Failure of Change Management at McKinsey & Company

McKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions. McKinsey & Company was founded in 1926 in Chicago by James McKinsey under the name James O. McKinsey & Company. In 1964 McKinsey started publishing the McKinsey Quarterly, a business journal written primarily by McKinsey consultants. In the 1970s, McKinsey was faced with a loss of market-share and began investing in what it called "systematic knowledge-building". Over two decades McKinsey & Company grew eightfold.In 1989 the firm acquired the Information Consulting Group (ICG), but a culture clash caused many ICG employees to leave. In 1990, the firm established an economics think tank on globalization, corporate strategy and governance called the McKinsey Global Institute. Firm revenues more than doubled from 1993 to 2004 with 20 new offices and twice as many employees. In 1994 Rajat Gupta became the first non-American-born partner to be elected as the firms managing director. By the end of his tenure, McKinsey had grown from 2,900 to 7,000 consultants, who were working across 82 offices in over 40 countries. In the 1990s, Anil Kumar set up accelerators for smaller internet startups to get started, accepting stock-based reimbursement for its services. The Business Technology Office was started in 1997 to focus on IT consulting and was growing at an annualized rate of 30% by 2003. Recently McKinsey has focused more on expansion in Asia and developing practices focused on the public and social sectors. In 2001, McKinsey launched several practices that focused on the public and social sector, which included taking on hundreds of nonprofit or public sector clients on a pro bono basis. By 2002 McKinsey invested a $35.8 million budget on knowledge management, up from $8.3 million in 1999. As the firm rebounded from the dot-com bust, its recruiting efforts substantially expanded in 2003 with 1,600 new hires, a 60 percent increase over the prior year.

Organization and administration

The firm, while formally organized as a corporation, functions as a partnership in all important respects. Its managing director is elected for a three-year term by the firm's other senior partners. Each managing director can serve a maximum of three terms, a policy instituted by Gupta. At a strategic level, a number of committees are charged with the development of policies and making critical decisions. Committee memberships, senior roles, and the managing director position all rotate regularly among the firm's senior partners and directors. Former managing director Rajat Gupta explains McKinsey's structure as follows: It is very much, in many dimensions, like an academic organization. We have senior partners who are very much like tenured faculty: they are leaders in their own right. [...] We have about 80 to 100 performance cells -- a geographic office or industry practice or functional practice. They are very much autonomous and they are not organized in any hierarchy beyond that. We don't have any regional structures or sectoral structures. So all these performance units, in a theoretical sense, report to me, which means they don't report to anybody, because nobody can have 80 or 100 people reporting to them. The firm operates under a practice of "up or out", meaning that consultants must either advance in their consulting careers within a pre-defined timeframe or leave the firm. "25% of the firm is new every year," Gupta says, "so half the people have less than two to three years' tenure in the firm, and their values need to be reinforced." All senior roles rotate among the directors (senior partners). McKinsey has about 9,000 consultants in 97 locations in 55 countries,working with more than 90% of the 100 leading global corporations and two-thirds of the Fortune 1000 list. Forbes estimated the firm's 2009 revenues at $6.6 billion. The notion of company growth has been controversial from the 1970s as the firm began its global expansion; McKinsey opened many new offices under Rajat Gupta's tenure in the late 1990s. The election of British-born Ian Davis as Gupta's successor was seen as "a return to McKinsey's heritage". This philosophy has come under increased scrutiny with the Galleon case, with some questioning whether the firm is a discreet broker of confidential or even inside information marketed as "best practices". Notable longtime McKinsey partners include: Dominic Barton; managing director, Ron Daniel; senior partner emeritus, Ian Davis; senior partner emeritus, Anil Kumar; former senior partner, Rajat Gupta; senior partner emeritus and Michael Patsalos-Fox; senior partner.

Recruiting and Compensation

Bower broke with then-common industry practice by hiring recent graduates from the best business schools rather than among experienced managers.Today the firm is among the top recruiters of graduates of the top-ranked business programs in the US and overseas, in addition to hiring a significant number of people with other advanced degrees in science, medicine, engineering and law. The firm is notable for the number of Rhodes Scholars and Marshall Scholars it is able to attract.McKinsey also hires undergraduates into business analyst positions, but competition for such positions is fierce and recruiting is almost completely limited to students at the very best undergraduate institutions. As a private firm, McKinsey is not required to disclose compensation figures. Unlike the financial services sector, consultants are not paid proportional to the business they bring in; top senior partners and the managing director have similar compensation. This was estimated to be $24 million in 1994 dollars ($35 million today),and has at least doubled ($612 million) today given the Firm's growth over the last 15 years.Other estimates place the managing director's compensation between $5 and 10 million. 2012 newly recruited McKinsey hires from undergraduates and business schools earn a total compensation (salary plus all bonuses) up to $85,000 and $192,000, respectively.

Competitors
McKinsey is one of the market leading "Big Three" in management consulting services to the Fortune 500 set, along with Bain & Company and The Boston Consulting Group, consistently recruiting top talent globally from elite colleges, professional schools, and graduate schools.

Knowledge management system

McKinsey invests significantly in its knowledge management system to support field consultants. The system includes generalist researchers, industry- and function-specific experts and librarians, and access to journals and databases. McKinsey maintains an organisation called the McKinsey Knowledge Centre (McKC) that provide rapid access to specialized expertise and business information. In addition, consultant-authored internal "practice development" documents capture generalizable insights from client engagements. There are also methods to access individual consultants with expertise from previous client studies or previous employment, for background assistance (competitive information is not shared). This system was created and chaired by former senior partner Anil Kumar as an early example of knowledge process outsourcing.

