The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World [1 ed.] 9781617354199, 9781617354175

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The Changing Paradigm of Consulting Adjusting to the Fast-Paced World

A volume in Research in Management Consulting Series Editor: Anthony F. Buono, Bentley University

Research in Management Consulting Anthony F. Buono, Series Editor Current Trends in Management Consulting (2001) edited by Anthony F. Buono Developing Knowledge and Value in Management Consulting (2002) edited by Anthony F. Buono Enhancing Inter-Firm Networks & Inter-Organizational Strategies (2003) edited by Anthony F. Buono Creative Consulting: Innovative Perspectives on Management Consulting (2004) edited by Anthony F. Buono Challenges and Issues in Knowledge Management (2005) edited by Anthony F. Buono and Flemming Poulfelt Socio-Economic Intervention in Organizations: The Intervener-Researcher and the SEAM Approach to Organizational Analysis (2007) edited by Anthony F. Buono and Henri Savall Mastering Hidden Costs and Socio-Economic Performance (2008) by Henri Savall and Véronique Zardet Board Members and Management Consulting: Redefining the Boundaries of Consulting and Corporate Governance (2009) edited by Pierre-Yves Gomez and Rickie Moore Emerging Trends and Issues in Management Consulting: Consulting as a Janus-Faced Reality (2009) edited by Anthony F. Buono Client-Consultant Collaboration: Coping With Complexity and Change (2009) edited by Anthony F. Buono Work and People: An Economic Evaluation of Job-Enrichment (2010) by Henri Savall Consultation for Organizational Change (2010) edited by Anthony F. Buono and David W. Jamieson The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World (2011) edited by Anthony F. Buono, Ralph Grossmann, Hubert Lobnig, and Kurt Mayer

The Changing Paradigm of Consulting Adjusting to the Fast-Paced World edited by

Anthony F. Buono Bentley University

Ralph Grossmann University of Klagenfurt, Austria

Hubert Lobnig Lemon Consulting and

Kurt Mayer M/O/T School of Management, Organizational Development and Technology, Austria

Information Age Publishing, Inc. Charlotte, North Carolina • www.infoagepub.com

Library of Congress Cataloging-in-Publication Data The changing paradigm of consulting : adjusting to the fast-paced world / edited by Anthony F. Buono … [et al.]. p. cm. — (Research in management consulting) Includes bibliographical references. ISBN 978-1-61735-417-5 (paperback) — ISBN 978-1-61735-418-2 (hardcover) — ISBN 978-1-61735-419-9 (e-book) 1. Business consultants. 2. Management. I. Buono, Anthony F. II. Academy of Management HD69.C6C35 2011 001—dc22 2011010594

Copyright © 2011 IAP–Information Age Publishing, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any electronic or mechanical means, or by photocopying, microfilming, recording or otherwise without written permission from the publisher. Printed in the United States of America

CONTENTS Introduction Anthony F. Buono . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix PART I: THE PARADIGM SHIFT IN CONSULTING 1. Delineating the Paradigm Shift Ralph Grossmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Expert Versus Process Consulting: Changing Paradigms in Management Consulting in Germany Thomas Schumacher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3. Complementary Consulting: The Only Real Option for Managers Othmar Sutrich and Martin Hillebrand . . . . . . . . . . . . . . . . . . . . . . . . 39 4. Changing the Paradigm of Crisis Management: How to Put OD in the Process Carole Lalonde . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 PART II: CONSULTING IN A GLOBAL CONTEXT 5. Strategy Work in an International Setting Hubert Lobnig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 6. Organizational Development Across Borders and Cultures: A Solution-Oriented Systemic OD-Approach Marlies Lenglachner and Manfred Madl . . . . . . . . . . . . . . . . . . . . . . 113

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7. Speculation on the Process and Practice of Organization Development in Hostile Environments Thomas Head, Peter Sorensen, and Therese Yaeger . . . . . . . . . . . . . . . 139 PART III: COLLABORATION, COOPERATION, AND NETWORKS IN CONSULTING 8. Toward a Multidimensional View on Collaborative Processes: A Case Study of an International Alliance Formation Raymond P.A. Loohuis and Aard J. Groen . . . . . . . . . . . . . . . . . . . . . 157 9. Beyond the Organizational Focus: Network Consulting in Regional Clusters Frank Lerch, Jörg Sydow, and Stephan Duschek . . . . . . . . . . . . . . . . . 185 10. Focusing the Network Business Case: Making Use of Teamwork—Key Issues in Collaborative Systems and Consulting Networks Hubert Lobnig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 11. Consulting Interorganizational Relations: Collaboration, Organization Development, and Effectiveness in the Public Sector Ralph Grossmann, Karl Prammer, and Christian Neugebauer . . . . . . . 229 PART IV: IN SEARCH OF PROFESSIONALISM IN MANAGEMENT CONSULTING 12. Critically Exploring Business Engagement in Academia: The Case of the U.K. Consulting Industry Joe O’Mahoney and Richard Adams . . . . . . . . . . . . . . . . . . . . . . . . . . 259 13. Challenging Universal Criteria in Management Consulting: When Practices Meet Prescriptions Carole Lalonde . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 14. Developing Expertise and Social Standing in Professional Consulting Alfred Janes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 15. Acting as a Long-Term Consultant: Challenges for Professional Practice Dagmar Untermarzoner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

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PART V: NEW APPROACHES TO MANAGEMENT CONSULTING: FRAMEWORKS, TOOLS, AND INSTRUMENTS 16. Solution-Preventing Tools Versus Solution-Supporting Tools Guenter Lueger and Peter Steinkellner . . . . . . . . . . . . . . . . . . . . . . . . 353 17. Maturity Grids as Tools for Change Management: Practitioner Guidance Through Field Experience Anja M. Maier, James Moultrie, and P. John Clarkson . . . . . . . . . . . . 371 18. Consulting by Expertise in Organization Science: A Special Use of OD Know-How for Transorganizational Collaboration Systems in Public Services Klaus Scala, Michael Stadlober, and Hans Fiby . . . . . . . . . . . . . . . . . 399 19. Management Consultant Interaction With Private Equity: The Impact on Growth Development Patterns in Southeastern Europe Viktor Manev, Elena Todorova, and Milen Manev . . . . . . . . . . . . . . . 417 About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431

INTRODUCTION Anthony F. Buono

The organizational world—profit and not-for-profit alike—is undergoing radical change and upheaval. Increasingly unpredictable market and nonmarket conditions are challenging firms and their management to not only survive but to literally thrive in chaos as soaring competition in an ever-changing business environment is creating unchartered territory for more and more organizations. As a result, many of the strategies and tactics that appeared to be successful in the past no longer seem to work as well—or even work at all. The consulting world is going through a similar paradigm shift. As this series has previously explored, this new reality has translated into significant cutbacks and consolidated consulting projects, changing client expectations about what they should expect from their consultants, and increased demands and pressures on consultants and consultancies (Buono, 2004, 2009). Going well beyond the task of providing astute advice, management consultants find themselves challenged to provide a far wider range of services than they have in the past, including implementation and the need to match goals with results. If anything is becoming clear it is that the rather perishable facets of consulting services must be made much more tangible and long lasting, being highly apparent to the client (see First Research, 2009; Gross & Poor, 2008). Yet, as research The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. ix–xxi Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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suggests, the proportion of consultancies that actually deliver on their promises is relatively small, especially as one moves from short-term, explicit interventions to attempts to create a foundation for sustainable results, setting higher standards and enabling client firms to “do what [they] didn’t think [they] could” (Czerniawska, 2006, p. 4). At the same time, the shift in many companies toward a leaner business model is creating increased opportunities for consultants. The expertise to appropriately structure and direct the operations of complicated businesses is increasingly challenging for many corporations to have internally, especially in rapidly evolving industries. As an offshoot, it appears that a growing number of businesses are retaining consultants as a matter of course, not only when they perceive a problem (First Research, 2009). Yet, to truly succeed, management consultants and their firms must be increasingly proactive, innovative, and risk-taking in their endeavors, from ensuring true client learning and development, to demonstrating the role that consulting can play in shaping the atmosphere and infrastructure that allows people to do their jobs well (Czerniawska, 2006). The economic crisis and dynamic global business world have thus provided a literal wake-up call for consultants and consulting firms. There are increased demands that consulting become much more relevant and real time. Gone are fee-based studies, billed on time expended. Clients are pressing for more involvement in projects and interventions (see Buono & Poulfelt, 2009; Sturdy, Werr, & Buono, 2009) and the consultant role is increasingly shifting toward facilitation and implementation rather than mere analysis. As a way of exploring these challenges, the Academy of Management’s Management Consulting Division devoted its fourth international conference to the changing paradigm occurring within the fast-paced world of business and management consulting. The volume is composed of the best papers from that June 2009 conference held in Vienna, Austria, drawing together insights from academics and practitioners, a true mix of practical scholars and scholarly practitioners.

THE CHANGING PARADIGM OF CONSULTING The volume is divided into five sections that explore the emergence and implications of this new paradigm, delineating and illustrating the paradigm shift taking placing within consulting, exploring the ramifications for global consulting, examining the challenges inherent in attempts to capture collaboration and cooperation in interorganizational networks, analyzing the push toward the professionalization—and professionalism—of consultancy, and assessing new approaches to management

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consulting, focusing on innovative instruments, tools, and intervention frameworks.

The Paradigm Shift in Consulting The first section contains four chapters that examine the paradigm shift taking place within consulting, with an emphasis on changing conceptions of consulting practice and intervention in the Austrian and German context. The first chapter by University of Klagenfurt (Vienna) professor and volume coeditor Ralph Grossmann explores the lingering tension between process and expert-based consulting, underscoring the reality that both forms of consulting have an important role to play—but that they need to be fully integrated to increase the probability of success. Drawing on a series of in-depth interviews with clients and experienced consultants, Grossmann argues that “simple process consulting … has become an out-dated approach.” Underscoring the ways in which this traditional method falls short of client needs and expectations, he suggests that consultants must provide insight into the client’s situation, enhancing the capability of the client system to identify its own developmental requirements and manage the change using internal resources. As part of his assessment, Grossmann concludes with a discussion of the ramifications for the ways in which we think about consulting related content and process, and the related challenges of containment (emotions, anxiety) and capturing the time and rhythm inherent in change processes. The theme of expert versus process consulting continues in the next chapter by German consultant Thomas Schumacher. He argues that clients are expecting and requiring much more implementation support from their consultants, which the latter have traditionally been reluctant to provide. Drawing on changes taking place in the consulting market in Germany, he underscores that a new approach to consulting has emerged, based on the sociological premise that organizations are self-organizing social systems. Beginning with an assessment of the basic principles of the rationalistic paradigm (in essence, traditional expert consulting), he focuses attention on this newly emerging constructivist paradigm, assessing the different characteristics, strengths, and weaknesses of the two approaches, which have significant implications for the consultant’s qualifications and client business model. The systemic-oriented management consulting approach, which draws heavily from Luhmann’s (1984, 2000) general systems theory, systemic family therapy and group dynamics, attempts to develop potential and resources in the client organization, offering support for solving and/or unblocking communication obstacles and socially critical situations. The

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chapter examines the possibilities created by three integrated forms of consulting—complementary consulting, integrated consulting, and the “Third Modus” of consulting—in an attempt to meet and satisfy growing client needs. As he amply illustrates, these different models reflect the ways in which different organizational theories shape our view of consultancy, pointing to the need for a different type of cooperation between consultants themselves and between managers and their consultants, potentially leading to a different form of consulting. The following chapter by Austrian consultants Othmar Sutrich and Martin Hillebrand continues this assessment, focusing on complementary consulting, an emerging model that combines the expertise of traditional business (expert) consulting and systemic process consulting. The chapter captures five issues—complexity, the need for greater organizational awareness, the threats and opportunities created by the current crisis, the dynamics of handling risks, and the challenge of responsibility and sustainability—using these issues to formulate a series of premises about organization and management consulting. The chapter uses two case studies to illustrate complementary consulting in practice, drawing on the authors’ experiences to examine the underlying ideals of complementarity, compensation (i.e., filling the gaps in know-how in the client system with insight from the consultants), an integrative focus on results, and the unique attitudes (e.g., reflecting and learning from feedback while remaining spontaneous and intuitive, being affected and getting involved while maintaining distance and composure, considering hard and soft factors, slowing things down without reducing efficiency) associated with this new form of consulting. Sutrich and Hillebrand conclude with a thought provoking discussion of ways to advance current consulting practices and insights into managerial decision making. In the final chapter in this section, University of Laval (Quebec, Canada) professor Carol Lalonde explores the potential role that organization development (OD) consultants can play in responding to and ameliorating crisis. As she argues, despite many advances in our crisis management knowledge, organizations often fail to apply this insight, leading to a series of dysfunctional actions and responses. As a way of illustrating these failures, Lalonde presents a qualitative meta-analysis of five major disasters that have struck countries around the world during the past 10 years—Hurricane Katrina in the United States, the 2004 tsunami in Southeast Asia, the 2003 heat wave in France, the SARS epidemic, and the 1998 ice storm in Canada. The chapter presents a synthesis of the guiding principles in crisis management—planning, coordination, crisis leadership and the behavior of civil society—outlining different OD interventions that have the

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potential to improve the quality of crisis response. Focusing on the role that OD could play in these four areas, Lalonde examines different types of OD interventions in terms of human processes, structural design, human resource management and strategy, and how these techniques could be integrated with the guiding principles of crisis management to increase both individual and organizational resilience in times of crisis.

Consulting in a Global Context The second section has three chapters that analyze the dynamics of international strategy work, organization development across borders and cultures, and the challenges faced when applying OD interventions in hostile environments. The first chapter by Austrian consultant and volume coeditor Hubert Lobnig is based on the premise that the impact of strategy development is increased when the process combines front line knowledge with the requirements of senior management in a comprehensive manner. Lobnig uses a strategy consulting project for an international leasing company, headquartered in Vienna with subsidiaries throughout Europe, to demonstrate the process. As part of his assessment, he proposes the application of “semifinished instruments,” tools intended to frame complexity and help translate uncertainty into grounded, coordinated action with the goal of stimulating deep, ongoing conversations to prompt new learning, new mindsets and new skills. The case study illustrates how such semi-finished instruments can enhance the integration of a basic framework determined by senior management with the specific expertise of operative and local management. Lobnig explores the challenges the consultant faces navigating within this framework—which he characterizes as “using unorthodox methods in unclear situations”—requiring extensive knowledge of content and process as well as a mindset and business model that supports intensive collaboration. The next chapter, by Austrian consultant Marlies Lenglachner and corporate executive Manfred Madl, describes the use of a solution-oriented systemic OD approach to facilitate team building and development in a cross-cultural environment. The discussion focuses on a 15-month change process intended to create higher-order organizational learning in an international management team—from the vantage point of both the consultant and the client. The basic objective of the intervention was to assist top-level executives with a wide range of experience in becoming a successful goal-, solution- and future-oriented team, with a shared vision, clear goals and common language.

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Drawing on two systemic consulting frameworks—the Tetralemma and Irreverence—the discussion focuses on the dynamics involved in attempts to increase the effectiveness of management decisions, the development of flexibility and open-minded readiness for continuous change, and the challenges inherent in joint strategy creation intended to achieve better financial results. The chapter concludes with a discussion of experiencebased learning from this solution-oriented, systemic OD approach and its usefulness in enhancing intercultural cooperation. While the first two chapters present successful interventions in international settings, the final chapter in this section explores the tensions that arise when OD is applied in “hostile” environments. U.S. professors Thomas Head, Peter Sorensen, Jr. and Therese Yaeger begin with a discussion of the core values that underlie OD (feminine, collectivist, low power distance, low uncertainty avoidance). As they argue, although there are many cultural environments that possess values that match those of OD, other context can have three or even four conflicting values (masculine, individualist, high power distance, high uncertainty avoidance). Noting that OD has proven to be an effective tool in undeveloped economies, the chapter speculates on the challenges consultants face when working in cultures with values hostile to this approach. Drawing on Cooke and Lafferty’s (1987) passive/defensive and aggressive/defensive dimensions, the discussion focuses on the ways in which the global OD practitioner must learn to adapt his or her methods to fit the realities imposed by local cultures.

Collaboration, Cooperation, and Networks in Consulting The third section in the volume examines the new paradigm within the context of interorganizational relationships, with an emphasis on international alliances and networks. In the first chapter, University of Twente (The Netherlands) professors Raymond Loohuis and Aard Groen apply Talcott Parson’s (1951, 1964) systems theory (adaptive function, goal attainment, integration, latent pattern maintenance) to alliance formation, examining how structural differences between partners can undermine alliance-related processes. Drawing on a case study of an alliance between U.S. and Dutch partners, their analysis illustrates the ways in which structural differences between the partners negatively affected the alliance—despite a trust- based relationship between them. Through in-depth participatory research, Loohuis and Groen examine the various ways in which representatives of both partners coped with these differences, and how they made necessary changes and adaptations to the relationship during the postformation stage. The chapter

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concludes with an insightful discussion of the theoretical and managerial implications for developing collaborative business practices, and the ramifications for consultants and their clients in their attempts to “coconstruct” inter-firm strategies, underscoring the importance of the underlying dynamics that emerge as the alliance becomes a reality. The following chapter, by academicians Frank Lerch and Joerg Sydow from the Freie Universität Berlin and Stephan Duschek from Helmut Schmidt Universität, continues this theme, delving into the nuances and challenges faced when consulting in network environments. As they argue, consulting to interorganizational networks is quite different from consultation in “isolated” or stand alone organizations—different to the point that experiences and practices from consulting single organizations are not easily transferred to consulting tasks in networks or clusters. Using an in-depth research project on the development of the optics cluster in the Berlin-Brandenburg region in Germany and an embedded case study of a specific network (the XRA-Tech network), the chapter underscores how network consulting in regional clusters requires a distinct approach that focuses on developing relationships at least at two levels: (1) the level of interorganizational networks in the cluster and (2) the level of the regional cluster itself. Drawing on a reflexive approach, in which social practices are “constantly examined and reformed in the light of incoming information about those very practices,” Lerch and his colleagues propose a multilevel approach to network consulting that provides opportunities for the network and cluster members to come up with their own insights and ideas on how to develop their networks and, as a result, the entire cluster. Continuing the focus on the unique aspects of consulting in such collaborative ventures, Austrian consultant Hubert Lobnig examines the role of OD in the development of these networks. His analysis draws out two key dimensions. As he argues, collaborative ventures have to initially focus on generating a common understanding of the “business case,” working toward the creation of a common purpose that is sufficiently attractive to bind the partners and key stakeholders together. A second key success factor lies in building effective cross-organizational working teams, as the people involved have to “invent” the content and process details of the network by themselves. Based on two field interventions, Lobnig illustrates these two success factors in action, detailing the processes and procedures he used as a consultant to guide the development of the networks. As he concludes, interorganizational interventions should be “ ‘simple’ but not ‘simplistic.’ ” Networks require a clear strategy, structure, and set of rules, however, overly complex designs can quickly drain the initiative’s capacity in terms of time, resources, and content.

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In the final chapter in this section, Austrian academicians Ralph Grossmann, Karl Prammer, and Christian Neugebauer examine the role of multiorganizational cooperation in helping to solve social problems. Focusing on what they refer to as “benefit alliances,” emphasis is placed on those activities that “exceed the boundaries between public, profit, and nonprofit sector” organizations. Drawing on a case study of the Upper Austrian public health sector, the chapter details how the underlying collaborative relationships evolved, highlighting the role of OD interventions as part of the process. As part of their analysis, Grossmann and his colleagues assess the challenges involved in creating a foundation for commitment, instituting a parallel transfer of solutions and creating “cooperative space,” examining the ramifications for ensuring long-term effectiveness and success. Despite these possibilities, however, they argue that although such cooperation may seem to be an obvious answer to resolve many difficulties in public services, successful multisector cooperation remains the exception rather than the rule. Successful interorganizational cooperation does not occur on its own or because of external necessity. Rather, as their analysis points out, the people and organizations have to go through an arduous process that includes: (1) development of good personal relationship between the actors; (2) well-structured performance processes of the partner organizations; (3) interlocking teams working within clearly defined areas with precise assignments; (4) those teams working within a structure supported by good interaction of working and decision-making levels of centralized and decentralized elements; and (5) support by consultants as external, objective third parties, especially early on in the process.

In Search of Professionalism in Management Consulting The next section in the volume includes four chapters that examine various dimensions of professionalism in management consulting. The first chapter by British academicians Joe Mahoney and Richard Adams looks at the role of academia in shaping the research agenda relative to the management consulting field. They argue that policymakers have encouraged a research agenda that emphasizes the priorities and opportunities presented in different business sectors, especially the “knowledge economy” in recent years. Focusing on the management consulting industry, the chapter critically examines the extent to which these trends have driven and received the research attention of academic researchers. Focusing on the United Kingdom, their analysis explores the success, failure and potential of business schools in engaging with the priorities of

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the consulting industry. Based on interviews with consultancy partners and senior stakeholders, the chapter traces the key challenges facing the U.K.’s consultancy industry. Using an extensive review of the literature, the chapter then examines the extent to which exhortations for academic research to follow business priorities have been achieved. The findings suggest that engagement with industry’s perceived challenges has been limited. As they argue, although academe has developed little engagement with the managerial priorities of the industry, it is developing a rich focus on the deeper issues underpinning the industry, including a strong social and moral critique that, in fact, may contribute toward the longterm survival of the industry. The next chapter by University of Laval professor Carole Lalonde explores the potential of universal criteria for assessing consulting practices. Lalonde examines the relational and processual dimensions of consulting, drawing out the nuances associated with universal success factors in consulting. Drawing on her experience in the public health and social services sector, she underscores the importance of organizational context, especially when dealing with professional bureaucracies. Based on a comparative analysis of two interventions—one a failure and the other a success based on project outcomes—the chapter uses an assessment from three experienced consultants to illustrate the importance of going beyond the surface to fully understand what is going on in the organization, allowing the consultant to adjust the intervention accordingly. As she argues, although universal criteria and generic ideas on consulting may be very appealing, they fall well short of framing interventions in a truly useful manner. From going beyond the idea of an individual client to the challenge of working with the client system, to rethinking the ideal of client commitment and to the contradictory nature of many of these universal criteria, Lalonde concludes with a number of insightful suggestions for those readers considering a career in consulting. Alfred Janes, an Austrian consultant and professor at the University of Klagenfurt, examines the nature of consulting knowledge, focusing on how such know-how develops over a consultant’s work life and how this development is related to the evolution of a consultant’s social standing in the field. Janes looks at consultant knowledge and expertise on three levels: (1) the basis for expert know-how; (2) general process models of knowledge-based services; and (3) the personal linking patterns between such expert know-how and general process models of these knowledgebased services. The chapter delves into how this personal basic “knowhow” develops along three phases—imprinting, optimizing professional standards and innovation—illustrating how certain consultants become “‘out of the box’ thinkers.”

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Although he presents a rather dismal appraisal of the certification process for consultants and its role in contributing to their social standing, Janes argues that such attempts have contributed to an institutionalized, open dialogue, which, he suggests, is “evolving in the right direction.” The ultimate challenge for the professionalization of consulting, however, is marked by the competition and rivalry that typically exists across consultants. Based on Schein’s (1987) notion of “cultural islands,” Janes talks about the different “professional islands” in which consultants reside, noting that there is little substantive dialogue between consultants that would create meaningful connections between these islands. As a result, there is no common, practical language of methods and theories—in essence a professional “lingua franca” in which everyone is proficient. “Professional consulting,” as he concludes “is still a long way from becoming a profession.” The final chapter in this section, by Austrian consultant Dagmar Untermarzoner, looks at the unique challenges faced by consultants who are committed to the long term. With the ultimate goal of helping the client organization “succeed in a permanently changing environment,” she examines the design of long-term consulting interventions, analyzing the underlying implications for organizational strategy, structure, processes, and people management. Noting that sustainable change implies the creation of true learning opportunities, the chapter explores ways to empower the client system to master future developments on its own. Beginning with an assessment of the dynamics underlying short-term consulting—the role of service provider, the competitive nature of the industry, and attempts at being the “transcendental therapist”—Untermarzoner delves into the unique attitudes of long-term consultants, with an emphasis on being relevant and real time. Drawing on the notion of “cooperative binding,” she points to interactions that combine intimate and strategic interactions, going well beyond the limited role of service provider. The chapter examines the core principles of long-term consulting, with an emphasis on the implications for the underlying business model and qualification profile of the consultant.

New Approaches to Management Consulting: Frameworks, Tools and Instruments The final section in the volume contains four chapters that present an array of frameworks, tools, and intervention instruments focused on the realities of this changing paradigm. The lead chapter by Austrian consultant Günter Lueger and PEF University for Management (Vienna) professor Peter Steinkellner focuses on the application of a “solutions focus” as a

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way of improving traditional performance assessment tools and strengthening their development function. Noting that traditional performance appraisal processes focus on deficits and problems, they argue that many of these tools often result in a decrease rather than an increase in performance, preventing rather than supporting the development of organizational talent. The chapter proposes the use of “solution-focused assessment” as a development-supporting tool, a methodological alternative that integrates basic systemic orientations into the instruments themselves. The focus is thus placed on discovering positive differences rather than individual ratings per se, modifying existing human resource (HR) instruments (e.g., performance appraisal, 360-degree feedback) to help identify “differences that make a difference” in supporting development and change. Moving beyond simplistic “either/or” thinking, the authors argue that this approach draws on an “as well as” orientation, helping the organization maximize the competitive advantage it can create through its HR talent. Technical University of Denmark professor Anja Maier, and Cambridge University professors James Moultrie and P. John Clarkson shift the focus to the development and application of maturity grids as a way of examining organizational capabilities. Beginning with a brief discussion of the origins of the maturity grid approach and the broad range of areas in which they have been used, Maier and her colleagues also delve into the various criticisms and shortcomings of this approach, from an oversimplification of complex issues, a lack of causal connections, and their resultant implied approaches to organizational change. As a way of creating more useful and effective maturity grids, the authors present a structured approach to such analysis, a “road map” with four phases—planning, development, evaluation, and maintenance—and a set of key decision points attributed to each phase. Noting that maturity grids are best thought of as change management tools, Maier and her colleagues emphasize paying particular attention to the rationale underlying the maturity levels in question. Drawing on their experience developing and applying maturity grids, the chapter applies this road map in two cases—assessing product development capabilities and the communication in product development—illustrating how such grids can be used in a rigorous and systematic manner. The next chapter, which focuses on the ITS (Intelligent Transport System) Vienna Region, is written by an Austrian professor, a consultant and the ITS project manager, Klaus Scala, Michael Stadlober, and Hans Fiby respectively. As Scala and his colleagues underscore, due to the complex and interrelated nature of public services they increasingly rely on collaborative relationships and networks that exceed existing organizational

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boundaries. The ITS Vienna Region project, a project involving three provinces, is a collaborative traffic control management system in Vienna and its surrounding regions. The responsibilities for the system are divided between the provinces’ three political systems as well as between national, regional, and local transportation companies with different customers. The project utilized consulting services in two ways: an external consultant in traffic technology was hired as project manager and two external OD experts worked as researchers, evaluating the project and providing feedback to management. The discussion details the ways in which the consulting model integrated content and process interventions, focusing on how the collaborative relationships were encouraged and supported, and how problems and challenges were overcome. Scala and his colleagues draw out the lessons learned, analyzing key success factors and presenting a consulting model for transorganizational ventures. The volume concludes with a chapter by South Eastern Europe (SEE) consultants, Viktor Manev, Elena Todorova, and Milen Manev. Manev and his associates focus on recent changes in the private equity (PE) business mode of operation in transitional economies and the role played by management consultants during the postclosing deal making. Focusing on the current economic crisis, they emphasize that PE professionals and management consultants are playing a vital role in preserving and enhancing value in SEE companies. As they argue, to ensure these endeavors are “driven by execution, backed by management and supported by industry knowledge transfer” there must be close, collaborative interaction between the management consultants and PE funders. The chapter explores the emergence of this new business model, with PE funders taking a greater hands-on approach to managing their portfolio companies. As such, they require more sector expertise and operational management knowledge than they have needed in the past, which is increasing the demand for consulting and advisory support services. The authors conclude their analysis with a call for the creation of a synergy model with real value-creation capabilities that can be developed through knowledge transfer and execution.

ADJUSTING TO THE FAST-PACED WORLD This brief introduction has hopefully captured the depth and richness of the ideas and analyses in the volume, drawing out the myriad complexities and uncertainties faced by consultants and their clients, and the concomitant search for appropriate mindsets, attitudes, and orientations as well as methods, tools, and techniques. As the reader will discover in

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delving into each of these chapters in more detail, while there are significant challenges facing the consulting industry, there are also a number of promising frameworks and approaches that can help us successfully meet these challenges. As editor of the Research in Management Consulting series, I would, once again, like to thank the book’s many contributors for their good natured colleagueship, patience, and willingness to accept constant queries and proddings in moving this volume to completion. As with all the volumes in the RMC series, my hope is that this book continues to add to our insights into and understanding of this complex, ever-changing global field.

REFERENCES Buono, A. F. (Ed.). (2009). Emerging trends and issues in management consulting: Consulting as a Janus-faced reality. Charlotte, NC: Information Age. Buono, A. F. (Ed.). (2004). Creative consulting: Innovative perspectives on management consulting. Greenwich, CT: Information Age. Buono, A. F., & Poulfelt, F. (Eds.). (2009). Client-consultant collaboration: Coping with complexity and change. Charlotte, NC: Information Age. Cooke, R., & Lafferty, J. (1987). Organization culture inventory. Chicago, IL: Human Synergistics. Czerniawsks, F. (2006). Consultant: Good; Consulting firm: Bad. Consulting to Management, 17(2), 3-5. First Research. (2009, November 16). Consulting services quarterly update. First Research Industry Profiles. Gross, A. C., & Poor, J. (2008). The global management consulting sector. Business Economics, 43(4), 59-68. Luhmann, N. (1984). Soziale Systeme [Social systems]. Frankfurt, Germany: Suhrkamp. Luhmann, N. (2000). Organisation und Entscheidung [Organization and decision]. Opladen/Wiesbaden, Germany: Westdeutscher Verlag. Schein, E. H. (1987). What you need to know about organizational culture. Training and Development Journal, 41, 38-41. Sturdy, A., Werr, A., & Buono, A. F. (2009). The client in management consultancy research: Mapping the territory. Scandinavian Journal of Management, 25(3), 247-252.

PART I THE PARADIGM SHIFT IN CONSULTING

CHAPTER 1

DELINEATING THE PARADIGM SHIFT R. GROSSMANN

Ralph Grossmann

As described in the “Introduction” to this volume, the consulting profession is facing a number of profound challenges, a literal groundswell of shifting demands, usage patterns, and expectations. A useful starting point for examining this paradigm shift is to take a closer look at our clients’ needs. Some years ago, we conducted a study among our clients and consultants to examine the expectations and outcomes of organizational consultancy that both parties had experienced. The research was based on in-depth interviews with project managers of client organizations (20 interviews) and experienced consultants who all used different approaches and came from different types of consulting enterprises (10 interviews). In addition, we reviewed 20 cases of consultancy with a focus on their content, processes, outcomes, perception by the stakeholders and any underlying concepts (Grossmann, 2004).1 EXPERT VERSUS PROCESS CONSULTING APPROACHES As summarized in Table 1.1, delving into the expectations of clients and the consulting services that were delivered, there was a range of practices The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 3–17 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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Dimensions of Consulting Services

• Offering expertise

• Facilitating processes

• Introducing external know-how/ expert-based content

• Developing internal know-how/developing solutions within the system

• Diagnosing problems

• Supporting the development and implementation of solutions

• External solutions

• Coping with uncertainty

• Consulting management

• Consulting the whole system

• Shifting responsibility to the consultant

• Keeping responsibility within the system

• Perform change as a rational

• Help to express emotions, using emotions process to “think”

• Buying consulting services

• Building trusting relationships

that varied along an expert-based, content-oriented approach to more of a process-oriented, facilitative problem-solving dynamic. The distinct between the two approaches, however, is becoming increasingly blurred as clients expect a useful integration of both types.

Offering Know-How and Expertise Versus Facilitating the Process Consultants are expected to provide clients with expert know-how that their organization does not possess, in essence providing them with supplementary knowledge. At the same time, consultants are also expected to simultaneously possess the ability to contribute to and support clientbased developmental processes. Particularly helpful during the critical stages of such development is the ability to create appropriate levels and networks of communication in order to facilitate discussion. These networks not only necessitate the moderation of individual events, but it is also important that the consultant design a communication platform with the entire change process in mind. Simple process consulting, in and of itself however, is now an out-dated approach. Moreover, reintroducing communication into the organization is no innovation either (Wimmer, 2005). Yet, in most instances, the primary, standardized specialist methods of major consulting firms also fall short of offering an appropriate alternative. As reflected by the comments of one of the top executives we interviewed, a combination of expert and process consulting as part of a collaborative effort is desired:

Delineating the Paradigm Shift 5 The consulting firm provides know-how, including certain support services. It also provides expertise on how things are represented and calculated in other organizations (benchmarking). It supplies the methods for numerical notation, provides the tools, without which it [the change] could not be accomplished. It also designs exemplary analysis models for our numbers and sees to it that the service is carried out by the management within the agreed time frame.

As another top executive noted: Consultants provide the concepts for the organizational structure, for job profiles and for costing principles. Together with the organization they develop a manual for outsourcing, divided into 60-70% contributed by the organization and 30% by the consultant. The consulting firm also provides objective future prospects and experience in change management. The client system provides decision makers and staff for planning and execution, and is responsible for the implementation and its staff are involved in the developmental processes.

The mobilization and combination of—often scattered and unused— internal know-how becomes the central objective of the consultants: (1) sources of internal know-how carriers need to be identified; (2) the change process should be designed so that the internal forces come into play; and consultants must help to take down certain barriers that prevent change processes (e.g., hierarchical, departmental, professional and organizational boundaries, hermetic work cultures). Consultants are also expected to: (1) provide know-how that the organization does not have; (2) provide human resources that cannot be internally mobilized; and (3) introduce useful tools and provide benchmarks on different levels. As a state officer director commented: Truly good consulting should lead to an increase in the independence of the public administration of the consulted department. This is comparable to developmental aid—one should not give people a few fish, but should instead teach them how to catch the fish themselves. The result of the consultancy should be the creation of an ever-evolving management that is capable of constantly developing itself.

As highlighted in this discussion, a primary objective of consulting is to be able to enhance the company’s own ability to change. Consultants are brought in to both provide insight into current change situations and ensure a forward-looking view to improve the capability of the system, to identify developmental requirements and to help manage the change using internal resources.

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Introducing Expert-Based External Solutions Versus Developing Options With the System In general, client expectations lean significantly toward seeking solutions within the system, taking advantage of the complementary knowledge provided by the consultants and their role as facilitators. There is, however, a difference between the perspective of top management and middle managers and project leaders. The heads of individual business units and internal project managers argued in favor of working on internal solutions in participation with the consultants. When it concerns unpopular decisions that may cause major changes or professional risks for employees, top management prefers to fall back on external solutions. The legitimacy of management decisions through external expertise is the priority here. Diagnosing Problems Versus Supporting the Development and Implementation of Solutions Several important issues are addressed in this topic. The emphasis that consultants place on diagnosis is criticized by clients. The general sentiment is that significant financial and time resources are invested in expensive diagnoses, but the organization is then left on its own for the actual implementation of the solution. As a result, many clients end up feeling abandoned by the consultants. Diagnoses are carried out by the consultants and internal know-how providers are used as mere suppliers of data and assessments. This approach does not strengthen or combine internal knowledge; rather, it draws knowledge from the system. At the same time, it also creates mistrust among employees, as the collected data is made available only to the management. The alternative to this approach, which was called for by our client respondents, would logically be to foster a general solution orientation without referring to a problem-oriented approach per se. In essence, the diagnosis would be created using representatives of the system, so that within the client system a clear picture can be painted of the changes needed and their direction. The resulting diagnosis would then be made available to the various stakeholders. The diagnosis and processing of the solution then become an integrated element of a uniform change management process. Consulting the Management Versus Consulting the Whole System From the perspective of the consultants, two key points related to professional self-image and consulting practices are addressed here. How do

Delineating the Paradigm Shift 7

consultants position themselves in relation to the client system? Do they see themselves as consultants of the management system, focusing on building an exclusive trust relationship with the respective top management? Or do they see themselves as consultants to the system as a whole, with the concomitant need to build a trusting relationship with a broader array of stakeholders? As our interview data suggest, although it is indeed imperative to provide optimal management support, in the interest of the successful development of the entire system it is equally important to involve other groups, incorporate the perspectives and know-how of relevant stakeholders, take potentially neglected views into consideration, allow contradictions to emerge, and initiate processes for handling them. Within this context, the differences between the professional concepts are usually more greatly pronounced. This is not primarily a question of values, but depends on organizational understanding, that is, the theory of the development of organizations, upon which the actions of the consultants are based. A consultant who views the organization as a survival unit with all of its relevant environments, like a system-theoretical approach, will insist on also involving stakeholder representatives in the decision-making process and utilizing their know-how. Such inclusion encompasses middle management, various groups of employees, collaborating partners, clients, and so forth. Other consultancy approaches would use these same perspectives, but they would work out the final solution with top management and then let them execute it. The second interesting aspect concerns the way in which the consultants incorporate their expertise, solutions, and tools. Drawing on my own experience, whenever I have presented a complete solution, even if it was demanded by the client, it quickly became apparent that this approach was not helpful. Such externally provided complete solutions often lead to long technical discussions, during which more reasons against the “solution” emerge. Often, the recommendations are implicitly accepted but later brought back into question. Internal experts and decision makers rarely commit to such solutions. The alternative is to provide the tools that can be used to guide the development of internal solutions (e.g., half-finished solutions that allow for use and further development by the organization’s own internal powers). This approach often leads to a different range of solutions, which the representatives of the system can choose from. Often a combination of the above approaches is used and shaped into an own internal solution. The tools that are ultimately used, however, tend to be more effective when they are developed in collaborative fashion, with clients working with con-

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sultants rather than their being brought in as already finished products (Prammer, 2009).

Performing Change as a Rational Process Versus Offering Containment, Helping to Express Emotions Thinking, feeling and acting are integrated processes (Ciompi, 1998), and change processes involve a lot of emotions. These emotions also shape the perception of concepts, structures, and communications. To use these emotions as resources, offering appropriate guidance in dealing with emotions has become a core component of a consultant’s work. This focus is of great importance for different groups of employees as well as the management in an organization. Learning how to cope with anxiety, feelings of helplessness, and burnout are major topics in a growing number of management coaching sessions. In today’s tumultuous business world, creating the right setting for “managing emotions” is a demanding task for internal and external consultants alike. Buying Consulting Services Versus Building Trusting Relationships Based on the interviews with both consultants and clients, it is clear that financial pressures and growing criticism of the performance of many consultants have changed the buying behavior of organizations. Awarding consultancy contracts is increasingly being subject to new rules and new expectations. Additional bodies such as decision-making and supervisory entities (e.g., purchasing departments) are positioned between the consultant and the client. There is pressure within client organizations to obtain more and more offers, which is leading to a standardization of selection and award criteria—a development that can be thought of as the professionalization of the client (Wimmer, 2005). This dynamic is changing an important aspect of how consultants approach clients and negotiate the consulting contract. At this stage it is increasingly important to build a relationship of trust early on, which clearly requires in-depth contact with the decision makers and actions and experience that foster such trust. In the contracting phase, it is advantage when the representatives of the actual client system can share their experiences with the consultant. A goal of the consultancy should be to build on this discussion, jointly defining the subject to be explored in the engagement. If the award of the contract is made through a tender, and the selecting authority is not the actual client of the consulting service, neither dimension of relationship building can be established.

Delineating the Paradigm Shift 9

In Europe’s public sector awarding consultancy contracts is governed by statutory regulations at the state level or even by European Union law. In this framework, it is difficult for both the client and the consultant to build a relationship that is necessary for the specific services the consultant will eventually provide. For consulting firms, this also means they need to invest a lot of time and money in the preliminary phase, all of which makes contact with top management as the initiators of the consulting contract that much more important. In this setting, consultants find themselves in a paradoxical situation. The dynamics of the organization and the complexity of management activities make security providing and trust-fostering relationships more and more necessary for consultants. At the same time, the conditions surrounding contracting often make it difficult to build such relationships. CONCEPTUALIZING ORGANIZATIONS AND THE CONCEPTS OF CHANGE Based on the results of our interviews, my own experience as a consultant and my observations of the development dynamics of companies, this section continues to explore central aspects of the paradigm shift taking place in consulting and consultancies. The perception and understanding of organizations as well as the creative shaping of new organizational forms are becoming more and more important. Linear Systems Versus Self-Developing Systems The idea of self-developing systems depicts organizations as living social systems. A basic premise underlying this view of organizations is that change must come from within the system and be self-generating. It is also underpinned by an understanding that: (1) a system can only survive if it develops the ability to work with important external and internal factors; and (2) the way an organization deals with these factors influences its ability to survive and develop in a sustainable manner. This ability encompasses such practices as: managing the know-how of employees; dealing with new technologies and emerging knowledge; managing external partners, even competitors; and dealing with a variety of political frameworks in different business locations. Growing Complexity Requires Systemic Approaches The paradigm inspired by system theory and organizational development is gaining more and more practical impact. Due to the growing complexity faced by decision makers and the higher levels of risk and

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uncertainty faced by managers, there has been a concomitant need for timely, flexible solutions that engage the entire enterprise. As part of this new organizational reality, companies are increasingly dependent on the specific knowledge, skills, and abilities of their employees. Organizations in both the private and public sectors are confronted with more and more complexity from a wide variety of stakeholders and as well as the need to incorporate a growing number of external factors into their decision-making processes. Managing complexity has become a key criterion for success. For consultants, this development means that they themselves must be able to find creative and flexible organizational solutions and guide their implementation. They must construct all-departmental and all-organizational processes and combine process management with the hierarchical structure of the company. Consultants must also manage the coordination of independent business units through horizontally and vertically integrated leadership teams and support the cultural development of these teams. They should assist in the formation of virtual teams and render cross-cultural work as well. They must invent strategic alliances in order to assist in work processes and decision-making tasks. The organizational core issues include: stipulating the horizontal alliance to the hierarchy, deciding on the necessary depth of participation and involvement of groups of employees, establishing a dynamic exchange of technical development work and decision making, and managing a high degree of heterogeneity in work-related and decision-making processes. The consulting system itself requires flexible corporate structures that enable the combination of all of the different sources of know-how, from organizing the delivery of individual work processes to the customer, to the implementation of autonomic endeavors of individual experts in a productive organizational framework, to enabling reliance on network partners for larger tasks and the formation of integrated consulting teams. Innovative Organizational Patterns Managers are quickly discovering that they simply cannot cope with these myriad challenges within traditional organizational structures (Neumann & Graf, 2007). The new reality, which comprises the need to be able to react quickly and flexibly to a host of novel challenges, is encompassed by such factors as: • complexity and the need for flexibility, which fosters decentralized intelligence; • the unconventional combination of resources within the enterprise and/or in relationships with external partners; • the need for employees to be able to act on their own initiative; and

Delineating the Paradigm Shift 11

• the challenge of leading independent organizational units to realize a common strategy. A premise that I have operated under over the past 15 years is that virtually all “new” organizations were varieties of a hierarchical structure. Change was managed without really questioning basic organizational patterns. In this respect, we can see a paradigm shift taking place. Today successful enterprises must constantly reinvent their organizations—from their policies and procedures to their structures and operating patterns. Some aspects of this challenge include: • a radical process of decentralizing the enterprise into different units, which are responsible for integrated outcomes that require different leadership structures; • the pressure to be very quick in terms of innovation, calling for networks of creative forces; • the need to more and more frequent collaboration through strategic alliances, developmental networks, and producer-supplier relationships; and • the critical importance of individual know-how and motivation leading to new types of participation and career development. Today’s organizational forms must combine vertical and horizontal patterns of organization. Organizational actors must take on different mindsets. Different management concepts and attitudes must be used. It has become an increasingly essential task for both management and consultancy to interlink relatively independent business units and their leaders. The art is to design different and appropriate organizational structures. Developing the Capability for Change and Organizational Capability Managers, internal specialists, and consultants must not only manage change, but develop the capability for change. This does not only mean developing the abilities of the people involved, but also developing organizational capability. An appropriate infrastructure for change must be created, as well as mindsets and skills that support a continuous change orientation and process. Within this context, it is useful to distinguish between organizational competence, competence monitoring, and organizational capability for change, realizing their inherent paradoxes and dilemmas. Organizational competence can be seen as the specific way in which an enterprise interlinks its resources in a pattern that has been proved to be successful. Therefore the organization will try to stabilize this way of working. Yet, as

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this approach organizational competence, because it is successful, tends to become a trap. By definition this competence is formed through success and is not the result of specific planning. To avoid getting trapped, enterprises have to install systematic self-observation and self-evaluation. This self observation must also always be in the context of external factors. An institutionalized way of monitoring is a crucial element of organizational capability for change (see Kerber & Buono, 2010).

