Opening the Books for change at Norwest Labs

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Opening the Books for

Change at Norwest Labs


In 1991, Jean Crépin, the CEO of Norwest Labs initiated a series of events which would significantly alter the face of his company.  Norwest had reached a point where it could no longer grow without becoming prohibitively inefficient.  The decision-making responsibilities, which up to now had been centralized in the hands of its CEO, would now have to be delegated to subordinates in order for Crépin to address issues of a more strategic nature.  With the help of external consultants, Crépin went on to modify his organisation with the hope of creating a decentralised, business-oriented company of empowered individuals.  Unfortunately, by 1994, it was becoming quite clear that the transformation had not been entirely successful.

The Symptoms

Via the change process, Crépin had hoped to redirect certain behaviours to bring them more in line with his new company objectives.  While the process did modify behaviour, it did not, unfortunately, lead to the desired ones.  Worse, it even brought about undesired behaviours that had previously been absent.

The clearest sign of the unsuccessfulness of the change process expressed itself in employee disorientation.  Several behaviours attested this state including, confusion about the bonus system, new job descriptions, and Norwest’s relationship with a former partner turned competitor.  There seems to also have been clear apprehension as to the future of the company and confusion as to interdepartmental as well as hierarchical relationships.

Perhaps the most disturbing sign that things were not going according to plan was the appearance of animosity at Norwest.  Following the company’s restructure, conflicts began erupting between the CEO and general managers who were clearly angry about losing some of their independence.  Conflicts also appeared between the more business-oriented staff hired after the reorganization and the more technically oriented staff hired previously.  At a broader level, the company even began to experience tensions across departments.

The change process also seemed to have brought about increased employee apathy, as can be seen from declining morale, the indifference displayed towards any goals that gain sharing might serve beyond handing out pecuniary rewards, and the continued apathetic tolerance of an opaque bonus system, whose favouritism and unfairness had been widely criticized and yet accepted.

Perhaps the most striking evidence that the change process had not reached its goals can be seen in the poor performance displayed by the employees who were promoted as a result of it.  There seemed to have been a collective inertia among them as they refused to be empowered and continued to rely on Crépin for decision-making.  They even went as far as being cynical of the new employees who were more in line with company objectives.

The Causes

In order to correct the behavioural challenges identified in the previous section it is imperative that we determine what caused them.  To that effect, we will analyse the situation at Norwest using the tools provided by the organizational behaviour theories of change, culture, leadership, motivation and empowerment.

The Change Process

As mentioned previously, Norwest underwent important changes in 1992.  These changes, unfortunately, did not bring Norwest to the point where its CEO had planned that they would.  We will examine the change process in two parts.  First, we will try to get an understanding of why the change process failed.  Later, we will try to see how the changes could have caused the undesirable behaviours currently taking place at Norwest.  By understanding the direct causes of the undesirable behaviours we hope to be able to stop them.  By understanding how the change process failed we hope to be able to devise a new course of action for Norwest that will allow it to become the kind of company its CEO had hoped it would become.

 

Lewin’s Change Model

Lewin provides us with a concise model for managing change.  It consists of three steps: unfreezing, moving and refreezing that must be consecutively followed in order to maximize the chances for success.  It is this model that we will use to understand what went wrong at Norwest during the months in which the changes were implemented.

The unfreezing phase, according to Lewin, is the stage where the organisation is readied for the upcoming changes.  In the case of Norwest, it appears that this stage was, at the very least,  hurried through.  It is unclear whether Crépin even conducted a readiness assessment.  While he clearly, had a good idea of what the driving forces of the changes were (increasing competition, desired growth and regulation changes), he neglected to consider what restraining forces might be working against him.  Many of these resistance factors might have successfully been predicted, like the fact that some employees would reject empowerment and attempts to change the existing bonus program.  Finally, Crépin clearly failed to arouse dissatisfaction with the status quo and to involve employees in the decision-making process.

The second phase of Lewin’s model, the moving phase, is the stage where the actual changes are implemented.  While Crépin clearly had his own mental blue print for the upcoming changes, he failed to establish specific goals for the initial changes and, as a result, created, in his employees, unnecessary confusion about the company’s future direction. Most importantly, Crépin did not institute small, incremental changes.  Instead, he created, all at once, a corporate services division where accounting, marketing, information systems and quality assurance were rounded up.  This department was staffed by the promotion of employees and by externally hiring.  Unfortunately, it soon became evident that many of the promoted employees were out of their element.  Outside of corporate services, lack of openness and two-way communication led to significant conflicts between Crépin and the general managers of the labs.

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The final stage of Lewin’s model, the refreezing stage, is the stage where changes are stabilized.  In Norwest’s case, this stage was entirely skipped.  Targets for change and company focus to meet them were not established and, as a result, no successful experiences were built.  No system was put in place to reward behaviours that reinforce the changes, instead the old bonus system, which was seen as arbitrary at best and biased at worst, was kept.  Finally, no structures, such as regular and objective performance reviews, were developed to institutionalize the changes.  

Overall, it seems clear that ...

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