Contrary to all the image campaigns about the innovative spirit and curiosity to discover new things, organizations are usually very resistant to change. What needs to come together for transformation to succeed? What does a transformation that breaks down due to resisting forces look like? In the following we present a systems-theory analysis.
In searching for the mechanisms of change, the sociologist Niklas Luhmann turned his attention to organizations that are publicly perceived to be the most hostile to change: administrative bodies and public authorities. The phenomena he discovered there are therefore most likely to be seen in companies or hospitals, too. After all, if there are good reasons for an administrative body to change, any other organization could change as well.
According to his observations, there are two directions that drive an organization to change. Firstly, it can be a matter of “adapting better to ideas”. “Idea” in this case is to be understood more as an ideal or higher goal, e.g. switching to flat hierarchies because they are supposed to be better for collaborative working, or the introduction of a new CRM system because better and more frequent customer interactions are wanted.
Or, secondly, it can be about “adapting better to reality”. This may become necessary after realizing that a company’s market share has fallen or that new legal requirements demand a different approach in development work. The fundamental difference between the two directions is whether the said change is an impulse from within – almost without a specific cause, apart from the quality of the idea – or an impulse fromoutside the organization, which can also be named with its cause.
Organizational structures prevent problem awareness
In both cases, signal words find their way into an organization that are intended to strengthen the “problem awareness” of its members, and thus their willingness to change. Benchmarks, in particular, make it easy to see how problem awareness is brought into an organization from outside. The problem may not have been recognized before, nor did it play a role in everyday life. However, the new comparison now makes it clear that other organizations are way out in front, and change is needed to not fall behind.
In management discourse there is also talk of the need to describe a “burning platform”. The situation is dangerous, they say, and there is no choice but to jump onto the new platform and into the transformation. The advantages of the new solution, e.g. a CRM system, are described in ever more colorful terms, while the problems of the method used to date are described in ever grayer terms. “The past is denigrated so the future can be better” is how Luhmann describes this approach.
There are basically four organizational areas that can be called upon to solve problems:
- Communication channels, i.e. reporting channels, managerial authority, and rules of cooperation.
- Programs, i.e. basically all the rules describing correct and incorrect behavior.
- Staff: Putting a lawyer instead of a mechanical engineer on a problem will produce different results.
- Situational leadership: If there is not to be or cannot be a fixed solution, and the result always has to be part of a negotiative process, the question of whose claim to leadership and whose solution will prevail will be decided on over and over again.
As soon as reform plans become known, things become convoluted
Only in very few transformations are all four areas examined to see how they can contribute a solution to the problem. This is understandable. After all, an organization cannot cope with questioning everything since it would mean everything could change – and that idea is difficult to bear in an environment built primarily on predictability and routines. So, when a problem comes along with such an impressively simple solution that involves “merely” introducing a new CRM model (i.e. a solution at the program level) in order to increase transparency in sales, it is not easy for organizational designers to evade that solution.
But even if organizational designers continue communicating conscientiously and make it clear which parts of the organization are to be transformed and where everything remains as it is, they will still have to deal with unrest, Luhmann says: “As soon as it becomes known that reforms are planned, the situation becomes convoluted.” He considers the very idea of a process that is controllable from above to be impossible: “Centralized authority is enough to shake up a system, but not to reform it.”
In other words, the most important factor that explains the impossibility of control is the fact that the announcement of a reform project reveals differences of interest within an organization. System descriptions, problems, and interests will emerge – “ones that would otherwise remain latent, and then contribute to controversial self-descriptions of the system”. In Luhmann’s view, this results in a self-reinforcing tendencies and “the system resisting itself”.
Reforms in organizations turn over stones many of its members wish had never been moved. The reasons for this may be manifold. Perhaps an informal agreement has been reached between two divisions on a collaborative format that speeds up processes, but unfortunately violates compliance rules. Or some members may feel that the influence they have built up in the structure is under threat. Or other members feel they have only just developed a routine in the existing system when the new one is announced.
The transformation goal: Making customer interactions more effective – and more controlled
In our consulting practice, we have often encountered cases where a company wanted to achieve better customer interactions with the help of a new CRM model. In one specific case, the “system resisting itself” was particularly noteworthy.