Specific areas where Mckinsey got troubled:

According to firm policies, firm members may not discuss specific client situations. The firm also maintains a deliberate and low-profile external image. Maintaining client confidentiality protects client interests. The policy of client confidentiality is maintained even among former employees. Despite such a policy of confidentiality, there has been criticism of incidents that have been made public. These include:

In February 2011, McKinsey surveyed 1,300 US private-sector employers on their expected response to the Affordable Care Act (ACA). 30 percent of respondents said they anticipated they would probably or definitely stop offering employer sponsored health coverage after the ACA went into effect in 2014.These results, published in June 2011 in the McKinsey e-Quarterly, became "a useful tool for critics of the ACA and a deep annoyance for defenders of the law" according to an article in TIME Magazine. In 2010 Rainforest Foundation UK released a report claiming recommendations McKinsey had given to developing countries on how to reduce deforestation were of poor quality. The NGO argued the companys work has serious methodological flaws and as a result systematically underestimates the destructive impacts of industrial agriculture while exaggerating those of subsistence farming. Adding to this, a Greenpeace study claimed McKinseys advice failed to address some of the main drivers of deforestation such as logging and mining, and that the companys proposals would actually reward those industries. Enron was headed by McKinsey alumni and was one of the firm's biggest clients before its collapse.In particular, McKinsey's "deep-seated belief that having better talent at all levels is how you outperform your competitors", a HR program implemented at Enron with McKinsey's knowledge, resulted, in the opinion of one author, a workplace culture of prima donnas that "took more credit for success than was legitimate, that did not acknowledge responsibility for its failures, that shrewdly sold the rest of us on its genius, and that substituted self-nomination for disciplined management." Jeff Skilling, sentenced to 24 years in federal prison as the CEO of Enron, was formerly a partner at McKinsey and "loyal alum."

Rajat Gupta ran McKinsey & Co. from 1994 to 2003, and was a senior McKinsey partner until 2007. When the Securities and Exchange Commission brought insider trading charges against Gupta, it did more than merely accuse him of being a crook. It shined a long overdue light on a company that has successfully dodged responsibility for some of the worst financial ideas in history. McKinsey, the global consulting firm, has created dubious strategies for all manners of companies ranging from Enron to General Electric.

Thats a pretty significant accusation. But it is bore out by the track record of the firm. Some of the more questionable strategies of McKinsey: Advocating side pockets and off balance sheet accounting to Enron, it became known as the firm that built Enron (Guardian, BusinessWeek) Argued that NY was losing Derivative business to London, and should more aggressively pursue derivative underwriting (Investment Dealers Digest) General Electric lost over $1 billion after following McKinseys advice in 2007 just before the financial crisis hit. (The Ledger) Advising AT&T (Bell Labs invented cellphones) that there wasnt much future to mobile phones (WaPo) Allstate reduced legitimate Auto claims payouts in a McK&Co strategem (Bloomberg, CNN NLB) Swissair went into bankruptcy after implementing a McKinsey strategy (BusinessWeek) British railway company Railtrack was advised to reduce spending on infrastructure leading to a number of fatal accidents, and a subsequent collapse of Railtrack. (Property Week, the Independent) No consulting firm that has been around as long as McKinsey has a blemish free record. But the total number of clusterfucks and McKinsey foibles they are associated with goes on and on. The question of today goes beyond the illegal insider trading of their former managing director what is it about McKinsey that allows them to give some very awful, legally questionable advice, and yet escape blame? Its ironic that their former chair was on the Board of Directors of GS perhaps McKinsey can now join the ranks with Goldman Sachs, as the latest to be revealed as great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Creating organizational transformations:

Organizations need to change constantly, for all kinds of reasons, but achieving a true step change in performance is rare. Indeed, in a recent McKinsey survey of executives from around the world,1 only a third say that their organizations succeeded in doing so. Executives were also asked how their organizations designed and managed a recent change effort, how they engaged employees in it, and how involved senior leaders were. The survey results highlight several important tactics that organizations use to transform themselves successfully. Setting clear and high aspirations for change is the most significant. A second tactic is engaging the whole company in the change effort through a wide variety of

means; a highly involved and visible CEO is important, but successful companies also use various other communication and accountability methods to keep people involvedfar more methods than unsuccessful companies use. Also notable: successful companies are far likelier to communicate the need for change in a positive way, encouraging employees to build on success rather than focusing exclusively on fixing problems.