A PORTFOLIO OF ORGANIZATIONAL CONSULTANCY Figure 1.1 captures the interrelationship between the services and roles of management and organizational consultancy within the contest of this new paradigm. Content Content stands for the different types of expertise provided by the consultant. This dimension includes specific knowledge about the purpose of consulting (e.g., strategy development, process optimization, leadership

Figure 1.1. A portfolio of organizational consultancy.

Delineating the Paradigm Shift 13

development, reorganization of certain business units). Consultants do not need to be specialists in all facets of the company, but nowadays they are expected to be competent sparring partners for managers, internal experts, and other specialists in corporate management. It is important that the consulting process fosters the acquisition of background knowledge about the industry in which the company operates. Relevant questions include: What type of organization is it that needs consulting? Is it a technology or knowledge-based company? Is it a family business or an organization with state funding? Each type has its own organizational dynamic with its own set of development issues. The consultant should be familiar with the legal and political parameters of the particular location as well. It is difficult to consult in government, for example, if you do not know the constitution of the location or country in question. The cultural context of the work is a critical success factor—including the culture of the country, the professional culture and the culture of the company. Consulting work is ever increasingly becoming more demanding in terms of the ability to rely upon theories, that is, one must be able to quickly orient oneself in various types of systems, to decipher the key aims of the organization and to understand the potential and limitations of a specific culture. Therefore it is necessary to have applicable data at one’s disposal, to be able to rapidly formulate usable hypotheses and to theoretically tackle a practical situation. This ability cannot solely be accomplished through the mediation of instrumental knowledge and tools. Experience in practical cases and theory-inspired reflection of such experiences can serve as excellent preparation.

Process: Communication Structures Process represents the communication structures in which the work and decision making takes place (Grossmann & Scala, 2002). Change and development require proper communication settings. The formation of change architecture as a structured series of various meetings and intermediate work processes therein is a creative effort that the consultant is capable of rendering much more easily than the members of the organization themselves who are often trapped in their entrenched communication routines. The traditional way in which meetings take place in modern organizations is growing ever more surprising. Innovative design for various events and goals is a “key technology” of consulting. The organization is presumably the learning location for the future. It is important to combine work with learning processes. This requires appropriate structures: structures that enable monitoring and evaluation of work, learning sequences that are part of the change process and the

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combination of learning in business schools with practical change management projects within the company. Here, consultants are used who devise and help to implement such learning structures together with the experts within the organization. Executive coaching is one of fastest growing consulting sectors today. This kind of coaching is very demanding but very effective. The coach conveys knowledge and experience, he assists in mentally coping with certain professional situation, he plays out various action plans with the client and he helps to shape the client’s role as a leader. To officially implement coaching as an instrument of leadership development within the company is in itself a sensitive change process. Consultancy firms are ever increasingly entrusted with the project management of major change processes. It is important for a systemic consultant to find a good balance between internal management and external support. Many organizations tend to not only delegate project management but also the responsibility for key decisions and internal development processes. Therefore it is often necessary to set up the internal resources for project managements at the same time the project management is being implemented and to incorporate and guide learning into the project development.

Containment Containment is a key concept of psychoanalytically based organizational consulting. Change within an organization is often associated with anxiety and other strong emotions. Management faces the task of providing a framework and means of expression for these emotions. It is an increasingly important role for the consultant to assist management and staff in helping to express their feelings and respond to these feelings, and, above all, to use these feelings as a major resource of knowledge and a legitimate basis for decision making. A suitable design, as well as personal examples set by the consultant, is required to make this process work. Dealing with uncertainty and risk requires different methods of communication than when a strategy preassumes the ability to calculate all important points, viewing decisions as part of a rational process. “Only undecidable things must be decided,” noted Heinz von Förster, one of the most important thinkers of constructivism. It is necessary to be aware of the uncertainty in certain actions and to regard decisions as processes that will only reduce uncertainty. This requires the consideration of decisions as an emotional process and the combination of rationality with emotion.

Delineating the Paradigm Shift 15

Containment as a task is one that can be performed quite well by a consultant in the coaching phase or when working with management teams. But containment is also important in the shaping of events with larger groups.

Time/Rhythm Time and rhythm are key elements of successful leadership and mastering change. Although it is important to accelerate processes in an attempt to make them more timely and effective, an underlying reality is that complex decision-making processes require time, and speedy solutions may pose additional risks or may be associated with less sustainable change. Acceleration and deceleration are among the most important acts of intervention carried out by the consultant. Deceleration can often only be accomplished by externals who are not under the legitimacy pressures of the organization. For this reason, it is the role of the external consultant to introduce unconventional approaches. Today, however, acceleration is increasingly part of the consultancy mission, whether through working with new media, creating virtual teams, providing efficiencyenhancing tools, and shifting the work into lean process structures. Many clients are also increasingly assigning shorter intervention tasks to their consultants. It is therefore important to be mindful of the long-term development of the organization and to integrate these isolated intervention efforts into a longer process. Dealing with pace and deceleration is also an important dimension for the consulting system in and of itself: reserving sufficient time for reflection, integrating different opinions in the assessment of a case, and, despite many responsibilities, to be quickly available. In essence, that is the resource paradox in which consultants and clients find themselves.

CONCLUSION The work of the systemic OD consultant is that of coping with the paradigm shift. The systemic consultant offers integrated services that encompass both process knowledge and special know-how, which is often not easily introduced and integrated in the organization. Consultants can help build the internal knowledge base and develop organizational capability. Although they typically support management, they must also feel a responsibility to the development of the entire system. They can help to overcome boundaries of professions, organizational units, and interests, and recognize and include the stakeholder perspective that is important

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for the organization. Effective consultants are increasingly able to invent creative organizational solutions and help to implement them. They view the company as a place of learning and in intervention efforts they try to include learning in the change process. The rhythm of development work and decision making is a central theme of consulting, as well as the balance between rationality and emotionality. In a time of great uncertainty and anxiety, the ability to contain client emotions becomes a critical capability for a consultant.

NOTE 1.

The majority of the management personnel that were interviewed for this study were from organizations representing a mix of public and private sectors. We believe that the trends described in this chapter are even more prominent in the for-profit sector.

REFERENCES Ciompi, L. (1998). Affektlogik Über die struktur der psyche und ihre entwicklung: Ein Beitrag zur Schizophrenieforschung Affect Logic [About the structure of the psyche and its development: A contribution to schizophrenia research]. Stuttgart, Germany: Klett-Cotta. Grossmann, R. (2004). Organisationsberatung in der Reform öffentlicher Leistungen: Auf den Nutzen kommt es an [Organizational consulting in the reform of public services: It depends on its use]. New York, NY: Springer. Grossmann, R., & Scala, K. (Eds.). (2002). Intelligentes Krankenhaus: Innovative Beispiele der Organisationsentwicklung in Krankenhäusern und Pflegeheimen [Intelligent hospital: Innovative examples of organizational development in hospitals and nursing homes]. New York, NY: Springer. Kerber, K. W., & Buono, A. F. (2010). Intervention and organizational change: Building organizational change capacity. In A. F. Buono & D. W. Jamieson (Eds.), Consultation for organizational change (pp. 81-112). Charlotte, NC: Information Age. Neumann, R., & Graf, G. (2007). Management-Konzepte im Praxistest: State of the Art = Anwendungen = Erfolgsfaktoren [Management concepts in the practical test: State of the art applications = success]. Vienna, Austria: Linde Verlag. Prammer, K. (2009). Transformations-Management: Theorie und Werkzeugset für betriebliche Veränderungsprozesse [Transformation management: Theory and tools for business processes of change]. Heidelberg, Germany: Carl-Auer Verlag. Wimmer, R. (2005, November). Wer braucht noch beratung? Aktuelle Trends und strategische optionen [Who still needs consulting? Current trends and strategic options]. Keynote speech at the Conference 1. Berliner Viennale für Manage-

Delineating the Paradigm Shift 17 ment und Beratung im System: X-Organisationen [1st Berlin Viennale for Management and Consulting: X-Organizations], Berlin, Germany.

CHAPTER 2

EXPERT VERSUS PROCESS CONSULTING Changing Paradigms 1 in Management Consulting in Germany T. SCHUMACHER

Thomas Schumacher

According to a study by the Association of German Management Consultants (BDU) on the present status and future development of management consulting in German speaking countries, the focus of consulting is changing. During 2007-08 these consulting companies expected that future key challenges in the area of customer relationship management would include innovation, cost management, and globalization, indicating that “growth” (Unternehmensberater, 2007) had a high priority. The expected challenges for 2009 differed strongly—there was shift toward consulting projects focused on structural challenges and the need to reduce engagement costs. Other important issues included risk management, the need for competitive differentiation, and the importance of a critical assessment of the existing business model (Unternehmensberater, 2009). From the vantage point of clients, in 2008 important issues included the need for support from consultants, solution competence, The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 19–37 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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concrete value added engagements, the personality of the consultant, and implementation competence. In 2009, there was also a similar shift to other issues, especially toward the quick and prompt availability of the outcomes of consulting projects. Overall, the results of these studies underline the growing expectation that consulting should go beyond analyzing and developing suggestions, with more attention focused on helping to implement and realize the recommendations. This expectation, of course, is neither new nor surprising, since the lack of capabilities on the customers’ side as well as the lack of practical suggestions by consultants have already been critically expressed (Groth, 1996; Turner, 1983) and both factors have been indicated as contributing to the high percentage of poorly executed change processes in organizations. But is the managerial reflex to ask for a different form of consultant’s involvement the key to higher performance or is it time for a new form of consulting?

ORGANIZATION: CONSULTING’S BLIND SPOT? The role, behavior, and performance of consultants (as well as managers) depend largely on their assumptions about the nature of an organization. According to Kieser (1998), one can basically differentiate between two organizational paradigms—the dominant objectivistic or rationalistic and the constructivist paradigm.

The Rationalistic Approach The rationalistic paradigm, which for a long time has influenced and dominated organizational theory as well as the “theories in use” of managers and consultants, differentiates between means and ends and creates robust cause-and-effect chains. The organization itself is seen as an instrument to achieve objectives using organizational rules in order to steer the behavior of organizational members. Nevertheless the explanation of the link between organizational rules and the behavior of its members is regularly excluded. The tasks of the general management (e.g., strategy development, organizational design) are expert tasks since these people are in possession of the know-how and methods to find organizational solutions. Within the rationalistic paradigm the task of the consultant is to support the organization, especially its management, in finding the “right” decisions (i.e., analyzing the situation and providing organizational solutions to adapt to the changing environment). As illustrated in Figure 2.1, this

Expert Versus Process Consulting 21

Environment

Organization

Figure 2.1. Linear relation of environment and organization.

approach is based on the premise of a linear causal relationship between the environment and the organization. Despite its influence, this rationalistic approach to organization has gained early critique. Simon (1991), for example, argues that decision making in organizations is better understood in terms of “bounded rationality” since decisions in organizations only partially meet the demands of rationality. The resulting “expert roles” within the decision-making process also produce side effects through the separation of formulation and implementation of organizational changes. Although organizational members need to be convinced of the experts’ solutions, the room for involvement and participation within this paradigm is rather limited. Beyond the practical challenges of creating wider participation, the underlying paradox restricts broader involvement since the legitimacy of the expert approach rests on its capacity to absorb the uncertainty of strategic decisions by referring to data, figures, and an abstract logic. The subsequent reputation of the experts therefore helps to cover the fact that no expert knows what the future will look like or how a manager should act in a particular situation. Nevertheless this approach helps to mask the underlying uncertainty of a decision maker or the overall organization when one has to decide about the unknown future of the organization. The assumption that stability in nonlinear and error-prone systems can be achieved by strict coupling of the subsystems has also been strongly challenged. As Weick (1998) has argued, within “high reliability” organizations elements and subsystems are loosely coupled, which allows for mechanisms that enable the organization to both adapt and improvise as necessary. The stability of a dynamic organization within a changing environment, therefore, requires loose coupling instead of strict coupling of decision premises, especially with respect to organizational structures and processes (Luhmann, 2000).

The Constructivist Paradigm In contrast to the rationalistic paradigm described above, a new systems theory, which serves as the prominent exponent for the constructivist paradigm in Germany, describes organizations as self-organizing,

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operatively closed systems. The relationship between the environment and the system is described as being a paradox. The organization as a social system is closed and separated from the environment and at the same time open and highly dependent on the exchange with its environment. The key question is how the organization can manage the paradox of simultaneously being open and closed, dependent on and independent from the environment. Within this context, managers and management consultants have to simultaneously consider the openness and closedness of the system (e.g., deciding whether a new requirement from customers should be ignored, whether the firm should invest in a promising innovation). Unlike the rational paradigm, this approach constructs the relationship between the organization and its environment in a circular rather than linear way (see Figure 2.2). In essence, as Weick (2001) has suggested, the environment influences the organization in the way the environment is perceived by the organization. The basic question for the systemic consultant is how the stabilization of routines and business practices as well as the openness toward the environment are possible at the same time. Within the systemic paradigm, the answer to this paradox is found in the self-observation of the system. In observing itself the system is using the difference between itself and the environment—or, in other words, the self-observation is a reentry of the distinction (between the system and the environment) into the distinction (the system). One consequence of this paradox is an irresolvable indeterminacy that is caused by the system itself and is not an impact of the environment. The system works in a state of self-produced indeterminacy. Unfortunately this paradox cannot be cracked by objective figures or facts since the indeterminacy is generated by the system itself and not caused by the environment (Spencer Brown, 1967). The practical consequence will, first and foremost, refer the organization back to itself whenever it comes to learning and adaptation. Instead of installing early warning systems and attempting to identify information in the environment, second order

environment

organization

Figure 2.2. A circular relation of environment and organization.

Expert Versus Process Consulting 23

observation gives the most consistent information for the reliability of the system. The way the organization observes the environment and its dependency from capital, energy, technique, and so forth provides the most reliable information. Therefore management has to observe the unobservable—the blind spot of the decision maker—and by this observation becomes aware of the risks in the decision-making process. Stability and reliability in social systems, therefore, cannot be achieved by a close coupling of the system with its environment (“fit”). Robustness needs permanent feedback loops to allow for the continuation of the system’s selforganization. Within the constructivist paradigm, the hope to detect lifesaving information from the environment is disappointing. Instead the observation of how the environment is observed (e.g., by the management) is the best way to safeguard the future of the organization.

Illustration: Organizational Patterns in Strategy Development and the Role of the Consultant As a way of comprehending the role of the consultant within or in relation to the organization, it is helpful to understand the managerial patterns in an organized social system. This conceptualization helps to define the role and paradigmatic starting point of the consulting process. Are there any forms or patterns of managerial practices that are not assigned to the rationally-oriented illusions of planning and predictability? The different paradigms and their underlying assumptions about the relation between the organization and its environment are typically reflected in these managerial patterns and practices, for example, strategy development. For a long time the analysis of strategy processes has claimed that the decisions about the future have been legitimized and backed by patterns of analyzing the past and deriving future decisions from success factors of the past. Besides the fact that yesterday’s success cannot guarantee the future of an organization, past solutions often turn into future problems. Mintzberg (1987) criticizes the premise of rationality of the strategic management process, underlying that strategies are not necessarily the result of a rational planning process. Although there are multiple ways of organizing the strategy decision process, all these patterns basically serve to overcome the fundamental dilemma of strategy making—not knowing today what the world will look like in the future, one is forced to decide on an uncertain basis. Nagel and Wimmer (2002) differentiate the organizational patterns in the strategy development process on two dimensions. First, they note that observable patterns vary between implicit and explicit forms of strategy development, distinguishing the extent to which certain activities that are explic-

24 T. SCHUMACHER Table 2.1. Where are company strategies developed?/How are they developed?

Patterns of Strategy Development Practical Patterns: Implicit

Explicit

• Outside the organization: As guideline instructing the management process

• Decision by intuition

• Development by experts

• Inside the organization: As achievement of the management process

• Development by evolution/chance

• Development as common achievement of management

Source: Nagel and Wimmer (2002, p. 33).

itly called “strategy development” take place in an implicit way. Second, they differentiate between who makes the decision about the fundamental questions of the survival of an organization—is the decision made “outside” (e.g., the “old man” in a family business, an external consultant) or “inside” (e.g., autonomous single business unit, joint effort within a management team) the organization. The resulting four patterns of strategy development (see Table 2.1) reflect the dominant paradigms and solutions for managing the underlying uncertainty of an organization confronted with strategic decisions. The different patterns with their inherent recipes in the struggle to cope with the uncertainty—rationality, intuition, evolution, and communication—have to be taken into account before defining the role of consulting and its contribution to the organization. In essence, management and consulting are both dependent on the form of the organization. To define the role of the management and even more the role of consulting, the interplay with the management and the organization is key to the understanding and must be taken into consideration. Given the different organizational patterns and the resulting organizational and managerial expectations toward consulting, the role of consultants can vary significantly. The role may well be understood as supporting the strategy development within the pattern of an expert mode (e.g., by delivering analysis) or it might take the form of a process facilitator. In the latter case, by focusing on the process of strategy making the consultant role thus serves as a container for the social dynamics within the system. Clearly these different approaches have significant implications for both the problem solution and the contribution of the consultant. Does the consultant attempt to find the “right” answers to the strategic riddle (perhaps in the role of oracle) or work on building capabilities within the management or organizational system?

Expert Versus Process Consulting 25

THE ROLE OF THE CONSULTANT IN THE TWO PARADIGMS The role of a general manager can be understood in terms of the plando-check-act cycle and how he or she attempts to improve organizational performance (e.g., low versus high sales, the difference between poor and good product quality). Using the tension between the two different states, the manager tries to reduce the difference between the system and the environment, for example, by improving the sales force or introducing a new quality system. The role of the consultant in a rationalistic paradigm is primarily to support the organization in adapting to new requirements. Therefore the consultant has to support the manager in marking the difference (e.g., by providing a problem analysis and benchmarks) and providing recipes. This approach, which is comparable to the medical doctor helping the patient, attempts to overcome the difference between the organization and its environment (e.g., by providing qualification of staff or a quality system) through the infusion of external expertise. The role of the consultant in a systemic paradigm, in contrast, is complementary to the manager. In this role, the consultant observes the differences the manager makes in order to reduce them and compares them to other differences that could have a more reliable impact. Within this context, the primary intention of the systemic consultant is to “always act to increase the number of choices” (von Foerster, 1997, p. 234).

“The Lives of Others”: How One Consulting Paradigm Views the Other In order to understand the possible challenges and conflicts between the two consulting approaches, it is useful to examine what one approach might look like from the paradigmatic orientation of the other. In essence, how does a systemic consultant view expert consulting and how might an expert consultant look at the systemic consulting approach? Expert consultants appear to accept the systemic approach when there is a need to ensure high levels of participation and commitment among organizational members. Two situations can be thought of here. First, a system-oriented approach is attractive to the expert when it is important to obtain information from organizational members about the present problems of the organization or when certain details have to be clarified that cannot be answered sufficiently with the knowledge of the expert. A second scenario deals with implementation of an expert solution. From a rationalistic perspective, the primary task is to convince the members of the organization that the solution proposed by the experts is the right

26 T. SCHUMACHER

course of action. Conflicting points from an expert view would be the symmetric qualification and relation between the consultant and the customer—the expert consultant is invited by the client due to his or her qualifications, know-how or capabilities. As the expert, the consultant is expected to solve the problem and not simply give it back to the client. From a systemic-oriented view, the expert’s language and concepts, which managers have often been exposed to in their education, can easily be understood and related to. Managerial familiarity with these concepts—or at least the school of thought these concepts build on—provide a degree of certainty on the side of the organization and its management. A similar effect can be observed among other stakeholders. This dynamic often leads to selecting a specific consultant (or consulting company) with well known methods in order to absorb uncertainty for those who are used to make decisions based on numbers, data, and facts. In essence, the expert consultant attempts to simplify complex problems and provide approved problem-solving techniques and success factors—often in the form of “best practices”—to improve the performance of the organization. However, research on such “success factors” has been very critical (e.g., Nicolai & Kieser, 2002) since it is not possible to identify the “best” solution for a specific problem and there are myriad questions as to the extent to which a successful solution in one organization can be transferred in a “copy and paste manner” to another firm.

The Paradigms in Management Consulting The roots of the classical management consulting approach lie partly in the historical phase of the industrialization and the influence of Frederick Taylor. This orientation forms the background of the development of companies like McKinsey and the Boston Consulting Group, and, in Germany, Roland Berger, whose founders built their services on expertise in technical and business analysis. As summarized in Tables 2.2 and 2.3, due to the dominant mindset at that time their way of consulting was implicitly influenced by the mechanistic paradigm, which lead to a number of standard methods that are still common in the classical management consulting today (Handler, 2006). The systemic-oriented management consulting approach in Germany has developed over the last 30 years. Stemming from different theoretical backgrounds, like constructivism, chaos theory, cybernetics, and therapeutic schools, systemic management consulting has strongly been influenced by the general system theory of Luhmann (1984, 2000). This sociological approach is widely known in German speaking countries, but has hardly received any attention on the international stage (Becker &

Expert Versus Process Consulting 27 Table 2.2.

Assumptions of Expert and Process Consulting Expert Consulting

Relation between environment and organization

Causality

Process Consulting

• Assumes that the environ- • Assumes that the environment influences the orgament influences the organization by (unexpected) nization, by the way the events and everything environment is perceived which changes in the enviby the system (loose couronment (strict coupling) pling) (Weick, 1998) • Differentiates between • Effect in the system can be means and ends and condescribed in circular and structs robust cause-andself-referential ways effect chains

Context

• Solutions can be general- • Solutions are highly ized and are independent depending on the context of the context (e.g., benchmarking)

How to safeguard future developments

• To safeguard the future • To safeguard the future observation of the envipermanent feedback loops ronment is necessary to that allow the continuadetect life-saving information of self-organization tion (observation of how the environment is observed)

Table 2.3.

Characteristics of Expert and Process Consulting Expert Consulting

Client

Process Consulting

Lacks know-how, time, commitment to the decision Focus of consulting Professional certainty is based on standardized problem-solving knowledge

Lacks ability to self-produce solution; has internal blockades

Blind spot Relation to client

Economical aspects Symmetric

Critique

Internal social dynamic Asymmetric • Standardization of consulting projects • Distribution of management fads • Implementation problems • Loss of reputation

Self-development potential of the organization and design of communication processes

• Complex and complicated • Lack of content expertise • No definite content-wise position

Seidl, 2007). Nevertheless it has—together with various other influences like systemic family therapy and group dynamics—contributed to the development of a specific organizational consulting paradigm, which differs to a significant extent from traditional management consulting.

28 T. SCHUMACHER

The content driven “expert consulting” gains its professional legitimacy out of superior knowledge, standardized problem-solving knowhow, and experience of similar projects (benchmarking) in a given industry. The internal social dynamic of the organization, however, is usually neglected and implementation remains a rather weak point, if done by consultants at all. The systemic management consulting approach, in contrast, relies on the development of potential and resources of the client organization and offers support for solving or unblocking communication obstacles and socially critical situations. As the focus is on internal social processes and competency building, a limitation of this approach is a tendency to neglect or underestimate the business challenges faced by management and the organization.

The Role of Consulting in a Self-Organizing System In order to identify the role of a consultant in a self-organizing system it is useful to clarify the nature of a self-organizing system as it is often misunderstood. The term self- organization does not mean a radical detachment of the system from its environment; it captures the system in close relation to its environment. Self-organization of a system does not make sense “unless the system is in close contact with an environment, which possess available energy and order, and with which the system is in a state of perpetual interaction, such that it somehow manages to ´live´ on the expenses of this environment” (Foerster, 1984, p. 33). Within this self-organizing system, the consultant, who is aware of the systems’ recursiveness, can only offer orientation. Realizing that there is no direct control of the system, the consultant supports the system in its self observation and self description. By asking the right questions consulting opens up potential and possibilities for the organization. This approach can lead to the generation of new knowledge about the system’s status quo, allowing for new self descriptions that may open up new options for the organization’s management and giving hope in moving forward in “tricky” situations. Therefore the task for the systemic consultant is not to deliver the “right” decision, but to support the organization in its ability to create options (Baecker, 2007).

Changing Client Expectations: Unwilling Consultants? Although there is significant evidence that clients are demanding more support for implementation or wanting consultants to share the risk of performance, consultants still hesitate to meet such demands and change

Expert Versus Process Consulting 29

their roles. Both classical management consultants as well as consultants in the organizational development-tradition appear to refuse to share more responsibility. Roland Berger (2003, p. 66), as a prominent representative of the classical consulting paradigm, underlines the difference by clearly separating the manager’s responsibility and that of the consultant: Consulting is consulting and not implementation, because implementation is the job of the manager. To consult on the implementation is the job of the consultant … each time the consultant tries to be the implementer, he will either not be successful or degenerate to a normal business service.

Wimmer (2008), as a proponent of the systemic organizational consulting approach, also dismisses a stronger managerial role of the consultants. He considers an acting management role of the consultant as the “fall of mankind” and argues that the final responsibility for decisions and implementation should stay with the client.

CHANGING PARADIGMS OR PARADIGMATIC CHANGE? The discussion thus far raises the question as to whether client needs and expectations are being neglected or if there is a need for a different form of consulting. A brief look at the emergence of new consulting approaches in Germany reveals at least three attempts to reconcile the traditional content and systemic process-driven consulting approaches and support the customer in an integrated way. Complementary consulting (Königswieser, 2008), the concept of integrated consulting (Handler, 2006), and the third modus of consulting (Wimmer, 2007) describe different evolutionary steps toward a new consulting paradigm (see Figure 2.3). Complementary consulting tries to integrate expert and process consulting know-how so that in each phase of the consulting process contentrelated expertise can be combined with the process-related expertise in a holistic and cooperative manner. Based on the systemic paradigm, the founder of the complementary consulting approach Königswieser (2008) builds a team of consultants with both process and content expertise. The idea is to integrate the “blind spot” of both consulting approaches to allow an integrated working process. The complementary approach allows the expert and systemic consultant to maintain their professional identities. Within the frame of a joint consulting project, the management of the organization has a clear understanding of who should be addressed for questions concerning social dynamics and who the expert is for content questions. As reflected in Figure 2.4, the sequence of content wise

30 T. SCHUMACHER

Degree of expert orientation High

Expertconsulting

Poor Dogs

Low

Low

Figure 2.3.

Complementary Consulting Integrated Consulting Third Modus of Consulting

Processconsulting

High

Degree of process orientation

Degree of expert and process orientation in different consulting.

Complementary Consulting Content-expertise

Process-expertise

Foundation: Systemic Mindset Source: Königswieser (2008).

Figure 2.3.

Degree of expert and process orientation in different consulting.

Expert Versus Process Consulting 31

input and phases of reflection oscillate according to the needs of the consulting project. The concept of integrated consulting (Handler, 2006) similarly tries to join or combine action and reflection in a consulting process. On the basis of interviews with managers who experienced both expert and process approaches, Handler (a former expert consultant) proposes that there is learning potential for both consulting approaches—development potential for expert consulting (e.g., to start understanding social systems, involving employees) and systemic consulting (e.g., to become open to expert know-how, develop concrete positions for content-based questions) alike. Not surprisingly, the analysis underscores that both approaches have very different and contradictory characteristics. Handler argues that due to these paradigmatic contradictions the integration of the two consulting approaches can be challenging. Since both approaches are typically not up to date with the area of the other—organizational complexity and dynamics as well as content-based challenges—the goal of the integrated approach is not be to separate the “what” of the expert consultant and the “how” of the systemic consultant but to combine content from the beginning with an adequate form of intervention. As prerequisites for the ideal concept of the integrated consulting, Handler defines a holistic perspective, an open handling of the stress fields and tensions, development of the consultant’s competence, the systemic attitude of the consultants, and their cooperation in the consulting process. Without any concrete realization of the concept of integrated consulting in the practice of consulting thus far, Handler (2006) identifies three process components as being of fundamental importance for the success of an integrated approach: a shared understanding of communication, feedback mechanisms, and reflection loops, which should all serve the integration of expert and process consulting. A key element in the conception is a project management orientation, which coordinates the consultants according to the specific topics and the phases in the project (see Figure 2.5). Usually the expert consultant will be in the lead in the conceptual phase and the systemic consultant in the implementation phase, establishing a clear differentiation between the two approaches. Finally, the third modus of consulting also tries to transcend the chasm of expert versus process consulting paradigms. In this approach, the content, social, and temporal dimensions are simultaneously worked on without separation of the different consultant roles, which are still rooted in classical identity concepts of expert and process consultants. The consultant offers cooperation architecture and acts as a sparring-partner for the business issues. An important aspect in this approach is that the decision and responsibility stay fully with the client, who maintains an “ownership-

32 T. SCHUMACHER Action focus Reflection cycle Reflectionlevel

Original state

Diagnosticphase

Conceptual phase

Implementation phase

Target state

Actionlevel Change Source: Handler (2006, p. 466).

Figure 2.5.

Process model for the concept of integrated consulting.

role” of the problem and does not delegate responsibility to the consultant. One of the major challenges in this model is the need to provide concrete support in helping to solve current problems while also attempting to enhance the capability of the organization to deal successfully with longer-term uncertainties and ambiguous situations. One of the central functions of the consultant therefore is the so called “container-function.” By developing mutual trust in the consulting process, the client finds confidence to work on critical and personally difficult problems, which can be worked on without the risk of loosing face within a team where everyone depends on each other even after the process. Wimmer and Sutrich (2008) exemplify the crucial elements of the “third modus” using the example of the strategy development process. They describe the key challenges of the process, which include the potential for an integrated form of consulting that does not simply sum up the two approaches but simultaneously considers the integration of the two consulting paradigms. One of the key decisions in a strategy process is whether the existing pattern of the process should be a topic of discussion and decision. Here the existing pattern of managing uncertainty about the future direction (e.g. in a family business in the form of a personalized intuitive and opportunity driven pattern, in an expert-oriented way) are often questioned in terms of their adequacy. A change in this pattern

Expert Versus Process Consulting 33

implies a consciousness for alternatives and the ability to manage this change from both a content and process perspective. A second key decision is strategic positioning, which implies that certain strategic options are chosen and others are dropped. Consequently an integrated consulting process attempts to foster a team process so the team takes on the entrepreneurial risk and decision. Thus, risk taking is not left to an individual player—with all the consequences this has especially in case of failure. A further necessity for integrating the two consulting strands is the development of a master plan, where the concrete need for change is visualized and it is evident that someone on the management team does not have the appropriate competencies for the new task. The tendency in management teams is to build the new organization around the members of the team, often giving away the chance to build an organizational architecture that clearly supports the new strategy. From a consultancy perspective, this requires a simultaneous understanding of the personal sensitivities as well as content clarity of the new organizational design, combined with the willingness not to let the organizational decisions be unduly influenced by personal interests.

Content and Process: Will They Truly Meet? The three different approaches that have attempted to integrate expert and process approaches to consulting all show a different logic for reconciling or combining the strengths of the two perspectives on the way to a new consulting paradigm. While Königswieser (2008) and Handler (2006) build on and combine the existing schools, Wimmer (2007, 2008) describes a new paradigm of consulting that simultaneously combines the two paradigms. All three approaches integrate content and process expertise by different means and make high demands on the consultants, either on the level of cooperation between the different actors on a team or on the individual level in terms of qualifications and personality. Nevertheless all three approaches seemingly found a specific form of combination or integration of the two dimensions. To clarify the specific combination of the two paradigms, the process scheme of the Tetralemma “four corners,” that is, four positions or standpoints (Varga von Kibéd & Sparrer, 2000), a traditional Indian logic for categorizing and developing different standpoints (e.g., in legal cases) is drawn upon. Summarizing the above discussion, the scheme helps to consider the inner logic of the combination of the three existing approaches as well as identify a combination of the paradigms, in essence attempting to examine the dilemma from a different perspective.

34 T. SCHUMACHER

1.

“The One” process consulting “As well as

4.

“None of them” What is the context that made it different? What is behind it? What might it really be about?

3.“Both” - Advantages/ Disadvantages - integration/ combinations not yet seen

2.

“the Other” expert consulting

Source: Varga von Kibéd and Sparrer (2000, p. 87).

Figure 2.6. The Tetralemma.

What are the elements of the Tetralemma (see Figure 2.6)? The “one” and the “other” are the alternatives in the dilemma, which are in conflict with or in contrast to each other. In the case of the two different consulting paradigms, systemic consulting (one) and expert consulting (the other) are seen as opposite and, at least in part, in contradiction to each other. Although difficult to merge the attempt to combine the two consulting approaches might lead to an oscillation between the two alternatives (x as well as y). In contrast to this oscillation, the third position “both” symbolizes a stable situation where the two poles are united. It can be a first meta-position of the former dilemma, which makes it possible to see communalities and differences of former contradictions creating a new “frame” and thereby supporting a reconciliation of the positions (e.g., a compromise or iteration). The fourth position, referred to as “none of both,” questions the context in which the contradiction has occurred (e.g., management routines and attitudes, the present situation). Applying the scheme of the two consulting paradigms with the three combination approaches, the complementary consulting approach of Königswieser (2008), with its attempt to combine consultants of different heritage, tradition and identity, seems to be a form of oscillation or alternating process and expert consulting. Thus, in this approach the different qualities are still visible and are brought to the foreground depending on the requirements of the situation. In terms of the Tetralemma, one would call it a “as well as” orientation. The concept of integrated consulting still sticks to the logic of expert consulting in following traditional content-driven procedures. Within this

Expert Versus Process Consulting 35

approach, the lead is taken over in the first phase (where content challenges are seen as dominant) by the expert side and handed over later to the process side when it comes to implementation. To a large extent, this reflects the traditional understanding of the division of work between the two consulting approaches. In terms of the Tetralemma, this would be a position of the other, with every now and then a “visit” to the contradictory side. What remains open in this idealistic approach is the question of what or who is driving the integration (e.g., in the case of the complementary consulting the systemic approach or company). Finally the “third modus” perspective can be understood in terms of the Tetralemma as a “both” (i.e., the approach tries to overcome the classical traditions and identities of the two paradigms). The individual consultant therefore must have a surplus of qualifications. Nevertheless this approach might be more difficult to understand for managers who are used to the classical separation of hard and soft facts and might even implicate a certain superiority over the consultant, especially if the consultant lacks one of the competences of content or process. In this regard, the “third modus” might even face a certain handicap in terms of relationship building with the management (Baecker, 2003).

CONCLUSION The fourth position of the Tetralemma (“none of them”) underscores that the different traditions and professional identities create strong differences in the consulting approaches, a reality that points to a major challenges for any model that attempts to integrate the different paradigms and consulting approaches. The present context of changing client needs, moving toward greater demand for implementation support, however, may generate sufficient momentum to make integration easier or even enforce new ways of consulting. The three forms of combination discussed in this chapter might be challenging, but it is becoming increasingly clear that we need new roles for consultants and managers. For managers, the complementary consulting and integrated consulting approaches might be more readily accepted, given their experiences. Since they have the opportunity to deal with content and process experts, managers might have an easier role in steering the process since no one individual has undue influence. Thus the “third modus” approach might represent a bigger challenge for clients, since it leaves less room for managers to feel certain predominance within the system. The challenge for the consultant who walks this fine line is to understand that ultimate responsibility continues to rest with the client. It is critical that the consultant’s role not evolve into a “who is the better manager” type of interaction.

36 T. SCHUMACHER

NOTES 1.

The discussion in the chapter refers not only to Germany but mostly to German-speaking countries, including Austria and parts of Switzerland.

REFERENCES Baecker, D. (2003). Organisation und Management [Organization and management]. Frankfurt, Germany: Suhrkamp. Baecker, D. (2007). Studien zur nächsten Gesellschaft [Studies about the next society]. Frankfurt, Germany: Surhkamp Verlag. Becker, K. H., &. Seidl, D. (2007). Different kinds of openings of Luhmanns system theory: A reply to la Cour et al. Organization, 14(6), 939-944. Berger, R. (2003). Perspektiven zur branchenentwicklung in der Unternehmensberatung [Perspectives about industry developments in the consulting business]. Zeitschrift für Organisationsentwicklung [Journal of Organizational Development], 3, 65-67. Foerster, H. V. (Ed.) (1984). On self-organizing systems and their environments: Selforganizing systems. London, England: Pergamon. Groth, T. (1996). Wie systemtheoretisch ist “Systemische Organisationsberatung”? Neuere Beratungskonzepte für Organisationen im Kontext der Luhmannschen Systemtheorie [New consulting concepts for organizations in the context of Luhmanns system theory: How systemic is the “systemic organization consulting]. Münster, Germany: Lit-Verlag. Handler, G. (2006). Konzept zur Entwicklung integrierter Beratung—Integration systemischer Elemente in die klassische Beratung [A concept for developing integrated consulting—Integration of systemic elements in the classical consulting]. Wiesbaden, Germany: Deutscher Universitätsverlag. Kieser, A. (1998). Über die allmähliche Verfertigung der Organisation beim Reden—Organisieren als Kommunizieren [About the fabrication of the organization when talking—Organizing as communication]. Industrielle Beziehungen [Industrial Relations], 5, 45-75. Königswieser, R. (2008). Komplementärberatung: Wenn 1 plus 1 mehr als 2 macht [Complementary Consulting: If 1 and 1 is more than 2]. Revue für Postheroisches Management [Journal for Postheroic Management], 2, 26-35. Luhmann, N. (1984). Soziale Systeme [Social systems]. Frankfurt, Germany: Suhrkamp. Luhmann, N. (2000). Organisation und Entscheidung [Organization and decision]. Opladen/Wiesbaden, Germany: Westdeutscher Verlag. Mintzberg, H. (1987). Crafting strategy. Harvard Business Review, 65(4), 66-75. Nagel, R., & Wimmer, R. (2002). Systemische Strategieentwicklung [Systemic strategy development]. Stuttgart, Germany: Klett-Cotta. Nicolai, A. A., & Kieser, A. (2002). Trotz eklatanter Erfolgslosigkeit: Die Erfolgsfaktorenforschung weiter auf Erfolgskurs [Despite striking lack of success:

Expert Versus Process Consulting 37 The success factor research on furthermore on success path]. Die Betriebswirtschaftslehre [Business Administration], 62, 579-596. Simon, H. (1991). Bounded rationality and organizational learning. Organization Science, 2(1), 125-134. Spencer Brown, G. (1967). Laws of form. London, England: Allen & Unwin. Turner, A. N. (1983). Ein guter Berater liefert mehr als Berichte [A good consultant delivers more than reports]. Harvard Manager, 5(3), 40-47. Unternehmensberater, B. D. (2007). Facts & figures zum Beratermarkt [Facts and figures about the consulting market]. Berlin, Germany: Bundesverband deutscher Unternehmensberater. Unternehmensberater, B. D. (2009). Facts & figures zum Beratermarkt [Facts and Figures about the consulting market]. Berlin, Germany: Bundesverband deutscher Unternehmensberater. Varga von Kibéd, M., & Sparrer, I. (2000). Ganz im Gegenteil. Tetralemmaarbeit und andere Grundformen Systemischer Strukturaufstellungen—für Querdenker und solche die es werden wollen [Just the contrary: Tetralemma method and other basic forms of systemic structure reconstellations—For lateral thinkers and those who want to become it]. Heidelberg, Germany: Carl-Auer-Systeme Verlag. von Foerster, H. (1997). Wissen und Gewissen: Versuch einer Brücke [Knowledge and conscience]. Frankfurt, Germany: Suhrkamp. Weick, K. E. (1998). Improvisation as a mindset for organizational analysis. Organization Science, 9(5), 543-555. Weick, K. E. (2001). Drop your tools. In T. M. Bardmann & T. Groth (Eds.), Zirkuläre Positionen [Circular positions] (pp. 123-138). Wiesbaden, Germany: VS Verlag für Sozialwissenschaften. Wimmer, R. (2007). Der dritte Modus der Beratung [The third modus of consulting]. Revue für Postheroisches Management [Journal of Postheroic Management], 1, 28-35. Wimmer, R. (2008). Kommentar: Komplementärberatung—mehr als ein Übergangsphänomen? [Comment: comlementary consulting—More than a transfer phenomenon]. Revue für postheroisches Management [Journal of Postheroic Management], 2, 35-39. Wimmer, R. & Sutrich, O. (2008). Die fünf Schlüsselstellen der Strategieentwicklung [Five key elements in the strategy development]. Profile, 16, 63-75.

CHAPTER 3

COMPLEMENTARY CONSULTING The Only Real Option for Managers O. SUTRICH AND M. HILLEBRAND Othmar Sutrich and Martin Hillebrand

The theme of this volume—“The Changing Paradigm of Consulting— provides a challenging and pivotal starting point for reflecting on our intervention work as consultants. The chapter seeks to explore what lies behind this challenge, and in doing so delves into the idea of integration and the perhaps less ambitious complementarity (Hillebrand, 2006; Sutrich, 2003). In today’s globalized, complex, and fast changing (and thus more volatile and hazardous) organizational world, integration becomes increasingly necessary, yet is also increasingly difficult to achieve (Lawrence & Lorsch, 1969). This dynamic becomes particularly apparent when managers and consultants put specific emphasis on high quality decisionmaking processes. With globalization quite literally forcing us to give way to a deeper awareness of ambiguity and uncertainty, we are convinced that now is the time to frame a sense of a new kind of a “risk management” in organizations—one that is much broader and more integrated than was previously the case. The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 39–61 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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SETTING THE SCENE FOR INTEGRATION AND COMPLEMENTARITY Complementary consulting is the helpful lens used by consultants to professionally reflect on their work and improve their contributions to enhancing organizational agility and resilience (Sutrich & Schindlbeck, 2005). This approach is a service used by organizations to help them improve their operational (immediate) and strategic (sustainable) performance. The range of interventions that characterizes complementary consulting and reflects our train of thought are captured by Königswieser, Gebhard, Sonuc, and Hillebrand (2006) (see Table 3.1). This approach can also be looked at from the client’s perspective. In their capacity to absorb uncertainty, decisions are the basic matter that makes organizations go “round” (Luhmann, 2000). Making fast and sustainable decisions is a primary task of managers and entrepreneurs, or as Tichy and Bennis (2007, p. 5) so aptly note, “Judgment is the core, the nucleus of leadership. With good judgment little else matters. Without good judgment nothing else matters.” We are convinced that decision making is the key element in the craft of management, especially given the paramount impact decisions have on an organization’s short- and long-term performance. Indeed, we embrace Sennett’s (2008, pp. 9-10) definition of craftsmanship as the “enduring, basic human desire to do a job well for its own sake” and his conclusion that “craft is as vital to the healthy functioning of modern societies as it was to the medieval guilds.” When decision-making processes work well, organizational matters also advance in a constructive manner. Otherwise, seemingly convincing con-

Table 3.1. Interventions in Different Forms of Consulting Traditional Business Consulting

Complementary Consulting

Systemic Process Consulting

Deliberate oscillation between content and reflection permits a positive change in problem-solving patters.

We want to change patterns of behavior and establish the ability to deal with conflict— second order change.

We work with “top” manage- We work with those people ment and experts. and groups who can achieve quick and lasting solutions to the issues involved.

We turn the people affected into participants and involve the powers that be.

We focus on business logic: numbers, facts, and data.

We unblock energy and watch out for patterns of behavior, relationships, and communication.

We seek clear unambiguous solutions.

We oscillate between business logic, unblocking and reflection.

