Organisations as living systems change management organisational life cycle change strategies

Gerda van Dijk en Freek Peters Dr. ir. Gerda M. van Dijk, adj. Prof. Director Leadership Development Centre, TiasNimbas Business School, Tilburg (g.m.vandijk@tiasnimbas.edu) and drs. Freek Peters (fpeters@galangroep.nl) managing partner, De Galan Groep.

SUMMARY Organisations have life cycles similar to those of living organisms. This concept offers us a framework to help understand and predict organisational dynamics, as well as the ability (or inability) of managers and HRM staffers to effectively intervene in these dynamics. In this life cycle, we can recognise and differentiate four successive phases and four fixed patterns. If the organisations current business climate differs from the desired phase, then the organisation requires a transition. The reason that many change operations fail is almost always due to the choice of the wrong change strategy for the transition to be undertaken. An effective change strategy should always intelligently and strategically complement the underlying organisational dynamic. In doing so, the question is not which HR instruments should be implemented, but when and how they are utilised. Each change strategy places its own demands on the manner in which an HR instrument can be effective. Thinking of organisations as living systems offers a dynamic perspective from the instrumental to the strategic levels of organisations, reorganisations and HRM.

INTRODUCTION Human Resource Management (HRM) takes people, human behaviour and interaction between individuals as the starting point for realising organisational goals. Over time, HRM has developed a variety of change concepts and instruments in order to help organisations or parts of organisations to function better. However, in practice the effects of these instruments on the organisations effectiveness and success have often been disappointing and are always unpredictable. Most change processes do not produce the desired results. Research shows that 70 percent of organisational changes do not end in success (Beer & Nohria, 2000; Higgs & Rowland, 2000; Boonstra, 2010). This problem can be adequately explained by system theory, which states that the characteristics of an organisation as a whole cannot be predicted or derived from the characteristics of individual units in the organisation. In other words, the whole is more than just the sum of the parts. The whole has its own rules and dynamics (Senge, 1990). One vital characteristic of the system is the company climate or culture. It is often this company climate that causes renewal projects to fail despite the initial enthusiasm, newly recruited employees to quickly become part of the established order, staff to deal sloppily with carefully introduced HR instruments, and resistance to develop against logical interventions such as 360 feedback. If we wish to increase the effectiveness of HRM interventions on the organisations performance, then we will first have to become better acquainted with the rules and dynamics of the organisation as a system. And we will have to learn to understand. The life cycle of organisations: four phases Like living organisms, organisations can be thought of as having a life cycle (Greiner, 1972; Cameron & Quinn, 1983; Lievegoed, 1991; Adizes, 1998; de Galan, 2002). This life cycle is a natural process. Organisations grow from chaotic to dynamic, then systematic, and end with rigid. From there the organisation either dies or finds a way to begin anew. We can recognise four successive phases in an organisations life cycle: the pioneer phase (I), the growth phase (II), the consolidation phase (III) and the relapse phase (IV). Each phase has its own characteristic company climate, with its own specific characteristics (see table 1).

Phase Focused on Spirit Environment Management

I. Pioneer Product or niche in the market Dynamic, scoring, 'taking risks'. Brought in from outside One leader; the pioneer

II. Growth Strategy and marketing Flexible, smart, acting strategically Determines our results Strong team with limited support from staff Structured, output- and results-oriented

III. Consolidation IV. Relapse Maintaining success Protecting position Careful, perfectionist, managing Occurs naturally Group (management and staff together), formal management Detailed, functional, input- and taskoriented Hiding, keeping the myth alive Is dishonest Coalitions, office politics

Organisation

Chaotic, few rules; everyone does what he/she must do

Decision making Communication HR instruments Example organisations

Hasty, orders, no paperwork Unstructured, irregular Dont use or need them, no time for them Start-ups, crisis teams or development teams

Quick, interactive, Formal, signatures, list of decisions memos Clear, goaloriented Utilised in deliberate and targeted manner Apple, Google, IKEA, bol.com Careful, deliberate Used according to internal procedures Back office for insurance firms & nuclear plants