Scaling up a transformation:
Eureko, a large insurance group operating in the Netherlands under the Achmea brand, faced a tough decision in 2006. The Dutch government had implemented radical market reforms that fused a partly public, partly voluntary and private system into one mandatory national health insurance program executed by private insurers. Amid uncertainty about future cost and premium levels, many stock-listed companies opted to leave the health insurance business. Achmea, which had grown during two centuries of mergers between mutual insurers, faced a choice of either exiting health insurance or going into it big and competing on quality to win substantial market share. We decided on the latter because we were good on the commercial side, explains Jeroen van Breda Vriesman, Eurekos executive board member responsible for the health division and for group information management and technology. So we went in, although we knew we would be losing a lot of money in the first year. The company launched a lean transformation of its health division, which went from a loss to profitability in three years, and then started to scale up that transformation across Achmeas nonlife, life insurance, pensions, and other activities in 2008. global survey by McKinsey & Company concluded that only by changing constantly could organizations hope to survive. There is nothing remarkable in this finding; it echoes what most writers and commentators have been saying for the past two decades). However, the McKinsey survey also claimed that some two-thirds of all change initiatives failed, which may account for why so many people appear to have a negative perception of change. Whilst two-thirds seems to be a staggeringly high rate of failure, it is not out of line with the majority of the change literature which regularly quotes failure rates of between 60% and 90%). For example, Bain & Co. claim the general failure rate is 70% but that it rises to 90% for culture-change initiatives In a survey of the change literature, Smith found similar failure rates. Nor does this level of failure appear to be new. In the 1990s, Hammer and Champy claimed that 70% of all BPR initiatives failed. In the 1980s, the failure rate for the introduction of computer-based technologies was estimated at around 60% (Bessant and Haywood, and in the 1970s, claimed that 90% of qualityimprovement initiatives failed. It seems, therefore, that for the last 40 years, at least, far more change initiatives have failed than have succeeded. However, this raises an important issue how reliable and representative are these figures? Claims of high failure rates tend to fall into three categories. The first contains writers who cite a high failure rate, but offer no evidence to support the claim (e.g. Hammer and In the second category, claims of high failure are substantiated by reviews of the change literature. The final category of claims are those which are based on empirical evidence collected by the authors themselves Obviously, the first category, regardless of the experience and standing of the authors, has to be treated with a degree of caution. Though one might assume that the second category of claims, those based on reviews of the literature, could be treated with a

greater degree of confidence, this rather depends on the literature surveyed and how the survey was conducted. For example, a survey which was heavily weighted in favour of category-one evidence would have much less validity than one which was based on category-three. Similarly, a survey which merely accepted the headline claims of the studies it included would have less validity than one which examined the studies in detail. This brings us to category three claims those based on evidence collected by the authors themselves. Such evidence, one might think, can be relied upon. However, this is not necessarily the case. It depends on the nature of the research and the evidence that is produced to support claims of a high failure rate. For example, is enough evidence presented to judge the methodological rigour of the survey? Does the research cover change in general or is it specific to one form of change? Who is the evidence collected from and are they in a position to judge managers and consultants need a model of change that is essentially a situational or contingency model, one that indicates how to vary change strategies to achieve optimum fit with the changing environment. Academics and practitioners are continually producing studies of, and offering, supposedly new approaches to change. Some of these do offer new and useful insights into organizational change others stress academic rigour but lack practical relevance and vice versa, whilst some appear to contain neither. The problem is that it is difficult to see how the field of organizational change can progress effectively unless it addresses the three issues raised above - the reliability of failure data, the causes of failure, and how to manage change successfully. We also have to recognise that these three issues are interrelated: unless we have reliable data on failure, we don't know the size of the problem and how concerned we should be; unless we know why change fails, we may be offering change approaches which address the wrong problems; and unless we can provide a range of appropriate approaches to change and identify their strengths and weaknesses, organizations are unlikely to be able to address change successfully. The purpose of this special issue is to encourage research and debate about these issues by posing the following questions: 1. How reliable is the data on change failure? Does the data show whether or not some types of change and organizations are more prone to failure than others? Why does change fail? Is each change failure due to the unique circumstances in which it is undertaken or are there common causes? What can organizations do to improve their success rate? Are some approaches more successful than others? Should, and can, organizations undertake less change?

2.

3.

In order to start this debate, this special issue offers three articles which each contributes to addressing these questions. The article by Mark Hughes examines a number of claims that the failure rate for change is 70%. He reviews five separate published instances identifying a 70% failure rate. In each instance, the review highlights the absence of valid and reliable empirical evidence in support of the espoused 70% rate. Hughes goes on to question the utility of inherent rates of failure and stresses the need to take account of that context within which change takes place and the different views of participants as to whether change has been successful. Provocatively, he also raises the issue of

whether it is even appropriate to seek to prove or disprove an inherent failure rate, given the disparity between types of change between, and within, organisations. John McClellan, in his article, examines the role of communication in the failure of organizational change. The article adopts a discourse-and-power perspective on change. McClellan argues that change fails because those who manage it often suppress the emergence of conflicting organizational meanings, rather than seeing them as a method of allowing participants to constitute new organizing discourses. In support of this argument, McClellan presents a case study of organizational change at a college of art and design. This illustrates how the suppression of conflicting narratives contributes to failing change practices. McClellan maintains that organizational scholars and practitioners need to consider how the complex relationship between communication and change not only provides insight as to why change fails, but can also enable alternative ways to promote successful change practices. In the final article, Jonathan Raelin and Christina Cataldo examine the crucial role of middle managers in the change process. They argue that though middle managers were once seen as obstacles to change, they are now seen more as facilitators of change. However, a lack of empowerment, due to executive constraints, means they are often ineffective in promoting change. Raelin and Cataldo present a case study of a failed change initiative at a large financial services firm. This shows that the failure can be attributed to the evolution of closed-executive and rank-and-file systems, leaving middle managers powerless. Raelin and Cataldo argue that empowerment is critical for middle managers involved in change as it helps ensure that interaction will cross systems, resulting in cascading empowerment that can prevent change failure. Whether one likes it or not, organizational change plays a significant role in our lives. In our own organizations, it affects the nature of our jobs, or even if we have a job. In our everyday life, it impacts on the cost, quality, and availability of the services and goods we rely upon. In the broader scheme of things, the ability of organizations to manage change successfully may have profound implications for global warming, and the availability and cost of energy, food supplies, and other vital raw materials. Few would doubt that we do not always manage change as well as we should, but what is the scale of the problem? Is it just certain types of change or certain organisations where problems occur or does failure occur on a much wider scale? What causes change to fail? Are there common causes or is each failure unique? Just as importantly, what can organisations do to improve their success rate? The intention of this special issue is to raise these questions and encourage scholars and practitioners to debate them. Each of the three articles in this special issue makes, in its own way, an important contribution to this debate. The Journal of Change Management now offers an open invitation to others to respond and contribute.