Complementary Consulting 41 Table 3.2. Integration-Complementarity in Managerial Decision-Making Processes Too Much

Not Only …

Dimensions

… But Also

Too Much

naive optimism without a sense of reality, only the thrill matters

identifying, primary task using and devel- “weighing up oping opportu- risks” nities

recognizing, accepting, tempering, and avoiding

seeing a danger/ threat in everything (frozen by fear)

initiating an indigestible amount of new or culturally imcompatible things

change = promoting innovation/creativity

change

conservation = stability/providing orientations

perpetuation, blocking, and sitting things out (to the bitter end)

breathlessness, relentness, lack of feeling for time, stop-andgo, speeds kills who?

taking decisions quickly and early; speeding things up

pace, timing, flow, rhythm

cautious, deliberate; waiting for the right time, changing pace

missing opportunities; not affected by the pace of those around

more symptomatic problems will arise

reducing appro- managing compriately; simpli- plexity fying to what is essential

deliberately building on the topic and the situation

getting lost in imponderability/indecision

cepts and worthwhile aspirations are doomed to falter and will remain just that—unrealized concepts and aspirations of managers and consultants alike. The very same integration quality can be observed on the part of managers in good decision-making processes (Sutrich & Opp, 2007, p. 78). It’s all about the “not only … but also”—doing one thing, but not refraining from doing the other as well. As reflected in Table 3.2, complementary consulting and decision making are two sides of the same coin. It might not be necessary to regard them this way, but doing so is certainly helpful. Why? Both go together in bundling forces to cope with the ever more demanding task of managing integration. Some consultants quite happily refer to it as complementary consulting, while managers often imply that they are tacitly talking about good risk management and economic decision making. Both views ultimately seek the same outcome—not “either/or” but the integration of “what and how,” “task and people,” and “content and process” for the benefit and sustained development of the organization (see Senge, Smith, Kruschwitz, Laur, & Schley, 2008).

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The basic rationale of our argument is very simple: complementarity connects leadership and managerial decision making with consulting. Complementarity is equally indispensable for both crafts. Discussing the pros and cons of complementary consulting per se is literally a meaningless task—along the lines of “flogging a dead horse.” Whatever label is used, there is really only one relevant benchmark to be met—whether consultants deliver the “right” kind of complementary consulting (in terms of depth, scope, and time span) to best support and develop the individual and organizational decision-making capabilities that are required to achieve performance. Consequently, this chapter attempts to demonstrate how complementary consulting can support managers in their primary tasks, helping to improve the quality and speed of organizational decision-making capabilities.

FIVE KEY ISSUES In aspiring toward integration—achieved via better decision making supported by complementary consulting, five key issues and their links to each other need to be addressed: complexity, organizational awareness, the current crisis, handling risks, and responsibility.

Managing Complexity: Problem or Solution? One cannot ignore the increasing complexity in the modern business world. Indeed, we would not have written this chapter if managers and organizational decision makers were not confronted with new problems and challenges that (confound existing know-how and) result in increasingly demanding decision processes (with globalization just one of the more frequently mentioned of a number of relevant, irreversible drivers of complexity). But what exactly is complexity and, on a more practical note, how can we manage it? Baecker (1998) suggests two ways of approaching this issue: (1) we can try to describe complexity either as a problem whose solution can be found in specific forms of management, or (2) as the solution to a problem that is yet to be found. The latter might sound unconventional, but it also has more promise, as complexity provides access to the “jewels of ambivalence” (Barz & Looss, 2008), which—according to Baecker (1998) is what life is made of. It is also the basis for good decisions, as we continually balance the innovations we consider necessary with the traditions we consider worth keeping. This dilemma allows us to observe and “juggle” the situation until the balance swings in favor of one or the other, either

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being seen as a positive result (Baecker, 2008). Other common or even reflexive responses to complexity (Königswieser & Heintel, 1998) include: (1) limited acceptance (e.g., through simplification, prejudices, unidimensionality); (2) forms of reduction (e.g., reverting to norms and hierarchies); and (3) self-steering principles in groups. Limited acceptance or reduction of complexity are both clearly survival options for managers and consultants alike, despite their lack of contribution to intelligent and lasting organizational development. Organizational Awareness: A Strong Answer to Weak Signals In their remarkable book Managing the Unexpected, Weick and Sutcliffe (2003) point out that ensuring sustained high performance in an increasingly complex age requires an ability to successfully manage the unexpected threats that could spiral out of control.1 They use the example of “high reliability organizations” (HRO) to illustrate that a “collective state of mindfulness” is needed to handle such situations, identifying five principles that may prove helpful not only during a crisis, but also when one emerges: (1) preoccupation with failure, (2) reluctance to simplify labels, (3) acute sensitivity to business operations, (4) strong commitment to resilience, and (5) deference to expertise—recently underpinned by Sennet’s (2008) plea for “craftsmanlike” attitudes. Organizations with this kind of collective attitude constantly seek to update their interpretation of the task at hand and identify the most plausible explanation for the situation to ensure possible remedies will be found. The main difference between HRO’s and other organizations is that the latter normally react weakly to or tend to ignore weak signals, while mindful organizations are alert to the importance of weak signals and react strongly.2 The Current Crisis: A Strong Signal, Major Threat and Great Opportunity The current economic crisis is a strong signal, a major threat and a great opportunity for better understanding and managing complexity. Indeed, we believe it can be seen—and used—as a symptom of a further increase in complexity. In Chinese, the words for “crisis” and “opportunity” are closely related; they are both made up of two characters, one of which they share. Crises want to be molded, as two recent quotes illustrate. “You never want to let a serious crisis to go to waste,” White House Chief of Staff Rahm Emanuel told journalists just after the election,3

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while economist Tyler Cowan announced on his Marginal Revolution blog that “recovery is about entrepreneurship.”4 As far as “sustained” organizational development is concerned, the challenges raised by the current crisis ought to be taken seriously. They have the potential to help us develop a better understanding of complexity. We need to use this understanding to advance more sustainable decision making and consulting, instead of resorting to the—admittedly easier and all too familiar—mainstream reflex option of seeking “quickfix” solutions and aborting collective learning by blaming easy-to-find scapegoats. If you were asked to put a figure on it, how many organizations do you think embrace high-pressure situations as an opportunity to take learning to a new level? As many as 10%—or less than 3%? Handling Both the Threat and Opportunity in Risk There are always two sides to risk—threat and opportunity. Indeed, one specific problem in the current crisis (in addition to the lack of a prior systemic view) is the way risk is handled. Fortunately life also always presents risk. Bennett (1976, 2004, pp. 29, 32) is a literal treasure trove of information when it comes to understanding hazard and risk. He maintains that risk bestows meaning and depth to experience, is omnipresent and permeates everything that exists. Without risk, life itself would not be able to develop. In the years immediately after the catastrophes in 1986 (Chernobyl, Challenger and Schweizerhalle), much was written about the “right” way to handle risk. Aside from increased criticism of technology and the rise of environmental organizations, these catastrophes were precursors to what Beck (1986/1992) referred to as the “risk society” (i.e., a society characterized by simultaneous development of wealth and risk). Yet, as so often before, the recent boom years have clearly led us to again forget, suppress or at least underestimate the dangers associated with risk. Indeed, the current crisis reveals not only the unidimensionality of the understanding of risk prevalent in organizations in recent years5 but also that conventional risk management is dangerously restricted to financial risk (Stulz, 2009). Yet surely now more than ever is the time to re-embrace Bennett’s (1976/2004, p. 34) idea that the really interesting and important thing about the way risk works lies in understanding how to draw benefit from it for our own lives. Responsibility and Organizational Sustainability Luhmann (1998) makes a useful distinction between risk and danger: attributing possible adverse events to a decision constitutes a risk, while

Complementary Consulting 45

attributing them to a chance external source constitutes a danger. This distinction also opens the door for other social problem-solving mechanisms. Danger (e.g., external enemies) leads to solidarity. The situation would be quite different if it were defined as a risk of the decision, which leads to a social split between decision makers (e.g., bank executives, investment bankers, politicians) and those affected (e.g., voters)—as demonstrated by the call on the website of a European nongovernmental organization criticizing globalization under the motto “We won’t pay for your crisis/debts!”6 Or, at least in part, by Bennett’s (1976/2004, p. 45) realization that we live in a dramatic universe full of risks, where every decision is important, no matter who makes it—a notion that for some reason is constantly rejected. Given the prevailing dynamics of the current crisis, we see a real need for organizations to (seek the empowerment to) face and embrace their respective responsibility.

SEVEN PREMISES The insights gained from the five key issues discussed above lead us to seven premises concerning the advancement of organizations and the future of management consulting.

Premise 1: Complexity, Uncertainty, Risk, and the Speed of Change: Implications for New Forms of Decision Making and Consulting This new form of decision making and consulting involves focusing on those processes that lead to the best possible decision-making support. The conventional approach of starting with the “hard” issues and following them up by addressing the “soft” processes in the system is simply too slow. Along similar lines, there is no longer enough time for an approach to begin with strategy development and then move on to work on the structures and culture. A holistic, lasting approach to organizational development needs to embrace both (i.e., it has to be based on an “as well as” not an “either/or”) and be exactly what it claims to be—holistic.

Premise 2: The Acceptance of Complementary Consulting Managers are used to incorporating business issues and process-related aspects into decision-making processes as a matter of course, typically without questioning why they do so. Thus, the only “real option” for man-

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agers that we allude to is intended to convey three observations. First, the “as well as” choice is the only reasonable option for managers, because business content and expertise are naturally linked to the processes that surround them. All managers and experts have to try to bring their expertise into—emotionally relevant—contact with other people. Second, managers often (unconsciously) exhibit a personal and/or professional preference/bias for one or the other (i.e., traditional business consulting or systemic process consulting). Finally, a focus purely on either business content or systemic processes invokes a discussion among short-sighted consultants seeking to defend their own turf. Selling a solution based on either “hard” or “soft” factors is seen as a waste of time, because the “as well as” option is elegant, cost-effective, time saving, and sustainable—and that is viewed as the paramount issue.

Premise 3: Complementarity, Energy, and Complementary Consulting Expanding the playing field demands greater professionalism and an investment into developing new room to maneuver. Consultants who embrace complementarity allow themselves to be guided by the systemic loop (see Figure 3.1). In line with the basic model behind the systemic loop, there is an expansion of the behavioral repertoire at all four points. Key additions occur in the “Gathering information/diagnosis” phase. If business issues are included in the diagnosis, the result will naturally be different (as will the “how” element of the accompanying diagnosis) and, as will be discussed, reflect any need for compensation. Similarly, the “Building hypotheses” and “Planning interventions” phases will also change. The actual gains are not simply additive in nature; they also provoke a qualitative leap. An identical logic applies to the managerial decision-making process. Managers usually (silently) draw orientation from (mostly tacit) risk analyses. What they want is an elegant, soundless, dynamic and “emotionally cost-effective” decision process that is understood, supported, and codriven by the consultants. The “source territory” (see Figure 3.2) is where managers and organizations lay the groundwork for what they want to achieve. This could include, for example, “facing reality”—letting people know in a mindful, open, honest and brave manner that you, as a responsible manager, are ready to get fully involved and act on the outcome of a decision—no matter who made it or what perspective it comes from. This position is the best starting point and driving force for the next phases in a successful decision process.

Complementary Consulting 47 Building hypotheses

Planning interventions Gathering information

Intervention

Intervention process/learning

Figure 3.1.

The systemic loop (see Königswieser & Exner, 2002).

Figure 3.2. Decision process map.

Unfortunately, you have to deliberately work your way through all five phases of the process, and thus “close the loop” (Opp & Schulda, 2008) to produce more real options and better decisions. If (and only if) this

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becomes a professional habit, will it enhance the sense of responsibility and create sustainably better managerial and organizational decisionmaking capabilities.

Premise 4: System Diagnosis The system diagnosis—and diagnosis of the need for compensation— is an ongoing process in which both managers and consultants alike (consciously)7 oscillate between the two poles of expertise (see Figure 3.3). Balancing the poles of expertise is just as important in managerial decision-making processes (which the consultants have hopefully understood and support) as it is in consulting diagnosis processes. Managers (clients), however, appreciate the benefit of quicker and better decision-making processes that follow a sound diagnosis (i.e., those that lead to faster and more lasting implementation of proposals simply because the interplay between “what” the organization does and “how” it does it encourages far

Complementary Consulting

Business Process Expertise

Systemic Process Expertise

Systemic Attitude, Values

Figure 3.3. Oscillating between traditional business consulting and systemic process consulting.

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quicker acceptance in the organization (or “connectivity” as systems theorists would say).8

Premise 5: Calculating More Quickly While Deciding More Slowly9 Decision making starts where calculating and downloading risk assessment models stops. If there were no incalculable risks, no decisions would have to be made. Consulting and decision making both involve recursive—largely subconscious and uncommunicated—observing, negotiating, sharing, and processing of perceived and diffuse risks. In systems theory terms, these risks always refer simultaneously to the different dimensions of meaning described by Luhmann (1984) as “fact, social and temporal.” If this management of perceived and diffuse risks is adequately integrative, the process will progress quickly and produce quality results. However, if the recursive, oscillating “as well as” approach can no longer be kept in balance, decision-making and consulting processes will get damaged, blocked or even aborted. Our two primary tasks as consultants are to be immediately helpful and to render sustained value-added. This outcome is best accomplished by

Figure 3.4. The Pentaeder model of the decision-making space in organizations.

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contributing to the enriching and enlarging of the sheer volume and qualitative richness of the decision-making space imaginable in an organization. Individual managers and the organization as a whole can ultimately only make responsible choices and influence a future they can imagine— the more often and the sooner they do so the better.

Premise 6: Linking Complementary Consulting With Decision Making and Organizational Learning Linking complementary consulting with decision making and organizational learning leads to sustained change. Learning and, in particular, organizational learning, are very important to consultants interested in complementarity—particularly in light of our first premise. Organizational learning speeds up when complexity and risk are both addressed in as business-like and conscious a manner as possible. We like to draw on the words of de Geus (2007, p. 30), who refers to decision making as a “social process” and describes nonroutine decisions as the most “distressing” and “vital”: Decision making consists of trying to find, as a group—in a social and language-based process—new solutions for new situations. These solutions should give the group of decision makers a sufficient amount of confidence to dare to implement them. Decision making is a learning process.

This can be achieved pragmatically by reserving time and space for lessons learned, starting perhaps with “feedback” (see Figure 3.2).

Premise 7: Consulting as a Cooperative Process Consulting is increasingly tasked with establishing a cooperative process that uses every possible integration opportunity—no matter how small—to ultimately support the long-term survival of an organization. Consulting is sometimes tacitly and incorrectly seen as a one-sided service designed to minimize the client’s risk. Consulting too often sells rather unsecure security, when “bold” decisions would help render more security, self-confidence, and responsibility (see key issue number five discussed previously). As Einstein once noted, “In the middle of difficulty lies opportunity.” We believe that the middle of all difficulties, opportunities, and solutions lies in oscillating between the seemingly incompatible. Consulting that meets the demands of modern organizational reality has to encompass a mindful, balanced regard for both sides of risk. Such forms

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of consulting—and the yet to be invented new organizational structures— will be identifiable by their characteristic, mindful, and integrative approach to managing risk—closing our recursive loop and bringing us neatly back to our first premise.

COMPLEMENTARY CONSULTING IN PRACTICE This section provides two examples of complementary consulting in practice. In doing so, we have consciously chosen smaller-scale change processes to ensure the case studies give a clear (simplified) impression of the approach we seek to advance. These examples turn the key issues and premises discussed above into concrete actions. We chose these particular case studies because they clearly illustrate two of the key elements in what we do and the theory behind our work—compensation and attitude— which will be discussed in more detail in the latter part of this section.

Case Study 1: Complementary Consulting as a Craft—Help in Times of Crisis The setting for the case is a medium-size transportation and logistics company with 4,400 employees based in Austria, with 129 international offices and sales of 990 million euro in 2008. It was a Saturday afternoon in March 2009, after 2 days of hard work and commitment that had just come to a positive end. Despite the inevitable high tensions, the atmosphere in the workshop had been lighthearted and effortless; we had laughed and had fun, the feedback was appreciative and touching, and the session had given the participants strength. The 16 managers from one of the German offices and the two consultants/facilitators (one internal, one external) who had supported them all left with the same impression: these had been two helpful days, the time and money had been well spent, and, most importantly, the workshop could not have come at a better moment. In relating this experience to complementary consulting, the work was embedded in a 100% commitment to “what,” “why,” and “how,” to tasks and people, and to hard and soft factors (see the first four premises) from the initial briefing session through the preparation of the workshop, the closing remarks and the outlook for the months to come. Second, behind the work lay the—perhaps 75% tacit—understanding and confidence that the facilitators would deliver as much compensation as was necessary and possible (see the second, third, and fourth premises). The general manager’s (GM) primary focus was on getting results and achieving targets.

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He expected us not only to implicitly understand his position and support his aspirations, but also to challenge and enhance (complement) them. At the same time, he expected us to stimulate and compensate him socially, address cooperation and personal aspects, and intervene in ways he himself could never have attempted (see Premises 6 and 7). We worked hand-in-hand on strategic and operational questions (e.g., strengthening customer value and relationships), on improving these processes (having intentionally ensured the “entire system was represented in the room”), on practicing giving feedback and brushing up on the rules for doing so, thus enhancing the team spirit and creating solidarity with the other members of the organization not present (see Premises 4, 6, and 7). We also did not have a particular name for the workshop when we started, and the participants wondered why. At the very end, someone suggested calling it “Feine Klinge 2009,”everyone agreed beautifully summed up what we were doing (doing something “intuitively right” or with “the right feeling”). When we reflect on this case study, we have to admit to feeling the sense of pride that stems every once in a while from the craftsman’s satisfaction in having “done a job as well as it can be done—for its own sake” (Sennett, 2008). And as true craftsmen, every single word we have said about complementing and compensating the GM also rang true and was apparent in our relationships with the other 15 managers in the room.

Case Study 2: The Need for Compensation in Systemic Processes The setting for the second case is another medium-size company with roughly 1,500 employees. The human resource (HR) department had a poor image, and its internal “clients” were dissatisfied with the service it provided. Something had to be done about the problem—and quickly. The department had to convey what it did well and needed help in finding a good way of doing so. We suggested complementing our system diagnosis with a 2-day manager workshop to identify the initial measures needed. During the workshop, it quickly became clear that we would have to work simultaneously on three aspects—strategy, structure, and culture (see Premise 2)—but we also identified a key starting point. The company needed a professional staff appraisal system (in itself, an effective method of achieving visibility and creating an impact). We provided our own expertise as “old hands” in the HR sector (see Premise 3), asking the following questions: Which tool(s) would make necessary changes most visible to the organization? How do we make sure that this initiative is a viable first step and a hint of long-term necessary

Complementary Consulting 53

change? Which instrument would best demonstrate a profound change in “how” these changes would be implemented (see Premises 4 and 5)? The subsequent system diagnosis confirmed our assumptions. In addition to professional issues like recruitment and letters of reference processes (where a lack of experience was apparent and mistakes had been made), a number of other “cultural” weaknesses (e.g., unreliability and lack of service orientation) were revealed. Of course, the department also clearly had its strengths (e.g., its salary and pension systems) and a very dedicated team (even if this might at first glance seem contradictory to its reputation for unreliability). The team was hit hard by the results. They were at a loss about what to do, what actually needed to be changed or even how to establish the necessary processes. In response, regular “Monday morning meetings” were introduced (and initially used to discuss mistakes), and we helped them with the issues and the processes involved (see Premises 3 and 4). Six months later, the turnaround was complete. A subsequent survey of 50 of the company’s managers confirmed that significant changes had been made. In simple (i.e., text book) terms, the advice on both “what” constitutes a good staff appraisal system and “how” to best use it were valuable inputs for the organization. The department also had to learn how to change its own patterns of behavior, initiate learning processes, and encourage reflection. Yet without the initial input on what needed to be done, some people might not have been with the organization long enough to actually reflect on how they might change their attitude. The head of HR clearly understood the necessity of addressing both issues simultaneously (see Premise 2) and, while the ongoing diagnosis in the client system through the Monday meetings and in the consulting system was arduous, it ultimately produced the desired results (see Premise 4). Leitmotifs in Complementary Consulting These two cases studies briefly illustrate the benefits of complementary consulting. In essence, there are four fundamental concepts behind this approach: complementarity, compensation, integrative focus on results, and attitude. Given their relevance to our case studies, our discussion now turns to the meaning of “compensation” and “attitude” and connects these concepts to managerial decision making. Compensation: Filling in the Know-How Gaps in the Client System What do we actually mean by “compensation” in a consulting context? Basically, compensation means filling the gaps in know-how in the client system with knowledge provided by external consultants (see Figure 3.5).

54 O. SUTRICH and M. HILLEBRAND

Figure 3.5.

The dimensions of compensation.

Of course, this is a delicate matter, and we approach it with extreme care. We carefully select the know-how required and introduce it into the client system in appropriate doses, almost like jump-starting or triggering the learning process (see Premise 6—it’s all about ensuring that the system is learning). Our consultants embrace the complementary approach, have extensive know-how (of various topics, fields, and so forth), use a variety of methods and are very different in terms of personality. The main focus of the knowledge provided by the consultants (i.e., whether the gaps need to be compensated more from traditional business consulting or systemic process consulting perspective) is determined by a system diagnosis.10 Since we—ideally—should have no a priori emotional preference for one or the other, the client is in the enviable position—not something to be taken for granted—of having access to a combination of the “best of both worlds.” This diagnosis—basically an internal and external assessment of the organization’s capabilities and deficits—serves to ensure we offer just the right amount of support—not too much and not too little—and neither dominate nor ask for too much. This is a very sensitive phase in the consulting process. Discussing areas where compensation is needed (i.e., pointing out deficits and potential) might be taken as offensive or interpreted as a criticism of the organization. But handled correctly, it can form the basis for a credible, constructive, and appreciative form of mutual understanding.

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Compensation in Practice In both case studies complementarity and compensation evolve explicitly and implicitly (see Premises 1 through 4). In both cases the consultants increased complexity (key issue 1) by raising issues the organizations were not particularly aware of. At the same time, they reduced complexity by compensating with know-how to increase reliability and confidence in the safety and stability of the process. They also enhanced awareness of (see key issue two) and appreciation for process expertise. This situation is paradoxical. With relevant expertise as a back-up, an organization can set off on its own path, developing an “appropriate” solution for its own needs—safe in the knowledge that the “expert” will intervene if it wanders off course. It does not have to reinvent the wheel, it only has to modify an existing model. For example, in the target definition process in the second case study, the organization can and should develop its own system—one which fits its culture, attitude, and strategy. The knowledge that the consultants understand the issues involved allows people to think more “outside the box” (since they know that the consultants will intervene if they go totally off track) without having a solution forced on them. Compensation and Decision Making The second case study demonstrates the use of consulting (of any kind) to initiate decisions and actions that have been blocked and are overdue. Both cases demonstrate that decisions are more readily accepted and implemented when a balance of focus between the task at hand and the people involved has been mutually agreed upon between the consultants and the client. Compensation is as important in complementary consulting as it is in managerial decision making. It offers support for decision making in organizations in a number of different ways, including the following three examples: 1. Managers can be shown (both on a personal and a role-based level) the most constructive way of complementing each other through their different styles of decision making (i.e., the way they prefer to handle decisions; see Lanzenberger & Sutrich, 2008). They can be helped to oscillate more smoothly between the “what, why, and how,” between work-related and people tasks, between analytical skills and intuition, and so forth. 2. The people in the many different kinds of teams that build bridges between individuals and organizations can develop greater awareness of and willingness to complement each other by providing different perspectives on the actual decision to be made. 3. On the organizational level, consultants with a systemic attitude can provide complementary know-how, for instance, linking opera-

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tional short-term performance improvements with strategy and the long-term fostering and development of organizational capabilities (e.g., cross-functional and cross-hierarchical decision-making capabilities). Indeed, one of the most demanding aspects of compensation in times of crisis lies in establishing and maintaining the link between survival and development—two seemingly incompatible goals. In short, the chances of encountering a single manager, expert or consultant who is equally aware or capable of handling all five phases of the decision-making process are extremely rare. This is another reason why we urgently need compensation and integration.

Attitude To cope with the five key issues is as challenging to organizations (our clients) as it is to the professional identity of consultants. The most relevant and sustainable response (responsibility) of consultants and clients alike to complexity and escalating risks (key issues 1, 2, 4, and 5) possibly lies in their basic beliefs, values and attitudes. By not believing in objectivity and respecting the context as relevant, we undoubtedly increase ambiguity, ambivalence and complexity, but we do so consciously in order to foster better and faster decision-making processes. This creates self-confidence and confidence in the systems that surround us, thus inducing better and more integrated risk management and ultimately reducing complexity. Developing such attitudes is the linchpin of successful consulting and lasting managerial success. The attitude of an integrated consultant can best be described in its differences to that of a “pure business consultant” and a “pure systemic consultant.” It does not simply combine the two; instead, it adds a new dimension of quality—context-dependent oscillating between the poles that opens up totally new perspectives. Nonetheless, some of the systemic conventions remain valid. Differences are enriching and diversifying, and holistic approaches center both on working together with the client and on balancing the attitudes between the poles (e.g., reflecting and learning from feedback while remaining spontaneous and intuitive, being affected and getting involved yet maintaining distance and composure, considering hard and soft factors, slowing things down without reducing efficiency; see Königswieser & Hillebrand, 2005). No matter what form consulting takes or what tools are used, we believe that this integrative attitude is absolutely fundamental. It makes complexity (even in its newest form) workable and risk addressable, yet

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also allows both consultants and managers to remain empowered (i.e., able to always embrace new options and be open to doubts without doubting too much).

THE REALITY OF DECISION MAKING IN ORGANIZATIONS Whenever we sit down and reflect on the day-to-day-reality of decision making in different organizations, the story of Mullah Nasruddin’s lost key never fails to come to mind: Late one evening a group of people come upon Mullah Nasruddin crawling around on his hands and knees under a street light looking for something. “What are you looking for?” they asked. “I’ve lost the key to my house,” he replied. Eager to help, they all got down and began searching. After some time had passed without any sign of the key, one of the helpers asked where he had originally lost it. “Over there in the dark under the bushes,” answered Nasruddin. “So why are you looking for it under the street lamp?” asked someone else. “Because there is more light here,” replied the Mullah.

Mullah Nasruddin’ remarks point to three keys to the long-term learning process that is potentially embedded in real decision making in organizations. It teaches us not to look for solutions in familiar, well lit areas, but to focus on those areas currently in the shade, where the broadening of our horizons will lead us to “new solutions for new situations” (de Geus, 2007). • The first key can be found by broadening our level of awareness, shifting from the current practice of limited financial “risk management” (which clearly fails) and shedding more light on areas which offer greater and more integrated understanding of and improved dialogue on risks. Hopefully we will learn from the irony of the situation that—of all possible culprits—it is in fact the proclaimed experts in financial and economic risk management, the two sectors of the economy with the strongest risk management—banking and insurance—that are currently so brutally demonstrating the deceptive security and downfall of this limited, albeit customary, perspective. • The second key lies in shifting our awareness away from the opinions or judgments of individual men (and, albeit more rarely, women), no matter how great their expertise and ability or how powerful and convincing they might be, to the organizational capabilities of decision making that need to be enhanced. This includes the pivotal function of teams and networks. Relying too much on, perhaps

58 O. SUTRICH and M. HILLEBRAND

even worshipping (and eventually condemning) great men and would-be heroes keeps us from developing those badly needed pragmatic tools and organizational capabilities.11 And it goes further—we now know that this all too limited perspective is also, more often than not, harmful. Those numerous CEOs who relied on investment bankers for their bonus schemes were (and still are) very successful decision makers in their own right—to the detriment of their respective organizations, that in turn enabled the problem through their organizational myopia and incompetence. The investment bankers themselves made the “right” decisions at a personal level (i.e., to earn as much money as possible). • The third key we have mentioned before—shifting and broadening our awareness from the time of the formal decision to the actual process of deciding. This helps us greatly in understanding and learning about the business of decision making in organizations. All three keys have one thing in common—the need to expand the three cones of light (see the second key issue) and work with an oscillating beam of light (see Premise 4). Therein also lies our permanent role as consultants, a role we must seek to strengthen in the long term. In doing so, we need to ask ourselves and our clients even more distinct questions, for as one anonymous author once said, “The type and number of questions a man can ask limits his horizons.” Our two case studies clearly show that complementary consulting works when it comes to addressing integration and the five key issues. It works even better if the consultants have a wide range of skills and the ability to use them flexibly and spontaneously. Yet these skills are pointless if the client is not aware of them. It takes more than just a persuasive rationale to raise this awareness—it must be demonstrated in actions, through emotions and with personal presence. This is the primary way of drawing more attention to our craft. It will also hopefully help to win the client’s confidence that his or her consultant/facilitator/coach really does help increase both the quality and speed of the decision-making process and organizational decision-making capabilities.

ACKNOWLEDGMENT A note about the authors: We each followed different career paths, coming from different consulting backgrounds, working for different clients, and using different forms of cooperation. We are also at different stages in our lives. We found this diversity very enriching when working on this

Complementary Consulting 59

chapter. Our discussions opened up a number of new perspectives that might even possibly shape the paradigm of consulting in the future.

NOTES 1. 2.

3. 4. 5. 6. 7.

8.

9. 10.

11.

It is useful to note that Weick and Sutcliffe (2003) do not elaborate equally mindfully on unexpected opportunities. Taleb (2008, p. xvii) follows the same basic concept: “Black Swans being unpredictable, we need to adjust to their existence (rather than naively try to predict them).” Taken from http://www.youtube.com/watch?v=1yeA_kHHLow. Taken from http://www.marginalrevolution.com/. See the 2009 Ernst & Young business risk report. See www.attac.de. Consciously oscillating in this way requires (intensive) effort, so setting priorities with regard to both business and systemic processes is a clear sign of professionalism. We are certain that systems—individuals and organizations—reduce energy and instinctively slow down or block activities when the “as well as” between business and systemic processes (the “what” and the “how”) is damaged or out of balance. This idea was adapted from Baecker (2008). Other ways of determining the need for compensation include reviewing milestones and goals, external supervision, and internal reviews with project managers. For more about these and other tools, see Sutrich (2006), Sutrich and Opp (2007) and Opp and Schulda (2008).

REFERENCES Baecker, D. (1998). Einfache komplexität [Simple complexity]. In H. W. Ahlemeyer & R. Königswieser (Eds.), Managing complexity: Strategies, concepts and case studies (pp. 21-50). Frankfurt, Germany: Gabler. Baecker, D. (2008). Schneller rechnen, langsamer entscheiden [Calculating more quickly, deciding more slowly]. In O. Sutrich & E. Endres (Eds.), Entscheiden oder driften? [Decide or drift?], Profile 16 (pp. 22-27). Bergisch Gladbach, Germany: Verlag. Barz, M. & Looss, W. (2008). Die verborgenen juwelen der ambivalenz [The hidden jewels of ambivalence]. Profile, 16, 103-111. Beck, U. (1992). Risk society: Towards a new modernity. New Delhi, India: Sage. (Original work published 1986) Bennett, J.G. (2004). Risiko und freiheit. Hasard—Das wagnis der verwirklichung [Hazard: The risk of realization]. Zurich, Switzerland: Chalice. (Original work published 1976)

60 O. SUTRICH and M. HILLEBRAND de Geus, A. (2007). Learning together for good decision making. Reflections: The SoL Journal on Knowledge, Learning, and Change, 8(1), 28-35. Hillebrand, M., & Hagenauer, F. (2006). Strategieentwicklung, ein anfang [Strategy development: A first step]. In N. Tomaschek (Ed.), Perspektiven systemischer entwicklung und beratung von organisationen [Perspectives in systemic organizational development and consulting] (pp. 241-250.). Heidelberg, Germany: Carl-Auer Verlag. Königswieser, R., & Exner, A. (2002). Systemische interventionen: Architekturen und designs für berater und veränderungsmanager [Systemic interventions: Architectures and designs for consultants and change managers]. Stuttgart, Germany: Klett Cotta. Königswieser, R., & Heintel, P. (1998). Teams als hyperexperten im komplexitätsmanagement [Teams as hyper-experts in managing complexity]. In H. W. Ahlemeyer & R. Königswieser (Eds.), Komplexität managen. Strategien, konzepte und fallbeispiele [Managing complexity: Strategies, concepts and case studies] (pp. 93-103). Frankfurt, Germany: Gabler. Königswieser, R., & Hillebrand, M. (2005). Systemic consultancy in organisations: Concepts–tools–innovations. Heidelberg, Germany: Carl-Auer. Königswieser, R., Gebhard, J., Sonuc, E., & Hillebrand, M. (2006). Komplementärberatung. Das zusammenspiel von fach- und prozeß-know-how [Complementary consulting: The interplay of business and process know-how]. Stuttgart, Germany: Klett-Cotta. Lanzenberger, M., & Sutrich, U. (2008). Das KAIROS-entscheiderprofil [The KAIROS decision maker profile]. Profile, 16, 113-123. Lawrence, P. R., & Lorsch, J. W. (1969). Organization and environment: Managing differentiation and integration. Homewood, IL: R.D. Irwin. Luhmann, N. (1984). Soziale systeme [Social systems]. Frankfurt, Germany: Suhrkamp. Luhmann, N. (1998). Die kontrolle von intransparenz [Controlling intransparency]. In H. W. Ahlemeyer & R. Königswieser (Eds.), Komplexität managen [Managing complexity] (pp. 51-76). Frankfurt, Germany: Gabler Luhmann, N. (2000). Organisation und entscheidung [Organisations and decisions]. Wiesbaden, Germany: Vs-Verlag. Opp, B., & Schulda, G. (2008). Close the loop—aus erfahrung wird organisation klug! [Close the loop–Organizations learn from experience!]. Profile, 16, 8594). Senge, P., Smith, B., Kruschwitz, N., Laur, J., & Schley, S. (2008). The necessary revolution: How individuals and organizations are working together to create a sustainable world. New York, NY: Doubleday. Sennett, R. (2008). The craftsman. New Haven, CT: Yale University Press. Stulz, R. M. (2009). 6 ways companies mismanage risks. Harvard Business Review, 87(3), 86-94. Sutrich, O. (2003). Neuland für junge berater am horizont? Oder: Wem und wozu nützt die grenzziehung zwischen expertenberatung und prozessberatung noch? [New ground on the horizon for young consultants? Or: Is there still a point in differentiating between traditional business and systemic process consulting?]. Profile, 5, 53-65.

Complementary Consulting 61 Sutrich, O., & Schindlbeck, U. (2005). Es gibt viel zu tun—wer packt mit an? Nachhaltige beratung als verbindung von fach- und prozessexpertise im beratungsprozess [There’s a lot to do—Who’s going to help? Sustainable consulting as link between business and process expertise in the consulting process]. In G. Fatzer (Ed.), Gute Beratung von Organisationen [Good organizational consulting] (pp. 269-301). Bergisch Gladbach, Germany: Edition Humanistische Psychologie. Sutrich, O. (2006). Besser entscheiden in organisationen [Making better decisions in organizations]. Hernsteiner, 3, 4-9. Sutrich, O., & Opp, B. (2007). Was ist anders in einem entscheider-coaching? [What’s different in decision maker coaching?]. Profile, 14, 76-87. Taleb, N. N. (2008). Der schwarze schwan: Die macht höchst unwahrscheinlicher ereignisse [The black swan: The impact of the highly improbable]. Munich, Germany: Carl- Hanser Verlag. Tichy, N. M., & Bennis, W. G. (2007). Judgment: How winning leaders make great calls. New York, NY: Portfolio. Weick, K. E., & Sutcliffe, K. M. (2003). Das unerwartete managen [Managing the unexpected]. Stuttgart, Germany: Klett Cotta.

CHAPTER 4

CHANGING THE PARADIGM OF CRISIS MANAGEMENT How to Put OD in the Process C. LALONDE

Carole Lalonde

This chapter focuses on the potential contribution of organizational development (OD) to crisis management. The incursion from OD stems from the observation that despite advances in knowledge about crisis management, organizations integrate these insights more or less effectively, to the extent that behaviors that could have been avoided continue to impede the efficient resolution of crises. Given these findings, a number of researchers are seeking models or frames of reference allowing organizational members, and more specifically managers, to integrate acquired knowledge and lessons already learned in the area of crisis management. The underlying intent is to increase systems’ resilient capacities, avoid the most common errors in conduct and minimize negative impacts for organizations and civil society. This idea of transferring knowledge with a view to enhancing organizational abilities and capacities is consistent with the notion of resilience proposed by Quarantelli (2001) and Rosenthal and Kouzmin (1996). OD The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 63–87 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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could thus provide what Bourrier (2002) calls the missing link, in essence integrating crisis management and organizational resilience in a sustainable manner while stressing what happens outside of the crisis period. The field of crisis management offers a particularly interesting opportunity for OD researchers and practitioners to put into practice a new strategic orientation based on crisis management practices. In short, OD can bring a changing paradigm to crisis management by breaking out the dysfunctional patterns too often adopted in the process of managing such crises.

A DIAGNOSIS BASED ON FIVE CRISES In the last decade, many countries have experienced major disasters that have captured our collective imagination due to their very serious consequences in terms of death and material damage. These events mobilized public services, as well as the highest governmental authorities. They gave rise to a number of investigative reports by experts in the field or national commissions. These reports constitute invaluable sources of information for researchers (Quarantelli, 2005). Thus, the present research was designed employing a qualitative approach consisting of content analysis of reports on five national disasters: Hurricane Katrina in the United States (2005), the tsunami in Southeast Asia (2004), the heat wave in France (2003), SARS (severe acute respiratory syndrome, 2003), and the ice storm in Canada (1998). Each of these crises was treated as a case. These five cases were chosen based on their great visibility, the fact that they were studied in depth by committees of experts or commissions of inquiry, their extensive coverage in the media, and the considerable upheaval they caused for the populations of these countries as a whole.

Classification of the Material The research was based on a two-stage process. First, the crisis management literature was reviewed to identify guiding principles in crisis management practices, principles considered by researchers as standards to respect in effective crisis management. These principles or “standards” were grouped into four categories: planning/preparation, coordination, leadership and behavior of civil society. Second, quotes from public reports of experts were selected and classified into each of these four categories.1 For each category, an unranked meta-matrix as defined by Miles and Huberman (1994) was created to obtain an overall view of the material.

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Research Questions There were three main research questions addressed in the project: 1. Do the crisis management approaches in the five cases reflect the guiding principles outlined in the literature in terms of planning and preparation, coordination, leadership, and the behavior of civil society? 2. What are the most common failings? 3. What type of contribution can OD make to enhance crisis management effectiveness and efficiency? The first two questions will be analyzed in the “Results” section. The third question will be dealt with in detail in the second part of the chapter.

RESULTS Table 4.1 summarizes the principal results of our research. Let us examine these results for each of the dimensions of crisis management: planning/ preparation, crisis coordination, crisis leadership, and the behavior of civil society.

Planning/Preparedness The public authorities of three of the five regions studied had crisis management plans. The government of Ontario did not have a plan in effect to fight a pandemic prior to SARS. This situation significantly worked against preventative intervention and coordination of various actors in the health system since, in the very midst of the crisis, they had to create a plan, literally starting from zero. The need for such planning, however, was well-known and brought to their attention on a number of prior occasions, including Judge Krever’s inquiry into a contaminated blood scandal.2 Similarly, in the Indian Ocean region, a number of experts (cf. Kelman, 2006; Oloruntoba, 2005; Schaar, 2005) took stock of serious deficiencies in national planning, in basic support infrastructure and risk evaluation. In fact studies since the 1980s have demonstrated the importance of being better prepared to deal with a tsunami but the Indian government, in particular, considered that this threat was not the most dangerous or significant for the country. In Indonesia, the government had started to develop a national tsunami detection system to warn the population of danger, but this system

Conflicting & centralized Difficult Not effective Weak Problematic Unknown5 Mixed appreciations6 Yes

Coordination • Exercise of authority • Communication • Cooperative structures

Leadership • Before the crisis • During the crisis • After the crisis

Civil society • Civic behaviors • Emergence of spontaneous leaders

Mixed appreciations7 Yes

Weak Problematic Unknown

Centralized Difficult Not effective

Yes3 Weak No

Fair Problematic Unknown

Centralized Difficult No

No Weak No

SARS (Ontario, Canada)

Mainly positive8 Mainly positive Yes Yes

Weak Problematic Unknown

Confusing Difficult Variable

No Weak No

Tsunami (South-East Countries)

Mainly positive9 Yes

Fair Good Unknown

Confusing Good4 Variable

Yes Weak No

Icestorm (Québec, Canada)

Notes: 1Written plans, procedures, emergency routines, jurisdictional specifications. 2Statford Act (generic). 3“Plan Blanc” which is generic and not specifically for a heat wave crisis. 4“Good” at the national level. 5Leadership undertaken mainly by experts. 6Evacuation has been a major problem. 7 Indifference of families has been noted. 8Positive thanks to nongovernmental organizations and humanitarian help. 9Dependence upon public services has been noted.

Yes2 Weak No

Planning/Preparedness • Formal planning1 • Capacity assessment • Risk assessment

Guiding Principles

Heat Wave (France)

Diagnosis of Crisis Management Practices

Katrina (U.S.)

Table 4.1.

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was far from ready at the time the quake struck in December 2004. Finally, while France and the United States had crisis management plans at the time of the heat wave of 2003 and Hurricane Katrina in 2005 respectively, their limitations were quickly revealed. In the French case, the dangers linked to a heat wave were not among the concerns of society at large and public health organizations in particular. At the time Hurricane Katrina hit the Gulf of New Mexico in the United States, the American administration was in the midst of revising its crisis planning so that the lessons drawn from simulation exercises were not fully integrated into the plans. Following the September 2001 attacks, the orientation was toward reinforcement of a military command and control system, a direction a number of observers considered ill-suited to natural catastrophes.3 The constitutional foundations of the Stafford Act, according to which the federal government intervenes only at the request of the states, are also poorly adapted to incidents on a national scale. In sum, the initial findings on the planning/preparation dimension corroborate previous research to the effect that having a plan is a necessary but insufficient condition to deal with a crisis. Crisis planning is a process that must be based on a multirisk approach to improve preparation, aspects which were absent in all five crisis cases studied.

Coordination Coordination problems were prevalent in these five crises. The cumbersome, halting nature of bureaucracy, the tendency to isolate the different actors, the gap between actors on the ground (or those intervening directly with the population) and administrators, the tendency toward organizational hierarchy and centralized decision making, the multiplicity of actors generating confusion and sometimes duplication of efforts, and inefficiency in managing donations and international aid are mentioned in practically all the crises studied. Thus, problems associated with the collection of funds and the analysis and sharing of information hindered the fight against SARS. In addition, tense relations among various levels of government, and between the provincial public health authorities and local offices did not help to resolve the crisis efficiently. Judge Campbell, who presided over the SARS Commission in Ontario, reported that numerous local offices thought management had high expectations but provided neither support nor timely and accurate information to doctors and hygienists in the field. In France during the heat wave, experts designated to investigate reported that the “Institut de veille sanitaire” and the “Direction Générale de la Santé” operated in seclusion, no member of these institutions visited

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hospitals to take stock of the situation, and it was only very late that they discussed possible measures to curb the crisis with interveners from the hospital sector. In the case of Katrina, the principle of the pull system maintained an extremely hierarchical vertical relationship between levels of government, which led to delays in responding to the crisis. Certain interveners attempted to by-pass problems in applying the National Response Plan by taking their own initiatives while responding at the same time to the task assigned by the Federal Emergency Management Agency (FEMA). Research and rescue activities are among those most affected by this situation since, all too often, a number of rescue teams were deployed to the same spot, stranding many other victims. In the case of the tsunami, despite international assistance of more than $6 billion, donations were not managed efficiently and only a portion was used to assist communities in need. The absence of functioning cooperative structures thus diminished the efficacy and consistency of the response, each organization having a tendency to operate independently of the others.

Leadership The main criticisms of national leaders in the crises studied concerned the delay in taking action following warning signs of a crisis, as well as their lack of visibility during the crisis itself. Thus, the Toronto daily, The Globe and Mail, reports the absence of the Canadian Prime Minister, Jean Chrétien, as well as the lack of visibility of the Canadian Minister of Health, Anne McLellan, leaving the public to believe that the SARS crisis was not a federal government priority. Under the headlines “Where are the leaders when they’re needed?” and “Chrétien criticized for lack of involvement in crisis,” the journalist Cheadle (2003) wrote “a political leadership vacuum has made a bad situation much worse and helped fan domestic and international perceptions that containing SARS is not a high priority.” The same phenomenon was raised by the press with respect to the Premier of Ontario, Ernie Eves, who, after having declared a state of emergency, remained on the sidelines throughout the crisis. Under the headline “Premier offers too little, too late in SARS crisis,” journalist Campbell (2003) of The Globe and Mail reported: From the early days of the SARS outbreak four weeks ago, the Premier said he wanted to keep a low profile on the issue. He certainly has succeeded.… It's one thing to let the professionals handle the SARS outbreak. But the Toronto area desperately needs a politician who understands the symbolism of such a crisis. Mr. Eves has shown he's no Rudy Giuliani.