Fragmented with many constructions, experience counts, has experienced several reorganisations Non-decision, bureaucratic, narrative reports Unclear back-room decisions We pretend: rituals Many monopolists and several govt. ministries

Table 1. Some characteristics of company climates per life cycle phase

Phase I. The Pioneer Phase: energy and wild growth Beginning organisations are characterised by a strong external orientation and a dynamic, chaotic organisational form. There is no clear or explicit strategic vision, the target group is still fluid and the organisation has not developed fixed organisational patterns, but it does display plenty of entrepreneurship and drive, with a product that addresses a niche in the

market. The employees are focused on scoring and operate aggressively in order to win a position in the market. There are few internal rules or structures, but the largely young staff display enormous effort and commitment. The company climate is passionate and blunt. The actual leadership is often concentrated in the hands of a single person the leader a pioneer who may have a charismatic personality. The communication structure is simple: the boss decides what needs to be done. The phase-I climate should ideally last no longer than three to five years. The pioneer organisation faces the constant risk of losing its grip due to growth spurts or overexpansion, which may result in the sudden collapse of the organisation. As soon as the target group is clear, the organisations vision is more delineated and the activities are more structured, the organisation becomes a phase-II organisation. Phase II. The Growth Phase: focused continued development In phase II, the organisation grows and determines its direction. It clarifies its market and ambitions and reacts to changes flexibly with a conscious strategy. Growth does not always entail striving for higher profits or sales; it can also be geared towards reinforcing the organisations expertise, impact or market position. The general organisational and process structure has been elaborated and established with a systematic type of planning and a focus on output and results. The organisations leadership includes multiple persons, with board members responsible for specific lines. A limited staff supports management as specialists and implementers. Decision-making processes are structured, with a clear position for the person with final responsibility for the decision. Communications are interactive, but clear and direct. The company climate is smart and alert. The organisation is at risk of over-rationalising and has a tendency to feel invincible, which may in turn affect its original sense of drive and entrepreneurship. It then moves on to a standardised, planned form characterised by a phase-III organisation. Phase III. The Consolidation Phase: stable continuity A phase-III organisation works to continue obtaining the usual results and to manage its risks. Its attention is focused increasingly on the internal organisation and improving and controlling the current situation. This

implies a larger role for administrative aspects and an increasing influence of staff organisations. The company climate is primarily careful and responsible. Although this tendency of perfecting processes and procedures begins with the primary production processes, it soon spreads to other processes and procedures This often progresses to the point where the procedure is more important than the result. The result is often a sense of arrogance: The customer should be happy to be allowed to take advantage of our services Interaction and decision-making gain a more procedural character and discussion is conducted through memorandums. Decisions are only taken after exhaustive research and formalised consultation. The risks in this phase are posed by losing contact with the market and by the organisations inflexibility. In this stabilised setting, the organisation begins to react and innovate less rapidly. Phase-III organisations do not react easily to external changes. Phase IV. The Relapse: keeping up appearances In phase IV, the organisation becomes even more introvert. The internal situation becomes the highest priority, with the result that the organisation loses touch with its surroundings. Its past successes and institutions become sanctified. Failures and lower returns are played down or explained away due to temporary external circumstances. The enemy is 'out there', and the organisation therefore requires protective measures. The company climate is defensive and makes excuses for itself. The often overly structured formal organisation begins to take a more ritualised form, and the informal organisation becomes more dominant. The result is often a chaotic, unfocused work method. Roles and responsibilities of management and staff become confused and the employees begin to shift blame to one another. Decision making becomes an interminable process and new ideas are seldom implemented, and when they are, they have a purely cosmetic character. In this phase, mutual mistrust and office politics are very common in order to protect ones own position within the organisation. The natural dynamics of the life cycle An organisations life cycle has its own natural dynamics with familiar patterns. This applies to organisations in any field, whether public or