Change management:
Change management is an approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at helping change stakeholders to accept and embrace changes in their business environment or individuals in their personal lives. In some project management contexts, change management refers to a project management process wherein changes to a project are formally introduced and approved. Change management is a systematic approach to dealing with change, both from the perspective of an organization and on the individual level.Firstly, A somewhat ambiguous term, change management has at least three different aspects, including: adapting to change, controlling change, and effecting change. A proactive approach to dealing with change is at the core of all three aspects. For an organization, change management means defining and implementing procedures and/or technologies to deal with changes in the business environment and to profit from changing opportunities. Successful adaptation to change is as crucial within an organization as it is in the natural world. Just like plants and animals, organizations and the individuals in them inevitably encounter changing conditions that they are powerless to control. The more effectively you deal with change, the more likely you are to thrive. Adaptation might involve establishing a structured methodology for responding to changes in the business environment (such as a fluctuation in the economy, or a threat from a competitor) or establishing coping mechanisms for responding to changes in the workplace (such as new policies, or technologies). Secondly, with the influence of good governance in public sector, the government on a worldwide basis began to rethink its role and position in the market, initiating deregulation, privatisation and devolution (Hamlin et al, 2001:14). Government itself has been changing for a long time. Take British Government for example from 1979-1995, because The Conservative Party believes in the pursuit of individualism and the freedom of choice rather than state provision or collectivism, and the culture of the private sector would lead to a more efficient and effective public sector, the British Government was committed to rolling back the frontiers of the state. Rhodes stated from 1979-1994 that the British governments programme can be broken down into six broad parts: introducing the minimalist state, reasserting political authority, extending regulation, audit and evaluation, reforming public sector management and structure democratising the public sector, and transforming the culture (1997:88). Finally, globalisation is widely recognized as a fundamental feature of our time. It has a farreaching implication towards every aspect in our society. Globalisation has forced many national companies restructure their operations to reposition themselves in a broader and more open market place (Dawson, 2003:114). They have to base their strategies on complex and multifaceted focuses instead of a single focus. In terms of public sector, globalisation has facilitated connection and coordination among governments and nongovernmental organization and also caused major changes in the character of the modern state, such as the reinforcement of supraterritorial governance organizations, the increasing degree of interdependence among modern states, gaining the information-age advantages to process information, the growing role of governments as partners with the private sectors and the shift of the administrative state from

a welfare state to a corporate state (Farazmand, 1999: 514-515). From the above, it is apparent that there is an unavoidable trend that many organizations whether in public or private sectors are changing and becoming slimmer and flatter. Therefore change management is considerably important as a sort of systematic approach to deal with changes.

Organizational change:
Managing organizational change will be more successful if you apply these simple principles. Achieving personal change will be more successful too if you use the same approach where relevant. Change management entails thoughtful planning and sensitive implementation, and above all, consultation with, and involvement of, the people affected by the changes. If you force change on people normally problems arise. Change must be realistic, achievable and measurable. These aspects are especially relevant to managing personal change. Before starting organizational change, ask yourself: What do we want to achieve with this change, why, and how will we know that the change has been achieved? Who is affected by this change, and how will they react to it? How much of this change can we achieve ourselves, and what parts of the change do we need help with? These aspects also relate strongly to the management of personal as well as organizational change. Organizational change is a structured approach in an organization for ensuring that changes are smoothly and successfully implemented, and that the lasting benefits of change are achieved. In the modern business environment, organizations face rapid change like never before. Globalization and the constant innovation of technology result in a constantly evolving business environment. Recent phenomena such as social media and mobile adaptability have revolutionized business and the effect of this is an ever increasing need for change, and therefore change management. The growth in technology also has a secondary effect of increasing the availability and therefore accountability of knowledge. Easily accessible information has resulted in unprecedented scrutiny from stockholders and the media. Prying eyes and listening ears raise the stakes for failed business endeavors and increase the pressure on struggling executives. With the business environment experiencing so much change, organizations must then learn to become comfortable with change as well. Therefore, the ability to manage and adapt to organizational change is an essential ability required in the workplace today. Organizational change directly affects all departments from the entry level employee to senior management. With recent developments, such as social media marketing and smart phone applications, the entire company must learn how to handle these new changes to the organization. Whether it is the CMO determining how to incorporate social media, or the executive assistants representing themselves and their company responsibly online, change is occuring at an increasingly rapid pace. When determining which of the latest techniques or innovations to adopt, there are four major factors to be considered. 1. 2. 3. 4. Levels, goals, and strategies, Measurement system, Sequence of steps, Implementation and organizational change,

