JWI 555 Organizational Change & Culture, week3 summary, 4/28/13
What an
outstanding week of learning this was ! I know how a hummingbird would
feel when it senses its wings and feels its ability to flap them at
astonishing speeds. There is lift off. And so does my spirit of
leadership.
The intellectual guns were
blazing in the war against complacency in organizations.
We learned how to use the power of emotions in starting with why,
communicating a sense of
urgency and using stretch goals to drive higher performance in
organizations - to reach higher than what the team thought was possible.
The blue print for a movement from Derek Sivers made us comfortable
with being
in "lone nut" mode when we find ourselves there from time to time.
I
am using these principles daily and am finding them at a time when I
need them most - in the middle of leadership role in technology
development where change happens faster than in almost any other field
and culture is THE defining factor in winning.
This
continues to be an intense and highly challenging program. Jack Welch's
video about commitment gave me the cheer I needed to keep going - much
like a marathon runner would feel approaching the finish line exhausted
and exhilarated at the same time.
Takeaways below
Dr DP
JWI 555 Organizational Change & Culture, week3 summary, 4/28/13
I. Jack & Suzy Welch "Making Change Happen"
****************************************
change initiative (seed) => expand => go after a new idea
Transformative efforts take 3-5-7 years
Change the culture of the company and make it Part of the system
Avoid Traps: Stay engaged - keep it new, and keep reinventing
(1) Don't launch an initiative with lot of fanfare & then 12 mo later launch a new one.
(2) Not putting best people on it sends wrong message
If something is important, note who is leading the change
Put best people, leaders in charge, convey to all that this matters
(3) Don't publicly promote people who don't embrace the initiative
Employees should know "This is a train worth getting on - Bam Bam ! & What's in it for me ?"
II. Simon Sinek "How Leaders Inspire Action"
************************************
Great leaders inspire action by starting with why
Why - what I believe is the emotional side
How & What are the logical side
III. Derek Sivers "How to Start a Movement"
*************************************
Lone nut - have the guts to stand out, stand alone and be ridiculed
First follower - embrace him as equal; it is not just about leader; it is about them; shift center of gravity from me to we
Second follower - 3 is a crowd; it is news; attracts public attention
Early adopters - new followers emulate the follower & not the leader; tipping point
Majority-
won't stand out, don't want to be ridiculed but know they will be part
of "in crowd" if they hurry now that risk is low
Leadership is over glorified
First follower transformed the lone nut into the leader
Have the guts to be the first one to find a lone nut and join in
IV. Demand Better Performance & Get Better Results (Schaffer, 1991) & JWI 555 W3L2
**********************************************************************
1. Make the business case - Start with an urgent problem.
**********************
2. Select the goal and specify the minimum expectation of results.
*****************************************************
Broad, far-reaching, or amorphous goals should be narrowed to one or two specific, measurable ones.
eg. each business unit should be ranked #1 or #2 in their markets
With
stretch goals, challenge and help employees do something beyond what
they thought they could do and also create urgency for change.
Avoid demotivating & dysfunctional stretch goals.
3. Communicate your expectations clearly and relentlessly
************************************************
(i) appeal to people's emotions, feelings, core values and not just the intellects
***************************************************************
start with why (limbic brain governs feelings & behaviors and has much greater impact on people's actions)
then
how & what (neo cortex controls rational & analytical behavior)
- ask for original ways to think about the problem, technological
breakthrough
(ii) overcommunicate 10X
**********************
Use different types of media and forums
Repeat, Repeat, Repeat
Lead by example: your decisions should relect your stated priorities; every conversation should convey a sense of urgency
4. Monitor the project, but delegate responsibility.
*******************
5. Hold people accountable for achievements
*************************************
Assess, cultivate, manage and reward people against the clear goals using 20/70/10 Differentiation principle
Shower the top 20% of employees with bonuses, stock options, prasie, love, training, variety of rewards to pocketbooks and souls
6. Unleash more creative juices !
****************************
Use new stretch goals to shape and direct the evolution of an organization.
eg.
for businesses that have reached #1 or #2 positions in industry, ask
them to imagine their share in a new market is only 5-10%...ask them to
describe the market
and say what they would do to increase market share.
***************
More insights from Schaffer:
(a) Focus on one or two vital goals - non negotiable expectations
Assess organization readiness
Select and define the goal
Specify minimum expectation of results (avoid far reaching amorphous goals)
Assign responsibility for results to individuals
(b) Ensure organization receives clear demands & expectations
- Communicate expectations clearly with responsible persons
- orally and in writing (goals, timetable, constraints)
(c) Anticipate pitfalls
subordinates may test demands by ignoring the boss or by saying "it can't be done"
when responsibility for results is not explicitly assigned, people delegate it up to boss.
