mission-oriented thinking teams.
Close to the customer – all of the companies provide quality, service, and
reliability of even the most basic of products and services, this being above
competition. These companies keep close to the customer and learn from him
what his needs and desires are when all the workers participate in the effort.
Companies that excelled in innovation got most of their ideas from the
customers.
Autonomy and entrepreneurship – many companies out of the 75 were

innovative by nature. These innovative companies, such as 3M, for example,
along with others, foster many innovative leaders throughout the organization.
They operate as a network bustling with teams and individuals full of initiative
and will to renew, and they don’t tend to impose tight supervision on their
workers in order not to limit their spirit of creativity and initiative. They
encourage risk taking, and they consider failures as learning opportunities.
Productivity through people – treating the workers as the source of any

business success – the worker is not only a pair of working hands but also a
source of knowledge. Outstanding companies dedicate themselves more than
others to promotion, development, and investment in the work conditions of the
workers. They have respect for the individual, and they involve workers in
decisions that concern them.
Direct contact and motivation deriving from the power of values –

outstanding companies have strong cultures. Simple and clear values and norms
are assimilated in the hearts of the workers, who are familiar with the culture,
and thus, operate for its benefit and realize it in their day-to-day lives. In these
companies, there is direct contact between the workers and managers, as well as
between the company and its customers. The customers are familiar with the
culture of the company and appreciate it.
Focus on the core – all outstanding companies have a strategy of focus on their
field of expertise. They gain excellent competencies in all processes within the
value chain, but in one focalized domain. Indeed, some companies were
exceptions to the rule, but most of the investigated companies remained close to
the field in which they were proficient.
Simple structure, lean managerial staff – in spite of the fact that the
investigated companies were very large (Disney and McDonald’s, for example),
they all had minimal managerial staff and overhead expenses were relatively low
considering their size. None of them had a complex structure such as a matrix-
based structure, and those who did keep such a structure immediately abandoned
it. Their hierarchy is also limited, and the tendency is to eliminate middle
echelons.
Simultaneous loose-tight characteristics – outstanding companies are based on

a paradox or opposites. They are extremely centralized on strategy, vision, and
values, but they tend to give operational autonomy up to the level of departments
and teams.

22.2 BUILT TO LAST – THE STORIES OF LONG-LIVED
EXEMPLARY COMPANIES
Collins and Porras (1994) conducted a similar research on 18 long-lived
exemplary companies. Their research obtained findings similar to those found by
Peters and Waterman, but they added other domains and went more in-depth.
Collins and Porras conducted a comparison between pairs of organizations of
analogous fields, both outstanding and not. Their conclusion is that longlasting,
exemplary companies have competencies that are both antagonistic and
complementary at the same time.

CHARACTERISTICS OF LONG-LASTING COMPANIES:
ON THE ONE HAND: ON THE OTHER HAND:
The goal goes beyond profitability Pragmatic relation to profitability
Existence of a fixed core ideology Alertness of change and movement

Conservative maintenance of the core Audacious actions, risk taking, and commitment
Clear view and a sense of direction Opportunistic exploration as well as trial and error
Setting major and audacious goals Developmental and evolutionary process

Appointing managers that are linked to the core Appointing managers who encourage change
Ideology-oriented supervision Existence of operational autonomy
Sectarian culture that requires adaptation Ability to change

Short-term investments Short-term ambitiousness
Philosophy, vision, futurism Excellent daily performances
Company that is adjusted to core ideology Company that adapts itself to its environment
The researchers conclude their work with the following insights:

• Clock building, not time telling – establishing a system capable of
functioning continually, without depending on this or that manager.
• Sticking to core ideology – the basic reason of the existence of the
organization goes beyond profits, through principles providing inspiration.
• The genius of the “And” – combining opposites instead of “Or” –
decentralization and centralization, change and conservation.
• Sticking to core values, constant change, and progress – change of
procedures, strategies, and bold objectives, all the while preserving core
values.