The top management of a pharmaceutical company was concerned that the important interfaces to hospitals and doctors’ surgeries, which were run by different departments, were a black box. As required, the departments reported on their successful interactions, but little beyond that, for example on why exactly access was so difficult. From the perspective of the individual departments, it is only logical that they guard their specific skills like a trade secret; and from the organization’s perspective, it is equally easy to understand the ever greater desire to obtain more precise findings on which therapy doctors use when and why, or what precise route is taken to reach a treatment decision.
The new CRM system is supposed to provide this information because it precisely pre-structures the course of a customer interaction, records the actual process, and makes suggestions as to what might interest the respective doctors. For the sales department, this adds up to a high-value service; for the organization, it is the opportunity to gather more knowledge about its own sales processes through the data generated.
An organization’s top management thinks it has control options it hasn’t actually got
A company’s top management plays it safe. No-one is sure that the service aspect of the new CRM model is sufficiently convincing, but the company simply says there is no alternative. This lack of alternatives is also underlined by technical means. All employees with external contacts are given new tablets with just one program installed – the CRM. So, except for customer interactions closely aligned with the prescribed contact procedure, these work devices can no longer be used for much else.
Even a board of management will not have been surprised that such a change to the daily work routines would meet with resistance. However, top management’s critical blind spot was that they thought that what the company had to offer, i.e. the preconceived paths along which customer interaction ought to take place, was actually useful.
Niklas Luhmann calls the assumed connection between a problem (a doctor is supposed to use the therapy but has not yet done so) and the formal problem solving procedure (a company’s employees compare a doctor’s concerns with the CRM’s prepared offers and present them along the predetermined discussion guidelines) the assumption of a “fixed link”. This assumption now leads to the fallacy that the organization can simply adapt the formal solution of the problem, i.e. program it even more conditionally through the CRM and specify even more strongly how a specific conversation situation can be most intelligently solved. The possibility that conversational situations or questions may arise that are not mapped by the CRM system is successfully ignored by assuming that fixed link.
Yet according to Luhmann’s observations, “the stability of the system” (in this case departments with doctor contacts) “is based more on loosely coupled links” so that “operations not subject to direct access can survive the reform without being adapted”. In relation to the example in question, this means that what Internal Sales or Medical Affairs have to offer is quite possibly not the big selling point. Or that what they offer is perhaps insufficient and additional information is required – reports from other hospitals or legal assessments on the use of a new drug, which the company cannot officially present as part of its offering but a clever sales person can use as an argument.
If an organization now decides to transform customer interactions and to work with a CRM that can present nothing but formal, prefabricated offerings, the consequence will usually be that the program is gratefully acknowledged, but will not result in any change in the day-to-day work of the sales department. But by simultaneously replacing the technical support previously provided, the organization actually forces a conflict on itself: The old solution has gone but the planned new solution does not solve the problem – and the organization comes to a standstill.
Planning remains important, but not as a control element
Transformation also always means being humble in the face of the dynamics of collaboration, employees’ clever workarounds, and the powerful mechanisms of “grandfathering”, the impact of which is derived from the corporate culture. Luhmann is particularly radical in this respect and believes transformation can only be accompanied, not controlled.
At the same time, however, this does not mean “that it is better not to plan. A system manager would be ill-advised to sit back and merely observe the system”. Only once a plan exists can expectations be formulated as to how the structure of the organization will have to change and check if these expectations are correct. The question of how a company can better understand its own customer interactions leads to various consequential questions. For example, once you have abandoned control fantasies in the transformation process, you are forced to intensively examine the actual problem: What actual steps are there in route to a contract being signed? How far away is the routine of customer contact from the guidelines – and from what the company foresees on how customer contact can function? If the existing offerings only partially support the process, how could they be made better? And what can the company do to improve its sales department?
Even with more constructive questions, the differing interests of a sales department and a company’s top management will naturally continue to be influential factors. Centralizing knowledge and ensuring members of the organization are interchangeable – or put more diplomatically, facilitating training of replacements should employees need replacing – is one aspect of smart organizational design. Moreover, that sales personnel do not want to have their knowledge stolen is only logical. It is not only contacts, but also good processes that determine an employee’s market value in this industry. A transformation that is to succeed cannot merely honor the top-down logic.
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