(d) Monitor the project, delegate responsibility
Assess progress with work-planning discipline
Ensure management is wired in, tenaciously pushing project forward
(e) Expand results with step by step expansion strategy
Use Early success to extend the first goal and set additional goals
Expand and extend the process once success achieved on first set of demands
Repeat process on new goals or extensions of first and expand
provide reinforcement to shoot for more ambitious targets
(f) Check Outcomes
Multiply the results to the organization
Create a Results oriented environment
Achieve greater job satisfaction, mutual respect, better relationships
(f) Shift management style with org dynamics
Use sophisticated planning techniques, job redesign, closer line staff collaboration
IV. Week3, Lecture1
****************
Apollo13 Case Study
******************
During crisis change happened in a rapid, spontaneous, uninhibited way
Repurpose the lunar module
Makeshift system
New methods tested in real time
Crisis releases hidden potential - forces people to tap into hidden reserves of creativity, commitment, energy
Crisis forces everyone to see consequences of failure and measures of success
Waiting to act is not an option - results must be achieved quickly
Jump in to do whatever you can, regardless of formal position or title
Lots of experimentation, willingess to take good ideas from anyone on the team
Participants feel a great sense of team work - competing agendas and priorities suspended
Without a crisis, building urgency is a leader's first job.
A critical mass of key leaders & employees must share the sense of urgency.
Sources of complancency
************************
- Absence of major and visible crisis
- too many visible resources
- low overall performance standards
- Org structures that focus employees on narrow functional goals
- internal measurement systems that focus on wrong performance indexes
- lack of sufficient performance feedback from external sources
- kill the messenger of bad news, low candor, low confrontation culture
- human nature, with its capacity for denial, especially if people are already busy or stressed
- too much happy talk from sr management
Establish a shared sense of urgency
******************************
Build a business case for change
- use data to illuminate risks and opportunities
- bring the outside world in
Cornerstones of a case for change
*****************************
A crisis of any kind;
Negative trends in key performance indicators (e.g., sales, profits, membership, market share, new customers);
Emergence of a new competitor or game-changing technology in your industry;
Emergence of a new competitor or game-changing technology in an
adjacent industry (think about the impact the iPod had on the music
industry);
Restructuring or consolidation in your industry or among your customers or suppliers;
Big social or demographic shifts;
Changes in popular culture or values;
Emerging needs, markets, or skills in other countries; and
Trends toward significant shortages or availability of key inputs or outputs.
IV. DQ1 - Sources of Complacency & driving urgency
******************************************
Consider either a work or social organization you are currently a part of and Identify one major change that needs to be made.
Check
what level of urgency most people are currently feeling regarding the
change and what are the major sources of complacency.
V. DQ2 - How to handle requests for change when approaching individuals
************************************************************
Start with why, appeal to emotions and logic. Follow the framework learned in class.
Sunday, April 28, 2013
Saturday, April 27, 2013
Bond valuation - Capitalize on market shifts
JWI 531 Financial Management II, Week3 summary, 4/27/13
How to value Bonds and capitalize on shifts in the bond markets to strike the best deal for your organization.
Takeaways this week are :
1. Bond market
Bonds are also known as Debt, fixed income, credit
Purpose of Bonds - help finance institutional initiatives
Companies, Govts, nonprofits turn to bond market to raise capital
2. Bond basics
investor receives interest payments from borrower
when bond matures, principal is returned to investor
3. Face value or Par value is the amount borrower promises to repay to an investor at maturity
4. Coupon rate is the annual interest on principal
5. Yield is the total return earned on a bond at maturity
6. When interest rates rise, existing Bond prices fall - this is because newer bonds issued at higher interest rate will deliver higher returns and therefore be in higher demand
7. Top credit rating agencies in the US - Moody's, Stand & Poor's, Fitch
They classify bonds as Investment Grade, Junk Grade
8. Fixed income investments in the US
(a) Treasurys - investors lend money to US govt; perceived as risk free; can print money to repay debt; highest quality investing instrument so far; this status may change
(b) Agencies - investors take loans from Banks; agencies such as US government & quasi-government agencies***buy the loans, repackage them (Mortgage backed securities) and sell to investors
***Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage corp (Freddie Mac), Govt National Mortgage Association (Ginnie Mae)
(c) Corporate Bonds - Companies sell bonds to raise capital just like they do with stocks.
(d) Municipal bonds - issued by state & local governments to raise funds; higher risk of bankruptcy and therefore must pay higher interest; raise taxes or cut expenses to manage.
(e) International bonds - BRIC,Mexico, Venezuela, Eurozone, Far East offer sovereign bonds like US Treasury or foreign corporate bonds; higher perceived risk and therefore higher
interest rate; volatility from interest rates and inflation.
9. Risk from Bond issuer point of view
Fixed income investments in the US (JWI 531, W3, L1)
(i). Treasurys - investors lend money to US govt which is perceived as risk free. US government can print money to repay debt, which makes this the highest quality investing instrument.
Risk: This status as risk free instrument may change within this century. If investors lose faith in the US government and leave is droves, forcing the US government to print more money, the value of the dollar will go down with long term stalling and repurcussions to economy.
(ii). Agencies - investors take loans from Banks; agencies such as US government & quasi-government agencies***buy the loans, repackage them (Mortgage backed securities) and sell to investors
***Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage corp (Freddie Mac), Govt National Mortgage Association (Ginnie Mae)
Risk: Complexity rises to a point where issuer is no longer in control and a global financial meltdown looms like the one we had in 2007-2009.
(iii). Corporate Bonds - Companies sell bonds to raise capital just like they do with stocks.
Risk: Risk of Default would bring down the credit rating of the firm. The firm will lose potential investors in the future.
