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A sidelong view of organizational transformation failure

Looking at the corporate landscape of the 2020s, I’m compelled to wonder why large organizations today seem no different from those of 150 years ago, despite the work of people like W. Edwards Deming, Peter Senge, Taiichi Ohno, and others; and well-thought-out improvement programs/frameworks/methods like Kaizen, Business Process Reengineering, Operational Excellence, Total Quality Management, Agile- and Lean-derived frameworks, and others, all diligently applied year after year.

There’s been speculation about why all this time, money, and effort has yielded no fruit.

Executive turnover tends to happen on a shorter time scale than genuine organizational transformation. The new bosses overturn whatever their predecessors were doing, whether good or bad, to demonstrate the wisdom of bringing them on board. No doubt that’s a factor in many cases.

As each improvement method gains popularity, demand for it grows at a rate higher than new practitioners and guides can be trained. Soon, people are teaching and consulting on the method who lack deep understanding of what it is meant to achieve and how it functions. That’s probably another factor.

Possibly because executives and managers don’t know what they don’t know, those responsible for selecting and paying for organizatinoal transformation services have to rely on indirect evidence for the competence of trainers and consultants who are selling services.

That situation tends to create a mini-industry in “certification” that rises and falls along with the popularity of each method. On the whole, the certifications tend to be meaningless. Certified people who have no idea how to effect positive change in organizations lead the charge. Intuitively, this seems to be yet another factor.

In many cases, the new method is introduced at a level in the organization where it doesn’t have broad support vertically or horizontally, by a mid-level manager who sees the potential in the method but lacks the clout to establish the conditions for successful adoption.

Local improvements – say, at the departmental or team level – are crushed by the weight of organizational culture and management inertia. That is surely a factor, in those cases.

Another view

I’ve seen situations suggestive of all those causes, but in this post I want to offer another. Fair warning: It might seem a bit cynical.

What is the general career path of senior-level and executive managers? How is the performance of people on that career path measured and judged, as they negotiate for positions with greater authority and higher pay?

I am not a member of that class, but what I have observed over the past 47-ish years of work is the following.

The career path

The career path sometimes involves “climbing the corporate ladder.” There are examples of individuals who started out in the “mail room” and ended up in the executive suite. But I think that is not the typical case.

The career path sometimes involves creating a company to realize a vision that didn’t occur to the majority of people. Whether you love them or hate them, people like Elon Musk and Steve Jobs are in this category. It is not impossible, but it is not typical, either.

The more typical career path is for the individual to change jobs fairly often – in the range of ten months to five years – using each job as a stepping-stone to the next. Their first high-level position is a gift from their privileged family. The family may even rescue them from their first couple of astonishing mistakes, so they can try again. Legacy, you know.

Once they reach the executive level, they sell themselves as “fixers” to correct whatever problems the previous management caused – or, more to the point, problems the previous management can be blamed for. From that point forward, the career path consists of jumping from company to company, stirring things up, and then jumping again just before the you-know-what hits the fan. This clears the way for the person coming along behind, for whom that job is the next stepping-stone.

Measures of success

How do the hiring authorities for the executive’s next stepping-stone job assess the qualifications of candidates? The career path leads from smaller responsibilities to larger ones. The main question is whether the candidate can handle the responsibilities of the new position, which are greater than any the candidate has handled previously.

If we follow the money, there seem to be two key considerations for assessing candidates.

First, there’s headcount. How many people are “under” the candidate in their current position? The more, the better.

Second, there’s budget. In the IT field, executives and managers bear responsibility for a budget that is determined by others. The IT function of a corporation is seen as a cost center, not a profit center. So, a candidate who is responsible for a large budget looks better than one who is responsible for a smaller budget. Year over year in their present positions, managers and executives must exhaust their annual budgets in order to argue for a larger allocation the following year.

I see this as the primary difference between leadership positions in profit centers vs. cost centers. Executives and managers of corporate functions that operate as cost centers cannot generate revenue. They show their mettle by managing ever-growing budgets.

Measures of success vs. effectiveness

So far, this probably comes across as a value-neutral observation of how senior managers and executives drive their careers forward. But this tradition operates in opposition to every approach to organizational improvement that has been proposed since Deming.