private. We can discern the following four 'laws' that apply to an organisation's daily routine. The fixed sequence If an organisation does not consciously intervene in its underlying dynamics, it will always progress through these four phases in a fixed sequence (figure 1). The transition from one phase to another is easy to recognise. If one were to ask a random group of employees when their organisation progressed from one phase to the next, they will be able to pinpoint the exact moment that it occurred. For example: when we began using system X"; "when Mr./Ms. Y came to work here"; "when we formed that one department"; "when we started on that specific product or project", etc. The transitions occur within one of the following dimensions. The first dimension is the manner in which the organisation is organised, within a spectrum running from intuitive-chaotic and rational-systematic. The second dimension is the organisations position on a spectrum between 'external' and 'internal'. The transition from phase I to phase II is characterised by the implementation of greater systemisation in the organisations strategy, structure and management. The transition from II to III occurs due to a shift from an external focus to a more internal focus; the organisation is led less by external developments than by internal events. During the transition from III to IV, the organisations structured processes gain a more ritual and chaotic character. When a phase IV organisation dies whether through bankruptcy or reorganisation a new organisation is often created and the life cycle begins anew: renewal. Examples of this process include the start-ups that bloom after the mother organisation disappears or is reorganised.

Figure 1: Life cycle of organisations Variable tempo of change The speed with which an organisation progresses through this cycle is not constant. An organisation may progress quickly through one phase, but the next may last for decades. Or two transition moments can follow one another so quickly that it may seem as if the organisation has skipped a phase. The speed with which an organisation progresses through the cycle is determined by a combination of environmental and organisational variables. It is clear, however, that management interventions (such as HR instruments) can influence the tempo of change. If a phase II organisation does not anticipate a declining market by introducing new products and services, then it is likely to rapidly move on to phase III. Such an organisation often looks for a solution in the form of a better internal organisation, taking advantage of the wide selection of HR instruments developed for that purpose. For example, competency management can be an excellent HR instrument to support an organisation in the transition

from phase I to phase II, but implementing it in a phase III organisation can often accelerate the transition to phase IV (see "A real-world example").
Competence management increases bureaucracy A large municipal services department with around 400 employees displayed primarily phase III characteristics. Recent changes in the political climate led the new Alderman to place new demands on the department. He envisioned a more phase-II organisation, and instructed management to make the department more flexible, results-oriented and entrepreneurial. The HR department proposed implementing competency management because the new HR Director had good experiences with it at the successful telecom company where he was previously employed. Management decided to approve this proposal, but unknowingly implemented it in a phase III manner: very carefully according to fixed procedures. Two years after the implementation, the department has described 67 competencies and printed a Competency Management Manual. All flexibility had been organised away and the organisation was completely ossified and bureaucratised. More and more people suggested that the department be split into two separate departments, effectively reversing the merger implemented 15 years before.

The parts influence the whole and the whole influences the parts Organisations usually consist of a variety of subsystems: divisions, sections and/or departments. These units can each find themselves in different phases of the life cycle. This is often a source of misunderstandings, tension and often conflicts. A department in phase III of the life cycle can become very agitated over the way work is done in a phase I department, with comments such as they just make it up as they go along and "they are always away from the office and nobody knows what theyre really up to. Alternately, a phase I department will often complain about a phase III department: they always say 'no', or it takes forever to get anything done". When units are at different phases in the cycle, then the organisation as a whole will often tend to act like the unit that is farthest along the cycle. Each subsequent phase therefore pulls forward the units in a previous phase. The parts therefore influence the whole and the whole influences the parts. This also applies to individual employees. A common phenomenon in phase IV organisations is that new

employees begin to act bureaucratic and defensive after a few months, even if they had been hired based on their initiative and entrepreneurial spirit. This does not mean that the hiring process is faulty, however, but it does illustrate how the company climate as a characteristic of the system can influence the behaviour of the individual employee. The same applies to the position and role of HR management and HR instruments. In phase I, the function of HR management if such a thing exists in the organisation is primarily that of the implementer' of the terms of employment. In phase II, HR management acts as a specialist and consultant at the request of management. In phase III, HR management is often the administrator and HRM owner; the HR staff creates a strong position in the organisation by referring to their expertise and professionalism, and management follows. The risk here is that HR staff can begin to implement too many management instruments, bringing the organisation quickly into phase IV. In phase IV, HR management is primarily involved in a struggle for power and primacy with management. The actual effectiveness of the HR instruments is very limited; window dressing and open- or subversive resistance are commonplace. Position is a choice In contrast to living organisms, organisations are capable of influencing their position in the life cycle. There is no generally accepted best phase; the ideal position depends on the organisations specific purpose and the circumstances in which it operates. An organisation whose purpose requires the accurate and consistent execution of protocols and procedures would benefit more from a phase-III climate rather than a phase-I climate. Examples include nuclear reactors and (to a certain degree) the back office of an insurance firm. A more sales-oriented organisation in an aggressive market, on the other hand, would benefit more from a phase-I climate. An innovative service provider would prosper more with a phaseII climate. An organisation composed of departments with different missions should also have different climates. This requires leadership that can create, explain and defend these varied climates within the organisation. Focusing on a single type of climate is counterproductive to the organisation as a whole. If the current business climate differs from the desired phase, then the organisation may require a transition. Organisations can also move