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Compared to the role played by the Québec premier, Lucien Bouchard, during the Québec ice storm crisis, his Ontarian counterpart is judged severely. The same criticisms—slowness to act and a failure to be proactive—were hurled at the Prime Minister of France, Jean-Pierre Raffarin, as well as the Minister of Health, Jean-François Mattéi, during the heat wave of the summer of 2003. Thus, in an article in l’Express, Jean-Marc Biais (2003) reports:  At a minimum we could reproach the prime minister and his minister of health for having led a poorly timed public relations campaign from the top. In the course of this, Jean-François Mattei had the bitter experience of visiting the Pitié-Salpêtrière hospital services (Paris). A nurse did not want to shake his hand. ‘It is shameful,’ she told him. ‘We needed much faster action.’

As the journalist continued: Jean-François Mattei was, before being named to government, head of the Timone hospital services in Marseille, one of the largest French hospital establishments. As such, he was familiar with the heat wave that struck the Phocaean city in 1983. Also, he would have had to be more sensitive to alarming information.

The lack of preparedness was also stressed by the four main leaders involved in crisis management after Hurricane Katrina (Michael Chertoff, Michael Brown, Kathleen Blanco, and Ray Nagin), and by the Indonesian Prime Minister, Susilo Bambang Yudhoyono. The Thai Prime Minister, Thaksin Shinawatra, for his part, emerged from the crisis fairly honorably. According to Parry (2005) in The Times, “most Thais revere him as a man of practicality and action, a welcome change after 72 years of weak civilian governments punctuated by military coups.” After-crisis leadership is most often relegated to experts who are assigned responsibility for leading national commissions of inquiry. Aside from the impressive number of recommendations from these commissions, recommendations that are usually based on a reinforcement and increase of formal crisis routines, it is practically impossible to determine the degree to which public authorities will follow through on these recommendations. Management judged inadequate by the public and media also leads to a search for those responsible or scapegoats, such as Michael Brown (director of FEMA) for Katrina, Dr. Lucien Abenheïm (director of DGS) during the heat wave, and Dr. Collin Cunha (director of public health in Ontario) during the SARS outbreak.

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Civil Society’s Behavior The participation of civil society, through expressions of support and solidarity is carefully depicted in the crises examined. During Katrina, the role of religious and charitable organizations was underscored in the report of the committee established by the American House of Representatives:4 Countless numbers of charities provided billions of dollars in relief to those in need.… The efforts of charitable organizations in the Gulf Coast represent the largest disaster response effort in U.S. history.

In France, the report of experts on the heat wave, while revealing the isolation of senior citizens, in particular those living in institutions,5 shows that victims’ families mobilized to come to their aid. Consequently, the information mission of the Senate under the aegis of Mr. Létard attests to families’ devotion to their senior members. Rodriguez (2006) reports that, in a number of communities in India and Sri Lanka, citizens actively engaged in activities to comfort the victims and begin to rebuild. Tightlyknit communities of fishers demonstrated remarkable altruism. Similarly, the report of the SARS Commission puts great emphasis on the courage, exceptional dedication and even heroism of frontline healthcare workers who did everything possible to counter the risks of the pandemic associated with SARS. At the same time, most experts deplore the fact that these unseen efforts on the part of civil society were not at all or not effectively coordinated with the official system of assistance established by the states. Thus, the American Red Cross, a nongovernmental organization mobilizing thousands of volunteers, was denied access to many shelters for victims of Katrina. Cases of looting are mentioned in most reports, notably those on Katrina and the tsunami6 although it is it difficult to assess their extent. In fact, the lack of information and late or inaccurate communication of information are deplored by experts in all the crises studied. Rodriguez (2006) mentions that a month after the disaster, a number of members of local fishing communities remained in a state of uncertainty about their families, their savings, and where they would live. Plans for relocation proposed by the state suffered from a lack of participation by the concerned communities. Certain groups mentioned that the government, without an appropriate preliminary investigation, suggested relocating them to regions threatened with flooding or the presence of wild animals. These groups had the impression that their needs, cultures and interests, which would allow them to return to a relatively normal life, were being neglected.

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Summary In the light of the results discussed above, it appears that the guiding principles advanced in the literature to orient and inspire effective crisis management were neither followed nor respected in these five crises. Shortcomings appear at all levels – in terms of planning and capacity for preparation, in coordination, and at the level of leadership, as well as in understanding the behavior of civil society. The next section attempts to explore avenues arising from the field of OD that could contribute to developing a fresh look at the crisis management process.

CONCEPTUALIZING AN OD-BASED MODEL FOR CRISIS MANAGEMENT In order to assess the potential contribution of OD to crisis management, we can draw on various interventions proposed in this field (Cummings & Worley, 2005; French & Bell, 1999)—those relative to human processes, technostructure, human resources management, and interventions of a strategic nature—integrating them with the guiding principles emerging from the crisis management literature, the principles conceived as adding to the efficacy of organizational response to crises and contributing to the reinforcement of organizational resilience. These guiding principles can also be structured around the four dimensions of crisis management used in the earlier part of the chapter: planning/preparedness, coordination, leadership, and civil behavior.

OD for Crisis Planning and Preparedness Studies on planning and preparation dominate the crisis management literature (Lalonde, 2007). Many authors argue that organizations can significantly increase the effectiveness of their crisis response by establishing an integrated and comprehensive risk management process and regularly updating their crisis preparedness (cf. Alexander, 2005; Lagadec, 1996; McEntire & Myers, 2004; Perry & Lindell, 2003; Quarantelli, 1988). This process should be part of the organization’s overall strategy (Pauchant & Mitroff, 1995; Sapriel, 2003), should not be dealt with as an exceptional phenomenon (Roux-Dufort, 2009) and should be led by a senior manager acting as facilitator (Denis, 2002; Pauchant & Mitroff, 1995). Many authors deplore the fact that planning exercises are limited to establishing routines and formal plans that will rarely be put into practice (McEntire & Myers, 2004; Perry & Lindell, 2003), rather than situating

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planning within an ongoing process to improve the organization’s intrinsic preparedness to cope with crises (Boin & Lagadec, 2000). According to Perry and Lindell (2003), a serious and rigorous approach to crisis planning and preparedness should be based on four major components: (1) evaluating the risks (vulnerability assessment); (2) evaluating the ability of the organization and community to cope with crises (capacity assessment); (3) developing and maintaining the individuals’ skills; and (4) establishing a flexible structure that can be deployed quickly when a crisis arises. In the same vein, Robert and Lajtah (2002) suggest that crisis management be understood as a process that is continuously enriched by the knowledge, experience, and training of managers, staff, and other stakeholders who work closely with the organization, as well as by conducting regular simulations. Such knowledge and experience must be monitored and updated regularly, because crisis preparation is never definitively completed, nor should it be limited to drafting plans and designing emergency response protocols. Any number of situations can drive the need for regular updates, such as: key people leaving the organization, taking valuable expertise with them; changes in resource availability (financial, material, and human), which can impact the emphasis given to planning (Boin & McConnell, 2007; McConnell & Drennan, 2006); and variations in the nature of risks over time. An approach that draws on an OD perspective may provide a framework for moving beyond the formalism of plans to help organizations develop a crisis management planning process anchored in continuous improvement. Managers who act as facilitators, for example, should possess or acquire the skills of OD practitioners (Archer, 2009; Burke, 2004; Eubanks, Marshall, & O’Driscoll, 1990; Gottlieb, 2001; Worley, Rothwell, & Sullivan, 2005) in order to manage the crisis management planning process from a holistic, integrated, multirisk, and multiplayer perspective. Organization development also provides interesting avenues for defining a strategic vision for managing crises, such as search conferences, team planning meetings, and future searches. These interventions gather a group of stakeholders with varied professional and organizational backgrounds for 2- or 3-day retreats, during which they reflect on how they can collectively deal with societal issues (Emery & Purser, 1999; Janoff & Weisbord, 2006; Williams, 1979). It is clear that the crisis management planning process would fit well in such a holistic framework for reflection. According to Williams (1979), the search conference is a unique learning experience in that it is designed to develop the adaptive capacity of organizations in turbulent environments. Inherently, the search conference requires a commitment from the participants to rethink their operating models and their organizational routines

Changing the Paradigm of Crisis Management 73

and culture in order to work under a network model (Chisholm, 1996, 2008). In sum, the goal is to establish a process of planned change based on a common understanding of the emerging trends in the overall environment. As adapted to the context of crisis management, the goal of a search conference would be to gather key stakeholders in crisis management to enable them to: share a common analysis of organizational risks; take stock of the strengths and limitations of the current system for dealing with those risks; identify more effective ways of managing crises; and commit to working collaboratively as a network. Several other interventions developed in the OD field could also help increase an organization’s crisis preparedness through better sharing of knowledge between individuals. Among these is survey feedback, a method designed to gather and analyze relevant information about a given problem and return the findings to key stakeholders for discussion and integration. Through their experience and contacts with the community, individuals acquire knowledge that could be utilized during crises (Lalonde, 2010). Yet to be of use, such knowledge must be shared with other members of the organization and with stakeholders. Survey feedback can promote this sharing of knowledge and experience and result in rapid mobilization in times of crisis. Survey feedback can also aid in updating knowledge and sharing a common vision, and has the additional advantage of revealing not only explicit knowledge but also tacit knowledge. Survey feedback provides the opportunity to systematically collect data on a given problem usually by means of a questionnaire administered to individuals. This first level of information is typically synthesized by an analyst, who then presents the main results in aggregate form. The analysis can thus make explicit a set of perceptions and ideas on crisis management—for example, knowledge that members of an organization have about formal crisis management plans, organizational routines to implement in times of crisis, the roles and responsibilities of various actors, formal knowledge about the surrounding community and other stakeholders, and so forth. These results are then compared and examined through exchange with participants. The perceptions of this information and its underlying tacit knowledge can then be detected by way of sharing and exchange, as participants explain their point of view, sharing tactics they would use in a crisis with an explanation of why they think it would be useful (Lalonde, 2010). Similarly, a risk assessment approach based on open systems theory (Burke, 2008), the theory underlying many OD diagnostic models, is likely to lead organizational stakeholders to accept the influences of external environments and discover opportunities for intra- and interorganizational collaboration. The development of appropriate and flexible crisis

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responses that encourage creativity and improvisation—fundamental skills according to many authors in crisis management (Rerup, 2001; Webb & Chevreau, 2006)—could be fostered by laboratory training sessions. Laboratory training can be based on crisis scenarios or simulations, enabling individuals, employees, and managers to develop the skills that would be required during emergencies. The merits of such exercises have been well documented by many authors (Crichton, Flin, & Rattray, 2000; Hart, 1997; Perry, 2004; Pollard & Hotho, 2006). In sum, designing a crisis management plan as a continuous improvement process is very much in keeping with objectives of enduring organizational development.

OD for Crisis Coordination The crisis response literature has identified the lack of integration among the various stakeholders as one of the major ongoing problems in crisis response coordination, highlighting as well the fragmented, even conflicting nature of their interventions. This lack of integration was illustrated by Oloruntoba (2005), in a study of coordination mechanisms among the various international aid agencies in the tsunami crisis in Southeast Asia in 2004, and by Tierney and Goltz (1997), in their examination of the 1995 earthquake in Kobe, Japan. The sheer number of stakeholders involved can contribute to a lack of integration and the complexity of coordination. Tierney (2003), for example, noted that the Disaster Research Center counted at least 500 organizations involved in the first 10 days after the attack on the World Trade Center on September 11, 2001. The ability, or lack thereof, to create collaborative networks in times of crisis is also highlighted in the literature. Waugh and Streib (2006), in a study of Hurricane Katrina, and Oloruntoba (2005), in his study of the tsunami in Southeast Asia, suggest the importance of incorporating all stakeholders, organizations, governments, and local communities into a network of responders. In particular, the inclusion of local stakeholders is a factor frequently identified in the crisis response coordination literature. Moreover, this issue seems to be at the heart of the concerns of the Disaster Research Center at the University of Delaware, particularly in studies conducted after the September 11 attacks in New York. Wachtendorf and Kendra (2004), for example, found that there was a major convergence of volunteers and assistance organizations during the aftermath of the attacks. They suggest that it is important to include these local groups and to recognize the social capital they represent as well as the expertise they can bring to the decision-making process. In addition, the authors

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also recommend establishing and maintaining partnerships, including groups often ignored in the crisis response process, familiarizing community volunteers with existing response systems and encouraging local initiatives. In the same vein, Takeda and Helms (2006a, 2006b) suggest that organizational structure itself can contribute to poor coordination during crises. In their study of 2005 Hurricane Katrina and the 2004 tsunami in Southeast Asia, the authors show that some failures to effectively coordinate actions can be explained by a reliance on the bureaucratic model. According to the authors, the bureaucratic model, which limits information from outside the system from being processed, works in isolation and can be represented as a closed system. The inflexibility of such systems could well cause difficulties in responding to emergencies. Takeda and Helms therefore suggest a need for organizations to decentralize authority and make structures and processes less formal and rigid. Such decentralization is generally characterized by better access to information and faster and easier decision making. As these examples illustrate, in times of crisis organizations and their stakeholders become more interdependent (Comfort, 1985; Dynes, 1987; Karte & Lindell, 1990; Drabek & Hoetmer, 1991) because of the urgency to act in the absence of information that would normally be considered essential for decision making (Quarantelli, 1988), the increased uncertainty concerning what should be done, the possible negative effects on the reputations of those directly involved in the crisis, and the long-term impacts on the future of the organization or its official representatives. Thus, during crises, organizations typically put all kinds of strategies into practice, most of which are based on forming alliances—alliances made on the basis of the personal contacts of the strategists and senior leaders involved. Unfortunately, these strategies are often imbued with political gamesmanship (Rosenthal, Charles, & Hart, 1989). In most instances, however, they are not implemented blindly, as organizations tend to form alliances with others that are comparable in terms of status or legitimacy (Drabek & Hoetmer, 1991; Dynes, 1978; Wolensky, 1983), becoming similar to the “coalitions” described by Cyert and March (1963). According to several authors (Dynes, 1994; Morris, Morris, & Jones, 2007; Quarantelli, 1997), there are two main models for defining coordination. The first is based on a traditional hierarchy in which relationships between the components of a system are clearly defined, including the distribution of authority. As these authors point out, while this model is very effective for routine and repetitive activities, it can result in inflexible structures that discourage adaptation and change. The second model is based on networks of interdependent stakeholders that go beyond simple hierarchy and function through cooperation. This model assumes that

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relationships among organizations or individuals cannot be defined through formal ties alone, and that networks are formed among stakeholders who share values or beliefs. Yet, although the network model is based on greater structural flexibility and agility, it can prove difficult to implement, especially when organizational actors are not accustomed to working together or, worse, when they see each other as competitors. Insofar as one of the best predictors of effective coordination during crises is prior knowledge of potential partners and collaborators (Dynes, 1994), OD offers an interesting approach, namely the socio-ecological view of networks put forward by Trist (1983). In this view, networks address the meta-problem of organizations (Trist, 1983), namely the difficulty they have in dealing with complex or chaotic environments when they operate in isolation. In the crisis management literature, the “crisis room” is often identified as the place for interaction among stakeholders from various organizations who are striving to act in concert during the heat of a crisis. The crisis room would thus benefit from the socioecological view of networks described in the OD literature, becoming “the referent organization.” In essence, the crisis room transcends the particularities of each organization because, taken separately, each one is incapable or unable to solve the meta-problems generated by a crisis “because they lack the requisite variety” (Trist, 1983, p. 272). To do this, a set of complementary OD practices and conditions must be met, specifically: the relationship between network members should be egalitarian, horizontal, and voluntary; the network should be self-regulated and exist as an open space for collaborative exchange (Owen, 1997) or a “megacommunity” of interests (Kelly, Gerencser, Napolitano, & Van Lee, 2008); network members should develop operating rules that bind each of the parties; the members should have mutual respect for the spheres of responsibility of each; common goals should be pursued by maintaining a continuing dialog to solve the meta-problems posed by the crisis; and the network should not be static and should be able to change form over time by, for example, including emerging stakeholders. In addition, the crisis room can move to action quickly by using future search techniques, another OD method. In this regard, Janoff and Weisbord (2006) propose that this type of intervention, which is directly in line with the Lewinian tradition of action research, could quickly activate cooperation among stakeholders during a crisis. This approach is based on four main features: (1) it gets the whole system in the room; (2) it explores the whole before seeking to fix any part; (3) it puts the future and common ground front and center; and (4) it promotes self-management and responsibility for action. The authors point to specific examples of organizations that underwent rapid and radical change—the rapid expansion of the Swedish company IKEA and the sudden growth in air

Changing the Paradigm of Crisis Management 77

traffic that U.S. Federal Aviation Administration had to manage—using this intervention model to quickly mobilize a group of stakeholders in a crisis or near-crisis context. In this regard, Lalonde (2004) has shown that the most effective organizational models during a crisis are either integrator (striving to maximize their service offerings by aligning professional resources to community needs, using a layering strategy that takes into account what other collaborators are doing) or collectivist (building on community resources and working with those resources to resolve the crisis) in nature. The least efficient model is reactive, in which the organization tends to act quickly but in isolation and with little legitimacy and/or a weak connection with the community. Beyond their inherent lack of flexibility, bureaucratic structures pose other intraorganizational issues that impact coordination during crises (Quarantelli, 1988). These issues concern: the modes of delegation and communication among units; the organization of work, such as the allocation and assignment of tasks; the ability of stakeholders to demonstrate self-management, resourcefulness, imagination or improvisation (Lalonde, 2010); and the ways in which information is transmitted and communicated to maintain overall cohesion. However, various interventions derived from OD may help members of the organization become accustomed to operating in a way that differs significantly from the traditional vertical models and thus provide the agility that is so lacking during crises (Docherty, Kira, & Shani, 2005; Nadler & Tushman, 1997; O’Reilly & Tushman, 2004). Such interventions include the establishment of communities of practice (Wenger, 1999; Wenger, McDermott, & Snyder, 2002), collateral structures (Rubenstein & Woodman, 1984; Zand, 1974), and parallel learning structures (Bushe & Shani, 1991; Shani & Eberhardt, 1987). All of these models lead individuals to adopt a less restrictive view of their responsibilities, because they are based on the principles of horizontal (job enlargement) or vertical (job enrichment) expansion of tasks, which promote skill development in terms of creativity, improvisation and self-management—skills deemed essential during crises (Lalonde, 2010; Rerup, 2001; Webb & Chevreau, 2006). Ultimately, in view of the studies and the suggested approaches discussed above, it appears that the critical elements for effective coordination during crises are: • decentralized authority structures with a liaison function between the strategic crisis center and the operational crisis center; • autonomy for the responders in the field, who self-organize into communities of practice; • inclusion of local groups and communities in the crisis response;

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• formation of resource and service networks to benefit the community; • agreement on the objectives and roles of the various stakeholders; and • maintenance of lines of communication with the public. In this regard, various OD interventions would potentially be of use in increasing the efficacy of inter- and intraorganizational collaboration. Among them, the most promising approaches include: the socioecological network model; matrix-type, ad-hoc, collateral and learning structural configurations; the formation of communities of practice; and laboratory trainings based on scenarios that require job enrichment or enlargement.

OD for Crisis Leadership Crisis management not only requires speed but also appropriate responses (Lagadec, 1991, 1996; Perry & Nigg, 1985), not only for implementing plans and creating tools, but for fostering capacities for judgment and directing the operations. As discussed in the previous section on coordination, crisis management should not be based strictly on hierarchy and a centralizing approach of command and control, but rather on collective leadership (Wooten & James, 2008), the construction of a shared legitimacy, and the principles of continuity and cooperation (Dynes, 1983, 1994; Lagadec, 1996; Quarantelli, 1988). Some authors (Lagadec, 1991, 1996; Smits & Ally, 2003; Wooten & James, 2008) believe that managers must develop a certain number of specific abilities in various phases of the crisis. In a recent study, Wooten and James (2008) differentiate key skills for each phase. Thus, they believe that the capacity to (1) give meaning to signs warning of a crisis and (2) anticipate the potential impact on others represent two key skills during the detection phase. In the prevention/preparation phase, the authors believe that a key skill in is the capacity to convince organizational members of the importance of investing in crisis management planning. As they argue, for organizational leaders to pay attention to crisis preparation requires a change agent that is skilful in issue selling. The two other skills in this phase are organizational agility (i.e., having a detailed knowledge of the organization, a systemic view of interaction dynamics likely to be deployed to face the crisis) and creativity (i.e., the capacity to imagine novel scenarios to confront the contingencies of the crisis situation). At the height of the crisis, in the context of direct and active interventions, the capacity to make decisions under pressure, to communicate effectively, and to have the courage to take needed risks are

Changing the Paradigm of Crisis Management 79

critical success factors. During the phase of reconstruction and returning to normal activities, the promotion of organizational resilience and the adoption of ethical and responsible behavior are two additional skills. On this point, the authors mentioned that after a crisis an organization never totally returns to the “way it was” before the crisis. It is important that lessons should be taken from the strengths and weaknesses revealed during the crisis, with a concomitant review of any errors committed that should be avoided in future. Even more importantly, the acknowledgement of these shortcomings will truly raise the stakeholders’ support and confidence. The adoption of a learning mentality is a skill that allows for the pursuit of further reflection on the improvement in crisis management practices outside the phases linked to the crisis itself. With an emphasis on communication, problem-solving and decisionmaking processes, interventions relative to the human process of OD seems particularly appropriate for the development of crisis leadership. However, traditionally, interventions in such processes have been especially based on the organization’s internal dynamic and interpersonal dimensions within work teams (Buller, 1988; Jelinek & Litterer, 1988). While needing the abilities to mobilize people and communicate adequately with them, crisis leadership also requires a keen sensitivity to the external environment (e.g., the capacity to pick up on signals indicative of a coming crisis, the ability to anticipate, a systematic view of events, the capacity to work in a network and with emerging actors). Of course, the required skills in times of crisis do not develop in a vacuum; they will have been painstakingly cultivated through appropriate training, coaching, and mentoring. While capitalizing on existing modes of intervention, OD interventions aiming at developing skills for crisis leadership largely remain to be developed.

OD for Civil Behavior in Face of Crises Civil society’s behavior when confronted with crises is the subject of popular perceptions and myths, which a number of researchers have attempted to deconstruct (Connell, 2001; Dynes, 1983, 1994; Helsloot & Ruitenberg, 2004; Perry & Lindell, 2003b; Quarantelli, 1988). Far from being a group of panicked and irrational actors, civil society can bring together citizens who are generally in control of themselves, who make logical decisions, and who provide initial help to their fellow victims. Dynes (1983), for example, characterizes the expansion of civic roles in the form of expressions of mutual aid and solidarity toward victims as situational altruism.

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The role of civil society affects a number of facets of crisis management and requires multifaceted OD interventions. First, acquiring greater knowledge of community characteristics and civic behavior in times of crisis is one of the guiding principles identified by scholars working on planning and preparation. Survey feedback, for example, allows a timely sharing of knowledge among interveners at this level. Altruistic gestures give rise to the emergence of more or less organized action, an aspect that should be considered when coordinating actions in crisis management. Trist’s (1983) socioecological perspective of networks, discussed earlier, also allows us to integrate significant actors from civil society in coordinating crisis responses. The communication dimension inherent in this process is a crucial skill raised by a number of writers, including Wooten and James (2008). According to Helsloot and Ruitenberg (2004), the average citizen is little inclined to and not very interested in investing in preparing for a crisis. It is, thus, important to take into consideration the level of information to which citizens have access during the period leading-up to a crisis since the time dimension of the crisis will, when it occurs, quickly prevent authorities from communicating relevant information to actors of civil society. Overcoming this obstacle is, furthermore, a real test of strength for those responsible for crisis management. In order to ensure that there is a clear understanding of what is going on, managers need to have strong communication skills. Laboratory training sessions, as well as coaching and mentoring, are interventions that could be designed specifically with the goal of developing the communication skills of key managers to deal with the public and media nature of the crisis. In this respect, it is vital to note that the literature on non-crisis communication stresses the importance of selecting a single spokesperson within the same organization for the public and the media.

CONCLUSION This chapter attempted to paint an overall, comprehensive picture of OD interventions that could contribute to more efficient crisis planning and coordination (see Figure 4.1). The basic idea of OD, with the effect of reinforcing lasting individual and organizational capacities to confront the changes they are experiencing, is connected to the notion of resilience proposed by crisis management. The research of Tierney (2003) and Kendra and Wachtendorf (2003) allows us to identify certain characteristics of resilient systems. Such systems are:

Changing the Paradigm of Crisis Management 81

OD FOR CRISIS PLANNING/

RESILIENT CAPABILITIES

PREPAREDNESS

Robust Redundant Resourcefulness Rapid Interconnected

OD FOR CRISIS LEADERSHIP

OD FOR CRISIS COORDINATION

OD FOR CIVIL BEHAVIOR IN FACE OF CRISES

Figure 4.1. Resilience and crisis management.

• robust, capable of withstanding a high level of stress and tension; • redundant, in the sense of substitutability (one unit may replace another in case of disruption); • resourceful, capable of efficiently identifying the issues or problems, establishing priorities and mobilizing resources; and • quick to take action, able to minimize the losses and negative impacts of the crisis. In addition to these diverse characteristics, other observers (e.g., Horne & Orr, 1998; Mallak, 1998; Weick, 1993) add interconnectivity, the capacity to see oneself as a member of a group or larger virtual action system. This notion of interconnectivity is highly correlated to the importance of functioning in a network, as presented in the section on crisis coordination. Clearly, organizational resilience, as defined previously, is central to achieving the goals of the guiding principles of crisis management in terms of planning, coordination, leadership and civil society’s behavior. As this chapter has argued, these principles and goals can be facilitated and achieved through targeted OD interventions. The application of OD in crisis management does, of course, present some challenges. OD’s focus has traditionally been on improving organizations’ incremental internal processes rather than a strategic analysis of the external environment. Historically risk analysis and evaluation of the

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capacity of an organization to face a crisis have not been a concern of OD. In this respect, a number of authors (Anderson & Ovaice, 2006; Brown, 2006; Buller; 1988; Greiner & Cummings, 2004; Jelinek & Litterer, 1988) observe that OD practitioners and researchers must expand their knowledge base in terms of the strategic analysis of organizations if they wish to remain relevant for contemporary organizations. The field of crisis management is seeking such models that allow for a strengthening of resilience and the caliber of response when a crisis arises. It is to be hoped that OD interveners will understand how to fit into this new paradigm.

ACKNOWLEDGMENT The research in this chapter benefited from the financial assistance of the Social Science and Humanities Research Council of Canada, as well as the Fonds Québécois de recherche sur la société et la culture. The author would like to thank Alexandro Silva Trigueros, Laurence-Amielle David, Marion Barillier and Mylène Tantchou-Dipankui who acted as research assistants.

NOTES 1.

2.

3.

4. 5. 6.

The principle of multicoding was used in classification, that is, there were always at least two coders to analyze the material for each of the five crises. Discussions were held to establish a common understanding of themes and their classification. See The SARS Commission. A Spring of Fear. The Honourable Mr. Justice, Archie Campbell, Government of Ontario, Canada, December 2006. See Volume 4, pages 35 to 40. For the full report see: http://www.ontla.on.ca/ library/repository/mon/16000/268478.pdf See A Failure of Initiative. Final Report of the Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina 2006, page 15, “We train soldiers to fight wars. You can’t kill a storm.” For the full report see: http://www.gpoacess.gov/congress/index.html See A Failure of Initiative, page 343. The mission established by the National Assembly (Jacquat Missiont) noted a number of bodies that were never claimed. The question of looting does not arise in the case of the heat wave or in that of SARS.

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PART II CONSULTING IN A GLOBAL CONTEXT

CHAPTER 5

STRATEGY WORK IN AN INTERNATIONAL SETTING Entangling Top-Down and Bottom-Up Approaches via Continuous Conversations, Learning Cycles, and Semifinished Instruments H. LOBNIG

Hubert Lobnig

Immoconsult Leasing (ICL) is a real estate leasing company owned by the Volksbank Group, headquartered in Vienna, Austria, with subsidiaries in eight countries throughout Central and Eastern Europe and Southeastern Europe region with a total of about 130 employees. In 2005 ICL appointed a new international managing director of sales (IMDS), who took the initiative to considerably change the core business from a successful administrator of existing real estate assets to a market driven and volume growing leasing company. The IMDS focused his efforts on improving the profitability of the company by gaining additional market share in each country. In his strong and convincing commitment to economic growth, the IMDS was also ready to restructure the company’s units, processes, and work force in order to make change happen. The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 91–112 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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In early 2006, an integrative consulting process was started to help the company define its business for the future and implement necessary organizational change processes. As a first step, key decision makers were invited to define the company’s mission, vision, and core competencies needed in order to make the vision become reality. After these strategic frames had been set, two key questions arose: (1) how should the results be transferred throughout the organization; and (2) what type of mindset would be necessary for this type of change to be successful (e.g., how should the subsidiaries in different countries be approached, which units would be most decisive for the company’s overall success). First attempts to implement the strategic work across the different countries with the help of a sales trainer were not seen as very productive by the company’s board members. They then began looking for another consultant, someone more closely connected with both the concept and methodology of organizational change process—which is the point I met with ICL’s executive management team. The chapter examines the resulting consulting process, which was conducted mainly in 2007. It starts with introducing the company and its business, describing how the approach to strategy development was specified. The discussion provides an overview of the consulting process with detailed analysis of the initial phase to create a more complete picture of the e case. Drawing on this comprehensive understanding of the case, an in-depth analysis of the consulting methods and tactics is presented: the concept of semi finished instruments and their application in strategy work, the creation of context and frame as consulting activity, the focus on individual and team learning in strategy work, and finally appropriate structures and design elements that can help guide learning from workshop settings into daily practice. Methodologically the paper is based on a case study where the author was the consultant and scientific inquiry was subsequently added. Schein (1988) framed this type of organizational research as a “clinical perspective,” an approach that can produce deep insights into many aspects of organizational dynamics. Instead of using the criterion of replicability, the clinical model bases its scientific validation through the intersubjectivity of conclusions, exposure to colleagues, and internal consistency of the underlying assumptions with all observations available. To add scientific evidence, supervision throughout the process, feedback sessions during the consulting process, continuous reflections with colleagues, and selfreflection were utilized. THE CONTEXT Real estate leasing is based on the business logic of financial services applied to the field of real estate. The business case in real estate leasing

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usually includes the planning, building and financing of a real estate object and the establishment (with a client) of a leasing contract running for a period of time. During the term of the leasing contract, the client does not own the leasing object and consequently it is not included in the client company’s balance sheet. The main economic advantages for clients are that they can focus on their core business rather than on the real estate, they only need a single contact for finance and real estate expertise, and they can save taxes. Some characteristics of the real estate leasing business in general and ICL in particular influence the choice of the appropriate concept for the strategy work. First, real estate leasing is a complex service comprising issues of real estate, financial, and legal concerns. It is not a standardized product or a mass article, and a single client project typically involved significant investment as well as possible revenue. Second, ICL was owned by an internationally operating financial institute, where its activities were administered and integrated at headquarters. At the same time, the company engaged in business in diverse regional markets, primarily in Austria but also in the Central and Eastern Europe (CEE) and Southeastern Europe (SEE) regions (see Figure 5.1). These regional markets differ considerably concerning the company’s history, its existing market share, competitors (in terms of quantity and quality), attractiveness of the product for client, and performance capabilities of the teams in the subsidiaries. Thus, in order to define an appropriate methodological framework, the consultants formulated a set of guiding principles for the design of the strategy development process: • to reconcile demands from headquarters with local opportunities and needs; • to develop market options and internal performance capabilities; • to help regional managers to apply strategic thinking, strategic reasoning, and decision making, with the aim of improving managerial skills; • to adjust the strategic planning process and application of strategic instruments across the different country units; and • to encourage mutual understanding, learning, and support in direct lateral cooperation. Creating the Approach Strategic management is about collecting and assessing external and internal information an organization faces in order to make decisions and conceptualize courses of action directing the organization toward a better

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Figure 5.1.

The new organizational design of ICL.

future. As the quality of these decisions is of utmost importance for companies, “strategy” is seen as the “core discipline” of management research and practice. As a discipline, strategy development offers a variety of methods and tools based on different assumptions on how to cope with the challenge of making decisions under uncertainty and implementing appropriate measures. In their summary of the most influential approaches in strategic management, Mintzberg, Ahlstrand, and Lampel (1998) group several strategic approaches into clusters of different schools, underscoring that each of these paradigms has strengths and limitations when it comes to applying them in the business environment. The selection of the “right” approach is therefore not so much a question of scientific proof but one of fit between the particular organization and its context as well as the explicit and tacit implications of the strategic approach. Some of the context factors that are critical when it comes to paradigm selection include: the particular industry the company is in, the organization’s vision and mission, its internal decision making and management culture, change approaches that are used, and the available internal capabilities for strategic thinking and acting. A consulting approach based on an organization development (OD) perspective faces the challenge of integrating classic methods of strategic analysis with a participative and system based process. It is just in recent years that OD

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professionals have elaborated on approaches that are able to bridge this method-development gap (see Greiner, 2008; Nagel & Wimmer, 2002). When I was brought in, ICL was already undergoing an integrated change process with another consultant who recommended me to help with the strategy process. As the overall organizational change process applied OD principles, emphasizing individual and team learning, and project management, the strategy development concept had to align itself accordingly. On a conceptual level, I felt the need to prepare myself thoroughly in order to be able to provide OD interventions and state-of-theart tools in strategic management. Drawing on a set of assumptions, useful theories and strategic instruments (Mintzberg et al., 1998; Nagel, 2007; Nagel & Wimmer, 2002), I also consulted with a business school professor and strategic management practitioner for regular coaching and advice throughout the process. In the first meetings with the international managing director of sales (IMDS) and lead consultant, the core concept of the process was designed, guided by a set of working principles. First, the strategy development process had to build on a sound and solid set of strategic instruments tailored for the business of real estate leasing. The intent was to create a foundation for repeated and informed analysis, decisions and actions. As the owning company itself was in the financial industry, it primarily focused its strategic decisions on financials (e.g., return on invested capital). Managers in the regional units, however, required a different type of strategic analysis as they operated very close to specific product/market combinations. As the owning company did not provide adequate strategic tools, analysis or forecast systems, the project had to close that gap. Second, as research shows (Kaufmann & Panhans, 2008) foreign-owned companies in the CEE and SEE region are commonly managed in a rather authoritative way, where all main decisions are rolled out from headquarters to the country units. As a result, local managers have a limited degree of freedom in their decisions. One of the disadvantages of this situation is that it undermines the creativity, self-confidence and decisionmaking competence of regional managers and their local teams. At the same time, however, real estate leasing is a very complex product, where success strongly depends on the capability, knowledge and expertise of the work force in the regional units, and their ability to act in a target oriented fashion rather than wait for specifications from “above.” The regional manager’ skills in strategic thinking, planning, and decision making had to be improved by the project. Third, the IMDS believed strongly in teamwork and less in individual performance as the fundament for business advantage. As the leasing product included different professional expertise and was only performed well in interdisciplinary collaboration, this principle also had to underpin

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the strategic management approach. The strategic analysis, planning, and experimentation were not to be tackled by individual regional managers but by the team of local experts working together. These interdisciplinary teams were seen as nuclei of the strategic management process in the countries and the project was intended to help them perform better as teams. Thus the teamwork approach had little to do with the ethics of a participative OD approach; the key driver was the belief that the complexity of tasks would overburden individual capacities. Fourth, strategic management was not seen as an expert-oriented approach, where market researchers or product engineers are responsible for design and the sales force is responsible for selling. Instead, it was viewed as an iterative process between analysis and action with integrated feedback loops. When the internal marketing, business or law experts systematically researched market and product potential in their countries, they also “invented” their business. The project had to encourage the regional experts to strategically examine potential and experiment with new options. Fifth, as the company decided to open small, flexible and locally focused offices in eight countries, it was quickly seen that there was a need for lateral coordination processes outside the headquarters to avoid competition between the units and their reluctance to assist other countries. As the overall capacity was rather limited, combined efforts in thinking through innovative product/market combinations were seen as beneficial. The project therefore focused on fostering learning processes across the countries, on lateral coordination, and on feedback between colleagues. Finally, the steering of multinational cooperation required both local flexibility and a set of systems and indicators on a transnational level. The project therefore had to develop a set of indicators for strategic planning, including market/product assessments, estimation, and forecast models to provide a database for cross-national and local decisions.

Designing the Process The strategy development process was based on a project management approach. The project team consisted of the managing directors of seven country units, an internal consultant assigned to finance, and an external consultant. One of the managing directors of the country units was appointed project leader. The project sponsor was the company’s IMDS. A series of five 2-day workshops were scheduled (March-August 2007), each dedicated to a specific strategic issue, an instrument for analysis or planning, and a setting for learning and reflection (for an overview see Table 5.1). One of the underlying premises was that all managing direc-

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tors of the country units had to take part in the project. There was no excuse permitted for not attending, coming too late or leaving early, not even if “important clients call in for an important meeting.” These rules, which were rigorously enforced, encouraged continuous work and underlined the relevance of the project for all involved. A related, important dimension was that the group of managing directors was quite diverse in terms of: • cultural issues: some came from headquarters and the home market in Austria; others came from their home countries in the CEE and SEE region; • educational backgrounds: from university degrees in economics, finance, law, and sociology to no university degree, from extensive management training to no management training at all; • experiences in management practice, organizational change and strategic management; • tenure with the company and the trust they had earned from headquarters for results and leadership; • language skills: some were good in German, others not; some were good in English, some not; and • the results of the units in terms of business growth they had achieved.

The Kick-off Meeting: Unorthodox Methods in an Unclear Situation The first 2-day workshop started with the IMDS’s statement about aims and objectives, inviting the country managers to codefine ICL’s strategy for the coming years. After that, the project leader presented the milestones and general working frame. Both issues were discussed and reflected upon by the participants. After the IMDS left the meeting, in my role as the external consultant, I asked participants to form groups using some of the above mentioned differences. They were asked to discuss what these differences could mean for collaboration in the project set-up. This exercise—a classic tool in systemic workshop design—may have helped the participants to see their differences as a resource rather than an obstacle. However, most of the participants were not used to this type of workshop setting. They were expecting paper presentations and results that would subsequently be discussed. For some, especially the participants from the former communist countries, the request that they form groups according to criteria that were not primarily related to business

98 H. LOBNIG Table 5.1. The New Organizational Design of ICL Kick-off meeting • Clarifying aims and expectations with the IMD March 6, 2007 • Discussing the working method in the international setting and preparing for the work to be done together with the teams in each country unit; • Examining existing knowledge and experience concerning strategic management and real estate leasing specifically Workshop 1

• Presenting the specific concept of the strategy development project • Defining the main terms and indicators to describe the leasing business • Introducing first methods: analysis of trends, stakeholder analysis

March 6-7, 2007

Workshop 2

• Presenting first results (analysis of trends, stakeholder analysis), elaborated in the teams in the country units, feedback and counseling in peer groups • Introducing and assessing a set of economic key data to describe the (economic) situation in the country (proposal to the steering group) • Introducing and implementing the instrument competitor analysis • Introducing the concept of market segmentation

April 2-3, 2007

Workshop 3

• Peer reviews and feedback of the competitor anal- May 3-4, 2007 ysis • Market segmentation: developing a concept of a segmentation that makes sense for countries as well as for headquarters • Market analysis: introducing the concept, piloting a market analysis, improving the set of criteria together with the project sponsor

Workshop 4

• Progress reports from the countries including all July 2-3, 2007 strategic instruments (with the project sponsor and other department heads of headquarters present) • Cross-checking of the results with the headquarters´ risk policy • Aggregation of the results into a SWOT analysis • Feedback from the project sponsor and other experts from headquarters on the analyses of the country teams • Introduction of the concept: From strategic analysis to strategic options

Workshop 5

• Final reports and feedback based on a traffic light scheme • Definitions of issues for further negotiations in bilateral approval processes • Outlook on the realization phase

July 31August 1, 2007

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was initially seen as having little to do with strategy—in essence, an intervention that was seen as a “waste of time,” as evidenced by the workshop evaluations. The approach of talking together in groups about the meaning of differences was seen to be too personal and not “tough business,” and many felt quite irritated at the beginning. The concept of team learning, where relevant knowledge emerges from what are often awkward group work settings, was different from their accustomed management practices. A second irritation was the introduction of the systemic model of strategy development. In its core the model suggests that sensitivity toward differences is an important dimension of strategic thinking—differences, which are observed in the outside world, are also produced internally in the system itself. For an organization to truly increase its strategic capacity, it needs to increase its sensitivity toward internal complexities and information processing. This means considering internal communication processes and the way assessments from individuals become relevant for organizational decisions. As data are nearly always open to interpretation, the main challenges for managers are to cope with increasing internal differences in perspectives and assessments, coming to a decision within a limited period of time. They need to be able to listen carefully, learn what is unknown, argue through different interpretations, and act in situations of high uncertainty. A mindset that primarily looks for objective and clearly measurable data “out there in the world” that “speaks for itself ” represents a different but widely prevalent mode of strategic development, especially in the former communist countries. When the basics of the systemic approach of strategic management were presented at the kick-off meeting, a debate started about whether “subjectivity” would lead to good results in decision making. One group felt comfortable with the model and was pleased to be invited to share their observations and assessments. Others, however, demanded external advice, where the consultancy itself formulates the strategies for the company—a model they felt more comfortable with based on past employment experiences. A third but smaller group mistrusted headquarters, felt that it might already have a strategy in mind, and thought what they were doing was little more than “occupational therapy.” Reflecting on Schein’s (1998) process consultation, I reasoned that the approach would work well for some members of the group, while others would have difficulties since they were unacquainted with the kind of strategic thinking through which the project had been conceived. In summary, there were important cornerstones that helped stabilize the setting at the beginning and directed the individuals toward collaborative action and work:

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• Context: the strategy development project was embedded in an integrative company development project addressing changes on structural, personal and business process levels. • Mandate: there was a clear and unambiguous mandate by the international managing director sales, which created a clear sense of urgency. • Approach: the project management approach, thoroughly planned in advance, provided structured work and conveyed orientation • Group leadership: a dedicated project manager, appointed from among the group (“one of us”), was a trusted leader and provided guidance for the rest of the group. • Instruments: the tools already implemented in the first workshop were highly practical in application but also demanding in terms of directing work and involvement.

APPLYING STRATEGIC TOOLS AS “SEMI-FINISHED INSTRUMENTS” Strategy development processes usually apply instruments for gathering, analyzing and interpreting data. The underlying premise is that thorough an application of these tools the uncertainty of the external environment can be contained and its development predicted to the point where informed strategic decisions can be reached. Instruments help strategists reduce complexity and translate uncertainty into grounded and coordinated action. Although a sine qua non in strategic planning, the way these instruments are applied varies considerably—from primary use in an external expert’s approach to attempts to increase the system’s internal capability to observe and take action.

Selecting and Tailoring the Instrument As each workshop included the implementation of a specific strategic tool, the significance and applicability of each tool was thoroughly screened in advance in meetings with the IMDS and project leader. They asked a set of questions that guided the selection procedure: (1) how does the selected tool contribute to a better understand of the underlying market dynamics of ICL?; (2) how does it fit the mission and vision?; (3) can the management team use it without external help after first advice? Implementation of the instruments followed an “outside-in-approach,” starting with defining the relevant macro-economic figures for the busi-

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ness, followed by a screening of the environment (environmental and stakeholder analysis) before explicitly defining the type of products and services that lead to an innovative answer to the question of “what business are we in?” When the series of workshops proceeded, the applied instruments became more focused on the core business, emphasizing the segments that were being investigated. The analysis of the stakeholder groups, competitors and markets focused the relevant set of data and a strengths, weaknesses, opportunities, and threats analysis compiled a strategic assessment of each country unit. Table 5.2 summarizes the selected instruments and their specific backgrounds. Each of the instruments was provided in “semifinished” form and they were finalized and made ready to use in the workshops. This approach helped the group to tailor the content as well as to understand the meaning behind each of the instruments

Analyzing Competitors: From Semifinished Instruments to Strategic Results As a way of illustrating this process, this section goes into detail about application of a semi-finished instrument. As the external consultant on the project, I prepared a paper introducing the concept of the method, the steps to finalize the semi-finished instrument and guidelines about how to apply the instrument in the country units. Step 1: Defining Relevant Indicators for Comparison I prepared a list of possible indicators that served as examples of comparative indicators with competitors. These indicators included items such as pricing, customer satisfaction, quality of services and products, additional service qualities (e.g., timeliness, capacity to deliver), knowhow, networks available, reputation and image, regional anchoring, economic strength, strategy, and company culture. The workshop participants were split into two groups, each with the task of developing another list of useful indicators. They could add and remove items as they seemed appropriate, and they were instructed to write each item on a card to be pinned on the board. When they had finished, they had come up with a total of 32 items. After these were screened and clarified in terms of meaning, relevance for business success and accessibility of data, each workshop participant voted for the 10 most important items. The final instrument included a set of 18 indicators (see Table 5.3) and was converted into a questionnaire where each item was rated on a scale between 1 (very poor) and 10 (very good).