If I had to distill the key ideas from all the improvement programs of the past into a few simple statements, I’d probably have to include concepts like Systems Thinking, collaboration over (internal) competition, Daniel Pink’s observations on human motivation, and perhaps most critically, the idea of doing more with less – avoiding needless waste.

One very large (too big to fail) bank where I had an engagement years ago had around 1,000 people sitting shoulder-to-shoulder at long tables, filling one floor of a building. They were Java programmers. They were low-paid H1B visa holders performing, poorly, work that 100 well-qualified and properly-compensated Java programmers could have performed well. Did management really care whether the work was performed well?

And that’s one floor of one building at one location in one large corporation. The pattern is everywhere.

That sort of staffing does not serve the business, customers, environment, or community. It serves senior managers and executives by enabling them to show many, many names “under” them on the org chart. And it serves the H1B visa holders by getting their careers off to a strong start. I suppose that’s a positive side-effect of over-staffing and under-paying.

Large corporations spend several hundred million dollars per year (each) on their IT budgets, and other departmental budgets. Most of that money is just thrown away, often on big-ticket waste like “agile transformation” and “digital transformation,” but also on routine practices such as launching hundreds of projects at the start of a fiscal year, knowing 70% or more of them will be canceled prior to completion. The large-scale initiatives and their costs appear on the executives’ résumés, so they look as if they can handle responsibilities of great scope in their next stepping-stone position.

Several smaller companies, operating competitively under a lightly-regulated free market economic system, would provide better products and services to customers, serve the broader society more positively, and exercise better environmental stewardship than a handful of mega-corporations that enjoy taxpayer bail-outs whenever their incompetence or unbridled greed gets them into financial trouble.

So, cynical though it may be, I think one of the main reasons large organizations never really change is that they are, on some level, just vehicles to build executives’ résumés. They have little or no other function in the economy or the society.

To serve that purpose, executives don’t want their companies to operate efficiently. Quite the opposite – by operating just at the edge of collapse, with as many people as they can hang onto, providing the bare minimum level of service they can get away with, flirting with the gray areas of regulations and laws, spending as much money for nothing as they can sustain, they can maximize their headcount and budget.

A source of frustration

A number of people I know personally or online who work in organizational transformation and/or agile and lean coaching/mentoring have expressed dismay in recent years that the net result of all our efforts over a period of decades seems to be approximately zero. I often feel as if the part of my career devoted to that sort of work has been in vain.

Sure, there are cases when the coaching, mentoring, consulting, and training had a positive effect. The problem is the effect has never been “sticky.” Things always revert to the status quo ante. And it’s not only me; I don’t know of one single case that meaningfully qualifies as a “successful transformation” – one that resulted in long-term change in the way people think and act. The economic system still operates on Tayloristic principles.

In hindsight, I wonder if that sense of futility comes from unrealistic expectations. We’ve operated on the assumption that corporate leaders want their companies to be successful – profitable for shareholders, useful to customers, beneficial to the communities where they operate, engaging and satisfying for employees, respectful of the environment, law-abiding and fair.

But if actions speak louder than words, the true objectives of corporate leaders are quite different. They are engaged in an altogether different game. They see their shareholders as walking wallets; their customers as rubes; their communities as resource pools ready to be exploited and exhausted; their employees as a lower class to be held down; the environment as somehow magically everlasting and able to absorb infinite abuse; the law as a challenge to be thwarted; fairness as an incomprehensible concept they can only understand as “softness” or “weakness.”

Those are the people who own the world, and they like it the way it is. They like it very much indeed. There never was any hope of achieving meaningful and lasting organizational transformation.

The only approach I’ve seen that “worked” was to sidestep “transformation” altogether. Sometimes, a large company will spin off a subsidiary that is organized from the start along the lines of contemporary management methods, and gradually shift the workload of one of its stodgy old departments to the new entity, phasing out the stodgy old department.

There’s no “transformation” in that case. The new entity is organized differently, named differently, located elsewhere, and staffed with people who are already predisposed to work in the “new” way. That seems to “work.” Transformation? Well, not so much.