22.3 LONG-LIVED COMPANIES IN EUROPE
De Geus (1997) also investigated long-lived successful companies, this time in
Europe, and his findings are similar to those who preceded him. These
companies are characterized by the following properties:
• The ability to know and be familiar with their global business environment
and to exploit resources and knowledge for the benefit of the organization
without destroying the environment. Preserving harmony with its
surrounding world. Long-lasting companies were proactive in extracting
information from their surrounding world.
• A deep sense of identification of the workers to the company. Creation of a
consolidated community with a sense of pride and belonging. In order to
survive in a dynamic environment, the workers must be tightly bound to the
company. The managers of these companies have generally grown within
the company and have recognized its values and identify with them.
• Decentralization and autonomy of the various different parts of the
company. Long-lived companies are tolerant: tolerance of experiments,
initiatives, attempts, and oddities.
• Saving and accumulating capital directed toward the exploitation of
business opportunities and toward the ability to rapidly change. Long-lived
companies are modest. They disburse their money cautiously, and they
accumulate resources for times of special needs in the future.

22.4 THE 500 SMALL AND MEDIUM UNKNOWN
GLOBAL CHAMPIONS
A study conducted by Herman (1999) on high-performing small global
businesses in Europe found they all share a surprising set of common
characteristics:
• They are all great innovators. Creativity and innovation are embedded in the
business culture. Innovation is expected from everyone in the organization.
• They expanded a narrow product focus to meet the needs of customers all
around the world.
• They avoid outsourcing, diversification, and strategic alliances. Instead,
they have created unmatchable internal competencies.
• They are extremely close to their customer, but have no large marketing
departments.
• They are led by executives who are both authoritarian and participative.
• Their hallmark is continuity, with almost no employee turnover and an
average CEO tenure of 24 years.

22.5 FROM GOOD TO GREAT: WHY SOME COMPANIES MAKE
THE LEAP AND OTHERS DON’T
In Collins’s book, From Good to Great (Collins 2004), he also details the
characteristics of long-lived successful companies:
• Level 5 leadership
• First who, then what
• Confront the brutal facts
• Focus on what you are better at compared to everyone else
• Culture combining order, organization, and discipline, along with initiative
and innovation
• Technology as an accelerator, not as a goal
• The flywheel and doom loop
FIRST CHARACTERISTIC: LEVEL 5 LEADERSHIP

Collins enumerates a hierarchy of five echelons of management and leadership,
of which the highest level is named “Level 5 leadership”:
• Level 5 leadership – building enduring greatness through a paradoxical
blend of personal humility and professional will.
• Effective leader level 4 – encourages commitment to and vigorous
application of a clear vision, stimulating performance at higher standards.
• Competent manager level 3 – organizes people and resources toward the
efficient and effective progress of predetermined goals.
• Important team member level 2 – contributes personal abilities to the
achievement of group objectives. Operates effectively in collaboration with
the other members of the team.
• Highly capable individual level 1 – makes a contribution through his
talent, the knowledge in his possession, and his good work habits.
The two prominent characteristics of level 5 leadership are:

Professional will
• Generates excellent results
• Uncompromising will to achieve excellent results
• Undeterred by difficulties
• Sets a high standard
• Looks in the mirror and takes personal responsibility
• Constitutes a personal example for assiduousness and devotion
Personal humility
• Bases himself on inspiration rather than on charisma
• Channels ambition rather than ego
• Chooses successors who are more likely to succeed
• Attributes his success to the workers, to luck, and to external factors
SECOND CHARACTERISTIC: FIRST WHO, THEN WHAT

• Choosing the right people.
• Establishing an excellent management team.
• Assigning the right person to the right place.
• Emphasis on who will be rewarded, not on how he will be rewarded.
• Preserving good people through reward.
• Refraining from dismissals.
• Removing incompatible people without compromise.
• Assigning the best ones to issues of opportunity rather than problematic
issues.
• Atmosphere of friendship and team relations.
THIRD CHARACTERISTIC: CONFRONT THE BRUTAL FACTS

• Honest consolidation facing the brutal facts
• Culture enabling every worker to hear and to be heard
• Atmosphere of openness and attentiveness
• Leading with questions, not answers

FOURTH CHARACTERISTIC: FOCUS ON WHAT YOU ARE BETTER AT COMPARED TO
EVERYONE ELSE
• If your core business doesn’t enable you to be the best in the field – search
for another one.
• Don’t focus on what you’re good at; focus on what you can do better than
others.
• Acquire in-depth insight of your economic model.
• Be enthusiastic about the products and services that you produce.
FIFTH CHARACTERISTIC: CULTURE COMBINING ORDER, ORGANIZATION, AND

DISCIPLINE, ALONG WITH INITIATIVE AND INNOVATION
• Discipline based on self-discipline rather than on bureaucratic procedures.
• Freedom, entrepreneurship, and responsibility within the framework of the
existing method.
• Assiduousness and intensiveness of each and every one; fanatic adherence
to the three circles.
• Self-management for everyone; management from the top is of the system,
not people.
SIXTH CHARACTERISTIC: TECHNOLOGY AS AN ACCELERATOR, NOT AS A GOAL.