Classic approach in national economics, utilized here because of a lack of appropriate figures in the headquarters’ research departments

SWOT analysis

1. Helps to express strategic potential in terms of financial forecasts; the underlying assumptions of growth, stagnation, and competition become visible; 2. Provide key figures relevant for strategic decisions; 3. Teams learn how qualitative assessments can be translated into financial planning. 1. Combine internal capabilities and external challenges and demands; 2. Easy to compile, allows differentiation in the assessment; 3. Compiles and evaluate the data in order to formulate a set of strategic directions for the country units.

Market analysis

Classic strategic tool from Design School (Mintzberg et al., 1998)

Own invention, following ideas by Nagel (2007)

1. Systematically draw attention to competitors on the market; assess strengths and Classic tool, adapted from Nagel weaknesses compared to relevant competitors; (2007) 2. Realistic assessment requires knowledge but also assumptions from the team; 3. Teams learn how to assemble “subjective assumptions” into a more complete picture.

Competitor analysis

From the political school (Mintzberg et al., 1998). Originally proposed by Freeman (1984), in the meantime widely adapted for consulting processes (e.g., Boos, 1990)

1. Provides an overview of interests and motives as well as connections to relevant organizations; 2. Performed in teams, it helps to create a strategic overview of the dynamics of the environment and the situation of the unit; 3. Honest assessments inevitably lead to options for action.

Stakeholder analysis

Definition of the core 1. Develop an attractive description of the type of product real estate leasing; Consultant’s invention product 2. Inventing that description in the group is a direct way of professional “sensemaking” —within the country units and across the whole company.

1. Screening of key economic indicators of a national market economy; 2. Prioritizing a list of key indicators relevant for real estate leasing—helps to get a first orientation “at a glance.”

Economic analysis

Source, Rationale “Design school” (Mintzberg et al., 1998; Power, Gannon, McGinnis, & Schweiger, 1986), classic strategic tool

Aim, Application Criteria

Tool Kit of Strategic Instruments

Analysis of trends 1. Systematically screen the relevant legal, fiscal, geographical, and cultural context; and relevant environ- 2. Local teams are called to exchange views and perspectives (“everyone sees a bit of ments the elephant”); 3. Recognize previously undisclosed options or threats.

Instrument

Table 5.2.

Strategy Work in an International Setting 103 Table 5.3. New Volume

Selected Indicators for Comparison Market Share

Advisory Skills of Staff

Number of finished projects

Presence of the company in the region

Sales skills of staff

Number of clients

Quality of indirect distribution Employee turnover channels

Pricing (spreads, addi- Delivery time tional costs)

Team spirit

Quality of services

Decision processes

Participation at market events

Additional services

Expertise of staff

Presence in media

After the instrument was finalized, one of the participants worked out an Excel sheet with the indicators and the assessment scheme. Each managing director was then asked to perform a full competitor analysis together with his team and to present the results at the next workshop. Step 2: Defining the Most Relevant Competitors Each country unit had to define the object of analysis. For this purpose they had to select the three to five most important present and future competitors in the regional market, regardless of whether extensive data were available. Step 3: Assessing One’s Own Company “in the Eyes of the Customer” Initially each country unit had to evaluate itself, taking the perspective of the customer. Team members were asked to take the role of a potential customer looking at the company from the outside, taking a critical but also realistic perspective. Step 4: Assessing Selected Key Competitors “in the Eyes of the Customer” The teams then rated each competitor. Differences in the assessments by team members were not to be seen as a weakness of the analysis but as a resource for exchange and deeper understanding of what might be the case. Step 5: Drawing Conclusions Finally the data were interpreted. The teams had to extract strengths and weaknesses of ICL’s country unit compared to its competitors. Given the analysis, questions focused on possible actions in the short and long

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term. Team members focused on what the company “was good at” and how they might learn from their competitors. Step 6: Presenting the Results At the next workshop the competitor analyses were presented in peer group settings, each including teams of three countries working in parallel. Starting with one country presenting the analysis and details of the work processes, the others were expected to listen carefully and to try to understand the results as well as the way the teams accomplished their tasks. Subsequently as peers they had to provide collegial feedback and advice. These rather intensive peer group discussions led to a diagnosis of how the strategy processes were running in the country units. Moreover a number of indicators for positive as well as critical development surfaced. On a positive note, it became evident that the instrument proved to be helpful for all countries as it was a quite understandable and created clear and directive guidelines on what to do next in terms of data collection, interpretation, and conclusions. It was perceived to be supportive in synthesizing prevailing knowledge and the assumptions of the team members. This approach appeared to ease the start of the strategy process in the country units, eliminating the emergence of strategic confusion and encouraging people to take part in the process. On the more critical side, during the implementation some inconsistencies with the originally proposed model of collectively developing the strategy appeared. For the managers of three countries, the principle of teamwork as a guiding structure was a challenge on two levels. In some of the countries, people felt out of place as they were invited to take part in discussions where they thought they had little to contribute. In their own view they lacked direct observation and data for assessing competitors, in essence creating a case of “the blind leading the blind.” One proposed solution was to delegate the task to individuals who had direct experience with the competitors. The other way—as one country chose—was to delegate the task back to the managing director, as it was seen as his duty to strategies and complete the “questionnaires for headquarters.” Both tactics were understandable from the perspective of the reports, but they were viewed rather critically by the rest of the group as well as the project coordinator as they indicated a different mindset about strategic thinking. As a consequence, the respective managing directors were advised by their peers and the project coordinator to restart the analyses with the teams and to follow that approach more consistently in the future. The feedback settings proved to be a powerful element, revealing not only positive comments but also critical issues in a process of “rattle and shake.” For some countries, the feedback clearly expressed that the gen-

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eral pattern lacked self-criticism and an honest examination of their specific situation. That such discussions were possible indicates that the group had reached a considerable maturity where different opinions, conflicts and criticism could be expressed and worked on. The feedback and way it was presented and reflected on eventually led to a more informed and “tested” view of the company’s competition. This approach of peergroup testing helped to create a culture where critical and supportive issues could be communicated in an understandable and consequential way. The ability to listen, give feedback and provide advice was growing within the team of the country managers, a lateral setting which in many organizations is more often characterized by isolation and competitiveness.

INTEGRATING STRATEGY CONSULTING AND ORGANIZATIONAL DEVELOPMENT: APPROPRIATE MODELS AND INTERVENTION TACTICS This section examines three challenges for consulting interventions that are intended to combine strategy consulting and organizational development that I have encountered throughout the project. In essence it was not the battery of tools and instruments that were introduced and applied that mattered most. Instead it was the deeper underlying changes that emerged throughout the process. At its center, the project focused on changing the mindsets of the managers and key persons as well as the organizational patterns for (strategic) leadership. When deciding to invite all country managers to take an active, cocreating role in the strategy development process ICL’s IMDS took some risks, which were not initially clear at the outset. In previous times, strategic planning had been centralized at headquarters and the country subsidiaries were invited individually to negotiate their forecasts and budgets. The new approach encouraged a more bottom-up and lateral way of integrating the country units into a single, simultaneous process. For headquarters this meant giving away power in such a way that the future of the company would be directed by the most senior managers. When organizations apply more lateral forms of coordination and steering, the strength of leadership becomes even more important than in centralized organizations (see Galbraith, 2008). The challenge for the managers at headquarters was to change their role, primarily providing a clear framework in which strategic options can evolve. This type of bottom-up approach also calls for dedicated and capable managers in the country units, individuals who are prepared to take on responsibility offered and do their part in changing the companies by

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exhibiting a sense of entrepreneurship. Events demonstrated that both headquarters and the countries had to learn to change the way they meet, communicate and decide in order to adopt the new paradigm. Given these needs and expectations, as part of the consulting process, I applied a set of different interventions in a way that enabled both headquarters management and the group of country managers to collaborate according the new paradigm that was embedded in the project. Figure 5.2 outlines the elements of the process design in a timeline. Before and after each of the workshops, executive meetings with the IMDS helped to keep the process on track. The support of the project manager and the IT administrator between the meetings further encour-

Figure 5.2. Process and intervention design.

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aged all participants to ship relevant results on time with appropriate quality. As the project consultant, I intervened continuously in all these areas.

Setting the Context and Elaborating the Frame In order to shape the context, I prepared each workshop thoroughly with the IMDS two weeks in advance. In these meetings, the process was guided by a spirit of client-consultant collaboration as we jointly generated the underlying model of the process. Nevertheless not everything was planned in advance and the process was constantly reworked during our collective analyses of past workshops, implementation issues in the country units, and other emerging concerns. The meetings also included in-depth analysis and reflection on how to act as IMDS in the project, where and which specific type of action was needed from him, and where it seemed appropriate to refrain from directive intervention. Although these meetings were highly relevant, typically characterized by harmonious discussions, there were times when differences and conflicts between the client and the consultant surfaced. One field of conflict was about adjusting the speed. The IMDS did not value the time reserved for critical reflection and testing ideas in the workshop settings, which I saw as an essential part of the learning process. He saw learning processes more as a mode, where good inputs are presented and learning occurs subsequently. Consequently he argued that this should be the way the country managers should learn about strategy. This position contrasted with my belief that learning management issues requires a “rattle and shake” process that helps to integrate new knowledge into existing patterns. A second area of conflict emerged when differing assessments of the value of the strategic instruments became evident. The IMDS, describing himself as “a man of figures,” prioritized the market analysis as the main strategic instrument. In contrast, I emphasized the importance of including all preselected instruments into the formation of strategic options. As these conflicting issues represented fundamental questions about the process model, it was necessary to explore the differences in our assumptions in detail, attempting to work out an acceptable frame. However getting into substantial conflicts with a client is a delicate issue in the consulting process. When consultants become conflict partners they risk losing sight of the complete picture, often being forced into a defensive position. I was also very concerned that I would be seen as not being right in the end, losing credibility in the eyes of the client. Even worse I also feared losing the assignment as a consequence of being seen as uncooper-

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ative, or as some systemic consultants describe it, “not being able to connect with the client.” By working together, however, we were able to find common solutions for the differences we encountered. Our relationship strengthened and the IMDS’s trust in the consulting process, and in me as the consultant, increased. Since the time for these meetings was limited due to the IMDS’s schedule, it was clear that each workshop needed a clear and unambiguous frame. I therefore insisted that these meetings had to take place several days before the next workshop to allow for good preparation or the workshops had to be postponed. After we went through the whole agenda, which typically took more time than scheduled, I felt well prepared to elaborate the design elements and methodologies for each workshop. In the workshops, participating country managers felt that things were “in order” because senior management’s signals were in line with what was elaborated in the workshops and the process as whole.

Focusing Learning and Meeting Resistance to Learn The comprehensive implementation of a market strategy in all frontunits required a common understanding of the strategy management model. This was not a “green field” activity as most of the country managers already had an implicit or even explicit model of strategic management in mind. It became clear, however, that these models differed considerably from the ICL project, both in terms of the concept itself and its application. The learning process therefore also included unlearning prevailing patterns and beliefs. It did not evolve smoothly but was accompanied by struggle and, at times, open conflict and hidden resistance. In order to support the learning process, I assumed the role of educator—from presentations and short thought papers to checklists for applications for participants to take home from the workshops. I considered these rather practical recipes (in the sense of Weick, Sutcliffe, & Obstfeld, 2005) as tools to help the participants apply the models outside the workshop context and thus contribute to innovative ways of processing the strategic discussions and work in their home base. Taking the role of an instructor, however, was also specific to the given context. When participants in management training programs complain about the content or its implications, trainers often describe the subject presented as information “one can take or not” rather than as a “must know.” The given situation was quite different, as the content I presented had substantial implications for the participants and they had to apply the concepts in their practices. My role therefore was also that of a change agent, advising the participants to act in a specific way. This allowed me little room to maneuver or to take a

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more distant attitude toward the strategic approach. I tried to meet this challenge in upcoming critical discussions with openness but also with a clear focus on expertise. Critical discussions were held and unclear issues were substantially reflected on as they emerged. It also became very clear that the methodology of the semi-finished instrument helped as it invited participation in defining the content and the processes.

Guiding the Transfer and Anchors to the Home Base The country units and the people working in them were the organizational entities where the strategic analysis and work had to be done. As the design of the project only allowed for the managers of the country units to participate in the international workshops, lingering questions concerned whether and how the knowledge and the team spirit which emerged in these international workshops would spread to the local companies. As no resources for consultancy at the country level were foreseen, the transfer primarily rested on the shoulders of the country managers. Given the reality of this situation, the workshops were designed to provide three anchors for home base transfer. First, each strategic instrument was demonstrated as an example; either for one country as with the stakeholder analysis or in small group settings where one or two countries experimented with them. While piloting, specifics of the application were also reflected on, which led to a more complete understanding of the instrument and, at times, to further improvement of the instrument itself. Second, at the end of each workshop “homework” was assigned. This usually comprised discussing the model, gathering and evaluating data, and drawing first strategic conclusions within the country teams. For coordinated action and to support a somewhat unified approach, the project leader prepared schemes for documentation and reports and sent them to the country managers for completion. Third, each workshop started with reports from country units presenting the highlights of the work accomplished, which were discussed in detail in peer groups. The peer group settings turned out to be quite advantageous for this purpose, as they allowed for more intense analysis and reflection. As a way of orienting the peer group discussions, a series of questions were used: What went well?; Where did we encounter difficulties?; What did I learn about my country team (or organization) while performing the task?; and What will I specifically consider next time? Roughly one third of the time in the international workshops was allocated to questions about transfer and reflection on the work at one’s home base. For the majority of the countries, that type of transfer was sufficient in order to get things done as the country managers acquired sub-

110 H. LOBNIG Table 5.4.

“The Run of the Fire Brigade”

The strategy development support was conceived as two workshop in the offices of the unit. Each workshop lasted one and a half days separated by two weeks. The first meeting was scheduled to start at 9 am. However no one showed up until 9:30 (except the secretary to unlock the room) and people slowly arrived and the seminar room filled up. At 10 we started with a welcome by the country manager. (In my role as external consultant) I announced that the aim of meeting was to help the country unit to collectively develop its strategy. Although no clear reactions emerged, I had the impression that the team was under scrutiny and disciplined by the head office. We then went through the project disposition and the strategic concepts. As we introduced the first instrument (the stakeholder analysis), the team said it had been “incompletely invited” to collaborate by their boss. The manager of the country unit argued that team members either visited customers or went on holiday instead of contributing to the strategy process. During the next two weeks the team went through the entire set of analyses, which had been individually performed by the country manager. With our help – primarily as facilitators – they were able to overcome the differences in their assumptions, specifically how they assessed market potential in different segments. It became clear that the country manager tried to avoid disputes, even when team members were explicit in their opinions. They admitted originally that they were not unhappy that they weren’t involved with the “paperwork.” The country manager left shortly after these events, and one of the experts on the team (who turned out to be quite skilled in strategic work) took his place.

stantial management skills and were extensively committed to the project. However in the case of one country unit, this setup did not work well. The results, which were not clearly produced, were assessed as rather weak by the full group. As a consequence the internal consultant and external consultant were sent there as a “fire brigade” after Workshop 3 to help the team achieve its goals (see Table 5.4). The “fire brigade” example illustrates the importance of managerial skills in reflective strategy development and the limitations of a process in which those skills are lacking. The process itself depends heavily on individuals and their ability and commitment to transfer and act accordingly. Thus the idea of getting the whole system in the room (at the beginning, in between or/and at the end) (see James & Tolchinsky, 2007) adds value because it allows all members to connect personally and directly with the change process. CONCLUSION Strategy development processes have the potential to contribute to organizational learning and change. However, most large companies center strategic analysis and decision making primarily within senior management. Roll-out processes as well as defined organizational change pro-

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grams then follow the defined strategic requirements in a top-down approach. A combined top-down, bottom-up approach has the advantage that the people who should redirect their practices are not only on the receiving end. They play an active role in exploring the reasons for change and in defining future directions. But if a broad strategy development process in that sense is newly initiated, it can have consequences for both senior management and local line leaders. Both groups have to rearrange their individual roles and mutual expectations, they have to adapt communication standards and structures which allow for meaningful discussion and true dialogue, and, perhaps most importantly, they have to change their mindsets so that they share the responsibility for cocreating the company’s future. These dynamics also raise implications for shaping the role and performance of the consultant. Schein (2009), for example, raises the challenge of “bringing different subcultures together,” in which he suggests that the consultant’s interventions should go beyond focused reflection and communication and move toward an action mode, taking the initiative toward solving the problem. The role of the consultant in such a process is to work intensively and deliberately with the different levels of management, providing direction, instruments, and facilitation. Although this might occasionally include bridging communicative and conceptual gaps between the senior managers at headquarters and the line managers, the consultant also needs to stand back from, and opposite to, both groups. Many strategy processes fall short because they are unable to convince the members of the organization that the new direction will lead to better results. The consultant can help to avoid this shortfall by helping senior management to define a clear framework, establishing learning processes for both senior and local management, and setting distinctive interventions to transfer workshop learnings into organizational practice.

ACKNOWLEDGMENT The chapter is based on an extraordinary collaboration. I would like to express my thanks to Managing Directors Brigitte Fruhstorfer and Gerhard Höfler, as representatives for other members of ICL, and Dagmar Untermarzoner, lead consultant in the company development project.

REFERENCES Boos, F. (1990). Projektmanagement [Project management]. In R. Königswieser & C. Lutz (Eds.), Das systemisch-evolutionäre management: Neue horizonte für unter-

112 H. LOBNIG nehmer [The systemic-evolutionary management: New horizons for entrepreneurs] (pp. 69-77). Vienna, Austria: Orac. Freeman, R. E. (1984). Strategic management: A stakeholder approach. London, England: Pitman. Galbraith, J. R. (2008). Organization design. In T. G. Cummings (Ed.), Handbook of organization development (pp. 325-352). Los Angeles, CA: Sage. Greiner, L. (2008). Integrating organizational development with strategic planning. In T. G. Cummings (Ed.), Handbook of organization development (pp. 385404). Thousand Oaks, CA: Sage. James, S. L., & Tolchinsky, P. (2007). Whole-scale change. In P. Holman, T. Devane, & S. Cady (Eds.), The change handbook (pp. 162-178). San Francisco, CA: Berrett-Koehler. Kaufmann, L., & Panhans, D. (2008. Managementhandbuch mittel- und osteuropa [Handbook on Management in Middle and Eastern Europe]. Wiesbaden, Germany: Gabler. Mintzberg, H., Ahlstrand, B., & Lampel, J. (1998). Strategy safari: A guided tour through the wilds of strategic management. New York, NY: The Free Press. Nagel, R. (2007). Lust auf strategie: Workbook zur systemischen strategieentwicklung [Desire for strategy: Workbook on systemic strategy development]. Stuttgart, Germany: Klett-Cotta. Nagel, R., & Wimmer, R. (2002). Systemische strategieentwicklung [Systemic Strategy Development]. Stuttgart, Germany: Klett-Cotta. Power, D. J., Gannon, M. J., McGinnis, M. A., & Schweiger, D. M. (1986). Strategic management skills. Reading, MA: Addison-Wesley. Schein, E. (1988). The clinical perspective in fieldwork. Beverly Hills, CA: Sage. Schein, E. (1998). Process consultation revisited: Building the helping relationship. Reading, MA: Addison-Wesley. Schein, E. (2009). Helping: How to offer, give and receive help. San Francisco, CA: Berrett-Koehler. Weick, K. E., Sutcliffe, K. M., & Obstfeld, D. (2005). Organizing and the process of sensemaking. Organization Science, 16(4): 409-421.

CHAPTER 6

ORGANIZATIONAL DEVELOPMENT ACROSS BORDERS AND CULTURES A Solution-Oriented Systemic OD Approach M. LENGLACHNER MarliesAND Lenglachner M. MADL and Manfred Madl

This chapter describes selected aspects of a solution-oriented systemic approach to organizational development (OD) from two perspectives, the consultant’s (Marlies Lenglachner) as well as the client’s (Manfred Madl, head of management team). The 15-month OD process described here is based on Change for More and Team Star for Success-TSS and the solution-oriented systemic leadership concept.1 Based on a complex architecture that makes higher-order organizational learning (Argyris, 1999) possible for an international management team in a global industry, this approach focuses on working with multicultural and multinational management teams and allows for an immediate and sustainable integration of learned and experienced attitudes into daily problem solving and further challenges.

The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 113–138 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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The chapter describes the different learning architectures and specific developed systemic tools that are available for constantly changing situations, such as a solution-orientation approach, higher-order organizational learning, cocreation, Tetralemma, Irreverence, Change for More, experiential learning, and analog methods, Team Star for Success, and the art of solution-oriented systemic leadership in cross-cultural management (Hofstede, 2005). In a related case study, the discussion outlines a transformational change process in which the recently appointed manager of a large sales business unit of a big European enterprise, coauthor Manfred Madl, had to create an international team by combining managers from other international companies as well as from within the old organization. The objective of the systemic change process accompanied by consultant Marlies Lenglachner, the lead author of this chapter, was to challenge and support these top-level executives from varying backgrounds to become a successful goal-, solution- and future-oriented team with a shared vision, clear goals, and a common language. This task was undertaken by making OD a part of the regular management team meetings.

THEORETICAL CONCEPTS AND TOOLS Successful change management requires a complex and systemic understanding (Baecker, 1999) of the organization so that the change can be sustainable. Active participation on all levels of staff in shaping a company’s goals and future helps to create an environment that is proactive in overcoming obstacles and allows further positive development. Given the growing importance of team-related activities in today’s business world, it is essential to recognize both the conscious and subconscious forces that are at work within teams to better ensure that they become integrated as a resource component in the team and organization development process.

The Solution-Oriented Systemic OD Approach It is only natural that in any environment where human beings have to interact with each other, misunderstandings will occur. These conflicts, however, can be used to establish sets of common goals, to build team strength and to focus role expectations (Lenglachner, 2009). Making use of different takes on a situation can result in curiosity and fun, two factors that are part of the basic characteristics of good cooperation. Hüther (2006), a well-known neurobiologist at the Universities of Göttingen and Heidelberg in Germany, states that every human being shares two basic desires: being part of a community and being challenged. Thus

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it seems necessary that leaders, especially in OD processes, look at cooperation from the perspective of these two basic human traits and invite reflection on how to change, utilize or develop a given situation where cooperation is necessary. As part of a complex systemic OD process embedded within the architecture of higher-order learning (Senge, Scharmer, & Jaworsky, 2004), the team development process described in this chapter focuses on three solution-oriented systemic assumptions: 1. Systems are automatically organized within their own unique contexts that generate their specific meaning, culture, and language in accordance with their own rhythm (see Luhmann, 1996; Maturana & Poerksen, 2004). 2. Systems are organized around business objectives, their solutions and their problems. 3. Systems develop their own characteristic internal logic and maintain it and interact with their environment accordingly. This basic solution-oriented systemic approach provides the foundation for working in an intercultural setting (Hostede, 2005) both within and between companies. It is thus useful to be explicit with regard to the distinctive cultures of the different departments in an organization in order to promote successful cooperation. In this process, problem-focused attitudes, the delegation of responsibility, and cause-and-effect thinking are no longer sufficient in a complex intercultural world where rapid change (see Kruse, 2004), flexibility, innovation, and creative solutions have become of paramount importance. The reality is that change has become the only stable constant in our times.

Solution-Oriented Attitude Systems are organized around problems as well as solutions. Systems, which focus on problems in their communication, have become used to their own auto-organization. Teams operating on this principle of problemorientation often invest a lot of time and energy into futile attempts of improving only the status quo. They are full of mistrust and desperation and often wind up too exhausted to hope for or invest in a better future. Given this situation, solution-oriented systems can only foster creativity, power, and trust when an investment is made in solutions. They focus on commitment to goals, sets of common rules, awareness of differences among staff, and varying role expectations on both sides, and on joint responsibility—thus creating a positive approach to problems and obsta-

116 M. LENGLACHNER and M. MADL Table 6.1. Problem-Oriented and Solution-Oriented Approaches Problem Orientation • • • • • • •

What is not working Devaluation Control Expert input Complexity Definition of deficit Problem hypnosis

Solution Orientation • • • • • • •

What is working Improvement Influence Cocreation Simplicity Actions and solutions Reflection and aims

cles. As captured in Table 6.1, solution orientation takes a different approach than traditional problem orientation. Some significant aspects of solution orientation are (Foerster & Glasersfeld, 1999; Glasersfeld, 1987): • the creation of a new working context that is disassociated from the problem-oriented system; • an approach that does not automatically equal success and happiness; • efforts to identify and overcome obstacles, leading to an increase of flow in systems while making use of the resources available; • the start of something new and different rather than a negation of problems; and • a focus on giving rise to new resources out of systems themselves. Higher-Order Learning Each organization uses different processes to modify styles of learning for new fields of application. This type of learning often takes place implicitly and unconsciously and, more often than not, is ineffective. Even a mere modification of learning styles in cross-cultural communication (Hofstede, 2005) can offer tremendous potential for far-reaching and essential creative changes, making a specific systemic approach to higher-order organizational learning highly desirable. Yet, it is still necessary to unlearn a previous style of learning in order to cocreate a new, more effective style, which may again result in unexpected but unavoidable shortfalls and failures. Over the last decade, systemic family therapy and its varied theoretical background have significantly influenced systemic management theories (Foerster, 2002), models and tools. Two examples of such tools—Tetralemma (Varga von Kibéd, 2009) and Irreverence (Cecchin, Lane, & Wendel, 1992)—also play a significant role in higher-order learning and the change process of systems. Varga von Kibéd, one of the famous creators of tools for

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systemic approaches and systemic constellations that deal with complex issues, takes an approach of lateral thinking or thinking “outside of the box.” One of these tools is the Tetralemma—the metalevel that offers alternatives in a deadlocked situation. The Tetralemma has five positions and serves to overcome bogged-down patterns: (1) the One (“the right one”); (2) the Other (“the mistake”); 3) Both (“the One and the Other” compromise); (4) Neither; and (5) all of the above and yet none of it. In covering these five positions of the Tetralemma process, additional options and perspectives on deadlocked situation come to light. Cecchin et al.’s (1992) Irreverence seeks to consistently search for the optimized solution—no matter how strange it sounds, never to be satisfied with a compromise or merely the first available option. It is essential to know the situation extremely well in order to be able to act irreverently toward it. In other words, Irreverence refers to the attitude of maintaining curiosity toward a system in order to be able to choose between different approaches when considering a given situation. In order to achieve this, the consultant constantly undermines stories and patterns and encourages less restrictive and limiting conditions. In an ideal sense, reaching for the stars is empowered by irreverence.

COCREATING A HIGHER-ORDER LEARNING ARCHITECTURE Higher-order learning means building up a complex infrastructure via an architecture for learning within an organization. At the start, it is important to choose members from across the company and commit them to defining the status quo, exchanging inner views and feelings, deciding and discussing if they fit the common goal (or not), reflecting on the conditions of learning, and optimizing experiences to reach the common goal together, step by step. It is important to know, however, that this specific process should be undertaken as part of the business unit’s regular business meetings, not as a separate activity. As an example, in the case study that follows, the two groups of the international team had to manage their first get together in a business meeting and share their common vision and goals as a “masterpiece” for the business management team (see Figure 6.1). On the job learning had an immediate impact on team culture and certain responsibilities were assigned to each team member. Commitments had to immediately be put into action, adapted as necessary, thus constantly challenging the people involved in the process. Although, clearly a demanding task for all involved, almost immediate reflection on the process facilitates a different kind of relationship that makes additional changes easier. The traditional response pattern “I am not responsible for X” disappears in this type of goal-oriented learn-

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Figure 6.1.

TSS: Higher-order learning in an intercultural team.

ing process because each system chooses what is useful for it to move on in any given situation. Each team member starts to realize that he or she is part of the whole, of a joint journey toward committed goals. Based on the work with clients over the past 30 years, we have found that the change of perspective between actor and reflector sustainably influences team culture and the way that communication and values are transformed and perpetuated in learning systems. The constant and necessary shift between associated and dissociated perspectives makes teams more flexible, agile, and creative, enabling them to consider further options early on. This dynamic further influences the culture of communication (Bohm, 1996). How team members listen to and talk with each other leads them to a different attitude in the team and offers them a transition from waiting and observing to being actively interested and staying involved. Increased self-confidence enriches the team members and enables them to innovatively reach committed goals together. Scharmer’s (2007) concept of “Presencing,” which has great significance for organizations, for example for the culture of meetings, is based on the ideal of “open mind, open heart, open will.” The concept focuses exclusively on and uses the future for four fundamental attitudes: • Downloading: Saying what you think others want to hear rather than what you really think;

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• Debate: Saying what you think; • Dialogue: Speaking from the perspective of yourself as a part of the whole; and • Presencing: Listening and speaking from the emerging future. Using the focus of the future to exchange opinions creates a specific communication culture, one that leads to innovative and sustainable results.

Cocreation Another crucial step in the process is identifying the benefit of differentiating between the client’s and the consultant’s home systems and cocreating the consulting system. The construction of at least three possible landscapes and their relevant environments—the client landscape, consultant landscape (Maturana & Varela, 1987), and the temporary cocreative landscape of the consulting system (each with its specific cul-

Figure 6.2. The cocreation of a consulting system.

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ture, structure, strategies and their networks)—makes learning and unlearning in different contexts possible. Participants typically begin with reflection on the specifics of the two home systems and then cocreate the consulting system for the change process (see Figure 6.2). This provides a safe practice basis from which to experiment with different approaches and to prepare options for possible solutions for the home system. The best fit can only be found and decided in the client home system. The cocreated space is like a learning studio (Weick & Sutcliffe, 2001) with room to experiment with different options, test them before bringing them back into the home system, sharing them with the members of the business unit and deciding what to implement. The new discoveries and altered ways of thinking, as well as experiences with learning and unlearning, are again brought back to the cocreated consulting system and reflected upon, continuing the recursive learning process. Discovering the combination of culture, structure, strategies (Schein, 1999), and networks in the client system provides an opportunity to challenge perceptions, loosen gridlocked opinions and get in contact with the fixed logic of each system. The overlapping spaces between the three systems—which, in turn, provide the environment for each other—offer a multitude of resources as inspiration to try out and develop new room to maneuver. This process facilitates an end to something familiar, which allows organizational members to courageously face new tasks with increased strength. Systemic cocreation requires a high degree of alertness and presupposes a high level of trust in order to be successful. There is risk involved in cocreation, because one’s own perspectives are challenged. Dialogue ability is necessary as a personal approach to communication (see Argyris, 1999; Bohn, 1996). Table 6.2 captures the characteristic features of discussion and dialogue that illustrate different aspects of specific attitudes toward change.

Table 6.2. Attitudes Toward Change: Discussion and Dialogue Orientations Discussion • • • • • • •

Knowing Having answers Winning or losing Being superior Using power Proving a position Defending a position

Dialogue • • • • • • •

Trying to find out together Asking questions Sharing and exchanging Being equal Paying respect, attention Listening Searching for new opportunities

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Experiential Learning As a part of organizational learning in the solution-oriented systemic approach, experiential learning and analog approaches address the frequent discrepancy between our assumptions and the experiences teams make in their simulated learning exercises. As described in greater detail in the case study, this offers new possibilities and reveals previously unavailable resources that cannot be accessed cognitively. Simultaneously, this approach also fosters trust. Experiential learning (Weick & Sutcliffe, 2001) is a specific intervention in a designed interactional setting that provides participants with the possibility to be more curious while also inviting joint experimentation with their resources outside the cognitive mindset. As will be illustrated in the case, new mental models develop and joint experiences support a change in team culture. The leader’s trust, his ability to think ahead and challenge members, support the team in moving forward, especially in difficult situations. As a result, team members typically feel relieved and encouraged, become enthusiastic, focus on their mutual goals, and increasingly believe in their own success. The Change for More Approach Figure 6.3 shows the steps toward a solution-oriented change approach. The process starts with the invitation to the client system to describe and delimitate the problem system. After this step, participants are encouraged to remove themselves from the situation entirely, either

Figure 6.3.

Toward a solution-oriented change approach.

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via an analog method, experiential learning, or merely by taking a break. At this point, they shift to their initial attempt to create their first solution system. Here the Change for More approach serves as a metalevel, general framework for the more team-focused Team Star for Success tool. By juxtaposing the cost-benefit analyses of problem and solution system as well as considering the possible consequences of pursuing one or the other system, the team learns to distinguish clearly between problem and solution systems and can research and assess its own home system in order to define a new relationship. Delimiting the problem system and dissociating from it are important steps to be taken before embarking on working with the solution system(s). Ambivalence supports the process of change until the system finds its balance in the best-fit solution and their new relation to the problem system. The Seven Steps of Change for More As part of a team development process, this approach has seven basic steps and foci: 1. Starting situation, organizational diagnosis, environmental analysis, and definition of goals; 2. Kick off, establishment of consulting system, definition of status quo and goals, and commitment; 3. TSS roles, rules, and learning steps; 4. TSS continuation, self-reflexive learning steps; 5. Experiential learning exercise, environmental expectations; 6. TSS cultural aspects, specific tools, and learning outcomes; and 7. Lessons learned, conclusion, feedback, feed forward, and farewell ceremony. The details of these seven steps will be described in greater depth in the case study. At this point, it is important to note that distance facilitates a change in perspective between what team members are currently focusing on in their work (i.e., what they are associated with) and what is simultaneously going on around them. Initially often confusing, the experience can be highly profitable for teamwork since new perspectives open up new horizons (Metzinger, 2009) and thus new possibilities (which often is a return to resources available earlier but discarded in a previous selection process). For the team this means increased flexibility and repeated access to the meta-level to optimize their performance.

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Fundamental Aspects of the Solution-Oriented Systemic OD Approach In OD processes, teams can be thought of as professional groups consisting of different personalities with specific personal histories, abilities, and different professional expertise. They are put together to reach common goals based on current company objectives and, in order to attain these goals within a specified time and agreed costs, certain resources are made available. In the systemic approach, at the beginning of the team development process, team members are invited to a narrative dialogue where they can exchange their impressions and personal views. Sometimes rules are necessary in order to facilitate a conversation where the participants learn to listen to each other instead of arriving at quick interpretations. Introductory questions could include such prompts as: What is your common picture of yourself as a team in the past? What are you as a team best known for? What is typical for you as a team? These questions can create an initial foundation upon which the team can begin to develop trust. Our experience suggests that it is often useful to provide teams input on communication skills, tools for working on conflicts (Lenglachner, 2009), and introduce feedback, especially when teams are open to such guidance. In essence, without listeners there can be no conversation. Once trust has been established, using the method of systemic organizational constellation can be useful, for example, as a diagnostic tool or an intervention at the beginning of a team development process. It is important that all members share their own picture of the team, their past, present, and future (Lenglachner, 2006). The goal of the organizational constellation is to cocreate a common team picture as a foundation for creating the presence and future of the team. Illustrative questions in this process could include: • How did you become a member? What influenced you to become a member of this team? • Who has been in which role in this team and since when? • What happened (what did not happen) in the team before other individual members joined? • From today’s perspective, who and what in the team have been important to you? • Given what we know today, is anything from the past still unresolved or does anything from the past still affect you, and if so, how?

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• If changes have already been implemented, how did that happen, and was it initiated by you or from outside? • In earlier changes, how did you succeed (or not succeed); what were the learning outcomes for you personally and you as a team member? Defining the joint conclusions for the team about their past and present as well as finding open points and unresolved conflicts is a work in progress. In a solution-oriented systemic team, all participants come to realize that each member is different, important, and makes the team unique. The whole person is challenged, specifically by: (1) learning to think contextually and cocreatively; (2) developing the ability to admit having made a mistake; (3) learning a different attitude toward mistakes; (4) seeing failure as a useful, sometimes necessary step in the process; (5) inspiring the other to create something new; (6) keeping differences as useful tools to sustain creativity; (7) trying and finding out the team culture as a part of the overall corporate culture; (8) taking risks and staying flexible; (9) living individual passion and being encouraging in a team; and (10) keeping the culture of flow creatively alive. As higherorder learning is about the conditions of learning, it is important that teams continue to reflect on the learning processes in their organization. Recursive learning offers a system whereby its adherents can continuously react to their own results of learning and development in their organization. It invites them to set new goals and be part of opportunities for change in organizations.

TEAM STAR FOR SUCCESS: TSS TSS was developed based on the theoretical background and practical solution-oriented systemic experience of the lead author over many years. Embedded in the Change-for-More framework, it is a metatool that is useful in different situations, specifically: • • • • • •

at the beginning of a team-building process; to challenge teams in times of crisis; to facilitate the use of conflicts as potential for change; to support teams in coping with complex contexts; to assist team optimization; and to support teams in reflecting and refocusing on their committed goals and updating their relation to them.

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Figure 6.4. The Team Star for Success.

Teams can become more effective through the Team Star for SuccessTSS process, flexibly managing procedures in the carefully developed team process and achieving stability while constantly undergoing necessary change. In our experience, quarterly or semi-annually moderated screenings help to optimize, motivate, and increase efficiency to foster animated team learning. At the core of the team development process it is essential, on a recursive basis, to jointly develop the interconnection of the team’s purpose, vision and spirit, and to reflect, exchange and update it from time to time on the basis of the TSS dimensions (see Figure 6.4). Starting to cocreatively develop the goal, purpose, passion, vision, and spirit of the team is fundamental for its development and sustainable success. With the team-specific elements of TSS, one can always develop, reflect and optimize, change from association to dissociation, and challenge teamwork from hindered to flowing. Even in situations of conflict, which might normally cause huge costs for a company, the TSS elements can be used to reflect on all aspects, elicit new resources out of the system, and build the team that will fit and be ready for future challenges. Smaller groups first specify their version of vision, purpose, and spirit for themselves and try to substantiate this with concrete examples. They

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then share their respective results in a plenary session and, as one team, commit to the three core aspects they have in common. The main task is to verify if they are living these aspects in their daily work lives, or—if not—to bring these experiences back to the next reflection meeting. In a second step, subgroups of two or three team members each take three TSS elements and use them to diagnose the team’s status quo and define goals for the future. These subgroups again share their results in a plenary session and commit to the joint team goals together. This metalevel provides a guideline for optimizing daily operations.

The Art of Solution-Oriented Systemic Leadership in Managing Across Cultures Solution-oriented leadership is a challenging learning process. It supports growth by providing inspiring challenges. It focuses on finding solutions instead of clinging to a problem. This approach requires the ability to think ahead and “outside the box,” being flexible, keeping an independent mindset and staying in touch with the others. It also demands versatility in different roles and in changing between them. Having a large number of resources and tools available, and leading by example are further prerequisites. Leading across borders requires more time to verbalize ideas and to describe situations. Due to the lack of a visual channel, communication needs to be structured differently. In addition, a good relationship of two people communicating via phone or email is helpful, as it fosters asking for and getting key information quickly. Solution-oriented systemic leadership also includes being a good listener, owning an adequate proportion of natural authority, and being genuine in simultaneously keeping distance and being in good conversation contact. The willingness and ability to share one’s own passion with others is a further key element. The facilitation of easy learning experiences (Schein, 2009) and strong support with trust building measures are additional factors that help to ensure people will believe that the goals they set will actually be achieved. In summary, a solution-oriented systemic leader: keeps the focus on the overview; is a multitasking expert who looks at many different things at the same time; is supportive and encouraging; challenges and controls; believes that success is possible; believes in the members of the team and their skills; challenges the members of the team; keeps an eye on long-term vision and commitment; sees different options on different levels; and thinks in terms of consequences. In the relationship between solution-oriented leaders and their employees, an old wisdom might be helpful to con-

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sider: When you challenge your employees with regard to a particular goal, step into their shoes for a while to get a better idea of their specific needs in this situation as this will effectively foster and support them. The challenge of solution-oriented leadership lies in resisting the temptation to offer solutions in favor of facilitating team members’ individual development as well as the team’s ability to sustain self-responsibility.

CASE STUDY This section explores the key aspects of the team development process, briefly illustrating the wide efforts and countless contributions from the different parties involved in the process. In this particular case, the coauthor was hired to lead the large, cross-border sales business unit of a major CEE enterprise with approximately 1,000 employees. As the unit head, he had to restructure the organization and build a new international team of managers coming from within and outside the company. The team had a clear aim to refocus the unit to become significantly more competitive, innovative and to increase long-term profitability. To ensure success, the coauthor set the goal, together with the team, to remove existing bureaucratic processes and traditional, hierarchical leadership thinking as well as the organization’s specific culture. Only a fully integrated team with strong cooperation and teamwork across borders was assumed to be successful in the context of increasingly competitive and volatile market conditions. His main objectives were to: (1) break down silo mentality between countries and profit center units; (2) manage the entire business using harmonized processes; (3) establish strong intercultural cooperation; (4) establish a management team which thinks and behaves internally as well as externally as one team; (5) increase the performance of teams to leverage the commercial success of the department; and (6) integrate the management team of a newly acquired company. The main challenges included leading from distance across diverse countries and cultures and the creation of a new vision and value set for the department. To facilitate this process, the lead author was invited to work with the team on their goals. In regular team meetings with the business unit management team (BUMT), which consisted of 10 direct reports, the business unit leader, supported by the consultant, started the team-building process. These meetings always focused on business topics and strategic development issues as their main content, but were continuously accompanied by team-building and joint recursive learning processes as integral parts of the meetings, supported and challenged by both the business unit leader and the consultant.

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Preparation Phase The most important tool at the beginning of the team development process consisted of a detailed organizational diagnosis, interviews with relevant team members, and the joint exchange of team images and reflection on them. This process helps to create a definition of the common status quo and commitment to current developmental goals. In the present case, the diagnosis focused on key factors relating to the change and team as well as organization culture. A useful starting point was jointly developing an understanding of the reasons for the current change, looking at cultural preconditions that may offer a system for change and development. A next step was to assess whether the existing culture was based on trust and responsibility or, for example, failure intolerance and fear of mistakes. Since the team realized that the latter was the case, they set themselves the goals to become more creative, learn to think solution-oriented and use mistakes to their advantage, and to develop trust, openness and a feeling of security. As part of this process it is important to work toward the understanding that a feedback-oriented culture is a main pre-condition for systemic solution-oriented learning. Finally, the diagnosis focused on the stress factors and resources that are shaping the company, its environment and actual market situation, attempting to use this insight to challenge the team-building process. In the case described in this chapter, at the beginning the individual team members did not have a common goal and each member showed clear signs of a silo mentality in favor of his or her own business unit. Fear of making mistakes and skeptical attitudes permeated the situation, and team members primarily took a wait-and-see approach that expected failure rather than success. Everyone knew exactly what should be done differently in other business units but they were not open to others’ views regarding their own units. For most of them, reflecting on their own activities was a strange concept. Attitudes toward what makes a good team varied widely and differed along business unit lines. There was hardly any group identity. Everyone brought his or her own cultural background from previous jobs into the new situation and tried to convince all others to adopt that particular approach.

Learning Architecture Based on our work in the consulting system, a complex architecture consisting of five components has been significant in the change process: the organizational structure of the business unit, the leader and the catalyst group, the recursive learning architecture, Change for More and TSS

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Figure 6.5.

Composition of the business unit management team.

(see Note 1). Using this architecture the aim was to create recursive learning loops to facilitate organizational learning. The business unit was structurally subdivided into several profit centers and functional units. The Business Unit Management Team (BUMT; see Figure 6.5), consisting of all profit centers and functional heads as well as the business unit leader, met five to six times a year in special BUMT meetings. An important role was also taken by the catalyst group (a selforganized learning group consisting of a number of BUMT members who always prepared and followed up on the meetings and who met several times before and after each meeting) and the extended BUMT (all BUMT members plus the leading employees from each business unit or function, which met twice a year. The catalyst team was developed after the second step in the team development process and acted as an optimizing force in the change process by assigning tasks for each meeting and keeping track of the agreed commitments and actions. One of the key challenges of the change process for each head of a profit center or function was also to become a strongly dedicated member of the overall business unit management team, thus increasingly contributing and committing to a shared vision and common goals.

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Figure 6.6.

Overview of the team development process.