Organizational change can have many faces. But regardless of the type, the critical aspect is a companys ability to win the buy-in of their organizations employees on the change. To effectively implement organizational change consists of a four-step process. First, recognizing the changes in the broader business environment. Second, developing the necessary adjustments for their companys needs. Third, training their employees on the appropriate changes. And fourth, winning the support of the employees with the persuasiveness of the appropriate adjustments. This four-step process is change management in its essence, and organizational change in practice. For organization changes, we can define that change management as activities involved in (1) defining and instilling new values, attitudes, norms, and behaviours within an organization that support new ways of doing work and overcome resistance to change; (2) building consensus among customers and stakeholders on specific changes designed to better meet their needs; and (3) planning, testing, and implementing all aspects of the transition from one organizational structure or business process to another (GAO, 1998) For organizations, Demands for change are now constant impending.According to Champy and Nohria, there are three major drivers stirring organizational change faster than ever before are as follows: technology, government and Globalisation (Champy and Nohria, 1996). In the first place, technology affects organization structure, determines the nature of individual jobs, affects employee attitudes and behaviour, and controls the informal social structure within the organization and ultimately determines the organizations

Scope of change management and its Process:

The purpose of defining these change management areas is to ensure that there is a common understanding among readers. Tools or components of change management include:

Change management process Readiness assessments Communication and communication planning Coaching and manager training for change management Training and employee training development Sponsor activities and sponsor roadmaps Resistance management Data collection, feedback analysis and corrective action Celebrating and recognizing success

The change management process is the sequence of steps or activities that a change management team or project leader would follow to apply change management to a project or change. Based on Prosci's research of the most effective and commonly applied change, most change management processes contain the following three phases: Phase 1 - Preparing for change (Preparation, assessment and strategy development) Phase 2 - Managing change (Detailed planning and change management implementation) Phase 3 - Reinforcing change (Data gathering, corrective action and recognition)

Examples of organizational change: 1. 2. 3. 4. 5. Mission changes Strategic changes Operational changes (including structural changes) Technological changes Changing the attitudes and behaviour of personnel.

As a multidisciplinary practice that has evolved as a result of scholarly research, Organizational Change Management should begin with a systematic diagnosis of the current situation in order to determine both the need for change and the capability to change. The objectives, content, and process of change should all be specified as part of a Change Management plan. Change Management processes may include creative marketing to enable communication between changing audiences, as well as deep social understanding about leaderships styles and group dynamics. As a visible track on transformation projects, Organizational Change Management aligns groups expectations, communicates, integrates teams and manages people training. It makes use of performance metrics, such as financial results, operational efficiency, leadership commitment, communication effectiveness, and the perceived need for change to design appropriate strategies, in order to avoid change failures or resolve troubled change projects. Successful change management is more likely to occur if the following are included 1 .Benefits management and realization to define measurable stakeholder aims, create a business case for their achievement (which should be continuously updated), and monitor assumptions, risks, dependencies, costs, return on investment, dis-benefits and cultural issues affecting the progress of the associated work. 2 .Effective Communications that informs various stakeholders of the reasons for the change (why?), the benefits of successful implementation (what is in it for us, and you) as well as the details of the change (when? where? who is involved? how much will it cost? etc.). 3 .Devise an effective education, training and/or skills upgrading scheme for the organization. 4 .Counter resistance from the employees of companies and align them to overall strategic direction of the organization. 5 .Provide personal counseling (if required) to alleviate any change-related fears. 6 .Monitoring of the implementation and fine-tuning as required.

Lewin's Change Management Model and Kotter's Eight Step Change Model: (Also Mckinsey 7s Model)

The McKinsey 7-S Model was created by Tom Peters and Robert Waterman while they were working for McKinsey & Company, and by Richard Pascale and Anthony Athos at a meeting in 1978 (12Manage, 2007). The McKinsey 7-S model is a holistic approach to company organization, which collectively determines how the company will operate (12Manage, 2007). There are seven different factors that are a part of the model: shared values, strategy, structure, systems, style, staff, and skills, which all work collectively to form the model (12Manage, 2007). Shared values are the center of the model because it is what the organization believes in and stands for, such as the mission of the company (12Manage, 2007). Strategy represents what the company plans to do react to any changes of its external surroundings (Recklies, 2007). The structure refers to the organizational structure of the company (12Manage, 2007). Systems are the portion of the model that represents "the procedures, processes and routines that characterize how the work should be done" (12Manage, 2007). Staff is quite obvious in the fact that it is a proper representation of who is employed by the organization and what they do within the organization (12Manage, 2007). Style signifies the organizational culture and management styles that are utilized within the organization (12Manage, 2007). Skills indicate the abilities and competencies of either the employees or the organization holistically (12Manage, 2007). There are many benefits and disadvantages of the McKinsey Model. There are four main benefits of the McKinsey 7-S Model: It is an effective way to diagnose and understand the organization; it is a guide for organizational change; it is a combination of both rational and emotional constituents; and all parts are interrelated, so all portions must be addressed and focused on (12Manage, 2007). One major disadvantage is that when one of the parts is changed, all parts change because they are all interrelated (12Manage, 2007). Another major disadvantage is that this model ignores differences (Morgan, n.d.). After five years many of the companies that used this model fell from the top (Morgan, n.d.).