• Prudence toward trends and slogans.
• Meticulous choice of technologies as per their correlation with the three
circles model mentioned above.
• Technology doesn’t entail excellence; it accelerates it.
• Adjusting technology to core competencies leads to its maximal utilization.
• Entrepreneurship and creativity in the use of technology, rather than out of
fear of competitors and out of reaction to the reality.
• Deep creative drive and strong need to achieve excellence.
SEVENTH CHARACTERISTIC: THE FLYWHEEL AND DOOM LOOP

• Accumulating constant improvement and change, continuous buildup on
small successes.
• The result is dramatic, but the process is slow.
• There are no renewals or dramatic breakthroughs; there isn’t one revolution,
and there is no amazing novelty.
• Persistently pushing forward the heavy, giant, accelerating flywheel
• Breakthrough comes unintentionally and without any dramatic launching
event; it comes in retrospect.
• Time is not wasted on generating commitment or motivation by artificial
means. Problems of commitment, motivation, organization, and change
management will solve themselves in a natural way as part of the daily
proceeding of the system.

22.6 CRAZY TIMES, CRAZY ORGANIZATIONS
Another interesting review of outstanding organizations was brought forward by
Tom Peters in his book Crazy Times Call for Crazy Organizations (1994). The
book is not based on scientific research, but rather on in-depth observation and
studying dozens of successful organizations in the United States, most of which
operate in a global competitive environment and succeed not only in surviving
but also in prospering. Peters analyzes the new environment, and calls our era
“crazy times.” In order to survive over time and to succeed in the long term,
organizations establish themselves in unusual forms and methods which Peters
calls “crazy organizations.”
Peters also emphasizes the abilities of successful organizations to change quickly
due to their flexible structure, to corporate culture highlighting innovation and
creativity, to constant organizational learning ability, to conditions encouraging
initiative, and to the organizational ability to quickly connect and disconnect
while creating partnerships and networks, with the purpose of generating an
advantage of size. Once again, the paradox motto repeats itself: organizations
that are both big and small, stable but changing, etc.
Peters’s findings indicate the importance of the ability to launch revolutions

within organizations. Moreover, outstanding organizations operate through
revolutionary processes and by way of revolutionary organizations and
management methods. They establish themselves from the bottom – meaning on
autonomy, freedom of action, and thought of the individual worker. They are
based on small autonomous teams, self-managed teams within a network
structure rather than a hierarchical one. They establish a culture of innovation
and inquisitiveness, and they constitute systems that learn not only from failure
but from success as well.
The following diagram summarizes the different factors and the connections
between them (diagram 11).
Peters’s model focuses on business firms that operate in a competitive market, in

conditions of constant change, and in situations of uncertainty and chaos.
Organizations based on knowledgeable workers can indubitably learn and
implement Tom Peters’s revolutionary principles.
diagram 11

22.7 HIGH-PERFORMING ORGANIZATIONS (HPO)
Holbecht’s research (2005) on high-performing organizations (HPO) found very
similar characteristics. Here are the main findings regarding HPO organizations:
• Developing organizational change ability (build inflexibility, speed, and
learning)
• Creating a knowledge-rich context for innovation (stimulate business
breakthroughs and continuous innovations)
• Creating boundary-less organizations (operate effectively across mind-set,
functional, corporate, and geographic boundaries)
• Stimulating people to sustainable levels of high performance (enable people
willingly to release “discretionary” effort)
• Becoming a great place to work, empowerment, and accountability (a fair
employee “deal”)
• Becoming a values-based organization (connect all stakeholders at a deeper
level of meaning)
• Becoming a values-based organization (“walk the talk” of organization
culture)
• Appropriate management and leadership (emotional intelligent leaders,
ethical leaders, guides, future-oriented, change leaders)