Overview of Team Development Process The team development process started with a kick-off session and then went through a series of stations, each station representing a 2- (BUMT) to 4-day (extended BUMT) business unit management team meeting with focus on different, but partly reiterated, team development process elements (see Figure 6.6). All team meetings in the change process took place at different locations. Team Development Station 1: Kick-Off (September) At the first meeting, the lingua franca was German. All subsequent meetings were held in English in order to integrate the participants coming in from other countries and cultures. The first meeting was characterized by the fact that the team was not fully established. The members already knew that some of them would be leaving and new members would be joining in a few weeks—the change process had already started. The head of the business unit put tremendous effort into making the meeting successful, but there was considerable tension in the meeting, hardly any trust among participants, and diverse doubts and many negative assumptions about the change process. The objective for the first meeting was to become familiar with the new situation of change and to build a base for growing trust. Divided into small groups, the participants were asked to describe themselves and the

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team based on three questions. Some steps in this process with the responses to the questions of the team members were: 1. How do we see ourselves as a team? • We are hard working professionals with diverse interests, coming together now. • We have potential in our team but low utilization of it. • We are sometimes friendly individualists who (mostly) support one each another. 2. Where are we now as a team? • We are at the beginning of a journey. • We focus on priorities. 3. Where do we want to go as a team and what do we need? • We should … o focus on the future and solutions, and less on problems. o take more self-responsibility. o learn to become one team. • We would like to … o be successful and learn to celebrate that success. o be a team with focus on clearly identified common goals. o learn to ask for help and to share our knowledge and experience. o have more time together in a relaxed atmosphere accompanied by a lot of fun. o develop more tools as well as purpose. This exchange led to new perspectives within the team. For example, some team members were encouraged to offer more of their expertise on a regular basis and not appear absent-minded or disinterested, so that their input would benefit the team. The team members were positively surprised and touched that their opinions were valued so highly and asked the team to remind them if they saw them in this trance-like state of withdrawal. Another team member was asked to make his points precisely and clearly without elaborating on the background. Many people on the team were getting annoyed with his stories and were no longer open to his valid suggestions when he finally came to making them. This team member was both irritated and—after some defensive explanations—also grateful for this pointer. After everybody had committed to the team development process (an important step to create alignment and common view), a to-do list was

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drawn up to define tasks to be completed and their subsequent deadlines. As homework, the team members were invited to reflect in their individual home systems (profit centers and functional units) and to present their observations in the next meeting. Thus the team members started with a first active step in taking on responsibility. Team Development Station 2 (November) There were four main team development topics at the November meeting. The team was tasked with identifying the roles of the team members and the setting up of team rules. As part of the discussion, expectations and concerns based on the team members’ different observations were shared. They also focused on how they could make diversity within the team more visible and what needs to be done to ensure that management would be perceived as one team. The BUMT members discussed and set goals for themselves on the basis of the following TSS questions: • What should our roles and rules be in the future as a successful team? How can we use our different roles to generate momentum? • How do we institutionalize reflection and feedback mechanisms within the BUMT as well as with our managers? • How do we make team diversity visible? How can we use the diversity for generation of additional views and opportunities? • How can we learn to give constructive feedback? Trying to realize the agreed goals, the BUMT conducted the extended BUMT with distributed roles and used this experience for their further learning. Based on feedback from the extended BUMT, members exchanged their impressions of their performance and—aided also by feedback from the business unit leader and the consultant—reflected on it. A main challenge with this team development meeting was the frequent change between the different roles each participant had to perform, for example, as facilitator, mentor, expert, moderator, supporter or colleague. Team members had to learn to differentiate between the roles each participant played and address the differences both appropriately and creatively. As an example, early on team members clarified how many different roles each of them had to take on in the team and determined their own role profiles. They then informed team members in which role they were talking to them. Statements like “I am talking to you as head of the business unit” or “I am asking you, the project team member of project X” were used to clarify the roles for everybody. Thus team members

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became more aware of the different roles and structural complexities and also added greater flexibility to switching between roles. This also made it possible for them to take criticism less personally and more role-oriented. At the beginning of the team development process, the challenging business goals, set by the business unit leader, seemed to be almost unachievable for the management team. We decided on an experiential learning exercise where the group had to solve an unusual problem together. By successfully completing this exercise, the participants overcame their initial doubts of success and in the end were proud of easily managing the exercise together. The successful experience led to trust in being able to reach very difficult goals even in a short time. This exercise offered the team a useful irritation and doubt arose, but they asked themselves, “Perhaps we are different in the way we are thinking about ourselves at the moment.” Team Development Stations 3 and 4 (February/March) The team reflected once more on TSS and tried to establish what was already working and to identify where more learning was needed in the team. In order to optimize communication in the team, the team decided to fix a meeting culture based on a structured sequence of activities to increase efficiency: information, exchange, discussion, dialogue (cf. Table 6.2) and decision making. The second focus was to initiate a transition from a problem (sometimes problems hypnotize systems and absorb their full attention) to a solution system. The ability to change between being associated and becoming dissociated in a team process offers many resources for cooperation and professional leadership. Becoming dissociated is like taking an elevator up to a viewing platform to get an overview of the team-relevant value chain and simultaneously seeing oneself as well as the team as part of the whole. The constantly necessary shift between associated and dissociated perspectives makes teams more flexible, agile, and creative, and enables them to consider further options later on. This leads to increased team effectiveness and efficiency. At the same meeting, various exercises to discover, understand, and focus the differences between problem and solution orientation status were important key learnings. A better understanding of these conceptual differences was also useful for additional reflection back in the home systems. The lessons learned were always brought back to the next meetings as further questions. Team Development Station 5 (June) This station focused on further TSS elements, such as principles, visions, rules, and team culture. For the latter, apart from the three-stage

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“information—exchange and discussion—decision” approach, meetings also need a clear differentiation in attitude with regard to choosing between discussion and dialogue at the right moment for the useful differences between discussion and dialogue (see Table 6.2). To facilitate this exchange, a new exercise was used in which each participant gave each team member feedback on two main questions: 1. What do I appreciate most about you in the BUMT? 2. What I would like to have more of you in the BUMT? The resulting experience in the team development meeting was so exciting that the team members decided to take this feedback format back home into their business units. The (hitherto unknown) honest and open plenary exchange between two people when telling each other what they appreciate about the other and where they would expect more had a tremendous positive impact on the group dynamics and team culture and provided initially unexpected inspiration for all team members. Increased openness, directness and trust made it possible for the group to come closer together. Team Development Stations 6 and 7 (September/November) These stations focused on the learning experiences of the team members as they committed to reflect and work on further TSS-elements. The workshops had several goals. First, team members agreed to take on more responsibility on a number of dimensions, including: working with TSS as a team; reflecting on team identity and purpose; defining vision, mission, and future; working on values, rules, and spirit (Schein, 1999); and defining roles, personal contributions, learning objectives, and commitments. A second goal was to elaborate common team understanding and the demands put on the BUMT via customers, the company executive board, relevant stakeholders and environments, and employees. Third, the team wanted to fully articulate and commit to the BUMT principles: leading by example; aligning processes and creating guidelines and performance targets; listening to each other actively and giving open feedback to each other; advising and coaching each other within the team; and accounting for team decisions, bearing the consequences together. In formulating the BUMT objectives, the team also committed to: continuing to work together in an environment of vision, openness, and trust; being able to take risks by using opportunities; using mistakes for learning; challenging each other and accepting suggestions and ideas; and building on the diversity in the team. A final goal was to formulate and agree on the team’s main commitments: (1) reflecting on helpful resources and success factors; (2) listening

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more carefully; (3) ensuring everyone understands the vision; (4) ensuring all team members contribute; (5) being aware of internal roles and structures (e.g., knowing who is in which role); (6) providing an opportunity for all members to take on leadership roles (in different situations); and (7) managing the process from creative chaos to structured execution. An early-morning outdoor exercise (a mountain hike) provided an experiential learning environment for team self-organization. Team members started out at different speeds, some enthusiastic, others hesitant, some carelessly running ahead, others caring for group rhythm and being supportive. Halfway up the mountain, they were invited to participate in a sensory exercise: the team members had to close their eyes, listen to the environment, smell the different scents, get in contact with their inner feelings and images, and then exchange their experiences. The experience changed the habit of the hike—team members became more attentive to their environment and also to the whole group. The team successfully reached the top together and was excited about jointly reaching their goal. Following this exercise, a meeting was conducted to share stories about their experiences during the hiking activity, guided by a series of focused questions, such as: How was this experience for us as a team? What was typical for us? What came to each individual’s mind when hiking up the mountain? What supported us in being successful? What did we learn from this experience? What might this experience tell us about our team? The main conclusions and commitments were immediately used in the continuing management meetings and eventually became part of daily business life. Representative themes that emerged from the team included feeling more open as a team and having more fun together, easily sharing more direct feedback, increasingly enjoying creative brainstorming, using criticism as a learning option for necessary change in the team, and viewing mistakes as opportunities and feeling empowered. Masterpiece for All BUMT-Members At the first external BUMT meeting in the OD process, the BUMT members had to demonstrate their leadership qualities and development by organizing a meeting with 80 participants, all their direct reports from 12 different countries, including those of the recently acquired company. Working with colleagues from different cultures and preparing focused input in different roles as well as giving an aligned view about vision, values, and objectives of the business unit provided a considerable challenge. Ultimately, the creative intercultural workshop laid the foundation for the shared commitment of everyone involved. In fact, this basis for intercultural cooperation continued to have a sustainable influence on their cooperation.

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After the large workshop, the BUMT reflected on the lessons learned from their masterpiece meeting. Their main focus was on how the team could create and support optimal cooperation in the multinational organization, within the context of the different cultural and historical backgrounds, different attitudes toward authority, and different attitudes toward taking responsibility. The team also focused on how they could develop useful standards to ensure better communication throughout the company. The original assumption that the masterpiece meeting would be a difficult process gradually gave way to increased interest in the other cultures, finally ending in feelings of joy and benefit from what was seen as an enriching experience. The OD process ended with feedback on the 15month team development process and a special closing ritual of farewell and “feed forward.” Follow-Ups 1 and 2 (1 and 2 Years Later) One year later, the team met again with the consultant for the first follow-up session. Targets were to identify blind spots and detrimental developments, to maintain the solution-oriented path, and to keep the team’s passion and motivation high. The main aspects of this follow-up session were to: share important experiences since the end of the OD process; assess changes in the team and its new members; analyze the “mads, sads, and glads” of the team experience; and understand the status quo of the team on the basis of TSS assessment. Two years later, a second follow-up took place, focusing on the status quo and current goals of the team. Team members were asked, “What specifically do you know about your team now?” Responses included such sentiments as we are effective, have fun, get positive results, create good team work, are thankful and respectful, pay attention to each other, are open and able to listen, are more focused, and are radical enough. Emphasis was also placed on where the team wanted to be in the future, especially with regard to its ability to think outside the box, achieve results faster, push the limits and challenge itself and its members, focus, and create innovation. On the first day of this follow-up BUMT meeting, the team also committed to new goals for the future. On the second day, to their own surprise, they realized that they were already achieving some of these goals in the day-to-day business of the meeting. They also took this joyful experience as indication that meta-level awareness of their goals could be supportive on a more regular basis. A major result of this process was a highly active team that was able to assimilate new team members and maintain high member engagement.

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In essence, team members had gotten used to supporting each other in finding the best-irreverence solution.

CONCLUSION Transformational change has become very important in today’s fastpaced world. The complex architecture of solution-oriented systemic organizational development described in this chapter provides a useful tool to unite common objectives and intentions in a challenging, passioninducing approach for organizations, leaders, and their teams. The specific solution-oriented development format of combining business and team activities in one and the same session created room for immediate and optimal on-the-job learning. The management team under the lead of chapter coauthor Manfred Madl learned to work together on the basis of new attitudes, shared goals and a common vision. It changed its approach from problem- to solution-orientation, which, in turn, led to the development of diverse individuals into a highly motivated, tough and performance-oriented management team whose members supported each other in reaching team goals. The experiences with this specific OD situation across cultures demonstrate the significance of the solution-oriented systemic approach to organizational development as well as its usefulness for enhancing intercultural cooperation. Such outcomes as increased effectiveness in management decisions, the development of strong flexibility and openminded readiness for continuous change, and a clear joint strategy and better financial results underline the value of this approach.

NOTE 1.

Change for More and Team Star for Success—TSS are registered trademarks of Corporate Development Lenglachner & Partner.

REFERENCES Argyris, C. (1999). On organizational learning. Malden, MA: Blackwell. Baecker, D. (1999). Problems of form. Palo Alto, CA: Stanford University Press. Bohm, D. (1996). On dialog. New York, NY: Routledge. Cecchin G., Lane, G., & Wendel, R. (1992). Irreverence. London, England: Karnac Books. Foerster, H. (2002). Understanding systems: Conversations on epistemology and ethics. Heidelberg, Germany: Carl-Auer.

138 M. LENGLACHNER and M. MADL Foerster, H., & von Glasersfeld, E. (1999). Wie wir uns erfinden. Eine autobiographie des radikalen konstruktivismus [How we invent ourselves: An autobiography of radical constructivism]. Heidelberg, Germany: Carl-Auer. Glasersfeld, E. (1987). Construction of knowledge. Salinas, CA: Intersystems Publications. Hofstede, G. (2005). Cultures and organizations. New York, NY: McGraw Hill. Hüther, G. (2006). Bedienungsanleitung für ein menschliches gehirn [Manual for a Human Brain]. Göttingen, Germany: Vandenhoeck & Ruprecht. Kruse, P. (2004). Next practice—Erfolgreiches management von instabilität [Next practice —Successful Management of Instability]. Offenbach, Germany: Gabal. Lenglachner, M. (2006, May/June). Im unternehmen die zukunft in die gegenwart holen [Getting the future into the present in the company]. Lernende Organisation [Learning Organisation], 31, 18-24. Lenglachner, M. (2009). Der lösungsfokussiert systemische ansatz in der wirtschaftsmediation [The solution-oriented systemic approach in business mediation]. ZKM—Zeitschrift für konfliktmanagement [Journal of Conflict Management], 2, 52-55. Luhmann, N. (1996). Social systems. Palo Alto, CA: Stanford University Press. Maturana, H. R., & Poerksen, B. (2004). From being to doing: The origins of the biology of cognition. Heidelberg, Germany: Carl-Auer. Maturana, H. R., & Varela, F. J. (1987). The tree of knowledge. Boston, NA: New Science Library. Metzinger, T. (2009). The ego tunnel: The science of the mind and the myth of the self. New York, NY: Basic Books. Scharmer, O. (2007). Theory U: Leading from the future as it emerges. Cambridge, MA: Society for Organizational Learning. Schein, E. (2009). Helping: How to offer, give, and receive help. San Francisco, CA: Berrett-Koehler. Schein E. (1999). The corporate culture survival guide. San Francisco, CA: JosseyBass. Senge, P., Scharmer, O., Jaworski, J., & Flowers, B. S. (2004). Presence: Human purpose as the field of the future. Cambridge, MA: Society for Organizational Learning. Varga von Kibed, M., & Sparrer, I. (2005). Ganz im gegenteil [On the contrary]. Heidelberg, Germany: Carl-Auer. Weick, K. & Sutcliffe, K. (2001). Managing the unexpected. San Francisco, CA: Jossey Bass.

CHAPTER 7

SPECULATION ON THE PRACTICE AND PROCESS OF ORGANIZATION DEVELOPMENT IN HOSTILE ENVIRONMENTS T.Thomas C. HEAD,C.P.Head, F. SORENSEN, JR., AND T.Jr., F. YAEGER Peter F. Sorensen, and Therese F. Yaeger

Organization development (OD) is a proven management technique around the world, successful in a wide variety of cultures and economic systems. The fact that OD was born and raised in an environment (United States) somewhat different to its natural value system proves its universality applicability. However to be effective, the field’s processes and techniques must be adapted to fit the host country’s values. In this spirit, this chapter speculates on what the consultant faces when working in cultures with values hostile to OD: passive/defensive and aggressive/defensive type cultures. As a field, OD was born and nurtured in the United States, which often times in and of itself is a hostile environment. For most of its life in its native land, OD was treated as an oddity that few business executives understood, and fewer still accepted. Jaeger’s (1986) landmark reworking The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 139–154 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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of Hofstede’s (1980) data supplied the explanatory proof for what many practitioners had intuitively known—OD’s outcast status was due to its counterculture foundation. Organization development’s core values (e.g., feminine, collectivist, low power distance, low uncertainty avoidance) differ from those of the dominant U.S. culture (e.g., masculine, individualist, low power distance, low uncertainty avoidance) on half the dimensions (Jaeger, 1986). Interestingly, it is probably the very same cultural differences that make the U.S. a somewhat hostile environment for OD that creates the need for, and effectiveness of, this “child” from the fringe elements. Today OD is generally accepted as a beneficial tool in corporate board rooms throughout the world (Sorensen, Head, Yaeger, & Cooperrider, 2004). Some environments, such as Scandinavia (Sorensen, Head, Gironda, & Larsen, 1997), possess values that match those of OD perfectly, while others, such as Chile (Fuchs, 1987), are much different compared to the United States, with three or four conflicting values. Organization development has also been proven an effective tool in the full range of economic development, from its natural environment of highly developed (Head, 2004) to the Third World undeveloped economies (Golembiewski & Luo, 1994). While OD has worked all over the world, it is essential to avoid making the common mistake that it is practiced in the same manner worldwide. While OD practitioners might use the same words, labels, and processes on a global basis, that does not mean that these words, labels, and processes are identical country to country. Significant differences in the design and implementation of interventions can easily be found if one only probes beneath the surface terminology, even for the most basic techniques (Head, Larsen, Neilsen & Sorensen, 1993). For those wishing to practice OD in the global arena one must learn how to adjust and adapt one’s thinking and applications to fit the native environment, be it accepting or hostile. Robert Cooke’s (Cooke & Lafferty, 1989) “Organization Culture Inventory” has proven to be a particularly useful model for understanding the need for local adaptations to OD practices (Sorensen, Head, Golembiewski, Preston & Larsen, 1996). Cooke’s instrument (designed to measure corporate culture) provides measurements for 12 independent cultural values. Using Cooke’s framework, OD appears much more compatible to the United States. Here, as with most western nations, OD’s value set matches perfectly, emphasizing what Cooke labels the constructive values of achievement (e.g., stress realistic but challenging goals which employees pursue enthusiastically), self-actualizing (e.g., value creativity, task accomplishment, and individual growth, employees seek new and interesting activities), humanistic/ encouraging (e.g., manage people in a participative and person-centered manner; members are open, supportive, and constructive with each other), and affiliative (desire constructive interpersonal relationships). However,

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there appears to be two other sets of values that are not conducive to modern management practices, creating an unnatural, or even hostile, environment to how OD is traditionally practiced in its native environment. These eight values fall into two categories that Cooke identifies as passive/defensive and aggressive/defensive. Most OD consultants are well versed in how their field operates in those nations with compatible value sets. Unfortunately, these same nations typically are most likely to possess a native group skilled in OD, and they are clearly in the minority among other nations. These two factors combine to impose a significant reality upon those consultants seeking to extend their practices to the global arena—most of their opportunities will come from nations possessing a hostile (noncompatible) environment for Westernized OD. The consultant can still be effective, but she must be prepared to adapt her practices, processes, and even thinking, to meet the different environmental demands. It is in this light that the following speculation occurs— how OD operates in those cultures stressing the eight nonconforming values. This speculation is based upon equal parts of our own practices, experiences, direct observations, and research. These suggestions are offered in the spirit of a starting point, a base with which discussion can be generated from a diverse set of practitioners that would ultimately result in the discovery of the truth. In an effort to address these eight nonconforming cultural values, we identified cultural values as presented in Cooke and Lafferty’s (1987) Organizational Culture Inventory (OCI). The OCI addresses a concept central to the field of OD and change. In fact, OD as culture change was one of the first definitions of the field put forth by Burke (1987) in his original Addison-Wesley series book.

PASSIVE/DEFENSIVE CULTURAL VALUES Two components of the OCI are the passive/defensive cultural values and the aggressive/defensive cultural values. We begin with the four nonconforming Passive/Defense values of approval, conventional, dependent and avoidance.

Approval The approval value stresses the appearance of harmony. Disagreements and conflicts are consciously suppressed by all. An organization’s members believe they must agree with each other and everyone strives to be liked by all others.

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On the surface one could conclude that approval would be a very positive value for OD. After all, the field was built upon the foundations of team building and sensitivity training. However, the field was also built upon the knowledge that disagreement and conflict (heterogeneity) is the essential key to success for effective groups. Without disagreement synergy cannot be achieved. Team building and sensitivity training are tools that permit groups, and their leaders, to tap into and manage the conflict so as to lead to collaborative/maximizing processes and solutions. In a culture that stresses the harmony value one would often experience dysfunctional dynamics such as Groupthink and the Abilene Paradox. Group discussions would not be fruitful as there would be no diversity of opinion, no alternative solutions suggested, and data collection/ interpretation would involve minimum search. Innovation would prove difficult as well as initial inspirations would be suppressed—members would not want to upset the proverbial apple cart by suggesting wild ideas that could be seen as controversial by their peers. The organization in a harmony-stressing culture would be much more dependent on the OD consultant who, as an outsider, would be the only one who could safely suggest innovative and/or differing ideas for the group to consider. The group would be expected to meet these externally spawned suggestions with two possible reactions: acceptance (if the consultant says what the first member to speak likes), or rejection as unacceptable to group (either politely rejected, or indirect—some cultures will never say no, but a maybe can be interpreted as a no). It is essential that the consultant have solid and noncontroversial reasons for all suggestions and that these be included at the time of the presentation. The more innovative a consultant’s suggestion, the stronger the support needed from facts and logic. These same facts and logic must be seen as clearly flowing from the data collected from the group itself. In this way the group can see that, while the suggestion might be innovative, at least it is supported by the group’s collective experiences. The key to successful OD is to focus on the process rather than the potential outcome. First and foremost, group approval is required for all steps and interventions to be implemented, with formal votes of support a good idea. If presented correctly, all the votes will be unanimous, but they will clearly establish that the change reflects the will of the group. It is critical for the consultant to remember that the proposed ideas will not flow from the group itself (at least in the group meeting) but they must be supported by data. Once the group sanctions an action/intervention, the consultant should implement the plan via utilizing the current organization chart or special task forces. In this way the changes can be seen as being compatible with the current system, or when that is not possible at least the result of inter-

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nal group consensus. As change requires altering the status quo, the OD consultant will find himself in the unusual position of being a micromanager—making sure that all the details are congruent and implemented. At the same time, the consultant must have a strong internal leader/ change champion to support her efforts. This would be the individual, clearly accepted and respected by the organization’s members, who would speak up (and speak first) to highlight the change’s positive elements. Clearly, the change effort will be under the control of the consultant, as the internal champion would require an “out” should the suggestion prove unacceptable to the members. Therefore we’re not really suggesting a partnership between the consultant and the champion (as is often the case in traditional environments), but rather more of a manager/spin doctor relationship.

Conventional The conventional cultural value is one that is obviously hostile to OD’s traditional practice and beliefs. Cultures that emphasize the conventional value are extremely conservative, and they emphasize traditions—both in terms of practices and thinking. Organizations will tend to be highly bureaucratic, and their members are expected to conform and follow rules. More importantly, the members find such behavior as both desirable and comforting. Clearly this is not a value that supports a critical process, such as OD, that strives to reduce mechanistic thinking and encourage organic structures. Clearly the OD consultant’s primary problem when working in a conventional culture is to facilitate change—while staying reliant and true with past organizational practices. Innovation and new ideas are not likely to be openly accepted or supported. While lower-level employees might actually enjoy such changes, support will never be found among the managerial ranks. Any changes that might be accepted would have to be planned out in extreme detail. Everything that will occur, step by step, must be spelled out—there will be no “winging it.” It is also important that the change presented to employees as a done deal in total, with an emphasis on the new rules, descriptions, and policies. There is nothing to be discussed, no feedback needed. Logic dictates modifications to the current system, and skilled experts diagnosed and solved the issues. Also quite contrary to the way in which OD is typically practiced is that when the changes are presented to the employees the announcement should not include any mention of the anticipated end results or new vision. First, identifying these could create psychological discomfort and

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insecurity—the trusted and loved traditions may suddenly appear dysfunctional. Change of outcomes/vision also highlights the potential uncertainty and deadly “what if ” questions. The employees know what the current, comfortable system brings in all conditions, but nothing about the unknown. By only addressing the actual specific changes the employees will most likely simply put them into the context of minor adjustments and fine tuning the current system. Finally, in a bureaucracy the individual members have no need (or desire) to understand the big picture. Each is to focus on his or her own individual task and small part. What is perhaps, on the surface, an apparent contradiction, is that OD’s newest innovation, appreciative inquiry (AI), would most likely prove highly successful and desirable in conventional cultures. The AI process emphasizes what is best with the organization and what has worked well in the past. This would be both comforting and desirable to tradition bound cultures finding themselves in need of change. Any changes/interventions developed from the data would most likely be seen as consistent with the current system and involve only a recapturing of a previous, more effective (albeit possibly brief) status quo. Appreciative inquiry is a technique that permits the individuals to focus exclusively upon their own activities—simply repeating those past actions that made them most comfortable and effective. In a conventional culture, the change process is entirely dependent on the chief executive officer (CEO), from recognizing the need for change, establishing what interventions are to be used, and overseeing of all the change efforts. The OD consultant’s job is to draw out the CEO’s ideas and then flesh them out into practical processes. Here the consultant simply collects data and presents it to the CEO. Data interpretation, by the consultant, is only performed when it is specifically requested. This does not mean the consultant is an organizational “yes” man. She is expected by the CEO to tell it like it is, but is wise to convey this knowledge as diplomatically as possible. The OD consultant in this culture is not an equal participant, but rather an information analyst/conduit for the CEO.

Dependent Cultures that emphasize the dependent value are antithetical to that of OD’s traditional practices and beliefs. These cultures encourage highly autocratic management practices and systems, and emphasize hierarchically controlled organizations. Employees do only what they are told and only when they are told to do it. Not only is this blind obedience considered the norm, the employees expect and desire it. Clearly OD, in almost any conceivable format, would prove a very hard sell in such a culture.

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The OD consultant’s sole role in a dependent value culture is clearly to serve only as a tool for the executive. The CEO is in complete control of any and all change activities and will make all the decisions. Both the CEO and the employees view the consultant as either a paid advisor who can be listened to or ignored, or a set of spare hands (“hired gun”) for the CEO to order about. In this environment the successful (in terms of retaining employment) consultant should simply provide a clear cut, fact based, conservative set of recommendations to the CEO and be prepared for answering any questions. Data interpretation, inferences, and conclusions should be left up to the CEO unless specifically requested, and then only within the boundaries established by the CEO. In a dependent culture, employees would be very reluctant to participate at any step in the change process. This would even include such basic data sources as employee surveys or even suggestion boxes. Employees are accustomed to be ordered about and/or ignored. This is the role they are both expecting and, in many instances, comfortable with. As mentioned earlier, the workers perceive the consultant as a hired gun and/or direct conduit to the CEO, and therefore it would very difficult for the consultant to establish an image of impartiality and externality, and be perceived as someone who would respect the workers’ anonymity. Any information the employees do provide to the consultant will be indirect and in the form of innuendo and rumor—carefully thought out as to what message they desire to be conveyed to the CEO. “I don’t think this way, but I hear that some believe …” is the most the consultant is likely to hear from the employees. Implementation plans could be something the CEO delegates to the consultant, but the CEO clearly is seen by all as the one who is in control of the process. A good analogy would be the old western movies where the boss tells the gunman to terrorize the landowners but leaves it up to the “muscle” as to exactly how this should be done. The implementation of any changes will clearly follow the organizational chart, both in terms of cause and effect. The actual changes would not be permitted to involve significant changes to the organization’s structure and culture. Change efforts will most likely involve small, simple modifications to existing practices. The change process will flow from the top and be introduced through the chain of command in terms of orders limited to the individual employee’s narrow scope of responsibility. Even here the OD consultant is viewed as an outsider with no real role, influence, or freedom of action. This is not a very rewarding position for the consultant, and just as with the western movies, the hired gun often resents both the position and being treated as mindless, but barely accepts it because the money is good.

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Avoidance The avoidance value results in organizations that punish mistakes but rarely reward successes. Therefore employees will strive to avoid responsibility at all costs. If one is not responsible, one cannot be held accountable. The organization will adopt a “pass the buck” norm where one first and foremost retains the ability to shift responsibility and blame for anything that might happen to others. If one finds it impossible to avoid being in a position of authority, one will tend to be very conservative in all decision making, to the point of putting off all decisions as long as possible, and then only relying upon past experiences. Recall that the goal here is not to succeed, only to avoid outright failure. OD consultants working in a culture that stresses avoidance must always remember that their client is not looking for any type of maximization outcome. Rather the client will clearly be in a satisficing mode, where the first solution that meets a preestablished set of criteria is the one to be used. These criteria will not be very rigorous or challenging. The consultant should not attempt anything that will stretch the organization, as those activities increase the likelihood of failure. In a related vein, the client organization will most likely have a very short time-frame for any change efforts. At the first sign of difficulty the client is likely to jump ship. Again, one doesn’t need to establish success, only to avoid any hint of failure. Unfortunately inherent in almost all OD projects is the concept of lag time—where a change first disrupts the workplace before its benefits start upward success. Premature cessation of any change effort is a definite factor that any consultant must anticipate and plan for. This may not be as onerous as it sounds. The consultant in an avoidance culture can also find that her client actively discourages evaluation of any form. One result of an environment where success is ignored and failure is punished is simply that if one doesn’t measure any outcomes, then failure can never be established, and as long as no one cares about success there is no compelling reason to evaluate. Granted, the consultant is an external agent with whom the organization would have no issue in laying blame, but ultimately the consultant is hired by someone internally. Hiring an expensive consultant who failed is, in and of itself, a major mistake which would be punished severely. On the positive side, the avoidance culture provides the consultant with a significant amount of autonomy to analyze and act. However, if the consultant attempts to seek formal sanctions from any group for proposed activities/interventions (as is typically the case in OD) the entire process will be ground to a halt. The client does not want to accept ownership of the change process, for that shifts the responsibility internally. One of the key reasons the client, in the avoidance culture, hires an external consul-

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tant is to shift as much of the potential blame for what might happen to an outsider. To mix one’s metaphors, this means that the change ball is entirely in the consultant’s court, and he faces a definite sink or swim proposition. The consultant should act as a benevolent dictator, but one that knows he or she could lose his or her head quickly at the first sign of trouble. The consultant must clearly accept full responsibility for any and all change recommendations. At the same time, she or he should never take credit for the success, but distribute it to the entire team. The consultant will tell the group what to do, when to do it, and so forth. This provides everyone with the “fall guy” they need to act. Resistance is actually unlikely, as that would place the resistor in the position of being labeled the barrier to the change. At the same time no one will, at least publicly, embrace the change in word or action. Contrary to what every OD consultant is taught, in an avoidance value dominated culture, one must be willing to act without any support of top management. The executive’s credible public deniability must be maintained above all else. The consultant must expect to assume all responsibility. In an interesting way, this shift of responsibility means the executive will place great emphasis on selecting the consultant in the first place. The executive will go to great lengths to select a highly experienced consultant with a long track record of not making mistakes. However the selection process will not simply focus upon the consultant’s proven ability, but also her willingness to avoid putting the executives in a position of risk. Given traditional OD’s norm of client ownership and involvement in the entire change process this later criterion will make finding a willing consultant problematic. “Forget employee participation and involvement” is the key rule for OD efforts in the avoidance culture. While such activities in this situation are possibly of greater desirability for the consultant (as they would permit him a shift of blame in the case of failure), the employees will avoid them at all costs (for the same reason). The consultant, contrary to many of our real natures, must remain very conservative in his or her recommendations. “Take no risk” is another key rule in this environment. Only well established interventions, with a long track record of success, are likely to be accepted without facing crushing resistance. In such a culture, the OD consultant will find that traditional diagnosis techniques are impossible to use, as they require some form of employee participation. No one will ever acknowledge personal difficulties or problems, but they will be all too happy to point to others’ (especially political enemies’) faults. This creates a highly political operating theater, in the worst sense of the term, for assessing the situation using traditional diagnostic tools. However, once again in a surprising twist, such a culture cre-

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ates an excellent set of conditions for appreciative inquiry. The employees are more than willing to point out personal successes, as they have no fear of punishment, and might also be seeking any kind of psychic rewards for them in place of the more tangible rewards they know will not come. With the possibility of using AI in the avoidance value dominated culture, there is an opportunity to make some cultural changes (if one accepts that this is not the most desirable environment for a modern organization), and it lies with the fact that successes are not rewarded. By building in official rewards for success in the change effort’s plans (whether individual- or group-based dependent upon the culture being individualist or collectivist), it is possible that the employees and management could perceive the personal benefits of at least that aspect of contemporary management theory. This could lay the groundwork for ultimately adopting the achievement value.

AGGRESSIVE/DEFENSIVE CULTURAL VALUES The aggressive/defensive cultural values, similar to the OCI’s passive/ defensive cultural values, also provide helpful descriptions of nonconforming values when consulting in hostile environments. These nonconforming values include: oppositional, power, competitive and perfectionistic.

Oppositional Possibly the worst possible culture for OD is one that possesses the oppositional cultural value. In this environment, confrontation and negativity is the norm. Everyone is highly critical of each other and quickly attack all suggestions and ideas proposed by anyone. While many of us have actually worked in such organizations, we must remember that most likely these were the very conditions we were hired to change. In this culture not only are these hostile (to OD at least) conditions the norm, they are considered highly desirable. It is impossible to imagine OD (in any form) operating under such conditions. Any type of change effort will be difficult, if not impossible, in an oppositional value dominated culture. Each individual will only accept those change efforts that are perceived as coming from him or herself personally, and everyone is sure to develop a different idea from each other. Even if the consultant finds two people who agree, once they discover the agreement, both will change their mind to something else. To dispel anyone’s doubt of such a scenario, let us share an incident that took place

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while one served as a department head. Two faculty members approached one of the co-authors, individually complaining about the course they were always scheduled to teach. Each one stated they would much prefer to teach the course the other one covered (incidentally neither of these individuals liked the other). Both were equally qualified to teach both courses. The decision was to implement a “win-win” scenario and switch their teaching assignments. Everything was fine until Professor A overheard Professor B talking about how much he looked forward to teaching the new class. Professor A immediately went to the Dean complaining about the change and insisted it be reversed. In asking Professor A if he really would prefer to teach a course that he disliked rather than teach a course he himself said he would enjoy simply to keep Professor B from also being happy, the response was literally, and simply, “Of course.” In such an environment the consultant will be perceived by all as simply another enemy, and trust will be impossible to establish. The consultant’s own suggestions will not be accepted publicly by the employees or by the CEO. The suggestions might be accepted privately but only if they confirm exactly what she or he believed in the first place. No one will ever agree on what the problem is, or even if there is a problem. In the unlikely event that the consultant actually gets to the stage of recommending changes, the group will find faults with everything proposed. Even in the situation where a suggestion has no problems/issues, the group will create them by creating impossible “what if ” scenarios, for example, “What would happen if space aliens took over the minds of the entire Board of Directors?” In the opposition influenced culture, the consultant is only hired to be the fall guy, the focus of blame as to why the change project (proposed for political reasons only) was ultimately rejected. The OD consultant should run, not walk, away from this situation. If one has a thick skin the compensation might prove attractive, after all one only goes through the motions, but the reputation damage far outweighs any monetary gains.

Power Organizations created with a dominant power value are highly autocratic and very nonparticipative. There is a rigid adherence to the hierarchy at all times. In such an environment individual members will want to take charge and control their subordinates, but interestingly will unquestioningly obey their superiors. Contrary to what many might think (given the desire to dominate) such complete obedience is not resented; it is considered natural and right, just as one would find in a high power distance culture. This environment is full of contradictions for any change effort. The OD consultant working in a power culture would be very comfortable with

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the accepted belief that all changes must be top down, although the lack of reverse involvement might prove worrisome. All aspects of any change effort (from diagnosis through evaluation) would have to be imposed upon the members without any consideration for their ideas, beliefs or feelings. However, minimum resistance is guaranteed, as such actions are the inherent right of management. The employees are all too willing to engage in any change activities required of them, but would be very uncomfortable actually participating in anything more than the most objective diagnostic data collection. Many of OD’s traditional interventions would prove ineffective in such cultures, as they are based upon the principles of empowerment, participation and organic structures. For example, job enrichment, (traditional) management-by-objectives, and the sociotechnical systems, interventions would all be undesirable. Yet, at the same time, the power value dominated culture would find other traditional OD interventions to be highly effective. For example, team building and many conflict resolution techniques, because they are peer-level focused, would prove highly desirable. Recall that the members all seek to be promoted so they can exercise power over more subordinates. So anything that would make the individuals more effective in their current positions, so as to increase the probability of promotion, is seen as attractive and will receive active support. Once again, a very thick skin is a prerequisite for any consultant looking to operate in the power environment. The CEO is used to acting in dictatorial manner with no impunity. First, this means it is very unlikely that he would hire a consultant in the first place, as it could be seen as evidence of weakness or fallibility. The CEO will constantly try to second guess the consultant, questioning any proposals, interpretations or assumptions. At the same time for the consultant to be effective at all, she must establish herself as an equal to the CEO—someone whose specialized knowledge places one on the same level as the CEO. Part of this means the consultant is expected to be true to oneself and defend one’s thoughts against any and all criticisms the CEO might level. In essence the consultant will constantly find the CEO wanting to” put him in his place” as a lower-level player, but will immediately dismiss (psychologically) anyone who acts submissive in any manner whatsoever. Developing a working partnership between the consultant and CEO is the key for success in this environment, as this is where all the change diagnosis and planning will take place. Once the change plans and goals have been established, then the consultant (or the CEO) will implement them utilizing the chain of command with each manager being charged with overseeing the change efforts as they specifically relate to her or his own unit. There will be discretionary flexibility permitted, with the exact amount established by the descending order of the hierarchy. This discre-

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tionary flexibility does not mean that the consultant would look for any participation of involvement with regards to what will change or why it will change. Rather it provides the various managers with the decision of how it will change, in a very narrow focused manner.

Competitive In a competitive culture winning is a primary value and the reward system is based on superior performance. This culture is characterized by win-lose competition creating a climate of adversity rather than collaboration. These cultural characteristics are contrary to the values of OD, and consequently present a unique challenge for the consultant. These cultures are frequently characterized by high levels of energy and tremendous drive. Consequently it becomes the task of the OD consultant to recreate an environment in which this energy and drive can be translated into high levels of organizational performance through collaboration. This is no easy task—even though the consultant has a range of traditional and innovative OD interventions on which to draw. For instance, a range of intergroup activities would be appropriate here, such as the image exchange. Probably a paramount and fundamental OD intervention would focus on the acknowledgement of common goals and objectives and the use of small group and large group interventions in order to facilitate the recognition of commons goals and objectives, and how increased collaboration could result in win-win solutions. Additional fundamental interventions would involve changes in the reward systems—reward systems that might continue to recognize individual accomplishments but at the same time recognize contributions to the team and interdepartmental collaboration, and accomplishments dedicated to the overall mission of the organization. Large group interventions might include Weisbord’s Future Search which would draw on successful events in the past that have focused on collaboration, and translating these historical events into ways of facing a future environment requiring increased collaboration and team efforts. Appreciative Inquiry might be another intervention which would draw on past collaborative efforts. In general, probably one of the most effective ways a consultant has of transforming the culture and its values is to focus on the increasing need for collaboration in effectively dealing with an increasingly hostile and competitive external environment. There is nothing better for increasing collaboration than having a common enemy. Having a common external adversary should help to harness and re-direct the high amount of intensity, energy, and drive.

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Perfectionistic The culture that emphasizes the perfectionistic value is one where hard work is rewarded. This culture expects perfection from everyone, and therefore, above all, mistakes must be avoided at all costs. Any action that appears risky will be rejected, as by definition risk means there is an inherent chance of failure. The perfectionistic value driven culture places its emphasis on the means (process) and never the end (goal)—if one works correctly and diligently the desired results will come. The perfectionist culture would prove the ideal situation for many consultants—those who are lesser qualified, inexperienced, or ineffective as evaluation (either by self or client) will never be required. As long as there is no evaluation to prove otherwise everyone can always assume success. Management won’t encounter the career-ending possibility of hiring a non successful consultant. If there is an evaluation, the entire focus will be on people enjoying and believing in the process—another excellent situation for appreciative inquiry (as practiced by many). The key for true OD success would involve the consultant tapping into the process by convincing all that the proposed changes would lead to both a better way of doing things and simultaneously decreasing the possibility of failure. In theory this should not be difficult as this is exactly what OD was created to accomplish. However, in practice it can prove much more difficult. The populace possessing a perfectionist value will generally reject innovation and new ideas. These individuals know exactly what to do, and what not to do, under their current system. They don’t know either set of parameters under a proposed innovation and will tend to flee from the scenario (no matter how attractive it might appear). When the consultant does find the client willing to engage in change, caution must be taken to utilize only the most tried-and-true techniques. Members can be expected to want to do their own research on any proposed intervention. They will only accept those where research provides overwhelming support and detailed explanations are available. Any change effort will require detailed plans drawn out ahead of time—but with no contingencies included (at least on a formal level). Such back-up, or contingent, plans imply a lack of confidence and a possibility of mistakes being made. Either possibility ensures that resistance to change is likely. The members want to know exactly what will happen (in terms of process not results) and what is expected of them ahead of time. Unfortunately this also means that the perfectionist culture promotes the paralysis-by-analysis condition where action is constantly delayed as the members constantly find more research is required. Contrary to what one might think, resistance to change is actually not likely if the members are convinced of the need for change and the logical

Speculation on the Practice and Process of OD in Hostile Environments 153

desirability of the proposed methods. The OD consultant will need a great deal of facts and figures to support all propositions, and must be prepared to respond to the endless set of questions. In such an environment employee involvement and participation is a two-edged sword. People will appreciate the need for data-driven analysis, and be more than willing to actively contribute to such activities, but if conflicting opinions or data are presented, or less than complete agreement received, doubts could be easily raised as to the desirability, or correctness, of the proposed plans. In the perfectionistic-driven culture, as the need for change is evidence that problems and shortcomings exist in the organization, management may be reluctant to admit there is a need for change. There is a strong probability that the managing executives will attempt to solve the problem themselves without acknowledging it even exists. Even when they are forced to acknowledge that a problem exists they will most likely try to avoid hiring an outside consultant, as such an action could be seen as recognizing the problem is out of control. Two conditions exist under which management is likely to openly engage in the change process. The first is that a new executive is hired (most likely from an external source), so the problems are clearly not her or his making. The second is when the cause of the need for change is clearly external to the organization, so that the executives can lay the blame for everything to a nonorganization entity.

CONCLUSION Organization development, as a field, has been successfully practiced worldwide. But this practice is not like natural science fields, like engineering and chemistry that are based upon universally applied principles. While combining the exact same two chemicals in the exact same fashion will result in the exact same reaction whether one is in Houston or in Ho Chi Minh City, the same is not necessarily true with OD. In order to be successful, the global OD practitioner must learn to adapt his or her methods to fit the realities imposed by the local cultures, the majority of which are quite hostile to the field as it traditionally practiced in its homeland. What is presented here is a jumping off point, a speculation on how OD would need to be adjusted to be effective in hostile (those countries emphasizing values contradictory to those of traditional OD) environments. The intention is that others, with different experiences and viewpoints, will step up and offer their own speculations, ultimately permitting the field to discover the truth through conceptual triangulation and solid empirical research. Why not simply skip to the empirical research? Quite simply one first must have some type of conceptual

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framework on which to establish one’s research questions and working hypotheses. This is a challenge that the field cannot afford to ignore. We know that OD can be quite effective in these environments, but we need to develop more critical knowledge bases—the why and the how. All too often OD practitioners have jealously guarded their answers to these questions. This norm, the antithesis of what our field stands for, has forced practitioner after practitioner to learn by doing, and all too often learn from their own mistakes. This norm has retarded and severely damaged the field’s growth and reputation. If we are ever to reach the level of acceptability that our natural science brethren share, we must develop this knowledge and incorporate it into our educational and socialization practices.

REFERENCES Burke, W. W. (1987). Organization development. Reading, MA: Addison-Wesley. Cooke, R., & Lafferty, J. (1987). Organization culture inventory. Chicago, IL: Human Synergistics. Fuchs, C. (1987). Organizational development under political, economic and natural crisis. Organization Development Journal, 5, 37-45. Golembiewski, R., & Luo, H. (1994). OD applications in developmental settings: An addendum about success rates. International Journal of Organization Analysis, 2, 295-308. Head, T. (2004). The role of a country’s economic development in organization development implementation. In P. Sorensen, T. Head, T. Yaeger, & D. Cooperrider (Eds.), Global and international organization development (4th ed., pp. 2534). Champaign, IL: Stipes. Head, T., Larsen, H., Neilsen, P., & Sorensen, P. (1993). The impact of national culture on organizational change: A Danish case study. International Journal of Public Administration, 16, 1793-1814. Hofstede, G. (1980). Culture’s consequences. London, England: Sage. Jaeger, A. (1986). Organization development and national culture: Where’s the fit? Academy of Management Review, 11, 178-190. Sorensen, P., Head, T., Gironda, C., & Larsen, H. (1996). Global organization development: Lessons from Scandinavia, Organization Development Journal, 14(4), 46-52. Sorensen, P., Head, T., Golembiewski, T., Preston, J., & Larsen, H. (1996, August). International business consulting. Paper presented at Academy of Management Conference, Cincinnati, OH. Sorensen, P., Head, T., Yaeger, T., & Cooperrider, D. (2004). Global and international organization development (4th ed.). Champaign, IL: Stipes.

