Company culture key to successful change

MANAGEMENT consultants have presented themselves as the prophets of success for so long that it comes as something of a surprise to find them admitting to failure.

But no sooner have Michael Hammer and James Champy, authors of the best- selling Re-engineering the Corporation, confessed that 70 per cent of the 're-engineerings' with which they have been associated have not achieved what they set out to do than along comes Arthur D Little, which says the problem is far bigger than that. A recent survey of 350 US companies and 200 in Europe showed that all were undergoing big programmes of change. But no more than about a fifth were really happy with the results.

So, what is going on? Part of the problem, says Peter Scott-Morgan, associate director at Arthur D Little, results from the 'conspiracy of silence' surrounding the issue. Nobody disputes the high failure rate, but nor does anybody put their hand up and say that, yes, they were one of the failures. As a chief executive told Mr Scott-Morgan recently: 'It's all a bit embarrassing.'

The difficulties are particularly acute in the United States, which jumped on the re-engineering bandwagon earlier and with greater zeal than Europe. But there is no reason why organisations on this side of the Atlantic should follow them, Mr Scott-Morgan says.

Close analysis of the failures suggests that the reason for them does not lie in the redesign itself. Fundamentally changing the ways things are done makes sense. Instead, the cause of failure is the approach.

Chief executives focus on the formal aspects of the organisation they are trying to change. But in playing by the 'written rules of the game' they ignore the powerful 'unwritten rules'.

These rules - often referred to as the culture of the company - usually have much more effect on the way the company operates than the formal principles espoused by managers, particularly those given to issuing mission statements or corporate visions.

Because they are unsaid and can be picked up only over the passage of time, they can account for the frequent failure of outsiders to turn around ailing companies.

A typical written rule would be: 'To become a top manager, get broad experience.' Its unwritten equivalent would be: 'To get to the top, job hop as fast as possible.'

As Mr Scott-Morgan accepts, this is hardly mind-boggling. Every organisation - even those lauded in the management books - has its share of cynics who hear the chief executive extolling teamwork but know that the way to get ahead is to stand out from the crowd.

What this often translates into is short-termism when the board is talking about long- term views, lack of co-operation between departments and the like.

Accordingly, it is hardly surprising that programmes involving great changes run up against potentially fatal obstacles. But the fact that everybody knows about these underlying factors - and can therefore predict the problems - also means that, in theory, they can be resolved.

In his book, The Unwritten Rules of the Game (McGraw- Hill, pounds 18.95), Mr Scott-Morgan explains how managers can decipher the unwritten rules and spot the precise causes of the trouble.

'Unwritten rules are neither good nor bad; they are simply appropriate or inappropriate to what top management is trying to achieve,' he said. And the route to certain failure is for senior executives to try to force through the changes in the face of this hostility.

This is because when, after an initial period of success, the programme starts hitting the undercurrents of the unwritten rules those involved start working harder, become burnt out and finally become disillusioned.

As a result, all kinds of unforeseen side-effects arise. A common one is that job security suddenly leaps to the top of employees' lists of concerns.

All of this has especial relevance for management consultants. Long criticised for sending in armies of young graduates who write weighty reports that fly in the face of reality, they will have to be more pragmatic, Mr Scott-Morgan says.

In particular, they will have to settle the conflict between answering to the chief executive who pays their bills and serving the whole company.

(Photograph omitted)