(iv). Municipal bonds - issued by state & local governments to raise funds
Risk: higher risk of bankruptcy since unlike the Federal government, state and local governments can't print more money and therefore must pay higher interest. Munis must raise taxes or cut expenses to manage - both are unpopular among voters.
(v). International bonds - BRIC,Mexico, Venezuela, Eurozone, Far East offer sovereign bonds like US Treasury or foreign corporate bonds; Risk - higher perceived risk and therefore must offer higher interest rate; volatility from changes in interest rates and inflation. Changes in unstable political regimes can make this a shaky investment.
10. Risk from a bond investor point of view
Risk of investing in bonds is the chance that one will lose some or all the money invested.
Various types of risks are shown below along with the impact to the bottom line for the investor.
In a developing economy like India, inflation poses the greatest risk. We see the impact of inflation already with commodity prices - such as tomatoes and onions - showing a sharp rise and causing major challenges to those in lower economic strata.
In a developed economy such as the US, rise in interest rate over the long term poses a higher risk.
Over a long term, interest rates are generally expected to climb up.
Risk Type Scenario Impact
1. Market Bond Market Declines Lose Money
2. Selection Chosen Security underperforms market Lower Returns
3. Timing Value declines after purchase, rises after sale Missed Opportunity
4. Event LBO, Debt restructuring, Merger, Recap Delayed payments
5. Default Issuing company troubled & files for bankruptcy Missed payments
6. Downgrade Company perceived by market to be riskier Selling price falls
7. i% Rate Rising interest rate Bond price falls
8. Contraction Declining interest rate, faster prepayment Reinvest at lower rate
9. Extension Rising interest rate, principal returned late Missed opportunity for higher yields
10. Inflation Value of principal falls Par value worth less in future
11. Call Company returns principal early NET Return drops
12. Taxation Investor should pay Capital gains taxes Cost of bond increases
13. Liquidity Bonds trade only sporadically Can't get out quickly
14. Reinvestment reinvest interest income & returned principal Lower rate of return
Dr DP
References
1.JWI 531 Week3, Lecture1
2. http://www.investinginbonds.com/learnmore.asp?catid=3&id=383
3. http://money.cnn.com/magazines/moneymag/money101/lesson7/index5.htm
4. http://www.investopedia.com/articles/bonds/08/bond-risks.asp
How to value Bonds and capitalize on shifts in the bond markets to strike the best deal for your organization.
Takeaways this week are :
1. Bond market
Bonds are also known as Debt, fixed income, credit
Purpose of Bonds - help finance institutional initiatives
Companies, Govts, nonprofits turn to bond market to raise capital
2. Bond basics
investor receives interest payments from borrower
when bond matures, principal is returned to investor
3. Face value or Par value is the amount borrower promises to repay to an investor at maturity
4. Coupon rate is the annual interest on principal
5. Yield is the total return earned on a bond at maturity
6. When interest rates rise, existing Bond prices fall - this is because newer bonds issued at higher interest rate will deliver higher returns and therefore be in higher demand
7. Top credit rating agencies in the US - Moody's, Stand & Poor's, Fitch
They classify bonds as Investment Grade, Junk Grade
8. Fixed income investments in the US
(a) Treasurys - investors lend money to US govt; perceived as risk free; can print money to repay debt; highest quality investing instrument so far; this status may change
(b) Agencies - investors take loans from Banks; agencies such as US government & quasi-government agencies***buy the loans, repackage them (Mortgage backed securities) and sell to investors
***Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage corp (Freddie Mac), Govt National Mortgage Association (Ginnie Mae)
(c) Corporate Bonds - Companies sell bonds to raise capital just like they do with stocks.
(d) Municipal bonds - issued by state & local governments to raise funds; higher risk of bankruptcy and therefore must pay higher interest; raise taxes or cut expenses to manage.
(e) International bonds - BRIC,Mexico, Venezuela, Eurozone, Far East offer sovereign bonds like US Treasury or foreign corporate bonds; higher perceived risk and therefore higher
interest rate; volatility from interest rates and inflation.
9. Risk from Bond issuer point of view
Fixed income investments in the US (JWI 531, W3, L1)
(i). Treasurys - investors lend money to US govt which is perceived as risk free. US government can print money to repay debt, which makes this the highest quality investing instrument.
Risk: This status as risk free instrument may change within this century. If investors lose faith in the US government and leave is droves, forcing the US government to print more money, the value of the dollar will go down with long term stalling and repurcussions to economy.
(ii). Agencies - investors take loans from Banks; agencies such as US government & quasi-government agencies***buy the loans, repackage them (Mortgage backed securities) and sell to investors
***Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage corp (Freddie Mac), Govt National Mortgage Association (Ginnie Mae)
Risk: Complexity rises to a point where issuer is no longer in control and a global financial meltdown looms like the one we had in 2007-2009.
(iii). Corporate Bonds - Companies sell bonds to raise capital just like they do with stocks.
Risk: Risk of Default would bring down the credit rating of the firm. The firm will lose potential investors in the future.
(iv). Municipal bonds - issued by state & local governments to raise funds
Risk: higher risk of bankruptcy since unlike the Federal government, state and local governments can't print more money and therefore must pay higher interest. Munis must raise taxes or cut expenses to manage - both are unpopular among voters.