PART III COLLABORATION, COOPERATION, AND NETWORKS IN CONSULTING

CHAPTER 8

TOWARD A MULTIDIMENSIONAL VIEW ON COLLABORATIVE PROCESSES A Case Study of an International Alliance Formation R. P. A. LOOHUIS ANDP.A.A. J. Loohuis GROEN and Aard J. Groen Raymond

In today’s business markets, strategic alliances are increasingly being considered as important means for organizations to achieve their strategic goals. In comparison to other business relationships, a strategic alliance is defined as a medium- to long-term, contractually arranged relationship between two or more independent organizations that acknowledge their mutual interdependence to jointly create an outcome (Gulati, 1995a). Many alliances, however, do not live up to expectations or fail outright (Bleeke & Ernst, 1991; Gulati, Sytch, & Mehrotra, 2008). Managing alliances involves coordination issues and complexity by definition, leading to high risk and uncertainty (e.g., Faems, Janssens, Madhok, & Van Looy, The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 157–183 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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2008; Gulati, 1995a; Park & Ungson, 2001), especially in the case of nonequity alliances (Gulati, 1995a; Zollo, Reuer, & Singh, 2002). The most important reason is that there is not one formal organization that governs the alliance, rather the partners need to coordinate the alliance together from their own organizations. Zollo et al. (2002) have argued that such alliances can be governed by informal interorganizational routines that are developed and refined over time. However, in order to build and maintain such routines, it is necessary for the partners to adapt constantly to changing circumstances. Doz (1996) and Arino and de la Torre (1998) have examined the underlying collaborative dynamics and argued that inertia and adaptability influence the learning process in collaborations. Others have highlighted collaborative process dynamics and their evolution in strategic alliances, joint ventures, and other types of interorganizational relationships (Koza & Lewin, 1998; Parkhe, 1993; Ring & Van de Ven, 1994). Paradoxically, however, alliances are considered potentially valuable if the parent firms possess complementary resources (Das & Teng, 2000; Shah & Swaminathan, 2008), but, as we argue, in combining these complementary resources in the postformation process, the partner firms may encounter all kind of difficulties. Complementary resources can be technological knowledge differences between partners (e.g., Nooteboom, 2000) that, once effectively combined, may yield the application of new successful combinations. Another example involves situations in which the partners can span different markets while using a similar technology, such as the alliance between KLM and Northwest Airlines. Because of these differences, partners and their members need to interact and allocate partner-specific resources to the alliance. Thus, when preparing strategy, it seems justified and logical that partner-specific complementary resources will potentially lead to new strategic opportunities and competitive advantage once combined effectively. But, as we have argued, during implementation, the partners may face difficulties in bridging the complementary resources and find a modus operandi to shape a successful collaborative process. The aim of this chapter is to explore the relationship between partnerspecific complementary resources as a rationale for entering the alliance, and the influence on the collaborative process in the alliance postformation stage (Kale & Singh, 2009). Postformation processes and dynamics are understood as the use of coordination mechanisms, trust development and relational capital, and conflict resolution and escalation (Kale & Singh, 2009). The consequences for postformation alliance management are indicated by the fact that they require different managerial attention, especially because of the divided authority structure and psychological, cognitive, and cultural distance between the partners (Schreiner, Kale, &

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Corsten, 2009). Therefore, we are primarily concerned with the following research question: How do complementary partner-specific resources influence alliance postformation processes? Because of its understanding and acknowledgement of heterogeneous partner-specific resources, a resource-based view perspective (e.g., Barney, 1991; Wernerfelt, 1984) would arguably be useful to examine or theorize about the influence of complementary resources in collaborative processes in strategic alliances (Das & Teng, 2000) and, more specifically, the social resources available (Eisenhardt & Schoonhoven, 1996). However, we consider examining alliances from a resource-based view (RBV) perspective as problematic. Aside from the widely acknowledged critiques provided by Priem and Butler (2001), our own arguments are specifically related to alliance concerns. The first one is the difficulty in explaining which particular resources contribute to alliance performance and sustainable competitive advantage. The difficulties of the disentanglement of heterogeneous resource bundles in the RBV are recently discussed by Kraaijenbrink, Spender, and Groen (2010). Although the notion of resource heterogeneity appeals to the idea that no partner resembles the other, it also implies that the antecedents or qualifications of such resources are difficult to disentangle and to apply to partner or alliance performance. The other problem with a RBV perspective is that this view is considered atomistic in nature (Dyer & Singh, 1998), which implies that the RBV does not count for the indivisibility of resources established between partners and in networks. Despite resource complementarities, alliances are typically examples of indivisible systems that could work once the resources bases become interrelated. In addition, they are or become a part of the wider network in which actors are continuously interacting with each other while shaping each other’s resource bases either directly or indirectly (Håkansson & Snehota, 1995). As a result, when examining alliance processes we must alter focus toward the way partners relate internal resources to external activities and vice versa (Håkansson & Snehota, 2006), and, by doing this, we should be more specific about the structures and resources that influence the collaborative processes in alliances. To understand resource complementariness between partners and its influence on collaborative processes, we apply a social system perspective based on Parsons (1951). By applying Parson’s AGIL scheme (which will be elaborated below), we are potentially better prepared to analyze the structural and systematic differences of social systems, here considered as strategic alliances and their constitutive network, than with the previously discussed RBV perspective.

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We had the opportunity to apply our perspective in a case that involves a non-equity-based alliance. We benefited from a participant observation case study (Reason, 1994), which allowed us to witness events in real time, including closer insights into interpersonal behavior and motives from the people who were directly and indirectly involved in the relationship and the collaborative process. The context is an existing supplier-customer business relationship between an American and Dutch partner that entered a non-equity-based alliance to perform activities in the commercial aviation interior industry in 2006. In the case study, the relationship between the partners' structural differences and how these differences influenced the actions of both partners in the collaborative process were explained. Some major tensions between the partners emerged almost directly after alliance formation. We saw that despite the goodwill trust (Das & Teng, 2001) that had developed during their long-term relationship, the amount of competence trust in each other declined enormously. After some informal actions by some organizational members together with managerial intervention, this relationship was able to recover. The primary contribution of chapter is to better understand the dynamics of collaborative processes. We also hope to contribute to the wider literature on alliance processes in the postformation stage. This domain needs much more process-based research to produce insights into the dynamics of collaborative processes, usually not provided by variancetype research (Van de Ven, 2007). Noteworthy examples of process-based studies are provided by Arino and de la Torre (1998), de Rond and Bouchikhi (2004), and Doz (1996). The remaining part of the chapter is structured as follows. In the next section, the focus is on Parson’s (1951) AGIL scheme and how it is related to the resource base of each partner and to the alliance. In the following section, we introduce both partners of our case study, including their rationale for entering the alliance, turning to the methods and techniques used in the research. The final section summarizes our findings and discusses implications for management practitioners and consultants.

THEORY The inspiration for this approach is based on Talcott Parsons’s social system theory (1951). The four dimensions of our framework are extracted from his AGIL scheme, which contains four functions of a social system: adaptive function, goal attainment, integration, and pattern maintenance. The connections between these four functions are encapsulated in the following phrase that defines a social system (Parsons, 1951, pp. 5-6):

Toward a Multidimensional View on Collaborative Processes 161 a social system consists in a plurality of individual actors interacting with each other in a situation which has at least a physical or environmental aspect, actors who are motivated in terms of a tendency to the ‘optimization of gratification’ and whose relation to their situations, including each other, is defined and mediated in terms of culturally structured and shared symbols.

In this sociological view, social systems exist at different levels (e.g., society, industry, organization, department, team, etc.). If we apply this definition of a social system on the level of an alliance, then this plurality of actors constitutes bonds of interacting people between both partners. These actors are constrained or enabled by organization-specific physical boundaries and influenced by the environmental aspects which are imposed on them, but in turn, they also influence the environment by exerting power. Alliances can be sources of increasing market power and can potentially enhance the network position of each individual partner (Gulati, 1998). Alliance managers may recognize the potentially strategic benefits of their alliance for the long term, but they also tend to strive for efficient short-term solutions during alliance activities in order to achieve maximum efficiency. Here we recognize a natural tension that alliance partners often encounter—the potential strategic benefits emerging from a long-term perspective juxtaposed with the short-term pressure to succeed. Such pressures may emerge endogenously through the impatience of, for instance, resource controllers (Van de Ven & Polley, 1992) or emerge from exogenous pressures such as market competition and uncertainties about the usefulness of the technology. Either way, managers must find ways to work together, established through mutually developed norms or values that mediate such tensions, leading to particular actions to deal with these strains. All four of Parson’s functions work concurrently and influence each other during the ongoing processes of organizing the collaboration. They influence the outcomes of a social system in a structured, though not deterministic way.

The Adaptive Function This function includes the ability of alliance managers to establish efficient governance structures under the assumption that resources, such as time and money, are scarce. It dominantly seeks to decrease transaction costs in the relationship (Williamson, 1975, 1985) by setting up efficient governance structures that contribute to speeding up alliance processes and the economic benefits of the alliance (Kogut, 1988). Considered in

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this way, alliance management attempts to minimize spillovers and continuously seeks for optimization (or suboptimization) of business processes that facilitate alliance activities and governance structures. Managers and members with an overemphasized belief in optimizing the business processes that govern alliances may forget to invest in resources that secure the long-term benefits of the alliance. As Ring and Van de Ven (1994, p. 93) have argued, efficiency is defined as a manager’s conception of “the most expeditious and least costly governance structure for undertaking a transaction, given production costs constraint.”

The Goal Attainment Function The goal attainment function relates to the goals that are pursued by the organization, including the power and control necessary to establish a status (Pfeffer & Salancik, 1978; Podolny, 1993). In the context of strategic alliances, Gulati (1995b) argues that external opportunities and the interest in entering alliances are determined by a firm’s strategic intent and the social network structure that provides a context for action. A singular alliance formation somewhere in the network alters the social structure and leads to different opportunities for the alliance and for others in the network. This dynamic implies that resource dependencies and status continuously change, and the attainment of goals requires different resources than those responsible for prior positions. Invoking the goal attainment function, to include network position and network dynamics, in analyzing alliance formation and outcome may prevent managers from slipping “into a “dyadic atomization,” which is a type of reductionism in which an analyzed pair of firms is abstracted out of their embedded context” (Anderson, Håkansson, & Johanson, 1994, p.13).

The Integrative Function It is through actors that organizations mobilize, mediate and integrate resources for their alliances that reside within both partners. Alliances thus depend on actors in the role of boundary spanners for direct communication with actors outside but also with actors within the organizations. It is important for alliances that people can rely on each other in a trustful and effective way (Kale, Singh, & Perlmutter, 2000; McEvily & Marcus, 2005). Being effective is related to the ability of these actors to transfer information in the organization of the parent firms, similar to the notion of intelligence dissemination (Jaworski & Kohli, 1993).

Toward a Multidimensional View on Collaborative Processes 163

The Pattern Maintenance Function The final function refers to the skills to integrate alliance-specific routines within existing organizational systems and routines. The capability to do so likely goes beyond alliance management capability, which is primarily concerned with communication, coordination, and bonding (Schreiner et al., 2009). It is this function that is responsible for the effectiveness of the integration and mobilization of appropriate organizational resources and their adjustments as the alliance evolves. It is challenging to do this effectively because it requires the capabilities to preserve private organizational activities while making necessary adjustments for the alliance. Norms and values, translated into tokens of mediation, support these capabilities. An important factor that enables effective mediation involves the beliefs and cognitions of the members of each partner and how these change over time. Beliefs and cognitions can be compared with the notion of interpretative schemes (Bartunek, 1984) and the related interpretation modes at the level of the organization (Daft & Weick, 1984). Especially those alliances in which the organizations involved have large cognitive distances (Nooteboom, 2000) may encounter difficulties in the translation of useful knowledge. Resources that support the pattern maintenance function are knowledge, (alliance) experience, technology, and skills to organize and adapt to new circumstances. Table 8.1 provides an overview of the four functions, the resources that influence effective alliance management, and managerial interventions in alliances. Each of these mechanisms produces its own type of processes and, within these processes, its own type of resources that influence the alliance-specific collaborative processes. Each functional process requires specific intervention methods that, ideally, lead to an increase of resources (Groen, 2005) and proclivity of alliance evolution. As we have argued, the primary assumption of Parson’s social system theory is that only when all four mechanisms are developed sufficiently can a social system (which we have defined here as a strategic alliance) last or continue to evolve. The difficulty is that the underlying theory also suggests that all these dimensions work at the same time and influence each other in a structured, though not deterministic way. What does this mean for alliance management in the postformation phase? For instance, if one partner is overly oriented toward optimization of business processes (e.g., Benner & Tushman, 2003), this might negatively affect joint product development at the level of the alliance in explorative alliances (Koza & Lewin, 1998), but also in exploitative alliances, as our case will demonstrate. In that situation, alliance management avoids variation and the necessary playfulness (Allport, 1962; Miner, 1994) to induce creativity in the joint innovation process.

164 R. P. A. LOOHUIS and A. J. GROEN Table 8.1. The Four Functions: Mechanisms, Resources, and Managerial Interventions

Function/ AGIL Scheme

Basic Mechanism Within a Social System

Resources That Influence Effective Alliance Management in the Postformation Phase

Possible Managerial Interventions in Alliances

Adaptive

Economic optimization adaptive function

Goal attainment

Strategic goals as goal Power, authority, influence, Using power, redeattainment strategic intent of actors fining alliance strategy

Integration

Interaction pattern process

Capable boundary spanRevise relationship ners and effective commu- management nication mechanisms

Latent pattern maintenance

Institutionalization and pattern maintenance

Values, organization, knowledge, skills, experience, technology, trust

Financial resources, means Using financial to produce efficiently incentives, lower interests rates, costcutting, lean manufacturing

Training and education, team-building among interacting members in an alliance, knowledgesharing, introduce adaptive organizational/ interorganizational systems

Another example that potentially leads to adaptability concerns is related to different organizational values and knowledge bases residing within systems, procedures and routines (Doz, 1996; Lane & Lubatkin, 1998) or cognitive distance and different cognitive schemes of partner firms. It is especially in such situations where pattern maintenance capabilities reveal their importance in collaborative processes. It does not necessarily question the willingness of partners “to be flexible in response to unforeseen circumstances” (Kale & Singh, 2009, p. 49), but the capability to change systems, procedures and routines at the parent firm level. We argue that this is an important challenge, especially for firms involved in nonequity-based alliances. As Doz (1996) has demonstrated not only do the initial alliance conditions matter, but also it is also important how alliances adapt to changing conditions emerging from exogenously or endogenously induced circumstances imposed on the alliance. For alliance management though, this implies that postformation activities such as the use of coordination mechanisms, development of trust and conflict

Toward a Multidimensional View on Collaborative Processes 165

Pattern maintenance function

Goal attainment function

Adaptive function

Integration function

Partner A

Alliance Formation and Partner Selection

Alliance Governance and Design

Integration function

Pattern maintenance function

Goal attainment function

Post-formation Alliance Management

Partner B

Adaptive function

Source: Adapted from Kale and Singh (2009).

Figure 8.1. The four functions of alliance conditions and three main phases of the alliance life cycle.

resolution practices (e.g., Kale et al., 2000; Kale & Singh, 2009) are important mechanisms to address and facilitate such changing conditions, but their role seems to be supportive. To illustrate the dynamic character of our four-dimensional framework, Figure 8.1 denotes the relationship between these previously discussed functions and the different stages of the alliance life cycle as offered by Kale and Singh (2009).

RESEARCH CONTEXT This section introduces the organizations under study and their rationale for entering into the alliance. The first partner firm is a 25-year-old, privately owned leather tannery based in New York with 130 employees. It is primarily active in the executive segment of the aviation industry and

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supplies high-end custom-made leather for seat covers and other interior parts to such companies as Cessna and Bombardier. The U.S. partner has over 20 years of experience with the corporate and “very important person” or VIP aircraft industry and is one of the leading suppliers of highend products in this industry. This company is able to meet complex customer requirements and has the ability to transfer customer needs into customized high-end leather products delivered in small quantities, in cut and “ready to trim” packages. This saves the customer time in selecting and cutting the right material for seat covers and other interior parts. In other areas, such as repair and after-sales services, this company works closely with downstream business partners. Over the years, they have gathered experience in establishing close business relationships with other actors in the industry. Recently, the company has received many inquiries from airlines and aircraft seat manufacturers to offer leather for the commercial aviation industry. Unfortunately, they were unable to fulfill such requests due to limited production facilities and loss of flexibility to existing customers if they accepted such large orders. Some large European leather suppliers supply their raw material (referred to as “crust,” a mostly naturally colored, manufactured, unfinished leather product) at purchase volume. Leather producers prefer working with Northwest European bull hides because of the consistency in their quality and yield. One of these suppliers and future alliance partner is a privately owned leather tannery located in the Netherlands. This company has existed for over 100 years, has a rich tradition in leather production, and is a well-known player in Western Europe. The firm employs 150 people. The relationship between the two partners began 15 years ago, and it has developed into a strategic customer-supplier relationship. The Dutch tannery has a production scale five times that of its U.S. partner’s capacity and for the most part supplies leather to the West European high-end furniture industry. Business experts consider this company a leading supplier of consistent quality leather, produced with state-of-the-art technology in terms of production efficiency and environmental friendliness. In 2005, several aviation industry outlooks (e.g., Boeing, Airbus, Embraer) indicated that the market was growing in the coming years. Thus, each partner’s complementary resources and their trusted relationship formed the basis for entering into a strategic alliance. While the Dutch partner lacked any market-based experience in the aviation industry, the U.S. partner had established a good reputation in the VIP aviation industry. The commercial aviation and the VIP aviation industry have overlapping similarities in terms of industry characteristics and network structure. Some of the differences are that customers in the VIP industry value exclusivity and service, such as repair and exstock deliveries, while

Toward a Multidimensional View on Collaborative Processes 167

the commercial aviation industry values economy and requires other services such as maintenance, repair, and operations. In recent years, the Dutch partner had encountered a dramatic market decline in the European furniture industry. This problem was mainly due to changing customer behavior regarding the purchase of home and office furniture. It seemed that these developments were structural, and management was concerned about the future. Entering a strategic alliance with a trusted partner and becoming active in another growing industry would provide a potential opportunity to compensate for the losses in the furniture industry. As discussed earlier, the U.S. partner based its rationale for entering into this alliance to take advantage of the opportunities provided by the commercial aviation industry without jeopardizing its existing operations. Therefore, they chose to promote the Dutch partner’s production facilities for aviation leather. The Dutch partner became responsible for European sales activities, and the U.S. partner agreed to cover the United States and the rest of the world. They agreed to share direct marketing costs and split the profits minus the cost price of producing and testing the aviation leather. Some of these agreements were formalized in an alliance contract.

Alliance Design The production methods for furniture and aviation leather are significantly different because aviation leather requires a chemical treatment to enable it to pass several Federal Aviation Regulations (FAR) or Airbus directives (ABD), such as flammability, smoke and toxic tests. The knowledge of how to make this kind of leather was an important issue in the alliance. This know-how was to be transferred to selected members of the Dutch partner. To achieve this, the U.S. partner produced an alliance handbook in which they described their production recipe, including testing procedures. This handbook also contained a list of chemical suppliers and quality test equipment manufacturers. The Dutch partner made some other commitments and invested an amount of €300,000 in test and production facilities. They agreed to amortize this amount over a 5-year period, parallel to the numbers in the marketing and sales plan that the partners discussed. The agreement that both partners signed also included a paragraph regulating disputes and early alliance termination. The partners agreed on a contract for a period of 10 years. At the time our involvement started, the members had established an alliance agenda. It consisted of: (1) discussing technology and planning the transfer of expertise on how to make the product (aviation leather); (2) the development of a long-term sales and marketing plan; and (3) a

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period and agreed frequency of visits between the United States and the Netherlands. Research Methods Our involvement covered the time span from September 2006 until January 2007. During this period, the first author was a participant acting as sales manager for transportation leather, a broadly defined function that covered different kinds of sectors, such as the railway, aviation and automotive industry. The second author’s role was to cointerpret the data from a more distant position. To improve the credibility of the research, we involved the participants in all relevant phases of the research project. This approach allowed us to experience organizational life from the inside and yielded more credible and insightful results. We characterize this approach as participatory research (Bradbury & Lichtenstein, 2000; Reason, 1994). Research Participants Eight participants were involved in our research: the Dutch organization’s chief executive officer, commercial manager, financial manager, and operational manager; and the U.S. organization’s chief executive officer, chief operational officer, head of the technical department, and production/purchase manager. These participants completed questionnaires and attended the workshops. The research design was structured as follows. First, we acquainted the eight participants with our framework and the four functions with their underlying processes (see Table 8.1). After that, we distributed a questionnaire consisting of several scales (see Table 8.2) selected from the existing literature that covers the processes underlying the four functions of our framework. After completion of the questionnaires, we drew preliminary conclusions about the extent to which the participants perceived that these processes were active within their own organization. The results are depicted in Figure 8.2. The second part of the research design was a workshop, one held in each organization. In these workshops, we created an open atmosphere that allowed the participants to reflect and find consensus about the quantitative part just described. We also discussed the possible implications for alliance progress. A third part of the design consisted of several observations of alliance meetings and the outcomes of critical events that occurred during the postformation stage. Our participative approach also allowed us to have

Toward a Multidimensional View on Collaborative Processes 169 Table 8.2. Literature Supporting the Processes Within the Four-dimensional Framework Dimension Integration function

Goal attainment function

Resources

Indicators

Contact (multiplex, filling structural holes, cohesive, centrality)

• How many contacts MT members have outside the firm • The frequency of interaction with members outside the organization (direct ties) • Nonredundancy

Power, authority, • Market orientainfluence, stratetion and gic intent moderating environmental effects (no interfunctional coordination) • Status-based power

Theoretical Basis

Question Types

Derived from Burt (1992)

Open questions

McEvily & Marcus (2005)

Five-point scale

McEvily & Marcus, 2005

Scheme/table

Jaworski & Kohli Five-point scale (1993)

Derived from Podolny (1993)

Five-point scale

Pattern Values, organiza- • Problem solving maintenance tion, knowlexternal ties and function edge, skills, amount of trust experience, • Interfunctional technology coordination (without environmental moderating effects)

McEvily & Marcus, 2005

Seven-point scale

Jaworski & Kohli, 1993

Five-point scale

Adaptive function

He & Wong (2004)

Five-point scale

Derived from Kaplan and Norton (1992)

Five-point scale

Money, time

• Balancing exploration/ exploitation • Installed process efficiency metrics

informal conversations and interviews with other members who were not directly involved in alliance activities. We also attended sales events, such as the Aircraft Interior Show in Hamburg 2007, client visits (e.g., Lufthansa Technique, Airbus Toulouse), and informal meetings with organizational participants and customers during site visits. We made field notes and document the data for further analyses and conformation.

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Figure 8.2.

Comparison of the two partners on each AGIL dimension.

RESEARCH RESULTS AND OUTCOMES Questionnaire results revealed that the managers have different ideas about the extent to which the processes that supported the functions (Table 8.1) were in place in their organizations (see Figure 8.2). The respondents from the U.S. partner felt that they had sufficient processes in place to support the integration function, which enabled them to access network resources (e.g., in terms of contact frequency, number of boundary spanners). The participants from the Dutch partner, in contrast, stated that they had fewer supportive processes in place. Participants on both sides rated the process that supported the goal attainment function as sufficient. This finding implies that the participants believed they were able to exert power in their network. The participants from the Dutch partner conceived the process that supported the pattern maintenance function as underdeveloped, unlike their U.S. counterparts. This perception implies that the Dutch partner was potentially more vulnerable to “inertial forces” than the U.S. partner. The situation concerning the processes that supported the adaptive function was the opposite—Dutch participants felt that they had processes in place to monitor efficiency and progress, something that participants from the U.S. partner did not. The questionnaire results formed the impetus for a workshop at both organizations. In these workshops, we ensured an open atmosphere in which the participants could reflect on the results and speak freely about what the data meant to them. Discrepancies between participants were evident, but the outcome always ended in a kind of consensus. Table 8.3

Toward a Multidimensional View on Collaborative Processes 171

represents our translation of the outcomes of the discussions, including the participants’ beliefs about the implications for the alliance.

The Postformation Period The discussions in the workshops reflected the initial findings from the questionnaire. The participants from the Dutch organization agreed that they emphasized process efficiency instead of encouraging the development of new ideas and combinations. The motto of the chief executive officer was “time is money,” and this strong attitude was dominant in his organization. Members in different departments had clear task descriptions and task-related performance indicators. The members were used to that situation, and some were even comfortable with it as it provided them with a certain identity and clear overview of responsibilities. Another important conclusion in the Dutch partner is that the majority of participants believed their position and reputation in the market were significantly dependent on historical values, stemming from the first owner of the company. The imprintings of the past were clearly an important part of the culture, and these values were imperative in the socialization processes for new employees. In another discussion we had with the commercial manager, he noted that, “Such values cannot be taken for granted in the near future, especially if we enter markets in which they have never heard of us.” The focus should be, he continued, to “Be able to develop high quality products that exactly meet customer requirements, but so far, research and development (R&D) had not been very successful in this. Look at the Italian leather producers and what they can offer these days!” His observation is something that all the participants were concerned about, as they were wondering if tighter departmental control, including measuring R&D results very closely, would be appropriate for developing new products. In their opinion, sales should continue to take the lead and assign the workload and R&D projects. If sales was capable of properly translating the customer's needs into internal specifications, R&D must be able to meet these specifications. The perception was that there was no direct need to involve R&D members with customers and alliance partners. The U.S. partner recognized this way of working, but it has not yet caused difficulties in their relationship. They did expect, however, that there would be frequent interactions in the beginning of the relationship, and while this approach might not be the most efficient, it was important to “get things started.” Members from the U.S. partner admitted that they did not pay much attention to their own process efficiency. They believed that their overall

U.S. Partner

• Customers are the responsibility of the sales department. Each department has its own responsibilities, and top management is responsible for orchestrating the different activities. This is necessary to maintain production efficiency and assure consistent quality. • There is no incentive or systems installed to share information about customers, competitors, and suppliers. • All organization members operate within their given task, and relevant information is transferred top-down. R&D is done inside the firm, and customer or market requirements are coordinated through the sales department. The focus is to do things right first time without spillovers (e.g. time, material).

Pattern maintenance function

• Sharing relevant information about customers and suppliers is encouraged. • They consider themselves as better than their competitors in transforming customer needs into valuable products and services. • Proactive behavior is expected. Production people are also involved in design and new product development within the firm and at customer sites. New product development and the associated new product program have high priorities. • Knowledge and best practices about how to solve problems are not documented.

• Their reputation as a solid partner in their home market, with • They see themselves in a position where they can exert influover 100 years of experience, enables them to retain a certain ence in the market. position in the marketplace. • They are the market leader in the aviation industry, and this • Many final customers in the furniture industry know their status puts them in a position where they can achieve their brand and that makes it easier for them in discussions with cusgoals. Usually, competitors follow them. tomers. • Due to their small-scale operations, they cannot exert much • In the longer run, however, they sense that the benefits of repbuying power over suppliers. However, firms are willing to utation will diminish. supply, and at competitive prices, because they represent a good reference.

Goal attainment function

Integration function • Network awareness and interest were rather low. • Members did not think in terms of network positions. They deal with customers, suppliers, and competitors—and contacts with them are based on departmental responsibility (e.g. the sales department maintains contacts with customers and the purchase department with suppliers).

• Networking is important to them. They encourage employees in different disciplines to have contact with surrounding business partners. • They consider themselves as having a central position (as a hub) in the private aircraft interior industry.

Summarized Results of the Workshops

Dutch Partner

Table 8.3.

• The performance of each process is thoroughly measured by means of an enterprise resources planning system. Managerial reports appear every week, and actions for improvement are implemented almost instantly. • They know exactly which product groups are contributing to profits and which ones are not. • They are convinced that the organization can absorb and integrate alliance activities with existing systems. After all, their partner is also a strategic customer, and they have not had many problems in the past. • They were hopeful that the market demand forecast given by their partner was realistic and that their investment would pay off.

Adaptive function

Participant’s opinions about alliance management

No systems are in place to measure production performance. Members fear inflexibility if they emphasize efficiency. There is no integrated enterprise resource planning system. Product group profit analyses are not made.

• They had noticed that their Dutch partner had a strong profit orientation and was rather impatient. Over the years, they had been able to establish a trustworthy relationship, and this was seen as a good basis to discuss disputes, which they expected to arise during alliance formation. • So far, discussing alliance concerns had gone well. However, they noted that their Dutch partner had difficulties in enacting agreements in their organization.

• • • •

• There are no interdisciplinary problem-solving teams. Subordi- • They use a customer relation management system to monitor nates are responsible for following progress and acting if somecustomer needs and let organization members work and thing occurs. report with this system regarding customer projects and • Organizational changes are implemented top-down, but memorders. Customer satisfaction is measured instantly, mostly by bers can suggest opportunities for improvement. qualitative information (visits, calls, etc.). • They are certified to aviation standards (FAR 145) and maintain systems to update changing requirements.

174 R. P. A. LOOHUIS and A. J. GROEN

performance would decline if they installed such processes. They did not worry about a few losses when making customized orders as the result counts, and, thus far, customers have been willing to pay the additional costs. The production manager stated that he was aware that they lacked performance measurement systems for key processes, but h noted that “Such processes might also constrain us in doing the things as we do them today and lessen the options that we have for tomorrow’s products.” During our visits, we observed that there were many external partners visiting their plant. We talked to designers from Bombardier and some of their agents in Europe who were on site for product training. One of the members told us that such visits were common in their organization because they liked to be in touch and know what is going on outside the firm. It appears that the processes that supported the pattern maintenance and integration functions appealed more to their business model. In fact, as they stated, they encouraged members of each discipline in their organization to participate in customer projects because such involvement enabled them to directly learn what the customers really wanted. The chief executive officer of the U.S. partner stated, “I know a lot of people at design centers, aircraft manufacturers and aircraft interior firms who I can contact directly.” After reflecting on the questionnaire results, we discussed the implications for the ongoing alliance formation. The participants from the Dutch partner affirmed that managing the alliance was primarily the responsibility of the sales department. Their partner was already a customer, and processes to support this relationship were sufficiently in place. They did not expect major differences in interaction patterns. During the postformation phase, there were a few recurrent problems that arose in the development of some leather samples of the required aviation quality. Developing the high quality samples was a necessary step in the alliance because approval of these samples would serve as the market introduction of the alliance. The U.S. partner expected to have these samples in house within 8 weeks after the formal alliance agreement was signed. The Dutch partner believed that the manufacturing process of such a product was similar to fireproof leather products they produced in the past for railway customers. The members believed that a trial order could be easily processed within the existing system through which they handled all new orders. The results, however, were rather disappointing for themselves and for the U.S. partner. The samples were not good enough to pass basic FAR and ABD standards, and the appearance of the leather did not meet commercial aviation industry standards. The U.S. partner took immediate action by planning a visit to their Dutch partner. They sent the head of the technical department, the chief

Toward a Multidimensional View on Collaborative Processes 175

operating officer and the aviation sales manager to discuss the results and possible solutions. The atmosphere of the meeting was rather disappointing for the U.S. delegation because they felt that they were not heard in their attempt to actively participate in providing technological solutions to solve the problem. The problems were mostly related to different insights about the use of chemicals. Despite the handbook that was provided by the U.S. partner, the Dutch company was not able to produce the few samples that were required to pass the standard FAR requirements. The Dutch partner continued to produce samples in different ways, but mostly relied on their own ideas about this kind of leather. During the turnaround time of 6 weeks needed for processing the samples, there was little technical communication between the partners about progress and difficulties. The marketing and sales activities, including the making of plans and budgets, continued during that time. After a while, a few samples of the second attempt barely passed the test, and the Dutch partner decided to present them to their U.S. partner. Unfortunately, the U.S. partner rejected these samples, once again, based on their appearance and feel and the negative results of an independent U.S. aviation fabrics and leather-quality test facility. At that time (approximately 4 months after the start of the postformation stage) the U.S. partner lost confidence in their Dutch partner. Matters became more troublesome because the U.S. partner encountered difficulties after processing the raw material that was still being routinely supplied to them. The material revealed a certain looseness or bagginess that appeared after finishing the leather. This was the moment that management of the Dutch partner put more internal pressure on its members to investigate the root cause of the problem. People from the chemical laboratory, R&D, and even the purchasing department were involved in finding the source of the trouble. Some argued that it was due to the period of the year when the quality declines naturally and that the problem would solve itself over time. Others believed that it was due to a recent change in the specification of the pickling agents. There were also people who argued that it was a combination of the chemical agents used by the Dutch partner and U.S. partner that was responsible for the looseness of the material. In the end, there was a lot of controversy and disagreements about the cause and possible solutions. What happened was that the competence trust (Das & Teng, 1996, 2001) of the U.S. partner declined, and they lost confidence in the alliance as well. During discussions at the Dutch partner, two R&D members of the Dutch partner, who were only partly involved in the alliance, posed that the problems that arose could not be solved by modified recipes and existing systems. A more radical approach was necessary. Their idea was that management of the Dutch partner should visit the U.S. partner and learn

176 R. P. A. LOOHUIS and A. J. GROEN

more about their production and testing methods. They also proposed following their raw material through production to see if something previously unnoticed could be identified that might lead to a possible solution. Instead of management, both R&D members were asked to visit the U.S. partner for a 2-week period. After these 2 weeks, the members came back with new information and insight about producing aviation leather and about procedures to process raw material. After some internal meetings at the Dutch partner, they agreed on a few parallel sample productions with different recipes. After the normal 6 weeks of turnaround time, the Dutch partner was able to produce samples that could easily pass the FAR and ABD requirements while retaining their appearance. The U.S. partner approved these samples, and finally they were able to specify their first mutually developed aviation leather. The Dutch partner acquired the first order for the alliance. The order came from Malev (Hungarian Airlines), which replaced seat covers for two of their B737 planes. Shortly after that, the U.S. partner also acquired orders from some U.S.-based airlines. The root cause of the raw material trouble was also found—a chemical supplier had slightly changed the composition of a pretanning agent and did not properly communicate this modification. In evaluating the first months of the postformation stage, the U.S. participants felt that their Dutch partner was inflexible, and its management was not taking the necessary steps to organize the necessary actions. They also encountered difficulties with the way the Dutch partner set up its communication lines. The U.S. members argued that technical difficulties needed to be discussed among technicians rather than following the Dutch route of going through willing but uninformed back office employees in sales offices. Despite these difficulties, in the end this alliance proved to be successful, and, today, it is expanding in Europe and the United States.

DISCUSSION AND CONCLUSION We believe the social system approach—adaptive, goal attainment, integrative and latent pattern maintenance functions based on Parsons (1951)—was helpful in analyzing preexisting managerial conceptions about their firm-specific organizational processes. In principle, such social system approaches avoid any type of reductionism1 because social systems are composed of interrelated parts/mechanisms that influence each other. The workshops, interviews, and observations confirmed the results of the initial quantitative analyses. More importantly, however, we witnessed how

Toward a Multidimensional View on Collaborative Processes 177

these functions come into existence through critical events during the collaborative process. The empirical dynamics of this study had naturally drawn our attention to some of these functions. We observed in more detail the dynamics and tensions between Parson’s (1951) pattern maintenance function and adaptive function. As the chapter has illustrated, the Dutch partner emphasized efficiency (a well-developed adaptive function) and was not able to adjust the resources to the needs of the alliance. Despite the fact that patterns between both firms were maintained and were routine in the older setting of their business relationship, the same systems and routines did not hold in the new situation. The U.S. partner was well aware of these differences and for this reason had formed a multi-disciplinary alliance team. They expected to communicate directly with people within the same discipline at the Dutch partner. Unfortunately, the Dutch partner was not able to organize boundaryspanning activities (integrative function) and link them to the right people. This failure was important because the U.S. partner knew that simply following the handbook would not be sufficient to produce aviation-quality leather—it considered frequent interactions and evaluations essential. As Kale et al. (2000, p. 232) argue, “the acquisition of difficult-to-codify competencies [which leather production is by definition] is best achieved through wide-ranging, continuous and intense contact between individual members of the alliance partners.” However, managers at the Dutch partner did not focus on a change of routines to allow them to establish such wide-ranging levels and contacts between members. On the contrary, they stressed efficiency instead of bringing in more variety. Consequently, despite established trust and good intentions, members from both partners became frustrated and lost confidence in the cooperation. A rather unnoticed but important finding of the research was that some suppliers recognized the potential power of the alliance. They saw the possibility of increasing the number of clients and, consequently, their chemical volumes. They also saw the opportunity to deliver directly to the U.S. partner to cover their own needs for tanning agents. Management at both partners became aware of these suppliers’ considerations (and others in the network) and began to think differently about what they could and should do in the future. They began to discuss other potential activities that the alliance would enable them to accomplish. They also considered possible actions by competitors, in particular the consequences for the U.S. partner after the alliance formation was discussed among the management team members. They anticipated that their current European suppliers of crust (semimanufactured hide) might turn hostile once they became aware of the alliance between the U.S. firm and one of their competitors. The other suppliers might lose interest in their relationship with the U.S. firm, assuming that from this point forward, it would pur-

178 R. P. A. LOOHUIS and A. J. GROEN

chase the majority of its annual volume from its announced alliance partner. Here we notice that network effects arise once new relationships or activities within the network are proclaimed or brought into practice. This finding is consistent with Gulati (1995b), who based his argument on Burt (1982) that events in the network—such as an alliance formation—alter the social structure of the network, firm interest and external opportunities for the focal firm and other actors in the network. Nevertheless, in this case, the anticipation of these changing attitudes at both partners had a positive influence on the relationship in terms of increasing an irreversible lock-in and constitutive commitment to their new activity. With this previously unnoticed finding, we demonstrated that in studying alliances, one should enlarge the scope to include the wider network, the reciprocal actions that take place and how they influence the focal relationship. It is the theoretical relationship between interorganizational routines, as discussed by Zollo et al. (2002), and the influence of network position and shifting strategic identity that matter. This reflects the notion of dyadic atomization (Anderson et al., 1994) proposed earlier as a type of reductionism that avoids the dynamics of network influences on alliances. Another key point is that the development of collaborative business processes is not an isolated and linear-patterned event (e.g., Håkansson, Harrison, & Waluszewski, 2004; Ring & Van de Ven, 1994). Such processes go along with other embedded, changing or emerging organizational processes that depend on other actors within and outside the organization. Taken together, these conjunctions of processes likely compete with partner-specific but scarce resources, including skills, human effort, and time (Medlin, 2004). It is predominantly for this reason that collaborative processes do not follow a linear pattern of formation, design and postformation, as we have suggested with our framework. The empirical “messiness” that we encountered in the study revealed that collaborative processes do not have clear-cut stages but follow a highly iterative process of trial and error. Therefore, in understanding collaborative processes, scholars as well as consultants should shift their focus from an organizational perspective to the underlying micro-processes at work (e.g., Abell, Felin, & Foss, 2007). This is particularly important in nonequity arrangements where participant firms operate from their own sites but depend on each other's actions to move forward during each stage of the alliance life cycle. This is where we want to add a few notes for consultants. We believe that our suggested social system framework offers an encompassing tool for analyzing structural properties during the initial stage of alliance formation. For each organization, these properties must somehow be complementary on the one hand (to make the endeavor valuable for both organizations) but compat-

Toward a Multidimensional View on Collaborative Processes 179

ible on the other (to make the relationship work). This is a paradox and consequently an extremely difficult one where especially consultants responsible for implementation, so-called process-oriented consultants (Schein, 1999), might get involved. At the brink of this paradox, all kinds of problems can and likely do happen that needs to be resolved. Instead of attempting to implement plans after diagnosis (preferably by means of our system approach) in an overly deterministic “stage-like” consultation process, process-oriented consultants in such situations might consider an approach that takes into account the irregularities and complexities that naturally flow from the interactions between both firms. Scholars have argued for a coconstructive (Hicks, 2010; Hicks, Nair, & Wilderom, 2009) or constructionist (Czarniawska, 2001) perspective on consultancy practices. Both views have in common that they appeal to the “muddling through” (Lindblom, 1959; Sarasvathy, 2001) character of organizational life. Where expert and process-oriented consultants typically enact diagnostic methods and use their expert knowledge to address problems, coconstructive consultants tend to focus “more on cycles of action and evaluation, until the purpose is considered achieved, or the problematic situation is replaced by a more pressing one” (Hicks, 2010, p. 205). In other words, knowledge about what to do next is created situational by consultants and participants. Such a view, however, requires that the client and organizational members are considered coconstructors of problems and purposes as well and not receivers of “ready-made” knowledge and solutions. This approach may require paradigmatic adaptations from both the client and consultants regarding their perception of their coconstructive role in the alliance processes. In conclusion, we hope that this chapter has contributed to the awareness of the organizational impact of implementing collaborative processes. This notion of scope is not only important for practitioners but also for consultants advising or, better yet, coconstructing with their client’s firms. As this chapter has stressed, the scope of concern should extend beyond the structure of the alliance itself and include the impact of micro-processes and their evolution once the interfirm strategy is initiated. In addition to the attention normally paid to alliance rationale and strategy, it is important to realize that true success also depends on understanding the underlying dynamics that are captured in practice as the alliance becomes a reality.

NOTE 1.

An argument about the reductionist character of functionalism in general could be raised, but this point is for sociologists to debate (Law, 1994).

180 R. P. A. LOOHUIS and A. J. GROEN

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CHAPTER 9

BEYOND THE ORGANIZATIONAL FOCUS Network Consulting in Regional Clusters F. LERCH, J. SYDOW, DUSCHEK Frank Lerch,AND JörgS.Sydow, and Stephan Duschek

Consulting interorganizational networks is on the rise. This observation, of course, is not surprising given the increased practical importance of strategic alliances, research and development (R&D) consortia, value chain partnerships, project networks, and regional clusters—and the significant failure rates associated with these “new” organizational forms. Given this situation in practice and the attention organization and management research has paid these forms in recent years (see Borgatti & Foster, 2003; Gulati, 1998; Provan, Fish, & Sydow, 2007, for reviews), such developments have not gone unnoticed by consultants always looking for new concepts and additional business. Providing such services has become an increasingly important business for both large and small consultancies. One major reason for this trend is the complex challenge of managing networks successfully, an increasingly fundamental management expertise—what might be thought of as “network management”—that many managers and organizations lack. As a The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 185–209 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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consequence, interorganizational networks, in addition to the traditional “objects” of consulting (i.e., more or less “isolated” organizations) are increasingly becoming clients in consulting processes. There are, however, myriad questions focused on the extent to which consulting networks are similar to or different from consulting organizations. If they are different, experiences and practices from consulting single organizations would not be easily transferable to consulting tasks in networks or clusters and, in consequence, traditional consultancies would experience difficulties in diversifying their field of business to network consulting. Based on a collection of reports from a variety of network(ed) consultants (Sydow & Manning, 2006) and, in particular, a long-term and intensive involvement in researching and, to a limited extent, consulting an emerging regional cluster in the field of optics in the Berlin-Brandenburg region, we gained insights into the differences between consulting organizations and consulting networks in general and also into the particularities of consulting networks in regional clusters. The chapter outlines our involvement in this process, describing the cluster and reflecting on our methodology that in several (though limited) ways combines researching and consulting to networks. The discussion then turns to our exploratory insights, highlighting (1) the differences between consulting networks and consulting organizations and (2) the particularities of consulting networks in clusters. Drawing on our empirical insights, the chapter concludes by arguing that network consulting primarily aims at “developing” networks of relationships between organizational actors so that either the network as a whole or the organizations in these networks profit from changes in their relational and/or structural embeddedness. Although network consulting is primarily directed at managing and developing networks of interorganizational relationships, neither intraorganizational antecedents nor intraorganizational consequences of interorganizational networking should be overlooked. A secondary aim of network consulting may well be explicitly addressing these intraorganizational antecedents and effects of interorganizational networking. While this second emphasis is beyond the scope of our own experience (as is the field level of analysis), it may constitute an important direction for future research on consulting networks. In any case, network consulting in regional clusters, as practiced and researched by us, requires at least a two-level approach that focuses on: (1) the level of interorganizational networks in the context of a regional cluster; and (2) the level of the regional cluster itself. Whichever consulting approach is being adopted, network consulting has to take notice of and influence the recursive interplay of processes on these two levels of analysis.