counter to the natural sequence and regress more than one phase, although this requires a consistent change strategy appropriate to the transition to be made. Otherwise, the laws of the life cycle will take over. Change strategies: four types of transitions The reason that many change operations fail is almost always due to the choice of the wrong change strategy for the transition to be undertaken. Organisational change is not a question of fashion or taste, but of conscious and critical examination of the organisations ambitions and circumstances.

Figure 2: Change strategies. We can discern four different types of transitions (figure 2). The first type is an acceleration in the natural direction; a transition 'with the wind'. The second is not as much a transition to another phase, but instead involves finding a dynamic balance within a single phase. The third is a transition

contrary to the natural direction, or 'against the wind'. The fourth type is the most rigorous: the 'turn-around. Each transition has its own effective change strategy that places specific demands on the HR manager and the implementation of HR instruments. Each transition also requires a specific leadership style (Peters & Strijp, 2011). The organisational culture is the link between the development of the organisation and leadership (Schein, 2004; Mintzberg, 2009). See Table 2. 1. With the wind A transition in the natural direction requires a strategy of applying structure in appropriate doses. The organisation usually has a feeling that something must be done, but no one knows exactly what or how. It needs a push in order to take the next step. This push need not be forceful, however, because the organisation may overdo it. Applying more structure can affect all of the aspects of the organisation. A transition from phase I to phase II will involve applying focus and consistency to the organisation, concentrating disorganised growth and managing the risks of overexpansion. Pioneer companies regularly experience problems due to poor internal organisation, even when there is still plenty of market potential. Their original strengths, such as aggressiveness and flexibility begin to pose a threat to their development and occasionally even their survival.
From pioneering to focused development Thanks to its combination of technical ingenuity and commercial skill, a young installation company had grown to more than 200 employees within a period of just a few years. However, the organisation began to strain at the link between the preparation of the work at the main office and the implementation on location. Projects were planned poorly and there were problems in supplying the materials. This led to a great deal of time and energy being wasted in correcting mistakes, obtaining missing materials and catching up on delays. The project leaders were largely occupied with dealing with crises and mediating conflicts, both with clients and with their own employees. A closer analysis showed that the organisation was poorly staffed at two crucial positions. The office and the warehouse were largely staffed by exfitters and assembly workers who were no longer physically able to perform the work on location, and the business had expanded beyond the

management's abilities. Both of the directors concentrated on what they were good at development and sales and in other business they gave adhoc orders that only increased the confusion. The organisation required some serious interventions. An experienced interim manager was added to the board as a delegated administrator in order to supervise both of the directors in their management duties. A capable logistical manager was brought into the office and quickly implemented an effective system for planning and supply. All project leaders and warehouse employees were trained on this system and those who could not perform at the required level were told to look for another job. After a few months, the company had stabilised and eventually developed into an important player in its market segment.