(v). International bonds - BRIC,Mexico, Venezuela, Eurozone, Far East offer sovereign bonds like US Treasury or foreign corporate bonds; Risk - higher perceived risk and therefore must offer higher interest rate; volatility from changes in interest rates and inflation. Changes in unstable political regimes can make this a shaky investment.
10. Risk from a bond investor point of view
Risk of investing in bonds is the chance that one will lose some or all the money invested.
Various types of risks are shown below along with the impact to the bottom line for the investor.
In a developing economy like India, inflation poses the greatest risk. We see the impact of inflation already with commodity prices - such as tomatoes and onions - showing a sharp rise and causing major challenges to those in lower economic strata.
In a developed economy such as the US, rise in interest rate over the long term poses a higher risk.
Over a long term, interest rates are generally expected to climb up.
Risk Type Scenario Impact
1. Market Bond Market Declines Lose Money
2. Selection Chosen Security underperforms market Lower Returns
3. Timing Value declines after purchase, rises after sale Missed Opportunity
4. Event LBO, Debt restructuring, Merger, Recap Delayed payments
5. Default Issuing company troubled & files for bankruptcy Missed payments
6. Downgrade Company perceived by market to be riskier Selling price falls
7. i% Rate Rising interest rate Bond price falls
8. Contraction Declining interest rate, faster prepayment Reinvest at lower rate
9. Extension Rising interest rate, principal returned late Missed opportunity for higher yields
10. Inflation Value of principal falls Par value worth less in future
11. Call Company returns principal early NET Return drops
12. Taxation Investor should pay Capital gains taxes Cost of bond increases
13. Liquidity Bonds trade only sporadically Can't get out quickly
14. Reinvestment reinvest interest income & returned principal Lower rate of return
Dr DP
References
1.JWI 531 Week3, Lecture1
2. http://www.investinginbonds.com/learnmore.asp?catid=3&id=383
3. http://money.cnn.com/magazines/moneymag/money101/lesson7/index5.htm
4. http://www.investopedia.com/articles/bonds/08/bond-risks.asp
Sunday, April 21, 2013
Stock Valuation Techniques
JWI 531 Financial Management II, 4/21/13
Stock valuation methods:
1. Earnings based valuation:
Earnings per share (EPS)
Price to Earnings (P/E)***
Price to Earnings Growth (PEG)
*** P/E = share price divided by earnings per share = market capitalization divided by net income
2. Revenues based models: Price to Sales ratio (P/S)
3. Cash Flow based model:
Cash Flow(EBITDA) - Earnings before interest, tax, depreciation, amortization
Discounted Cash Flow (DCF)
Economic Value Added (EVA)
Price to Cash Flow ratio (P/CF)
Price to Free Cash Flow (P/FCF)
4. Equity based valuation:Price to Book value ratio (P/BV)
- Look for discrepancy between what the company owns vs what the company is selling for in the market
- aggressive investors identify undervalued assets on the books of a firm, acquire controlling stake, break up the firm, sell it piece by piece, force market to revalue assets individually
Dr DP
Stock valuation methods:
1. Earnings based valuation:
Earnings per share (EPS)
Price to Earnings (P/E)***
Price to Earnings Growth (PEG)
*** P/E = share price divided by earnings per share = market capitalization divided by net income
2. Revenues based models: Price to Sales ratio (P/S)
3. Cash Flow based model:
Cash Flow(EBITDA) - Earnings before interest, tax, depreciation, amortization
Discounted Cash Flow (DCF)
Economic Value Added (EVA)
Price to Cash Flow ratio (P/CF)
Price to Free Cash Flow (P/FCF)
4. Equity based valuation:Price to Book value ratio (P/BV)
- Look for discrepancy between what the company owns vs what the company is selling for in the market
- aggressive investors identify undervalued assets on the books of a firm, acquire controlling stake, break up the firm, sell it piece by piece, force market to revalue assets individually
Dr DP
Lead Change with Kotter's 8-Steps
JWI 555 Org Change & Culture, Week2 Lecture1, 4/21/13
Superb week. Helped me internalize Kotter's 8 step process for leading change. So far I was leading change with a gut feel about how to do it. Now with Kotter's 8 step process that draws from GE's change methdology, I am equipped with a solid, clear and proven framework. I feel more empowered as a change agent.
Dr DP
JWI 555 Org Change & Culture, Week2 Lecture1, 4/21/13
************************************************
I. History of Organizational change & management
*****************************************
In an uncertain future participatory management, adaptability to change are key. Strictly hierarchical organizations that assume people would do as they are told no longer work.
Technology and Globalization are major forces of change.
Decentralization is not a panacea. Important changes in marketplace need to be watched carefully and if necessary rebuild systems, processes, structures, and management culture. Orchestrate the change effort. Manage communication. Mobilize political support. Align measurements and rewards.
Major change does not happen easily. Lead rather than manage - use Kotter's 8 steps framework.
Management: Set of processes that can keep a complicated system of people and technology running smoothly.
Leadership: Set of processes that creates organizations in the first place or adapts them to significantly changing circumstances.
II. John Kotter 8 Steps for Leading Change (kotterinternational.com)
(1) Establish a sense of urgency:
**************************
Help others feel the need to move and win now
Make the case for change and help others see the need for change and the importance of acting immediately
Get the pulse of the organization and see where it stands:
Complacency: "everything is fine" attitude and failure to react to signs
False Urgency: busy work does not translate to results that matter
True urgency: gut level determination to move, win now
How to create urgency?