Different drives of change management:

Change is a constant driving force in any organization, requiring the need to meet the unique needs of both the external and internal environment of the organization that the management needs to address. Thus, change management is an empirical approach to constant transitions involving the individuals who are part of the organization, the composition of teams, the organization structures, and the organizational culture in order to maintain its survival. Rothwell and Sullivan (2005) define change management as the continuous process of aligning organization in its market place and being able to do it in a more competitive manner and better than its competitors. There are many published literatures that deal with change management that are written by scholars, philosophers and writers as course books about change management in the attempt to identify specific processes that will help the management bring about change in an organization with better competence. This paper will present three case studies involving change in the management within particular companies or corporations as well to associate the common processes involved by which the management is able to handle the issues pertaining to different market conditions to different literatures available in change management. This paper should be able to identify the principal determinants of change in the organization and to identify the roles that leaders should assume in solving complex problems affecting their organization and how to bring about change more effectively. Cummings and Worley (2009) emphasized that for change management to be effective, the management should be committed to organizational planning. This pertains to establishing direction by which the management is able to take the organization. If the organization wants to

maintain its survival, they need to learn how to establish innovative ideas and learn to adapt to the constant changes affecting their existence in terms of profitability, market demands, and technology changes in order to be adept in keeping their competence against other competitors. Dubrin (2008) identifies the role of leaders or managers that in order to reach their objectives, they should be able to manage change almost daily as change has an impact to various aspect of the organization operation such as technology, organization structure, competition, human resource, and budgeting. Managers should hurdle the challenge of constant change demands almost everyday and must have a contingency plan in case anything goes wrong on the implementation of the change in the organization. In order to manage change better, it is vital to understand why the need for change while assessing the benefits for bringing change into the organization. Moreover, it is also as important to identify the impact of such change to the organization physical and human resources and prompt identification of the resources that could help assist in the implementation of change. Based on various literatures, the effectiveness of bringing change in the management relies on the conscientious judgment of a leader, the ability to maximize all physical and human resources, recognizing the strengths and weakness in the areas of management, and to reinforce the employee skills and ability for better competency in their areas of expertise. Anderson & Anderson (2001) describe change as one requirement for continuous success, with competent leadership change being the most coveted executive skills. Among the main points in these author's insights regarding change management is the identification of driver's of change. They identify the various shifts in the external environment such as in the marketplace that require for more specific changes in the business market strategy, organizational designs, and the human aspect of domains involved in the organization involving cultures, behavior, and ways of thinking of members of the organization. The need for leadership approaches to transformation in order to provide efficient change in management with a kind of leader who reacts to change more consciously than reactively. In support to these authors' point of view, Cook, Macaulay, and Coldicott (2004) also recognize the need to identify the driving forces and the restraining forces within the organization in order to address each one to be able to manage change in the organization more effectively. Most organizations struggle to implement change due to the inability or failure of the leaders to identify and attend to the cultural, mindset and behavioral factors that may result to resistance to change. In the case study involving the MCKINSEY, the change in leadership and abrupt changes in the company's services and policies caused tension among the employees. Campbell (2009) emphasizes the need for managers to develop their ability to communicate to their subordinates. In this manner does the manager is able to understand the predicaments of his support groups and to be able to act upon it. If the employees lack skills on a particular area, they can initiate to undergo training and seminars to upgrade their competency. With effective communication, the manager is able to explain better among the employees the need for change and its importance to the success of their organization.

The major driving forces to change involving the more large-scale change in organization, the social and economic factors affecting change, and the globalization of market and competition. Moreover, he further presents the 8-stage process of creating change. These are the variable steps

that will help management deal with the driving forces of change, how to assert the need for transformation despite the hardened status quo of its implementation. Among these valuable steps include the establishment of sense of urgency; creation of guiding coalition of groups to lead the change; developing a vision and strategy, communicate such vision; empower broadbased action; generate short-term wins; consolidate gains and produce more change; and anchor new approach to in the culture. (Kotter, 1996, pp. 22) In the case study involving the UPS, the management is able to recognize the need to re-upgrade its technology in order to offer better and more competent services to their customers. Holland (2000) discusses that engineering change is one among the important areas of management consisting of assessing the physical needs of the organization. The management should find the need to re-organize and adopt improvement on their technology resource when such a need will help them position their market better for global competitiveness. Along with the introduction of technology change is the process of upgrading the skills of the employees in order to maximize the benefits of the newly adopted technology upgrade within their organization. Gustin (2008) supports the recognition of Kotter to communicate the change within the organization and implies communication as the core of the change management program. The changes itself must be communicated among the organization members in order to engage them to participate in the needed change through the process of definition, explanation, and progression. It is indeed a matter of communicating well to the people involved in the organization the need for change in order to win their commitment and cooperation as primary key players in organization to help in the attainment of the organization's success and progress. As in the case study involving the need for disseminating the new work process to at least 13 government departments from various regions, the activity of presenting the new changes in the regional department went smoothly because of the efforts given by the government to educate their employees in order to prepare them to future changes. Through the various workshops given to the member of the organization, each employee is able to understand their role in making the changes effective to the benefits of their institution. Change is endemic to all organizations operating in business markets. Although all organisations are in the process of changing the nature of these changes can vary enormously and so, we need a way to differentiate between the scale and scope of change experienced across different organizations, and within the same organization, over time. Evaluating the extent and depth of company change allows us to classify change from small developmental activities and routine modifications through to large-scale transformational initiatives. The former can involve improvements on current ways of doing things, of finetuning operations and implementing incremental changes on standard operating procedures. These changes typically work within the domain of the known, and often form an integral part of in-house monitoring and evaluation activities. Within Universities, course and programme evaluations may be used to further refine and develop curriculum design and teaching delivery methods as part of ongoing and regular operating procedures.