22.8 COMPANIES THAT OUTSMART THEIR COMPETITORS
Champy (2008) searched for outstanding companies and what makes them so
successful. His conclusions are as follows:
• Companies that outsmart the competition look for dramatic growth, while
incumbent businesses are content with incremental growth.
• Companies that outsmart the competition make strategic choices based on
intuition, whereas incumbent businesses often get bogged down in research
and analysis.
• Companies that outsmart the competition stay focused on what they do best,
whereas incumbent businesses are often searching for new ideas and end up
losing their sense of purpose in the process.
• Companies that outsmart the competition have a culture that values and
freely promotes innovation, whereas incumbent businesses subject
innovation to a cumbersome process.
• Companies that outsmart their competitors depend on culture to manage
behavior, whereas incumbent businesses use rules and controls.
• Companies that outsmart the competition engage all their people in
constructing and executing strategy, whereas at incumbent businesses,
strategy is often an abstraction for most people use rules and controls.
Champy, J. (2008, p 165–174)

22.9 CLASSIC CONSERVATIVE ORGANIZATIONAL STRUCTURE
VERSUS STRUCTURE IN CONSTANT RENEWAL
It is possible to compare organizations of classical structures and organizations
of structures in constant renewal, thus, enabling them to succeed over time, in
competitive conditions and in a dynamic environment:
CLASSICAL APPROACH APPROACH OF CONSTANT RENEWAL
1. Focus of the structure and its goals
Task-oriented system System that gives meaning

Preservation and continuity of what exists Constant renewal
Preserving customs and procedures Entrepreneurship and creativity

Protection of frameworks Generating energy and motivation
Conservative system Learning system
Efficient system Durable system

Aspires to organize and to retrieve equilibrium Aspires toward the advantage of knowledge
2. Nature of the structure
The basic structure: rigid pyramid Flexible and changing network

Roles and authority: meticulously defined Unclear, changing, and indefinite
Clear and precise limits Unclear and changing limits
3. Management and leadership
Decentralization, empowerment, providing

Centralistic
inspiration, coaching
Leadership duties: control and supervision Creating meaning and forming a strategy
Changing, enabling, helpful, and coordinating

Strong and oriented central management
management
4. The units within the structure
Maximal autonomy, the teams manage

Teams and departments: under central supervision
themselves
Work unit: teams and departments Striving for more project teams

Permanent and rigid unit structure Activation of many temporary teams
One person generally belongs to one fixed team Belonging to several teams at a time, mobility
Surplus functions, people replace each other in

Within the team: surplus of people and fixed positions
their roles
Competition between units is prohibited Competition between units is allowed
5. Communication, decisions, relations

Internal communication: canalized through organized
Rich, multilateral, and not channeled
channels
Contact in correspondence forms by way of much
Elaborate contact: technology, e-mail, etc.
paperwork
Decision making: linear, through predetermined
Sometimes through parallel processing
patterns
Most decisions are made at the level of those

A considerable part of decisions needs senior approval
performing
Discussions in institutions without involving those Dialogue, while involving those concerned by
concerned by the matter the matter
Mutual, personal, accepting, and open

Formal relationship with the position
relationship
Physical structures of partitioned institutions Without barriers, encourages maximal contact
6. External relations
External contact: limited and regulated Plentiful, open, and enriching contact
Creates contacts, agreements, and partnerships

The system tries to be autarkical
with the exterior
The exterior is perceived as a threat The system is a part of other systems
The external environment exists in order to be

Establishing collaborations for mutual benefit
exploited
7. Supervision
Formal supervision: authority, procedures, and norms Strives to build upon internal motives
Through support, help, genuine encouragement,

Informal supervision: through criticality
and feedback
The individual: dependent Maximal possible autonomy

22.10 CONCLUSION
In conclusion, it seems that successful companies in the new era require
antagonist competencies that enable them to prosper in a chaotic, competitive,
and rapidly changing environment. These oppositions can be summarized as
follows:
Ability to combine order with disorder. Disorder or characteristics of

instability at the edges of the organization and at its points of contact with the
environment constitute the grounds for initiative, innovation, experimenting, and
creativity. None of these aspects can progress under order and discipline. Order
at the center of the organization is necessary in order to maintain stability and
continuity.
Ability to combine centralism with decentralization. Centralism in values,