Guaranteed to fail: appeal just to the head with a compelling business case
Guaranteed to succeed: aim for the heart; connect to the deepest values of people and inspire them to greatness
make the business case come alive with human experience, engage the senses, create simple/imaginative messages, call people to aspire
(2) Create the guiding coalition:
*********************************
Put together a group with enough power to lead the change
Mobilize commitment to change and fight forces of inertia
Effective Guiding Coalitions must have:
(i) Right composition - Position power, expertise, credibility, proven leaders with ability to drive change
(ii) Significant level of trust - this is the glue that makes teams function well; team-build in an off-site activity; connect hearts & minds of members
(iii) Shared objective
(3) Develop a change vision
****************************
Clarify how the future will be different from the past
Clear vision inspires and guides action by serving important purposes:
- simplify decisions by making sense of things to both mind and heart
- motivate people to take action in right direction though first steps are painful
- coordinate actions of people in fast and efficient way
- demand sacrifices to create a better future for all stakeholders
Vision undergirded with strong credible strategy, plan, budget makes it evident to stakeholders the vision is not a pipe dream
Vision must be communicable - must quickly make intuitive sense
Clear vision does more than an authoritarian decree or micromanagement
Effective visions are
(i) Imaginable: convey clear picture of what the future will look like
(ii) Desirable: appeal to long-term interest of stakeholders
(iii) Feasible: contain realistic and attainable goals
(iv) Focused: clear enough to provide guidance to decision making
(v) Flexible: allow individual initiative and alternate responses in changing conditions
(vi) Communicable: easy to explain and communicate
(4) Communicate the change vision for buy-in
*********************************************
Ensure as many people as possible understand and accept the vision
Undercommunication and inconsistency stall transformations.
Communicate in hour-by-hour activities, refer in emails, meetings, presentations.
Turn ritualistic, tedious meetings into lively transformation discussions.
Effective communication means:
Keep it simple - no jargon or techno babble; fewer words are better
vivid - use pictures, metaphors,analogy, examples
repeatable - ideas should be spreadable by anyone to anyone
invite - two way communication is more powerful than one way monologue
model - actions speak louder than words; eliminate inconsistent actions; be the change and motivate/inspire
(5) Empower employees for broad-based action
*********************************************
Structural conflict issues:
customer focus vs fragmented resources and responsibilities for products & services
local responsiveness vs layers of management that second guess and criticize regional decisions
increase productivity for low cost vs costly procedures and programs
Realign incentives and performance appraisals.
Improve Management Info Systems (MIS) - up to date competitive information and market analysis; close feedback loop with key info efficiently
Confront troublesome supervisors with honest dialog - explain how their style inhibits change
(6) Generate short-term wins (6-18 months):
*******************************************
Create visible, unambiguous success as soon as possible.
Carefully plan and direct the effort - Overcome political forces.
Wins must be clearly related to change effort.
Provide evidence that sacrifices of people is paying off.
Increase sense of urgency and optimism. Boost morale & motivaiton.
Gain support from bosses, board, shareholders.
Turn neutral people intosupporters.
Early successes build momentum and learning
Lack of short term wins can be due to
- insufficient management expertise in the guiding coalition
- lack of commitment by managers to the change initiative
(7) Consolidate gains and produce more change
*********************************************
Beware - resistance will reassert itself.
Don't let down the guard and keep up the sense of urgency.
Managers tend to think short term; Leaders must steer for long term.
If successful you will see
- launch more projects to drive change deeper into the org
- additional people brought to help with the changes
- senior leadership focused on giving clarity to an aligned vision and shared purpose
- employees empowered at all levels to lead projects
- reduced interdependencies between areas
- constant effort to keep urgnecy high
- consistent show of proof that the new way is working
- firmly ground the new practices in org culture
(8) Make it stick
******************
Anchor new approaches in the culture for sustained change
Culture = norms of behavior + shared values
Cultural change comes last, not first
You must prove that the new way is superior to the old
Success must be visible and well communicated
Lose some people
refinforce new norms and values with incentives and rewards - promotions
reinforce culture with every new employee
Anchor new approaches in the culture
III. President Obama's Change Agenda
Defense, Foreign Affairs, Economic Recovery (Jobs), Healthcare, Environment, Education.
Effective Coalition building may be the toughest challenge faced.
Superb week. Helped me internalize Kotter's 8 step process for leading change. So far I was leading change with a gut feel about how to do it. Now with Kotter's 8 step process that draws from GE's change methdology, I am equipped with a solid, clear and proven framework. I feel more empowered as a change agent.
Dr DP
JWI 555 Org Change & Culture, Week2 Lecture1, 4/21/13
************************************************
I. History of Organizational change & management
*****************************************
In an uncertain future participatory management, adaptability to change are key. Strictly hierarchical organizations that assume people would do as they are told no longer work.
Technology and Globalization are major forces of change.
Decentralization is not a panacea. Important changes in marketplace need to be watched carefully and if necessary rebuild systems, processes, structures, and management culture. Orchestrate the change effort. Manage communication. Mobilize political support. Align measurements and rewards.
Major change does not happen easily. Lead rather than manage - use Kotter's 8 steps framework.