Successful Change Requires Uncommon Sense

Digging deeper into why change programs fail reveals that the vast majority stumble on precisely the thing they are trying to transform: employee attitudes and management behavior (versus other possible sources such inadequate budget,poorly deployed resources and poor change architecture). Colin Price and Emily Lawson provided a holistic perspective in their 2003 article, The Psychology of Change Management, that suggests that four basic conditions have to be met before employees will change their behavior: A. A compelling story: They must see the point of the change and agree with it, at least enough to give it a try. B. Role modeling: They must also see colleagues they admire modeling the desired behavior C. Reinforcement systems: Surrounding structures, systems, processes and incentives must be in tune with the new behavior D. The skills required for change: They need to have the skills to do what is required of them. #1: What motivates you doesnt motivate (most of) your employees. We see two types of change stories consistently told in organizations. The first is the good to great story along the lines of Our historical advantage has been eroded by intense competition and changing customer needs; if we change, we can regain our leadership position once again, becoming the undisputed industry leader for the foreseeable future and leaving the competition in the dust. The second is the turnaround story along the lines of, Were performing below industry standard and must change dramatically to survive; incremental change is not sufficientinvestors will not continue to put money into an underperforming company. #2: Youre better off letting them write their own story. Well-intentioned leaders invest significant time in communicating their change story. Roadshows, town halls, magazines, screen-savers and websites are but a few of the many approaches typically used to tell the story. Certainly the story (told in five ways!) needs to get out there, but the inconvenient truth is that much of the energy invested in communicating it would be better spent listening, not telling. When we choose for ourselves, we are far more committed to the outcome (almost by a factor of five to one). Conventional approaches to change management underestimate this impact.The rational thinker sees it as a waste of time to let others self-discover what he or she already knowswhy not just tell them and be done with it? Unfortunately this approach steals from others the energy needed to drive change that comes through a sense of ownership of the answer. #3: It takes both + and to create real energy. This model is often referred to as a deficit-based approach to change. It identifies the problem (what is the need?), analyzes causes (what is wrong here?) and possible solutions (how can we fix it?), and then plans and takes actions (problem solved!). Advocates of this approach point out that its linear logic and approach to dissecting things to understand them is at the heart of all the scientiic progress made by Western civilization. Given the case for the deficit-based approach, it

has become the model predominantly taught in business schools and is presumably the default change model in most organizations.

#4: Your leaders believe they already are the change. Most senior executives understand and generally buy into Ghandis famous aphorism, Be the change you want to see in the world. They, often prompted by HR professionals or consultants, commit themselves to being the change by personally role modeling the desired behaviors. And then, in practice, nothing significant changes. The reason for this is that most executives dont see themselves as part of the problem, and therefore deep down do not believe that it is they who need to change, even though in principle they agree that leaders must role model the esired changes. The fact is that most well-intentioned and hard-working people believe they are doing the right thing, or they wouldnt be doing it. However, most people also have an unwarranted optimism in relation to their own behavior. #5: Influence leaders arent that influential. Almost all change management literature places importance on mobilizing a set of influence leaders to help drive the change. Typically guidance is given to find and mobilize those in the organization who either by role or personality (or both) have disproportionate influence over how others think and behave. We believe this is sound and timeless advice indeed having a cadre of well-regarded people proactively role modeling and communicating the change program is a no regrets move. However, since Malcom Gladwell popularized his law of the few in his best-selling book, The Tipping Point, we have observed that the role of influence leaders has moved from being perceived as a helpful element of a broader set of interventions to a panacea for making change happen (likely an unintended consequence of Gladwells work which itself was directed towards marketers versus change leaders). Influence leaders are no more likely to start a social contagion than the rank and file success depends less on how persuasive the early adopter is, and more on how receptive the society is to the idea. Gladwells law of the few suggests that rare, highly connected people shape the world. He defined three types of influence leaders that are among this select group: Mavensdiscerning individuals who accumulate knowledge and share advice; Connectorsthose who know lots of people; and Salespeoplethose who have the natural ability to influence and persuade others. Gladwell famously illustrates his point with the example of Hush Puppies. The footwear brand was dying by late 1994until a few New York hipsters began wearing their shoes. Other fashionistas followed suit, whereupon the cool kids copied them, the less-cool kids copied them, and so on, until voil!Within two years, sales of Hush Puppies had exploded by 5,000 percent, without a penny spent on advertising.22 Compelling stories such as this have been interpreted by many change leaders as evidence that the lions share of their role should focus on getting the influence leader equation right and voil! all else will follow. #6: Money is the most expensive way to motivate people Upton Sinclair once wrote, It is difficult to get a man to understand something if his salary depends upon him not understanding it.24 If a change programs objectives are not linked