An effective transition from phase II to phase III requires that the internal organisation elaborate its structure by drawing up more detailed work protocols and procedures with a priority on safe, predictable and reliable operations and eliminating possible risks. Planning & control and quality control are vital instruments in this transition; however, if these instruments become goals in themselves instead of tools, then the organisation can quickly devolve into phase IV. It is therefore vital that new structures are introduced in small doses. 2. Dynamic balance Dynamic balance is geared towards maintaining a phase-II or phase-III climate, or towards maintaining a phase-I climate if the organisational unit (department, project or assignment) can best operate in such a climate. These situations require a strategy that selectively stimulates, develops and makes cuts when necessary. In order to remain in phase II, the business must remain flexible, alert and innovative and must not give in to the natural urge towards control and perfectionism. When an organisation experiences success, it has a strong tendency to do even better and to focus its attention on its internal organisation. Dynamic balance requires interventions to counter this tendency to perfectionism and introversion, such as activities that stimulate thinking from outside-in and entrepreneurship throughout the entire management and organisation. A phase-II organisation in dynamic balance is characterised by constant focus on output and outcomes and a simple planning & control cycle. Its management organisation is dominant over the staff and staff and overhead are kept to a minimum. Management

should rotate through the organisation in order to bring in new blood and prevent the organisation from getting rusty. Collins and Poras (1998) describe several examples of organisations that have been able to maintain a dynamic balance for more than a century.
A research department in dynamic balance Following a reorganisation, a research department in a national research institute had been performing exceptionally well. The department had had great success using a systematically powerful strategy. It had acquired a number of major high-value projects and had initiated a variety of strategic alliances. In only three years, the department had grown from 15 employees to 35, and the prospects for further growth were very positive. And yet the department head was concerned that success might exceed the department's capacities. He knew that the backup was insufficient and that his assistant director was overburdened. Also, the constant need to train new temporary specialists was taking a toll on the permanent employees. The increasing pressure on the organisation made the department head aware of how vulnerable the department actually was. The department only had a single expert for every field of expertise, and it seemed as if the department relied increasingly on the director for all of its organisational issues. Was it now time to add account management to the department organisation? Or was the solution to add an extra layer of management, reinforce project- and programme management, bill more hours, knowledge management, quality systems, etc.? During a two-day work conference with the entire department, the director realised that a phase-II climate would be the best situation for the department. The department operated in a niche market and a variety of current European developments created uncertainty as to the future of the market. One thing was clear, however: it would always remain a niche market in which only the most entrepreneurial department with the best proposition would survive. This meant that the entire department would have to focus on future business and approach the market with an intelligent strategy. Simply acquiring new assignments would not be sufficient: the department would have to focus on those assignments that would help secure the department in the future. With this new external focus, the department realised that the internal organisations existing instruments were sufficient, with the idea that good is good enough. The only internal intervention that was necessary was the reinforcement of the department's account management in the form of a person respected by all of the staff as an expert and experienced account manager. This person also supported the

department head directly in the development and reinforcement of the strategic mission. This action provided just the extra bit of assistance necessary by stimulating, monitoring and fostering entrepreneurship without burdening the administrative organisation.

The nature of the core business may limit an organisation to phase III if it wishes to perform optimally. Some examples include organisations for which constant and accurate adherence to rules is vital, whether because mistakes can lead to severe safety risks (such as hospital operating theatres or airlines) or because detailed information can have far-reaching consequences (such as financial and legal processes). However, maintaining a phase-III climate requires constant vigilance on the part of management, or else the organisation will naturally develop a phase-IV climate. A dynamic balance in phase III requires a strategy that provides the proper balance between quality and safety on the one hand and the market and market conditions on the other. In other words: the right balance between internal and external focus. Effective interventions are geared towards constant improvement of existing products and processes from an outwards-oriented perspective. 3. Against the wind Transitions against the wind are in practice much more difficult to realise. This works against the natural momentum and therefore generates a great deal of resistance and misunderstanding. A successful transition from phase III to phase II requires a change strategy for simplification and de-organisation: breaking down, stopping and letting go of routines and patterns. If an organisation has been operating in a phase-III situation for a long time, then the strengths that have led to success in the past begin to manifest their dark sides. A well-oiled organisation changes almost imperceptibly into a mechanical, inflexible juggernaut. Renewal is an important aspect to consider, but the problem lies in that the organisation tries to renew itself in the familiar, established manner. Such changes end in purely cosmetic operations: detailed studies and plans that either suffocate in their implementation or only increase the weight of the bureaucracy. Examples include the drafting of the Innovation Manual and the 'Flexibility Procedure. A transition from phase III to II requires a strategy geared towards rediscovering entrepreneurship, innovation and a feeling for the market.