Management: Set of processes that can keep a complicated system of people and technology running smoothly.
Leadership: Set of processes that creates organizations in the first place or adapts them to significantly changing circumstances.
II. John Kotter 8 Steps for Leading Change (kotterinternational.com)
(1) Establish a sense of urgency:
**************************
Help others feel the need to move and win now
Make the case for change and help others see the need for change and the importance of acting immediately
Get the pulse of the organization and see where it stands:
Complacency: "everything is fine" attitude and failure to react to signs
False Urgency: busy work does not translate to results that matter
True urgency: gut level determination to move, win now
How to create urgency?
Guaranteed to fail: appeal just to the head with a compelling business case
Guaranteed to succeed: aim for the heart; connect to the deepest values of people and inspire them to greatness
make the business case come alive with human experience, engage the senses, create simple/imaginative messages, call people to aspire
(2) Create the guiding coalition:
*********************************
Put together a group with enough power to lead the change
Mobilize commitment to change and fight forces of inertia
Effective Guiding Coalitions must have:
(i) Right composition - Position power, expertise, credibility, proven leaders with ability to drive change
(ii) Significant level of trust - this is the glue that makes teams function well; team-build in an off-site activity; connect hearts & minds of members
(iii) Shared objective
(3) Develop a change vision
****************************
Clarify how the future will be different from the past
Clear vision inspires and guides action by serving important purposes:
- simplify decisions by making sense of things to both mind and heart
- motivate people to take action in right direction though first steps are painful
- coordinate actions of people in fast and efficient way
- demand sacrifices to create a better future for all stakeholders
Vision undergirded with strong credible strategy, plan, budget makes it evident to stakeholders the vision is not a pipe dream
Vision must be communicable - must quickly make intuitive sense
Clear vision does more than an authoritarian decree or micromanagement
Effective visions are
(i) Imaginable: convey clear picture of what the future will look like
(ii) Desirable: appeal to long-term interest of stakeholders
(iii) Feasible: contain realistic and attainable goals
(iv) Focused: clear enough to provide guidance to decision making
(v) Flexible: allow individual initiative and alternate responses in changing conditions
(vi) Communicable: easy to explain and communicate
(4) Communicate the change vision for buy-in
*********************************************
Ensure as many people as possible understand and accept the vision
Undercommunication and inconsistency stall transformations.
Communicate in hour-by-hour activities, refer in emails, meetings, presentations.
Turn ritualistic, tedious meetings into lively transformation discussions.
Effective communication means:
Keep it simple - no jargon or techno babble; fewer words are better
vivid - use pictures, metaphors,analogy, examples
repeatable - ideas should be spreadable by anyone to anyone
invite - two way communication is more powerful than one way monologue
model - actions speak louder than words; eliminate inconsistent actions; be the change and motivate/inspire
(5) Empower employees for broad-based action
*********************************************
Structural conflict issues:
customer focus vs fragmented resources and responsibilities for products & services
local responsiveness vs layers of management that second guess and criticize regional decisions
increase productivity for low cost vs costly procedures and programs
Realign incentives and performance appraisals.
Improve Management Info Systems (MIS) - up to date competitive information and market analysis; close feedback loop with key info efficiently
Confront troublesome supervisors with honest dialog - explain how their style inhibits change
(6) Generate short-term wins (6-18 months):
*******************************************
Create visible, unambiguous success as soon as possible.
Carefully plan and direct the effort - Overcome political forces.
Wins must be clearly related to change effort.
Provide evidence that sacrifices of people is paying off.
Increase sense of urgency and optimism. Boost morale & motivaiton.
Gain support from bosses, board, shareholders.
Turn neutral people intosupporters.
Early successes build momentum and learning
Lack of short term wins can be due to
- insufficient management expertise in the guiding coalition
- lack of commitment by managers to the change initiative
(7) Consolidate gains and produce more change
*********************************************
Beware - resistance will reassert itself.
Don't let down the guard and keep up the sense of urgency.
Managers tend to think short term; Leaders must steer for long term.
If successful you will see
- launch more projects to drive change deeper into the org
- additional people brought to help with the changes
- senior leadership focused on giving clarity to an aligned vision and shared purpose
- employees empowered at all levels to lead projects
- reduced interdependencies between areas
- constant effort to keep urgnecy high
- consistent show of proof that the new way is working
- firmly ground the new practices in org culture
(8) Make it stick
******************
Anchor new approaches in the culture for sustained change
Culture = norms of behavior + shared values
Cultural change comes last, not first
You must prove that the new way is superior to the old
Success must be visible and well communicated
Lose some people
refinforce new norms and values with incentives and rewards - promotions
reinforce culture with every new employee
Anchor new approaches in the culture
III. President Obama's Change Agenda
Defense, Foreign Affairs, Economic Recovery (Jobs), Healthcare, Environment, Education.
Effective Coalition building may be the toughest challenge faced.
Saturday, April 13, 2013
Be a Change Agent - Change the Game
JWI 555 Organizational Change & Culture, Week1 Notes, 4/13/13
It is the leader's job to look into the future with industry leading thoughts, see around corners and steer the direction of the firm to seize opportunities and avoid train wrecks.