somehow to employee compensation, this sends a strong message that the change program is not a priority, and motivation for change is adversely affected. The flip-side, however, is not true.When change program objectives are linked to compensation, motivation for change is rarely meaningfully enhanced. The reason for this is as practical as it is psychological in nature. The reality is that in the vast majority of companies it is exceedingly difficult to meaningfully link a change program to individual compensation. So why not just change the compensation approach? This is of course an option, but easier said than done and certainly not without risk and potential unintended consequences when considering that change must happen in real time the organization must continue to carry out its day-to-day tasks and functions while at the same time fundamentally rethinking them. The good news is that there are easier, relatively inexpensive ways to use incentives to motivate employees for change. #7: A fair process is as important as a fair outcome Consider a bank which, as part of a major change program, diagnosed that its pricing did not appropriately reflect the credit risk that the institution was taking on. New risk-adjusted rate of return (or RAROC-based) models were created, and the resulting new pricing schedules delivered to the frontline. At the same time, sales incentives were adjusted to reward customer profitability versus volume. The result? Customer attrition (not only of the unprofitable ones) and price over-rides went through the roof and, ultimately, significant value was destroyed by the effort. The rational change manager scratches his or her head in confusion wondering, What went wrong? The inconvenient truth is that employees will go against their own self-interest (read: incentives) if the situation violates other notions they have about the way the world should work, in particular, in relation to fairness and justice. In the case of the banking price-rise example described above, whether right or wrong, the frontline view of the pricing and incentive changes was that they were unfair to the customer, a symbol of increasingly greedy executives losing sight of customer service. Even though it meant they were less likely to achieve their individual sales goals, a significant number of bankers vocally bad-mouthed the banks policies to customers, putting themselves on the customers side, rather than the banks. Where possible, price over-rides were then used to show good faith to customers and inflict retribution on the greedy executives. #8: Employees are what they think.Many managers believe in their heart of hearts that the soft stuffemployees thoughts, feelings and beliefshas no place in workplace dialog. All that matters is that they behave in the ways I need them to; it doesnt matter why, they will say. While rationalbehaviors drive performance after allthis view misses the point that it is employees thoughts, feelings and beliefs that drive their behaviors. Ignoring the underlying mindsets of employees during change is to address symptoms rather than root causes. #9: Good intentions arent enough.It is well documented that after three months adults retain only 10 percent of what they have heard in lecture-based training sessions (e.g., presentations, videos, demonstrations,discussions). When they learn by doing (e.g., roleplays, simulations, case studies), 65 percent of the learning is retained. And when they practice what they have learnt in the workplace for a number of weeks, almost all of the learning can be expected to be retained.32 Accordingly, effective skillbuilding programs are replete with interactive simulations and role plays to ensure time spent in the training room is most effective. Further, commitments are made

by participants regarding what they will practice back in the workplace (My Monday morning takeaway is) to embed the learnings. This is all well and good, except that come Monday morning, very few keep their commitments. Given this aspect of human nature, it is unreasonable to expect that most employees will genuinely practice new skills and behaviors back in the workplace if nothing formal has been done to lower the barriers to doing so. The time and energy required to do something additional, or even to do something in a new way, simply dont exist in busy executives day-to-day schedules. Ironically, this is particularly the case in the days following training programs, when most managers are playing catch-up from their time away. This failure to formalize and create the space for practice back in the workplace dooms most training programs to deliver returns that are at best 65 percent of their potential.

Managing Organizational Change in the workplace of Mckinsey but it was not successful:
Mckinsey focused more on the structural change in their organization during 2000 when they moved more towards globalization of their company by understanding the forces of change in todays business and social environment,they focused more on : change in composition in gender and nationality of workforce rising employee expectations of work-life balance change in upper levels of management high rates of turnover and absenteeism rising employee expectations for greater involvement in decision-making : As

For this they worked on various aspects to cover it and few of them are as under explained if will the change be : 1. a) Incremental and linear such as introducing a new payroll system b)Transformational and multi-dimensional such as merging two companies .

Incremental and linear change is change that is undertaken where one step follows the last in a predetermined and well-anticipated sequence. This type of change leaves the fundamentals of the organization, such as values and vision, relatively untouched. On the other hand, transformational change impacts the organization at a very deep level. Attitudes, values and behaviors are changed significantly for a number of stakeholders and in a variety of ways. Unlike linear change, the outcome of the change process is unclear and not easy to predict. Upgrading office staff personal computers is an example of incremental change. The steps involved are well known and sequential. Purchasing the software comes before installation, which comes before training. The depth of organizational impact is also low, being restricted to one set of behaviors in one target group; the way office workers use their computers for everyday tasks.

On the other hand, implementing Total Quality Management (TQM) requires extensive involvement of a broad range of stakeholders, both within and beyond the organization; senior executives, supervisors, frontline employees, customers and suppliers. It also requires changes in many deeply ingrained behaviors and attitudes, from leadership to customer focus to teamwork to planning and goal setting. Another feature of transformational change is that a number of sub-programs run concurrently. Training on TQM improvement tools will run at the same time that document management and supplier appraisal systems are set up. Given the complexities and interdependencies of such a transformational change, the exact outcome of the TQM initiative is also somewhat uncertain. Incremental and linear change is change that is undertaken where one step follows the last in a predetermined and well-anticipated sequence. This type of change leaves the fundamentals of the organization, such as values and vision, relatively untouched. On the other hand, transformational change impacts the organization at a very deep level. Attitudes, values and behaviors are changed significantly for a number of stakeholders and in a variety of ways. Unlike linear change, the outcome of the change process is unclear and not easy to predict. The change activities and detailed outcomes of change in Mvkinsey can also be determined by management or by the people actually doing the work: 3. driven by top management agenda for change, or in which senior managers set the direction and

4.emerging from frontline workers in which employees are empowered to determine their own future Some changes, of necessity, will need to be more coercive than others. A company that is about to go into liquidation is a good example. In this case, a more collaborative approach will fail for two reasons. Firstly, the company will be out of business before all employees are consulted for their input and group agreement is reached. Secondly, it was the old-style thinking that put the company in the dire straits that it now finds itself. A wrench from the old way of thinking is what the company needs to advance from its present predicament. Once the emergency has passed, the organization may embrace the second, emergent approach that involves employees in the decision-making. In non-urgent situations where deep organizational changes are required, consider using elements of both strategies, with the general direction led by senior managers and local goal setting and implementation performed by affected employees. Once again, the outcomes due to change emerging from empowered frontline employees are harder to define and predict. However, top down change carries its own significant risk of frontline employees feeling disenfranchised and resentful.