At the same time, the organisations rigid customs and mechanisms must be dealt with and the foundations that had made the organisation successful in the past must be re-examined. Effective interventions should be focused on allowing active market influences back into the organisation in order to wake it up. To stimulate active entrepreneurship and innovation, not through general vision statements but by stimulating and conditioning concrete action at the shop floor level. In the organisational structure, this entails breaking down detailed task- and process descriptions and introducing looser work processes, both vertically and horizontally throughout the organisation. Other effective interventions include: setting goals in terms of output and outcome, simplifying planning & control, cutting staff and making managers responsible for their results. One example of such a revitalisation operation is the transition in a regional hospital described in the frame below.
Revitalising a regional hospital Over the past few decades, a regional hospital had grown apace with its rapidly growing region. However, over the past few months the organisation had attracted increasing criticism. The local press regularly published critical articles about alleged medical malpractice which was never proven poor relationships with general practitioners, overcrowded waiting rooms and long waiting lists for procedures. It began to seem as if the hospital was running on automatic pilot and was no longer adapting to the regions needs and desires. This was despite the fact that the organisation had successfully invested quite a bit in recent years. The hospital had everything it needed, but wasn't using it efficiently. Many excellent plans became entangled in their execution. What the hospital truly lacked was energy and the capacity for innovation and flexibility. A new wind began to blow when the Chairman of the Board of Directors retired and a new Chairman was appointed in his place. In his New Years address, he described his findings and sketched an inspiring image of his idea of an enterprising, innovative and above all patient-friendly hospital. Within a few months the hospital had begun implementing a revitalisation programme focused on three themes: entrepreneurship: after inviting many external stakeholders to provide their input, the hospital reformulated what was expected of it based on the needs and desires expressed by the region's residents;

 development: of strategic entrepreneurial visions for the various departments, of the hospitals capacity for innovation and of the cooperation between the departments from the patient's perspective; simplification: of the internal organisation, including document flows, digitalising appointments, hiring procedures, the organisational structure, the number of meetings, etc. This also involved re-examining the roles of supervisors and reallocating responsibility to lower levels in the organisation. The hospital also instituted an inspection system in which teams of employees took turns critically evaluating a part of the organisation. Both top management and the medical staff were actively involved in the programme. The project began with 40 employees actively involved, but soon snowballed to initiate innovation throughout the organisation. The various departments supported and evaluated one anothers progress. Communication within the hospital was playful and different than before and intentionally irregular in order to counteract the usual patterns. Within a year, the hospital had changed completely: the patient was now the focus point, work processes had been simplified in many units, structures had been made more flexible and simple and vital innovations had been realised. Patients were now able to make appointments via Internet, which significantly reduced waiting times. The hospital had greatly improved its relationships with general practitioners, and together they had made concrete plans for further collaboration. After 18 months, two surgeons affiliated with the hospital had opened a private clinic because the hospital had given them the space to realise their professional dreams. All of this had a positive effect on the hospital: the staff had a newfound energy and the faith to find new challenges, simply by daring to do so.

4. Turn-around Sometimes more drastic measures are necessary; a turn-around from phase IV, since this is the final stage of the life cycle. Even when it is absolutely clear that an organisation has entered this dangerous zone, people can still remain mired in purely cosmetic measures: restructuring, acquisitions or artificial strategy adjustments. The organisation tries to turn the tide with creative constructions to temporarily relieve some pressure, but once an organisation is structurally in decline none of these measures will have any permanent effect: old ways always win over the new".