I. Why organizations change ?
(a) Forces driving change
***********************
- Orgs evolve over time
- companies react to competitive pressures
- leaders pursue new agendas
- products progress thru life cycles
- Technology that transforms manufacturing, finance, medical, science
eg. Computing devices, Internet, Globalization, Social media, Mobile, Wireless
(i) Technology
***************
- multiplies speed & quantity of work that can be done
- distributes work across traditional boundaries of function, organization, geography
- restructures traditional industries (telecon, music) and gives rise to new ones
- facilitates tracking and analysis of big data, transforming managerial decision making, behavior of capital markets
- reshapes consumer behavior eg. how people shop, choose among competing products, entertain themselves
(ii) Globalization
*****************
- removes barriers to flow of goods, money, information, expertise across national/regional boundaries
- intensifies competition
- widens access to global talent pool and low-cost options
- expands market size & economies of scale
- increases political/financial risk
- drives product innovation to serve needs of middle class
(iii) Environment
****************
- scare resources eg oil and wter
- social sanctions
- increased regulation
(iv) Financial crisis
*********************
Magnified govt's size and spending
(b). Forces resisting change
*****************************
- companies resist change
- managers block the inevitable
- leaders make big investments in yesterday's products/services
- org cultures value/reward/perpetuate complacency
(i) Culture
************
unconscious assumptions and beliefs that members of an org take for granted
"we are the best"
"we have the right way"
resistance is often unconscious and expressed as
- behavior pattern
- reward and promotion
- org structures
culture based on flexibility and innovation can help with org's ability to change
(ii) Calcification
*******************
hardened in ways that limit flexibility over time
processes, procedures, rules, meetings, forms, decisions
20th century org success based on size, role clarity, specialization, control
High performance rewuires clear boundaries between levels, roles, functions, geographical locations
New success factors - Speed, flexibility, innovation, integration
Requires free flow of resources, information, expertise
(iii) Complexity
*****************
globalization
technological advances
requlatory requirements
self-inflicted: org structures with too many levels, redundant functions, unlcear jobs
simplify org structures, reduce product proliferation, streamline processes, manage complexity causing behaviors within self
(c) Intentional Change vs Organic change
************************************
Organic change - result of complex interaction between forces driving change and people resisting it
Intentional change - instigated and led forward by a leader to position an org for greater effectiveness, relevance, success
(d) Role of a Leader
********************
The leader must look into the future and stay several steps ahead of everyone else in the industry.
Leader's job is to see when an org needs to change, determine the direction, and make it happen.
Ability to drive intentional change is key to be a successful leader
Change leaders build an org culture that is based on flexibility and innovation.
The leader needs to be comfortable in a state of constant change.
(e) Signals that call for change
********************************
- competition & external forces create conditions that make it difficult for the organization to be successful if it stays the same
- growing feeling of discontent about the org's strategy, purpose, way of doing things
- new leader who takes over and wants to take the org in a different direction
- key people who see future opportunities or theats
II. How to Drive Change as a Change Agent
******************************************
There are four practices that matter to bring about change (Welch, 2005, p 145):
(1) Communicate a sound rationale for every change
(2) Have the right people at your side
(3) Remove resisters (change killers) from the critical path
(4) Seize every single opportunity
Great training. Another amazing week at JWMI.
Dr DP
It is the leader's job to look into the future with industry leading thoughts, see around corners and steer the direction of the firm to seize opportunities and avoid train wrecks.
I. Why organizations change ?
(a) Forces driving change
***********************
- Orgs evolve over time
- companies react to competitive pressures
- leaders pursue new agendas
- products progress thru life cycles
- Technology that transforms manufacturing, finance, medical, science
eg. Computing devices, Internet, Globalization, Social media, Mobile, Wireless
(i) Technology
***************
- multiplies speed & quantity of work that can be done
- distributes work across traditional boundaries of function, organization, geography
- restructures traditional industries (telecon, music) and gives rise to new ones
- facilitates tracking and analysis of big data, transforming managerial decision making, behavior of capital markets
- reshapes consumer behavior eg. how people shop, choose among competing products, entertain themselves
(ii) Globalization
*****************
- removes barriers to flow of goods, money, information, expertise across national/regional boundaries
- intensifies competition
- widens access to global talent pool and low-cost options
- expands market size & economies of scale
- increases political/financial risk
- drives product innovation to serve needs of middle class
(iii) Environment
****************
- scare resources eg oil and wter
- social sanctions
- increased regulation
(iv) Financial crisis
*********************
Magnified govt's size and spending
(b). Forces resisting change
*****************************
- companies resist change
- managers block the inevitable
- leaders make big investments in yesterday's products/services
- org cultures value/reward/perpetuate complacency
(i) Culture
************
unconscious assumptions and beliefs that members of an org take for granted
"we are the best"
"we have the right way"
resistance is often unconscious and expressed as
- behavior pattern
- reward and promotion
- org structures
culture based on flexibility and innovation can help with org's ability to change
(ii) Calcification
*******************
hardened in ways that limit flexibility over time
processes, procedures, rules, meetings, forms, decisions
20th century org success based on size, role clarity, specialization, control
High performance rewuires clear boundaries between levels, roles, functions, geographical locations
New success factors - Speed, flexibility, innovation, integration
Requires free flow of resources, information, expertise
(iii) Complexity
*****************
globalization
technological advances
requlatory requirements
self-inflicted: org structures with too many levels, redundant functions, unlcear jobs
simplify org structures, reduce product proliferation, streamline processes, manage complexity causing behaviors within self
(c) Intentional Change vs Organic change
************************************
Organic change - result of complex interaction between forces driving change and people resisting it
Intentional change - instigated and led forward by a leader to position an org for greater effectiveness, relevance, success
(d) Role of a Leader
********************
The leader must look into the future and stay several steps ahead of everyone else in the industry.