corporate culture, and strategy will preserve the identity of the organization and
the ability of the workers and customers to identify with it. Decentralization and
autonomy of workers and units will enable maximal flexibility, rapid change,
and the ability to quickly terminate or launch operations, without affecting other
activities.
Ability to innovate and to change quickly, along with the ability to preserve
the core of the organization and its identity. Successful organizations stick to
the field in which they are strong, maintain their identity, and develop esprit de
corps. On the other hand, they are capable of changing swiftly, coming up with
innovative products and services to be introduced into the market, absorbing and
rapidly processing knowledge, and changing in accordance.
The ability to combine advantages of largeness with advantages of

smallness. Successful organizations generate cooperation, partnerships,
networks, and mergers, and in this manner, they generate an advantage of
largeness. At the same time, they turn the different units into profit centers, to
autonomous units, and to independent subsidiary companies. Their workers thus
become promoters, contractors, and independent businesspeople, and thus, new
organizational configurations are created “as big as they are small.”
The ability to operate indubitably in situations of uncertainty. Successful
companies consider uncertainty as something certain. They accumulate
resources and abilities that enable them to become flexible with the ability to
react quickly. They learn how to use this uncertainty for innovation, initiative, to
guide, and to generate advantages that would be difficult for others to imitate.
The capacity of organizational learning along with the ability of

organizational oblivion. The ability to learn new things and to quickly adopt
new basic premises without resistance requires the ability to rapidly disengage
from old conceptions and to forget what we know or what we have known. It
involves the capacity of organizational learning and the ability to quickly draw
conclusions from processes and results.
The ability to change in times when change is not necessary. The capacity to
launch changes at the peak of success is of key importance for durability over
time. Success can be the source of failure, and smugness entails complacence
and degeneration. In order to continuously change, efficient people, knowledge
resources, time, and capital are necessary. These are plentiful only at the peak of
success. Change due to crisis takes place in impossible conditions: lack of time,
money, and talented people who have already left the sinking ship. The price is
also a heavy one: mass layoffs, pain, and suffering for many.
The ability to join together human values to business proceeding. All the
research on successful businesses indicates the fact that they stand for human
values regarding the importance of the worker’s place, his development, and his
empowerment. They support values of quality, concern for the environment, and
customer centrality, but they also tend toward business performance and success.
They are aware of the fact that both factors are necessary in order to survive over
time.
The ability to accept the fact that change is permanent. The ability to
continually carry out changes and to renew, all this without giving up on
rigorous maintenance of the core of the organization. Generating permanent
dynamics of rapid change and innovation without expecting salvation upon
arrival of the solution.
Leadership ability. The ability of the leaders of an organization to create an

attractive futuristic picture in an associative and exciting manner, along with the
ability to turn everyone in the organization into a leader, an entrepreneur, or
someone who creates small dreams and makes them come true. Leadership by
inspiration and reinforcement creates elbow room for individuals and teams and
encourages them to conduct change and innovation themselves.
Conducting changes and innovation from the top and from the bottom
simultaneously. Outstanding organizations create open and constant dialogue
between ideas that sprout from the top and those that sprout from bottom to top.
Through organizational learning processes, available information to all as well
as open communication, they establish complex growth trends that are
interwoven with a picture, albeit complex but suitable to organizational success
requirements.