Once an organisation has fallen to the point that it can no longer make any profitable use of market potential and its reason for existence is in critical danger, then it requires a turn-around strategy of dismantling, remediating and reinventing. A rigorous change, a form of shock therapy. However, many organisations in phase IV of the life cycle lack a sense of urgency; a make or break moment, because they are usually non-profit organisations or monopolists. In these cases, the organisation can survive for a long time with a phase-IV climate, unless some party, such as the government, social protest, clients, employees or management, realises the urgency of the situation. In order to survive phase IV, it is not sufficient to simply return to phase III. Even if the transition from phase IV to III is successful, the organisation usually quickly returns to phase IV. The difference between a phase IV and a phase III climate is too insignificant for a real transition. In order to survive phase IV, the organisation must transition to phases I or II. The transition from IV to I involves a shift of focus from inside the organisation to outside. In practice, this is often an insurmountable task: as if one were to try to tear down the Great Wall of China by hand as it is being rebuilt on the other side. The process requires coherent and simultaneous interventions in the organisation's strategy, structure and culture. Each of these interventions have in common that they initiate activities and movements in a phase-I manner. An important factor in the success of these interventions is that management must defend them and even partially screen them from the rest of the organisation. This creates 'hotbeds' in which people reinvent the new organisation through their daily interactions. Doing so requires a business strategy that is not geared towards the continuation of the organisation as a whole, but towards the survival of the viable units; in the words of Goshal and Bartlett (1997) "dont move at the speed of the slowest snail, but free the rabbits". At the top level, this means letting go of the dream (or illusion) of synergy. The organisation must be seen as a collection of units, each with its own purpose with goals formulated in terms of tangible results. The management of the business units should be considered as the new pioneers, and provided with their own small staff. The central organisation should be reduced to the absolute minimum. In a successful turn-around, more than half of management will probably have to be replaced. This requires determination, consistency and time, if the

organisation has time to spare. The organisational consulting bureau described below went through just such a turn-around intervention.
Turning around an organisational consulting bureau An established organisational consulting bureau with a good name and a solid reputation in the market had fallen on hard times. The economic situation and strong competition from freelancers and network bureaus had taken around 20 percent of its market share over the past year. The firm initially tried to reinforce its commercial capacity by increasing its marketing budget, launching a new website and organising sales training for all of its consultants. However, when revenue continued to fall and the firm continued to lose market share, the Board of Commissioners appointed a new General Director who immediately intervened. He dissolved the existing matrix organisation and divided the company into separate thematic groups with their own responsibility for results. Each thematic group was then forced to prove itself in the market. The management team was reduced from ten people to three, and the overhead was cut from 25 percent to 10. The firm also reduced the number of consultants based on their individual market- and revenue potential. As professionalism and expertise had always been the highest priority within the organisation, this change was a major culture shock. The measures created quite a bit of unrest and insecurity, especially since a large portion of the layoffs involved experienced, very knowledgeable employees with a long history in the company. However, after these reforms the firm was much more capable of competing and acquiring business in the market. The turn-around was painful, but necessary to the firms survival.

Change strategies An effective change strategy should always intelligently and strategically complement the underlying organisational dynamic. In doing so, the question is not which HR instruments should be implemented, but when and how they are utilised. Interventions and instruments that work in some situations may be completely useless or even counterproductive in other circumstances. An enthusiastic HR manager who has had good results with the implementation of a 360 feedback system in a phase-II organization should not be surprised if it completely bogs down in a phase-IV organisation, as a phase-IV company climate is far too focused on one's

Change strategy Transitions in the life cycle Dynamics in the organisation

With the wind From I to II; from II to III Feeling that things can be done better or smarter: need for improvement, but no idea how Add structure in doses Supervised progression, streamlining and limiting risks.

Dynamic balance Staying in II or III Tendency to focus attention inwards. Continue improvement, demand for manuals, rules and procedures. Selective stimulus, inaction and pruning. Staying in II: nurturing and stimulating innovation and entrepreneurship; staying in III: consolidation of position, targeted improvement of processes. Keep focused on the market and results: resultsoriented + external perspective

Against the wind From III to II Grasping onto existing structures; old is better than new. Tendency to see HR instruments as goal in themselves. Simplification and destructuralisation. Reconnect with clients and market dynamics and renew focus; breaking through and discontinuing old processes; letting go and breaking down. Reconnect with the client and environment: relationshiporiented + external perspective

"Turn-around" From IV (via I) to II Denial of urgency: it will blow over eventually. HR is viewed with suspicion: much underground resistance. Struggle for power and position. Dismantling, renovation and reinvention. Rigorous intervention and forced renewal by starting phase-I activities in a phase-I manner.