Leader's job is to see when an org needs to change, determine the direction, and make it happen.
Ability to drive intentional change is key to be a successful leader
Change leaders build an org culture that is based on flexibility and innovation.
The leader needs to be comfortable in a state of constant change.
(e) Signals that call for change
********************************
- competition & external forces create conditions that make it difficult for the organization to be successful if it stays the same
- growing feeling of discontent about the org's strategy, purpose, way of doing things
- new leader who takes over and wants to take the org in a different direction
- key people who see future opportunities or theats
II. How to Drive Change as a Change Agent
******************************************
There are four practices that matter to bring about change (Welch, 2005, p 145):
(1) Communicate a sound rationale for every change
(2) Have the right people at your side
(3) Remove resisters (change killers) from the critical path
(4) Seize every single opportunity
Great training. Another amazing week at JWMI.
Dr DP
Sustain Competitive Advantage - Widen Moat, Spot Disruptive Innovations
JWI 531 Advanced Financial Mananagement, week1 summary, 4/13/13
1. Competitive advantage
************************
It is the firm's identity in the market - the firm's ability to create value that is unique and difficult to imitate. In a dynamic market, competitive advantage is temporary and the leadership must constantly look out for emerging opportunities. Where possible the firm must develop unique resources to create disruptive change. Relentless innovation is critical to sustain competitive advantage.
2. Economic Moat = Competitive Advantage
*****************************************
(i) Value of a firm
********************
is the future cash that can be taken out of the business that can be discounted back to the present.
(ii) Establish firm's fair value correctly
*******************************************
- Accurately determine the magnitude and timing of the future cash flows
- Check how sustainable and protected are the profits
(iii) Study the firm's competitive positioning
***********************************************
what is the role of the firm in the industry's competitive landscape ?
Assess the firm's sources of competitive advantage and their durability
Use Porter's 5 forces, SWOT, Moat, Critical dimensions, benchmarking, perceived value, strategy testing, value curve
Wide and sustainable moats deliver enduring rewards to investors
(iv) Seller's model - 4 key Moat Metrics (Boyd & Quinn, 2006)
******************************************
Economies of scale - ability to exert low cost pressure
High switching costs - customer stickiness
Intangible assets - patents
Network economics - gain a wide user base
Actively strengthen such metrics to widen and deepen the moat
A firm that ignores the importance of a moat or takes its focus off of moat-metrics will face a higher chance of going out of business.
(v) Constantly scan the landscape for disruptive innovations
*************************************************************
they can make any conventional moat obsolete overnight (ClaytonChristensen.com)
stage 1 - they begin by meeting customer needs in insignificant/emerging markets at low margins
stage 2 - they get a break when performance of a sustaining technology exceeds high end of customer threshold
stage 3 - they change the game by shifting basis of competition from performance towards speed to market and delivery flexibility
when performance becomes less important for the customer, business models based on delivery efficiency begin to rule
eg. Dell in PC market; online education
Dr DP
1. Competitive advantage
************************
It is the firm's identity in the market - the firm's ability to create value that is unique and difficult to imitate. In a dynamic market, competitive advantage is temporary and the leadership must constantly look out for emerging opportunities. Where possible the firm must develop unique resources to create disruptive change. Relentless innovation is critical to sustain competitive advantage.
2. Economic Moat = Competitive Advantage
*****************************************
(i) Value of a firm
********************
is the future cash that can be taken out of the business that can be discounted back to the present.
(ii) Establish firm's fair value correctly
*******************************************
- Accurately determine the magnitude and timing of the future cash flows
- Check how sustainable and protected are the profits
(iii) Study the firm's competitive positioning
***********************************************
what is the role of the firm in the industry's competitive landscape ?
Assess the firm's sources of competitive advantage and their durability
Use Porter's 5 forces, SWOT, Moat, Critical dimensions, benchmarking, perceived value, strategy testing, value curve
Wide and sustainable moats deliver enduring rewards to investors
(iv) Seller's model - 4 key Moat Metrics (Boyd & Quinn, 2006)
******************************************
Economies of scale - ability to exert low cost pressure
High switching costs - customer stickiness
Intangible assets - patents
Network economics - gain a wide user base
Actively strengthen such metrics to widen and deepen the moat
A firm that ignores the importance of a moat or takes its focus off of moat-metrics will face a higher chance of going out of business.
(v) Constantly scan the landscape for disruptive innovations
*************************************************************
they can make any conventional moat obsolete overnight (ClaytonChristensen.com)
stage 1 - they begin by meeting customer needs in insignificant/emerging markets at low margins
stage 2 - they get a break when performance of a sustaining technology exceeds high end of customer threshold
stage 3 - they change the game by shifting basis of competition from performance towards speed to market and delivery flexibility
when performance becomes less important for the customer, business models based on delivery efficiency begin to rule
eg. Dell in PC market; online education
Dr DP
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