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Index
Acquisitions 13, 72, 85,107, 117, 126, 131, 139,263, 309, 348-350, 356, 374,
378, 391
Balanced scorecard 71, 184
Build to last 399, 396
Benchmarking 74, 255
Change strategy 269, 320
Chaos 104,112, 133-134, 136-137, 146, 149, 152,172, 195, 205, 294, 302, 310,
352, 358, 401
Complexity 12-13, 26, 47,54, 96, 119, 123-129,133, 135-136, 155, 192, 258,
389
Conducting change 14, 52, 104, 177, 193, 208,217-218, 226, 232, 240, 272,
407
Consultant 147,206, 233, 239, 252-255, 272, 278,318, 331-332, 335, 337, 377
Crisis 22, 36, 48, 50, 52, 53, 92, 109, 113-115, 120-121, 125, 132, 141, 145,
147- 149, 152, 154-155, 157-162, 164, 170-176, 190, 192, 196, 199, 219, 315,
345, 388, 391, 406
Decline 11, 50, 154-156, 159, 161-162, 164, 171-172, 262, 345
Diagnosis 24, 77, 131, 182-184, 215-216, 254-256, 258, 266-277, 270, 274, 277,
295, 299, 365, 372
Entrepreneurship 13, 122, 128, 289, 292, 296, 299, 302-303, 309, 313, 315,
318, 323, 340, 342, 346, 369, 395, 400, 403
Flexible organization 100, 192, 334
Intellectual capital 101, 108, 364-365, 367
Just in time 184
Management by objectives 60, 93, 184, 292, 300
Management style 20, 30 32, 36-39, 43-44, 47, 49-56, 59, 64, 101, 114, 121,
122, 138, 197, 238, 251, 253, 257-258, 275, 283-284, 291, 368
Mergers 13, 54, 107, 115, 117, 119, 126, 139, 150, 158, 263, 309, 348-360, 378,
380, 406
Networks 48, 76, 96, 104, 106, 114, 124, 126, 139,150, 158, 230, 318-319, 376-
377, 379-401, 406
Kaizen 185-186
Leadership characteristics 86, 93, 107
Leadership models and typology 92
Leading change 90, 180, 217, 270, 276
Lean management 79, 82-85
Learning organization 82, 192, 209, 218, 254, 292, 310, 364, 366-369, 373,
401
Open systems 114, 116, 144
Organizational development 23, 35, 52, 141, 273,275, 278
Organizational learning 108, 131, 138, 189, 252, 274, 292, 297, 300, 312, 329,
364-375, 401, 406-407

Organizational life cycle 119
Outstanding companies 394-397, 402
Paradigm 102, 112, 129-136, 140-141, 156, 168, 181, 205-206, 212, 214, 270,
273, 283, 310, 376
Planned change 24, 52, 146-149, 152, 178-180, 183,
187, 190, 194, 204, 240, 273, 328, 368, 372
Politics 25, 218, 226-227, 231-235, 238, 254
Reengineering 68, 74-77
Resilience 334, 336
Resistance 53, 133, 136, 140, 142, 144-145, 51-52, 156-157, 161, 164, 179, 184,
187-188, 190, 192, 196, 198, 224-200, 240, 327, 354, 388, 406
Sociotechnical systems 63
Stagnation 53, 154, 156-157, 160, 164-170, 194, 197
Theory of constraints 77
TQM 180, 184, 275
Transitions 120, 123

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Management

Amir Levy Ph.D

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Hebrew Edition Yael Shachnay Rimonim Publishing

Senior Editors and Producers: ContentoNow

Producer: Natalie Grin

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SECTION 1 | CHANGE MANAGEMENT AND LEADERSHIP

SECTION 2 | ORGANIZATIONAL CHANGE PROCESSES

SECTION 3 | CONDUCTING CHANGE

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SECTION 5 | FORMATION OF EXEMPLARY AND DURABLE

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Unexpected changes can occur suddenly in an open environment in which we

We witness the growing complexity of systems and processes, which generates

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Change Management and Leadership

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Classic and Modern Approaches

The general definition of management is based on the words of classic and

Management is the efficient and purposeful achievement of the goals of

Coordination is generating cooperation and congruence between the

Leading is using influence to motivate employees and middle management

Control means overseeing activities and their adherence to schedules, as well as

The evolution of managerial thinking presents a more complete and complex

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Fayol also set 12 principles of management:

Frederick Winslow Taylor (Taylor 1911), an American manufacturing engineer

Taylor’s claims were:

Roles of the Manager - according to Taylor, managers must constantly deal

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Researcher Peter Drucker (1954) presented a slightly different approach. He

Researcher Henry Mintzberg (1973) examined what managers do in medium-

An additional approach was brought forward by Adair named the “action-

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In the form of a diagram, the model appears as follows:

Researcher Laurie Mullins (2000) summarizes the research on the roles of

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As a conclusion, it appears that nowadays the job of a manager consists of a

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1. Ability to obtain results, on the one hand, and to be attentive to workers’

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Fill out the following questionnaire according to your perception of your

Question Give a grade from 1, very

Am attentive to the personal problems of the members of

3 Influence decisions made by my superiors

5 Clarify domains of responsibility of the subordinates

6 Display total commitment to the job

Put emphasis on the importance of continuity of daily

Study and compare data reports among others to identify

10 Show empathy in my attitude toward my subordinates

11 Set clear objectives for my subordinates

12 Seek ways to constantly renew and improve

14 Get involved as little possible in the workflow

15 Display high motivation for the job

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