Focus of HR instruments Focus on activities such as:

Leadership style

Exercise stability and control over the risk-prone processes: results-oriented + internal perspective

Renewed focus on environmental demands and results: results-oriented + external perspective

Table 2. Some characteristics of the four change strategies own position for the level of openness necessary for a successful 360 feedback system. The effects and effectiveness will often be disappointing due to the high level of socially desirable behaviour and underground resistance.

Each change strategy places its own demands on the manner in which an intervention or an HR instrument can be effective. For competency management, this can be summarised in the following manner: with the wind structuring and building in doses: see competency management as a tool for applying system to the organisation. Apply it pragmatically and prevent the instrument from becoming a goal in itself; dynamic balance selective stimulus, inaction and pruning: keep the instrument up-to-date and constantly monitor its utility. Regularly update and prune, do not expand or perfect; against the wind de-organise and simplify: utilise the instrument to bring the transition closer to all of the employees. First, remediate and update, as other competencies are undoubtedly needed for the future, and then implement; turn-around dismantle, remediate, reinvent: utilise as a selection instrument. Who are the go-getters', with whom do we wish to continue and from whom do we wish to take our leave? Knowledge of and insight into the dynamics and rules of the organisational level can help supervisors and HR managers not only choose the proper interventions more effectively, but also to critically reexamine their own role and position in the organisation. If the HR manager has too dominant a role compared to management, then it may be good for the HR manager, but it is not good for the organisation. In phase III, it is the HR managers challenge to continue to remain critical of ones own position in the organisation; otherwise, HRM itself becomes the problem. What is the bottom line? HRM from instrumental to strategic Seeing organisations as living systems helps us to remember the organisational context and prevents us from oversimplifications. It helps supervisors, HR managers and consultants to remain wary of all of the information, knowledge and instruments that reduce complex and ambiguous organisational phenomena to simple addition and subtraction. It draws attention from the instrumental planning and control at the individual unit level towards strategic thinking at the level of the organisation and its dynamics. It helps HR managers and supervisors to deal with the Baron van Mnchausen paradox: how can you pull yourself

out of the morass by your own hair? In other words, how can you deal with being part of a system while at the same time being the person who changes the system. This concept offers us a framework to help understand and predict organisational dynamics, as well as the ability (or inability) of managers and HRM staffers to effectively intervene in these dynamics. It offers a dynamic perspective on organising, reorganising and HRM, from instrumental to strategic. Literature Adizes, I. Corporate Lifecycles Prentice Hall, 1998. Beer M. and N. Noria (eds.) Breaking the Code of Change. Harvard Business School Press, Boston, 2000. Boonstra, J.J. Leiders in Cultuurverandering Van Gorcum, Assen, 2010. Cameron K. and R.E. Quinn Organizational life cycles and shifting criteria of effectiveness: some preliminary evidence In: Management Science, 29, 33-51, 1983. Collins J.C. and J.I. Poras Build to last Century Business Books, 1998. Galan, W. de De Paradijsvogel Amsterdam Contact Uitgeverij, 2002. Goshal, S. and C.A. Bartlett The individualized corporation: a fundamentally new approach to management. A HarperBusiness Book,1997. Greiner, L. E. Evolution and revolution as organizations grow In: Harvard Business Review, July-August, 1972.

Higgs, M.J. and D. Rowland Building change leadership capability: The quest for change competence In: Journal of Change Management, 1,2; pp.116-131, 2000. Lievegoed, B. Managing the developing Organisation Basil Blackwell, 1991. Mintzberg H. Rebuilding Companies as Communities In: Harvard Business Review , July-August 2009. Peters F. en C.M.J. Strijp Leiderschap in evenwicht: effectief verbinden van strategie en ontwikkeling Den Haag: Academic Services, 2011. Schein E.H. Organizational Culture and Leadership . San Francisco: Jossey-Bass (3rd edition) 2004. Senge, Peter, M. The fifth discipline Doubleday, 1990.

Translated from: Van Dijk, G.M. en F. Peters, 2011. Organisaties als levende systemen. HRM Handboek, Aflevering 56, 2/9-1.2. November 2011, p. 1-22.