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SETTING THE STAGE: CONCEPTUAL THOUGHTS ON NETWORK CONSULTING Formally, the notion of interorganizational networks adds networks (i.e., sets of ties or relations) to a set of at least three organizations. Two fundamental theoretical perspectives take this into account though highlighting quite different aspects of interorganizational networks. The relational perspective, which uses structural network analysis (Wasserman & Faust, 1994) because of the very complexity of many real networks, unpacks not only the relational and structural embeddedness of single network actors but also properties of interorganizational relationships (e.g., multiplexity) or whole interorganizational networks (e.g., network density). The focus of the governance perspective on interorganizational networks, by contrast, is on the practical coordination of different (economic) activities through networks of relationships (Provan & Kenis, 2008).

Definitions and Characteristics Networks are considered an organizational form of its own, either “beyond market and hierarchy” (Powell, 1990) or as a hybrid filling the “swollen middle” (Hennart, 1993) between these two archetypes. While the distinct governance property of interorganizational networks is still debated, the fundamental understanding of what kind of governance makes an interorganizational set of relationships an interorganizational network is highly relevant for network consulting. For instance, if a network is essentially defined by trusted and open-ended relationships (Powell, 1990) network consulting would have to try to develop exactly these relational properties, either directly or indirectly (by influencing network management). If the essence of a network was about power and negotiation or about organizing cooperation in face of latent competition, the consulting approach would certainly have to differ. In addition to any constitutive properties of networks, network consulting has to take into account that interorganizational networks, as an organizational form of economic activity, can display a variety of phenotypes (e.g., Podolny & Page, 1998). These may not merely differ in terms of size, goals, governance, spatial organization, leadership, and stage of development, but require special expertise not only with respect to managing but also consulting networks. In consequence, a “type-adapted” consulting approach may be asked for (Sydow & Manning, 2006). Consulting is understood here as a service that is organized in project form and supports a client to identify and solve strategic or operational problems (Sturdy, 1997; Werr & Styhre, 2002). Network consulting, then,

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is defined as a project-based service to support a client to identify and solve problems that are related to developing and managing an interorganizational network. When consulting interorganizational networks, in sharp contrast to consulting single organizations or collectives such as corporate groups, the consultant does not have only one client. Instead, several or even all organizations of the network are likely to be “the client,” more often than not only represented by some kind of “network administrative organizations” (Human & Provan, 2000) that handles the contractual relationships with the consultancy. Delivering such a service follows an approach that may be characteristic of a particular consultancy (or network of consultants). Basically such an approach reflects either an expert-based functional or interventionist process-oriented understanding of the consulting process. While the former approach relies on superior knowledge on the part of the consultancy and aims at transferring this knowledge to the client, the latter assumes that the relevant knowledge is available inside the organization or the network but has to be mobilized by some process intervention. More recently, some consultancies and, in particular, networks of consultants tend to reflexively combine these very different approaches, not least when they are consulting networks (Sydow & Manning, 2006). Consulting interorganizational networks is quite different from consulting “isolated” or “stand alone” organizations so that experiences and practices from consulting single organizations are not easily transferred to consulting tasks in networks or clusters. The major difference is that interorganizational networks, no matter whether conceived as an organizational form based on trust (or any other property beyond market and hierarchy) or as a hybrid of these archetypes of coordinating economic activities, are never controlled by “hierarchical fiat” (Williamson, 1985).1 In consequence, the management of an interorganizational network cannot rely on hierarchical authority but has to mobilize different resources of domination in order to powerfully intervene into ongoing practices and to keep the networks of relationships active. One of the more important resources is legitimacy that matters inside networks as much as from the perspective of external stakeholders and includes the legitimacy of the network form itself (Human & Provan, 2000). In order to establish and sustain this legitimacy, managers will have to be “successful” in managing this form, with an emphasis on negotiating and persuading rather than directing and controlling other network actors. This approach has direct implications for the consulting process that can neither rely on the efficacy of coordination in the shadow of the possibility of command and control nor take the legitimacy of the form as given.

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The immediate “object” of “transorganizational diagnosis” and then “transorganizational intervention” (Cummings, 1984) is, of course, the network of relationships that is either the relational or structural embeddedness of particular organizational actors or any qualities of the whole network, such as network density for example. The goal of the intervention may often be to transform interpersonal relations into more formal interorganizational relations in order to institutionalize collaboration and make it somewhat more independent of certain individual actors (Chetty & Adndal, 2008). Despite this “natural” focus on sets of relationships rather than isolated organizations, other “objects” may also be an important target of interorganizational interventions. For instance, as Gray (1990, p. 115) emphasizes, “the development of collective definitions are crucial to the process of building collaborative alliances.” This is not only true with respect to developing shared views but also with regard to norms about what should be seen as positive or negative, legitimate or illegitimate, fostering or hindering the emergence of trustful and open ended relationships, the efficient negotiation of a fair share of the collaborative outcome, or the balancing of formal and informal rules and relations that are effective in the network (Ring & Van de Ven, 1994). Apart from the network of relationships and the interorganizational views and norms that support (or hinder) their development, intraorganizational structures could be another “target” of network consulting. Although little is known about the influence of organizational antecedents on relational qualities—and even less about the role of interorganizational relations as causes of organizational change (Vlaar & Faems, 2008)—network consulting should take intraorganizational antecedents and the consequences of interorganizational relationships into account. Another difference results from the fact that the functions of network management are not per se identical to managing (isolated) organizations. Traditional managerial functions are usually listed as planning, organizing, staffing, leading, coordinating, reporting, budgeting, and controlling, where the order of these functions is not arbitrarily but determined by a specific understanding of the classical management process (Gulick & Urwick, 1937). No matter whether these tasks are also considered as relevant for managing interorganizational networks or whether the functions of network management and the respective network management practices are systemized in a different way (e.g., selecting, regulating, allocating, and evaluating; see Sydow, 2005), some of these practices are of a very distinct importance in the network context. Most obviously, selecting network organizations has an entirely different status than selecting personnel in the classical management process. In addition, tensions and contradiction characteristic of networks—for example, the dialectics between cooperation and competition—mould these mana-

190 F. LERCH, J. SYDOW, and S. DUSCHEK Table 9.1.

Network Consulting Versus Consulting Organizations Consulting Organizations

Network Consulting

Principal form of coordination

Hierarchical authority or fiat

Negotiation, trust, reciprocity, open-endedness etc.

Legitimacy of coordination

Usually given

To be created, internally and externally

Object of consulting

Isolated organization

Network of relationships (or subnetworks), taking intraorganizational structures into account

Managerial funcTraditional managerial functions Some management functions tions to be addressed have a very different status Mobilizing behavior

Addressing a single organization Mobilizing multiple organizations

Client

One client organization

One or more client organizations, possibly whole network

gerial tasks in a specific way. Like the importance of some managerial functions or practices, these tensions and contradictions are quite different in networks and, hence, must be addressed when consulting networks. Using the example of cooperation and competition once again, the underlying dynamic may be “redesigned” by either domesticating competition through more cooperative rules or by injecting more competition into dominantly cooperative relationships (as in the case of switching from a single to a dual sourcing strategy). Buono (2003) mentions additional differences. When consulting networks the consultant has to mobilize multiple organizations with different strategic interests even if they have agreed on an “interorganizational domain” (Trist, 1983). Not least for this reason the consultant is well advised in being sensitive to different interpretations and offering alternative interpretations of actions and events to network members. Moreover, power asymmetries may be more complex and subtle and, therefore, more difficult to unpack in interorganizational networks. This may be particularly true for networks that seem to be built on trusted and open ended relationships. Table 9.1 summarizes some of the major differences between consulting networks and consulting singular organizations. Network Consulting in Clusters: A Very Peculiar Context “Paradoxically, the enduring competitive advantage in a global economy lies increasingly in local things—knowledge, relationships, and motivations that distant rivals cannot match” (Porter, 1998a, p. 77). Since the

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1980s researchers in economic geography, business studies, economics, and sociology, and, lately increasingly, politicians and consultants have shown an increased awareness and interest in (developing) regional clusters (e.g., Asheim, Cooke, & Martin, 2006). One reason for this can be found in the observation that clusters and the intraregional networks that constitute them seem to have a positive effect on the performance and innovativeness of those organizations that actively participate in such systems, on the regional economic system itself and even on the competitiveness of nations (Porter, 1998b). Regional clusters are usually defined as “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions (e.g., universities, standards agencies, and trade associations) in particular fields that compete but also cooperate” (Porter, 1998b, p. 197). While clusters and networks are often (not only in praxis) seen as identical, we conceive clusters as consisting of several intertwined networks of interorganizational relations within a specific region (see also Boari & Lipparini, 1999; Chetty & Agndal, 2008; Staber, 1996). Hence, networks of relationships and the interactions that produced and reproduce them are constitutive properties of clusters. Interorganizational cooperation and networking within a cluster is extremely relevant because the development of a cluster depends not only on the particular organizations that are part of the cluster but to a considerable extend also on the concrete collaboration between them; between companies and research organizations in particular if innovation in science-based industries such as optics/photonics or biotechnology is high on the agenda. The cooperative tone, shared visions, and, eventually, collective identity that characterize a cluster, however, can, in turn, influence interorganizational collaboration (Sugden, Wei, & Wilson, 2006; Tallman & Jenkins, 2002; Tödtling & Tippl, 2004). In defining, characterizing, analyzing and consulting (networks in) clusters it is necessary, by way of interorganizational diagnosis, to take the (type of) relations between network and cluster actors and the degree of interconnectedness that is present in the cluster into account (Humphrey & Schmitz, 1996). Clusters may consist of some dyadic relations between cluster actors or, in more advanced stages of cluster development, may be composed of triads or even more complex relational sub-networks that are fostered by geographic proximity. Depending on the degree of interconnectedness, regional clusters can be positioned on a continuum that spans from agglomerations of atomistic companies and other organizations that do not really deserve to be described as clusters to “real” regional clusters that are made up of socially embedded relational networks (Brown & McNaughton, 2002, p. 28).

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However, not all interorganizational networks that characterize clusters are confined to cluster boundaries. Rather, networks often cut across industry and/or region and therefore cluster boundaries. A transregional embeddedness of clusters enables cluster organizations from profiting both, local buzz, and global pipelines of knowledge (Bathelt, Malmberg, & Maskell, 2004). In consequence, such networks can be identified at least at four different levels: (1) at an organizational level, personal networks between employees of the organization can be found in and between groups, divisions, and other functional substructures of the organization; (2) at the network level, organizations no matter whether they belong to the cluster or not may entertain ties through which they exchange knowledge or other types of resources; (3) at the cluster level one may find the described network relationships that belong to a specific industry in a specific locality; and (4) similarly such relational webs might be found at the level of an “organizational field” (DiMaggio & Powell, 1983) of which clusters might be a part. Figure 9.1 illustrates these relevant levels that would have to be considered, with respect to relationships building and generating output, in a rather complete, multilevel approach in (analyzing) consulting networks in clusters. The arrows between levels signal that structural conditions— including not only resources of domination but also rules of signification

Field level • relational network • output

Cluster level • relational network • output Network level • relational network • output Organizational level • relational network • output Figure 9.1. Multilevel approach in (analyzing) consulting networks in clusters.

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and legitimation (Giddens, 1984)—at superior levels affect the actions of cluster actors at lower levels of analysis (downward arrows)—and vice versa. On any of these levels, the activities of actors reproduce the structural conditions at these specific levels and beyond. Thus, as structural conditions they simultaneously enable and constrain the activities of actors at other levels (above and below). Network consulting in regional clusters should adopt at the very least a two-level approach that takes the recursiveness between the network and the cluster levels into account. In addition the embedded organizations that are part of a network in regional clusters as well as the wider organizational field (e.g., with its competitive dynamics) need to be considered at least as relevant contexts because they can provide a competitive (dis)advantage. In this chapter we focus on only two levels (i.e., on consulting a specific network in a regional cluster in the optics industry).

RESEARCH SITE AND METHODOLOGY Optics or photonics is an enabling technology (National Research Council, 1998) applied to a variety of areas like lighting, telecommunication equipment, medical devices, scientific instruments, semiconductors, imaging and reproduction, defence, and security (see also Hendry, Brown, & DeFillippi, 2000; Hendry, Brown, Ganter, & Hilland, 2003; Organization for Economic Cooperation and Development, 1993). The increasing importance of this technology is in the leverage effect it has on other markets by enabling innovations. A number of experts today see a bright future for optical technologies and proclaim the “century of the photon” (e.g., Rickman, 2000; Wirth, 2005). Developments in photonics are not driven by single actors but by complex constellations of individual and corporate actors because of the system character of the expected new technologies, the high costs and risks involved, and the necessity to involve and coordinate actors from different scientific fields (e.g., physics, material sciences, chemistry, engineering) as well as from different societal spheres (e.g., economics, science, politics) and from different locations (Hendry et al., 2003). The challenge for managers and consultants thus originates from the complex interplay of different social systems on different levels. The interplay of networking processes on and between these system levels, however, can be seen as the key to successful interorganizational networking and the development of regional clusters not only in optics (Sydow & Windeler, 2003). Studying an enabling technology like optics is difficult because it cuts across established industries or fields. Thus current industrial classification systems (e.g., Standard Industrial Classification) and patent classes

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do not display optics as a consistent industry (Feldman & Lendel, 2010). A number of studies have nevertheless shown that optics, like other science-based industries, tends to cluster in specific regions (Hendry et al., 2000; Lerch, 2009; Sydow & Lerch, 2007).

Research Setting The cluster we study—optics in the German capital region BerlinBrandenburg—has a more than 200-year-old history punctuated by considerable transformations due to the history of Germany (cf. Lerch, 2009; Sydow, Lerch, & Staber, 2010). More recently, the cluster has exhibited more continuous development. Within this cluster, an association— OpTecBB e.V. (www.optecbb.de)—was set up formally in 2000 to organize and administer cluster activities. At approximately the same time, distinct interorganizational networks (OpTecBB focus groups) were initiated within the cluster in order to organize for the transfer of knowledge generated in the numerous research organizations in the cluster into marketable products and services. One of these concrete networks is the X-Ray Analysis Technology (XRA-Tech) network that has existed from the beginning of the formal cluster development process and focused on the development and marketing of x-ray analysis technologies. The XRA-Tech network itself is part of a larger regionally based uv- and x-ray technologies community (see Figure 9.2). The optics cluster in Berlin-Brandenburg comprises about 270 optics companies and approximately 30 research organizations engaged in the development, production and sale of optical technologies. The companies generate revenues of about €2 billion each year and employ roughly 10,000 people (Hornauer, 2002). While some larger optics companies discontinued production in Berlin (e.g., Samsung, Infineon, JVC), most other optics cluster companies in Berlin-Brandenburg are growing. Between 2002 and 2007 sales grew in these companies by 55% and employment increased by 32% (TSB Adlershof, 2008, p. 15). This optics cluster is a rather dynamic entity that is, nonetheless, only partly reflected in the growth rate. The majority of the companies are relatively young, small or at best medium-sized. Every year on average about 16 new startup companies in optics and nanotechnology emerge within the cluster (TSB, 2008, p. 10). Moreover, the optics industry in general and the companies within the optics cluster in Berlin-Brandenburg in particular are very innovative. The companies invest about 8% of sales in R&D and about 15% of the employees are working in this field (TSB, 2008, p. 22). The XRA-Tech network is located in one of the OpTecBB subfields— the uv- and x-ray technology field (Figure 9.2). This network, which

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Optical Technologies Berlin-Brandenburg approx. 300 companies and research institutes uv/x-ray-community Berlin-Brandenburg approx. 60 organizations OpTecBB e.V. approx. 90 members

uv/x-ray focus group approx. 48 members

other OpTecBB focus groups

XRA-Tech network 14 companies and institutes Note: *While the XRA-Tech network companies and institutes are densely connected and forming a cohesive group within the cluster they simultaneously maintain numerous relations in different relational dimensions (e.g. R&D, commercial, personal, etc.) to other organizations outside the specific network (other OpTecBB members, other cluster organizations in the region and organizations outside the cluster).

Figure 9.2. Schematic representation of the XRA-Tech Network* within the Optics cluster in Berlin-Brandenburg displaying multiple embeddedness at different levels.

currently comprises 14 organizations, was formed at the same time that OpTecBB was founded as the association representing the cluster. The network’s dual governance structure—one speaker from industry, one from the field of science, both of whom are formally elected annually by network members—followed the blueprint laid out in OpTecBB’s cluster development plan in whose development we were initially involved as consultants in 2000. The head of the network representing the industrial side was a former director of the transfer oriented Institute for (x-ray) Scientific Instruments within the former East German Academy of Sciences. After reunification he founded his own company (focusing on hard x-ray technologies) after the institute and the academy were liquidated. He was, and still is, also well connected to researchers and to firms in this industry.

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The other head representing the science side is one of the directors of the Boltzmann-Institute for Nonlinear Optics and Spectroscopy,3 a successor organization of the East German Central Institute for Optics and Spectroscopy of the Academy of Sciences. Although he is equally well connected to the scientific community, he had been socialized in the West and, in addition, has been heavily involved in lobbying for optics at different political and scientific levels. The network member firms are mostly spin-offs of the liquidated Academy of Sciences or newly founded small enterprises, all of which are active in x-ray analytic technologies. Their staffs come mostly from organizations that were part of the former Academy of Sciences located in Berlin-Adlershof, particularly from the Institute for Scientific Instruments. The other members are x-ray and synchrotron research organizations previously located in West-Berlin. The XRA-Tech network, together with the regional cluster, provides us with the unique opportunity to study the particularities of (consulting) networks in clusters. Data Sources and Data Analysis The empirical findings discussed below result from extensive research on the development of the optics cluster in the Berlin-Brandenburg region in and, in particular, from the embedded case (Yin, 2009) of the XRA-Tech network. Actors and their networks of relationships have been studied since 2000, when OpTecBB was founded. Data were collected through a series of semi-structured interviews with the key players in the cluster and with focal actors in the XRA-Tech network. In total, we interviewed—in two waves (2003 & 2006)—121 individuals working in 101 organizations in the industrial and institutional domain of this cluster. Because we were involved as observers in the development of this cluster from its beginning in 2000, we achieved a response rate of 96% (2003) and 88% (2006) of all members of OpTecBB (including all 14 members of the XRA-Tech network). While OpTecBB does not represent all members of the cluster (see Figure 9-2), it comprises by far the most important cluster actors. The structured interview guide contained questions about the history and the present governance structure, as well as the recent development process of the cluster and its networks. Apart from about a dozen personal interviews with the most important actors in OpTecBB and the XRA-Tech network, all interviews were conducted by telephone. To permit triangulation, to heighten the validity of our results and to avoid respondent bias, data were also collected through participant observation by two of the authors, one of whom participated in all of the annual XRA-Tech and OpTecBB meetings and strategy workshops over a period of 7 years. We were also given access to minutes from meetings, documents, and presentations. In addition, we reviewed the secondary

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literature and internet sources for information about organizations and technologies (optics and, specifically, x-ray technologies) developed in this region. In the analysis of the interview data, for which we used concepts derived from network theory and reinterpreted from a structuration perspective (Giddens, 1984), the transcribed interviews were coded and then reviewed by each of the authors independently. The results were later discussed by the authors to arrive at a joint interpretation of the data. Despite—or perhaps because of—this research approach, we were seduced several times to intervene into the development process of the cluster and the network so that, at least at times, we adopted—and reflected upon—an action research approach (Eden & Huxham, 2006). In fact, at the beginning of the OpTecBB network development process (in 2000) we held for 2 months a formal contract as consultants specifying our task as “developing a network concept for the emergent optics cluster.” A network development concept was a prerequisite for participation in the German Ministry’s of Education and Research OptecNet-Competition, which in 2001 promised funding for the winning networks for a 5year period.4 From 2003 to 2007 we were basically only involved as researchers,5 conducting interviews, observing meetings and events, and presenting the results of our research at annual meetings of OpTecBB, discussing their implications with those who attended. In 2007 we engaged in drawing a cluster strategy for the Ministry of Economics in Brandenburg and in 2008 we consulted the XRA-Tech network and two central organizations in this network on technology transfer issues. As part of this work we helped develop a business plan and organizational concept for a collaborative application lab.6 The contract has now been extended to consult on technology transfer issues in this network (and beyond) until 2011.

A REFLEXIVE MULTILEVEL APPROACH TO NETWORK CONSULTING IN CLUSTERS For consulting with and developing the optics cluster in the BerlinBrandenburg region a reflexive approach was proposed and adopted from the outset. Reflexivity in this sense means that “social practices are constantly examined and reformed in the light of incoming information about those very practices, thus constantly altering their character” (Giddens, 1990, p. 38). Reflexive structuration implies the necessity of managers of organizations, interorganizational networks, cluster representatives and consultants to continuously produce and reproduce (network) structures taking into account the information they gather by “reflexive moni-

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toring” (Giddens, 1984) of their practices, their antecedents, and consequences. These structures, whose relevance for action are dependent on the managers’ and consultants’ practices, enable and restrain organizational, interorganizational, and cluster managers’ actions. The developed process framework makes use of the idea of “reflexive network development” (Sydow, 2005; Sydow & Windeler, 2003; Windeler, 2001) in which managers at different levels, assisted by consultants (or not), refer to structural properties of the network (e.g., the quality of specific network relations) and reproduce and eventually transform them. Actors also refer to the structural properties of the particular organizations they represent. This is especially the case in early stages of network and cluster development when these systems lack such structures. Structural properties at an organizational level may include organizational competencies or procedures that network(ed) actors draw upon in (interorganizational) practice. In addition actors may also refer to structural properties at a cluster or field level (e.g., industry expertise or cluster rules of engagement). What follows from these structurationist insights is a reflexive multilevel approach to network management, and respectively to network consulting in clusters. Such an approach necessarily requires a processual view of the development of networks and clusters in which structures are conceived as being dependent on the continuous reproduction or transformation by individual and organizational actors by means of social practices. Thus continuity and change are produced and reproduced by network and cluster management, an approach which adds to the line of research on interorganizational networks that focuses on network processes (e.g., De Rond & Bouchikhi 2004; Doz, Olk, & Ring, 2000; Ring & Van de Ven, 1994). With regard to consulting, this approach combines elements of an expert-focused methodology with those of an interventionist strategy. The expert knowledge was based upon a thorough review of organization and management research on interorganizational networks (e.g., Borgatti & Foster, 2003; Gulati, 1998; Provan et al., 2007) as well as of cluster research in the realm of economic geography, economics, and sociology (e.g., Porter, 1998a, 1998b; Sugden et al., 2006; Tallman & Jenkins, 2002). The interventionist knowledge was fed by the reading of the very few practice-based studies that develop an interventionist process perspective on developing networks and/or clusters (cf. Chisholm, 1998; Cummings, 1984; Gray, 1990; Huxham & Vangen, 2005). Combining these two knowledge bases with our own experience in empirical network and cluster research (e.g., Sydow & Lerch, 2007; Sydow & Windeler, 1998) and the knowledge of local industry experts allowed us to develop a process

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framework that was not only adapted to the type of network/cluster but was also accepted by the actors in the network and the cluster.

Consulting on Cluster Development Despite fundamental reservations against a linear perspective on the development of networks and clusters (see Sydow & Lerch, 2007), our framework assumes a multistage approach to the developmental process, starting with “initiation” and ending for the time being with “innovation” before a new development cycle may start again (see Figure 9.3). The first stage includes the initiation of relationships and networking in general. The second stage focuses on the intensification of novel and existing relationships and relational webs. During the following stage activities are intended to consolidate and stabilize these relations. The respective practices are then to be routinized and finally improved and innovated again so that new relations and networking activities are initiated. However, the thematic focus of the developmental activities at each stage on one of these stage-issues does not imply that no other activities, intended to be at the focus of other stages in the developmental process, could be followed. During the early stages of network and cluster development the exploration (March, 1991) of possibilities and the prospects of collaborative projects are necessarily in the foreground of developmental activities. Increasingly, as time passes, reflexive network and cluster development more and more aim also at the exploitation of opportunities. Collaborative innovation projects, for example, are assumed to lead increasingly to marketable products that produce a cash flow, which, at least in part, may be used for developing the network or cluster further. Finally, the idea of a reflexive multilevel approach to network consulting in clusters includes the feedback of information derived from the evaluation during and at the end of each stage. It also provides opportunities for the network and cluster members to discuss the results and to come up with new ideas on how to develop their networks and, as a result, the entire cluster. The German OptecNet program is aimed at developing regional optics clusters by means of interorganizational networking. However, the program did not prescribe in detail how actors should coordinate their network and cluster development activities. As indicated above, key actors in the field of photonics contacted one of the authors with the request to consult on the network and cluster development. The developed framework was adopted immediately and implemented over the following years. The creation of a network administrative organization sustained the process of network coordination and, together with the developmen-

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regional competence cluster

exploration Initiation Intensification Stabilization Routinization Innovation/Initiation exploitation

interfirm networks

1,..., n

within the regional cluster Figure 9.3.

Reflexive network and cluster development process in five phases.

tal plan, was a requirement to taking part in the OptecNet initiative and to receiving governmental funding for 5 years. The developmental plan also envisioned several central processes that needed to be implemented at single stages (or during all stages) of the developmental process. These processes included: (1) regular strategy meetings of all OpTecBB members; (2) a series of events called “members introduce themselves,” in which one cluster organization invited other cluster members to present its competencies and technological infrastructure; (3) the installation of network brokers and network mentors; and (4) a data base with network member profiles and competencies of network members. While at the beginning of the network and cluster development process exploration was at the center of most activities (e.g., a number of explorative workshops in form of a competence, cooperation, and market forum) activities during later stages were aimed at exploiting these opportunities (e.g., concrete innovation projects). However, instead of assuming a deterministic development of the network or cluster, this multistage approach was used only as a “tool for reflective practice” (Huxham & Vangen, 2005). Network/cluster members, as “knowledgeable agents” (Giddens, 1984), are assumed to be able to

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reflect on the appropriateness of a specific model or tool for their purposes. Despite their assumed ability to reflexive monitor their actions as well as their contextual conditions and consequences, they are never considered as being able to fully control the outcome of their practices that, at least in part, are carried out under unacknowledged conditions that may even result from unintended consequences of intended actions (Giddens, 1984). This dynamic means that knowledgeable network and cluster agents use the framework delivered by consultants for their particular purpose and adapt it as necessary. Even though not all the ideas laid out in the original developmental framework were implemented by the OpTecBB board, the network administrative organization and its numerous organizational members, the quality of interaction and communication in the cluster increased considerably, reflected among others in greater multiplexity and network density scores (see Lerch, 2009).

Consulting on Network Development in Clusters Right from the start of the coordinated cluster development process technologically focused subgroups or networks were implemented to foster vertical and horizontal networking between cluster organizations and to enhance knowledge exchange and innovation processes. According to the developmental framework, these OpTecBB sub-groups were supposed to be headed by a representative of both the economic and the science sphere so that the different logics of these groups of actors were taken on and institutionalized in the networks. One of these networks is the XRA-Tech network which operates in the field of uv- and x-ray technology (see Figure 9.2). The initial XRA-Tech network formation process was rather open-ended, as several distinct technological fields (ultraviolet, extreme ultraviolet, soft x-ray, hard x-ray technologies) were discussed by the actors in this OpTecBB subgroup. In the series of three explorative workshops (proposed by the consultants during the early developmental stage of OpTecBB) intended to identify technologies in which the cluster and the groups wanted to collaborate in order to generate innovations, one actor in particular (located in the hard x-ray community) communicated his understanding of the relevant technologies and how innovations might be generated. He also introduced the idea of coordinating the hard x-ray actors by means of a roadmap and began to develop this roadmap, while also inviting the relevant regional actors to participate in the process. The network governance structure that emerged however was a dual authority structure, consistent with the blueprint laid out in OpTecBB’s cluster development plan.

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Managers of these networked companies and representatives of research organizations are mainly faced with two problems in the interorganizational development process and in their networked innovation activities. First, managers have to coordinate the collaborative activities among actors originating from and belonging to different societal spheres. In the particular case of the XRA-Tech network, one finds (1) more or less transfer-oriented representatives of research organizations and (2) managers of companies more or less open to collaborative research and development. While each sphere exhibits its own typical set of rules and resources, the network needs to be managed based upon a common understanding. The difference becomes visible by looking at different incentive structures in research institutions and in companies. While a researcher is gratified for early widespread publication of new research results, entrepreneurs are reimbursed by income flows resulting from (patent) protected research results in form of sales for (new innovative) products (e.g., Bercowitz & Feldman, 2006; Berneman, 1995; Polt, Ramer, Gassler, Schibany, & Schartinger, 2001). Managers as well as consultants have to come up with solutions for this problem.7 Network consultants are not only able to inject knowledge and insight about possible concepts for technology transfer processes into the network or, by means of process intervention, to stimulate a network-internal process of developing a respective solution, but to increase capacities for network management and development. Due to network managers’ involvement in their own organizations, their own capacities to engage in networking activities are usually quite limited. This involvement can readily hinder the development of a network, especially, as in the field of optics, it is made up of small or medium-sized enterprises. Here consultants can extend such capacities of network organizations and the network as a whole. A second central task of representatives of networked organizations in the XRA-Tech network is the development, establishment, and advancement of (1) diverse and effective dyadic relations, (2) more complex relational webs with often rather different network members within the regional cluster, and (3) with organizations from outside the local context. In these efforts, network management and coordination of activities in interorganizational relations involve network managers to balance a number of tensions and contradictions like trust and control, cooperation and competition, and so forth (De Rond & Bouchikhi, 2004; Sydow & Windeler, 1998). Consulting networks in clusters should include enhancing the reflexivity of network management with respect not only to particularly important management functions but also with regard to these tensions and contradictions. In any case, consultants and network members need to be aware of the recursive relationship between network management

Beyond the Organizational Focus 203

and network development: (1) network management, intentionally or unintentionally, contributes to the development of a network over time; and (2) network managers—and hence their consultants—have to be aware of the influence of network development on network management practices (Sydow, 2005; Sydow & Windeler, 2003). With regard to (economic) performance, an important goal of consulting networks in a cluster would be to strengthen the competitive position of the networked organization (e.g., in terms of relational and structural embeddedness) and to support the development of structural properties of individual interorganizational relationships (e.g., multiplexity) or whole interorganizational networks (e.g., network density) that are believed to foster innovation. While such properties may only be loosely coupled with economic success or exhibit different than linear relationships (see Uzzi, 1997), they are an immediate outcome of network/cluster consulting that, by definition, targets the development of networks of relationships.

Recursive Interplay Between Network and Cluster Development With respect to the multilevel approach promoted throughout this chapter, the development process should take into account at least two levels: the network level and the cluster level (see Figure 9.3). Moreover, the development of relationships on one level (e.g., network) is likely to recursively influence the development on the other (cluster). In the case under consideration, the development of OpTecBB provided a context that made collaboration within sub-groups like the XRA-Tech network more likely. In turn, the effective development of this particular network had a positive impact upon the development of the entire cluster. This recursive interplay can be shown in some more detail, for members of the XRA-Tech network actually began to interact with other photonics companies and research organizations in Berlin-Brandenburg, many of them members of OpTecBB, more intensively, generating innovations or simply buying and selling products. More importantly, the development of the XRA-Tech network was presented and discussed on the cluster level in the annual strategy meetings of all OpTecBB members. In addition two of the central XRA-Tech network organizations continued to have representatives on the board of OpTecBB. Hence single network organizations and the XRA-Tech network itself contribute in a number of ways to the development of OpTecBB and the regional cluster. OpTecBB was also important for the development of the XRA-Tech network. First, the XRA-Tech network, even though single relations

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existed before, was initiated in the course of the foundation process of OpTecBB in which technologically focused sub-groups were initiated as part of the coordinated photonics cluster development program. Second, OpTecBB serves as a lobby group to politicians at different levels and as such was able to provide additional resources for the network. For example, OpTecBB activities resulted in the appreciation of optical technologies as a viable future technology in Berlin-Brandenburg resulting in additional funding for R&D projects in this technological field. In addition, OpTecBB supports its members in identifying sources of public funding for their R&D projects and assists in formulating grant proposals at the national and European level. Third, OpTecBB acts as a communication platform for its members and offers a frame for networked activities in the sub-groups. The evaluation of the network and cluster development process conducted by two of the authors identified that the network management practices within the XRA-Tech network have been perceived by other OpTecBB members to be exemplary. Having the recursive multilevel network and cluster development approach in mind, “good or promising network practices” were recommended for discussion at the cluster level during cluster strategy meetings. In fact, the XRA-Tech network roadmap process, among other identified good practices, was presented at one of the OpTecBB strategy meetings. The discussion that followed the presentation provided ample opportunities to learn from the XRA-Tech network, resulting in other sub-groups or networks introducing a road mapping or at least a more structured approach to network coordination. The idea of road mapping was even picked up at the cluster level resulting in a master plan for the entire optics field in Berlin-Brandenburg. Once this recursive process has gained momentum and become self-contained—which is obviously in the case under scrutiny—it may, for better as well as for worse, become path dependent (Sydow et al., 2010).

CONCLUSION By offering first insights into these multilevel processes, the chapter contributes to the emerging research on (interorganizational) network consulting in general and on consulting such networks in regional clusters in particular. Based upon our insights gained from a collection of reports from a variety of network(ed) consultants and from researching and consulting networks in an emerging optics cluster, we identified several significant differences between consulting networks and consulting organizations. These differences have to be acknowledged by consultancies that wish to extend their service domain to network consulting. More-

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over, we have unpacked important particularities of network consulting in regional clusters. Against this background, the chapter calls for a reflexive multilevel approach to network consulting in clusters. This approach focuses on developing networks of relationships, taking the recursive interplay between the development of the cluster and single networks within the cluster into account. While the organizational level as well as the field level would make a multilevel approach to network consulting in clusters more complete, it was at least possible to included them here as contexts. Nevertheless a full-blown multilevel approach to (analyzing) consulting networks in clusters would have to include these two levels. Given that our investigation of network consulting in regional clusters is based upon only one cluster embedded in one particular field (i.e., optics in the Berlin-Brandenburg region in Germany) plus—as discussed here—one single network embedded within the cluster (i.e., the XRATech network) we should restrain from drawing wide-ranging conclusions from our in-depth case study. More important than providing valid and reliable findings on network consulting in clusters at this point in time, we want to draw the attention of consulting researchers to this peculiar “object” of consulting and stimulate network researchers to reflect their insights with respect to network consulting. Without doubt, more consulting as well as more network research is needed before resolute conclusions can be drawn for network consulting in clusters. A beginning, however, has been made.

NOTES 1.

2. 3. 4.

5.

The lack of hierarchical authority distinguishes interorganizational networks from other collectives of organizations such as corporate groups. However, we acknowledge that some interorganizational networks may be governed in a quasi- hierarchical manner, which can be observed in the case of focal actors or hub firms in strategic networks (Jarillo, 1988; Lorenzioni & Baden-Fuller, 1995; Sydow & Windeler, 1998). As an example, clusters or cluster representatives may be in contact with representatives of other clusters within a region in another industry. Organizational names are anonymized for confidentiality reasons. Seven competence networks in the area of optical technologies were funded under the OptecNet competition. The funding was later extended to 8 years. Despite this significant public funding, however, network members had to pay fees for their cluster membership. From the beginning, these fees contributed at least 50% of the cluster budget. This research was made possible by a grant of the Berlin Senate (Senatsverwaltung für Wirtschaft, Arbeit und Frauen) and the European Union

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6. 7.

(EFRE). This grant, together with consultant fees and funding from the Freie Universität Berlin, enabled us to study the development of the cluster—and some of its networks—over a period of 8 years. We are not only grateful for this funding, but most of all we thank the numerous people within OpTecBB for their time, patience, and trust. Finally, we thank Arnold Windeler who, together with Jörg Sydow, was awarded the grant and supervised the research. This research was made possible by grants provided by Federal Ministry of Transport, Building and Urban Development in 2008. In the process of researching the development of the XRA-Tech network, one of the authors was asked to support the network by coming up with a concept for a collaborative, technology transfer-oriented application laboratory.

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CHAPTER 10

FOCUSING THE NETWORK BUSINESS CASE Making Use of Teamwork—Key Issues in Collaborative Systems and Consulting Networks H. LOBNIG

Hubert Lobnig

Recent discussions among researchers and practitioners suggest that consulting in networks and collaborative systems requires different foci and models than those used in single organizational settings (Chisholm, 1998, 2008; Mannings & Sydow, 2006). This observation is in line with our research and practical experience during the past decade. As these networks and collaborative relationships can be conceptualized as connected organizations or coupled systems, it is useful to describe them as specific types of organizational entities. They are built between individual organizations, each one existing mostly independent from the others, equipped with its own established structure, strategies, processes, and people. As Gray (1989) notes, collaborative systems are not set by definition per se, emerging in a collective process that is driven by the partnering organizations that decided to join forces to achieve something special. The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 211–227 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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Compared to most single organizations, collaborative systems are fragile and subject to recurrent change. The inherent logic underlying collaborative systems is expressed in the structures and processes for decision making and management, the way work processes within and across the partnering organizations are set up, and in the type of culture collaborative systems and networks build while operating. The fact that these structures, processes and management systems are rather fragile or even temporary provides a variety of potential entry points for consultants (see Table 10.1). At the same time, however, the specific nature of such collaborative systems raises a number of challenges for consultants working with interorganizational systems, which affect the underlying assumptions as well as the methodological repertoire to be applied. There are a number of key challenges involved with intervening in networks and collaborative systems. A fundamental question concerns “Who is the client?” Given the considerable complexity of the client system, usually structured as multistakeholder approach (Sydow, 2006), questions often linger as to who is the actual client. An added complexity often involves the payment of consultant fees, which typically includes work across different client systems. Especially when consulting with developmental initiatives, regional networks, and economic clusters, the consulting activities are usually financed by public authorities or programs and not by those who receive help. Thus, there is a need to embed the consulting project within a more loosely structured system as a whole, including such issues as defining the scope of the consulting approach and setting time frames and fees (Königswieser, 2006).

Table 10.1.

Consulting in Collaborative Systems

Phase/Subject of the Collaboration

Consultancy Support (Illustrative)

Starting up: Conceptualization and system building

• Due diligence for cooperation • Structuring the network formation: Convening the partners, developing basic rules and division of duties, establishing control systems, helping stakeholders defining their role

Defining the goal and visioning the future

• Developing strategy and future plans

Facilitating transitions, difficulties and conflicts

• Dealing with demands for re-structuring, taking critical inventory, providing conflict management and mediation

Redimensioning/restructuring

• Providing evaluations, carrying out change management processes

Starting up work teams

• Team development and coaching, providing project management

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A related challenge is to define appropriate structures and processes for steering, decision making, transorganizational work processes, and the formation of professional roles. As a way of facilitating the development of the collaborative effort, it is useful to focus on lateral as well as vertical coordinating principles (Chisholm, 2008; Grossmann & Lobnig, in press). Intervening in networks is also reflected in the increasing demand to combine process oriented consultancy with more directive types of counseling (Sydow, 2006, Schein, 2009). Drawing on the Grossmann and Lobnig (in press) model for networks and collaborations (see Figure 10.1), there are a number of roles that consultants can play in their work with these interorganizational ventures. For example, “defining the business case” is one of the most important issues in the initial phase and “making use of teamwork” is a central guiding principle for the process of organizing. Both issues can contribute con-

Source: Grossmann and Lobnig (2010, p. 69).

Figure 10.1.

The Grossmann-Lobnig model for networks and collaborations.

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ceptually as well as in practical application as a way to better understand the specific challenges consultants face when working with interorganizational systems. The research methodology underlying this model is based on a clinical perspective on fieldwork, an orientation originally developed by Schein (1988) and recently focused on organization development (OD) research by Grossmann Scala (2009). At its core the model assumes that simultaneously intervening and researching is not an obstacle for the research or intervention process. Instead it allows for the development of deeper and more congruent insights about the nature of organizational change when carried out with a reflective attitude and a process of repeatedly applying scientific hypotheses.

PREPARING THE BUSINESS CASE When talking about the importance of the business case for networks, colleagues repeatedly argue that many networks are not in the business world and therefore the term might not be fully understand by the recipients. However the idea of focusing the business case is not intended as bringing a market model approach to the world of interorganizational settings. The underlying concept is that these collaborative endeavors are intended to create something new, at least for those entities that are joining to achieve something together. In this respect, the innovative issue— the basic idea or new model—acts as what we call the business case for the collaboration, the reason why the initiative should be done. At the very beginning, collaborative ventures face the challenge of elaborating the business case, one which is sufficiently attractive enough for both the partners as well as key stakeholders, creating the required energy to start. In essence, this first foundation phase is crucial as it has to meet the challenge of a double-sided review, being attractive to decision makers of each partnering organization so that they are convinced to invest their resources and attention to the collaborative venture as well as to the other critical stakeholders. A convincing business case is a prerequisite for attractive collaborations, but it is not something that can be found “out there” or defined by one group of managers already working together. Rather, it results from a working process where key decision makers in organizations meet, define their aims or strategies to partner, and assess the extent to which these strategies are comparable with those of others. At its best, an iterative process is set up where the definition of the business case is a result of an intense discussion and learning process of the partners involved. The work on the business case helps to clarify explicit concerns as well as implicit assumptions. The final depiction of

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“our” business case” (often expressed as a signed document, a presentation, a logo, and so forth) is a first very important step when a new collaborative organization is created.

The Vienna Network for Workplace Health Promotion In 2006 the most important regional financer of workplace health promotion, the Health Insurance Vienna Region (Wiener Gebietskrankenkasse, WGKK) decided to set up a network involving all the insurance agencies and regional social partners in Vienna. In order to be successful, the WGKK determined that the network would have to assume the form of a collaborative effort instead of a more centralized cooperation based solely on WGKK’s activities. Initial attempts to invite the planned partners were favorably received but initiatives to actually start the network soon began to wane. The addressed partners seemed not to be ready to buy in into the initiative—the seemingly well accepted idea was not becoming a reality. First Hypotheses In the summer of 2006, I was asked by Eva Baumer, the internal project manager of the WGKK, to help them implement the network for health promotion in the workplace. In our first meeting, we developed a set of hypotheses for this situation, underscoring a number of possible explanations as to why the process stalled. First, insurance companies are rather big, hierarchical organizations, and decisions on issues that do not directly relate to their primary task are not easily taken on. These issues are also far from top management’s concerns, a reality that further slows the process. Another concern was that the different organizations were unequal in previous attempts to health promotion. Although some were highly experienced offering this type of program, with well developed internal professional structures for health promotion, others were quite inexperienced and lacked any internal contact points. Each organization had its own responsibility for the different sectors of employees, which are defined by law, but they were partly in competition for resources. This dynamic created some defensive posturing as any program one organization set up could also benefit the other insurance companies. Finally, personal relations between the partners were unequal and unbalanced— some had already developed a trusted relation through previous cooperation while others were not even known to each other. Based on this initial assessment, I proposed to restart the process rather than attempting to build on what was already planned. The most effective way for the partners to identify with and support the network

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would be to involve them actively in the process of defining goals and structures, in essence creating the business case for the venture. As a first step, a letter to the eleven leaders of the health care insurance firms and social partners in Vienna was sent by the chief executive officer of WGKK, as the initiating organization for the network, inviting them (as partners) to participate in its launch. The idea was to have these organizations nominate their delegates to represent each institution in the network. The nomination, however, proceeded very differently in the group of the participating organizations. Some of the delegates were from upper management with strong connections to decision making but with little involvement in operative details, while others were specialists in health promotion, with high expertise but limited access to the organizations’ decision-making procedures. This precondition was consequential for the consulting process as the “decision makers” were able to buy into collective decision processes (but with the risk of lacking expertise) already at the meetings while the specialists needed to regularly check with their organizations. As a response to this precondition, the intraorganizational feedback loops between or and even at the side of the meetings became very important. Interviews With the Partnering Organizations Before having a first joint meeting of all partners, I went on field visits to all invited organizations to meet the decision makers, key persons and the nominated delegates. The plan was to discuss the purpose of the network, their ideas about how it should function, and to reflect on their nomination process, advising that each organization should consider both expertise and adequate decision power in their decisions for nomination. The discussions also included advice on how to internally organize their delegation in the network and to prepare for the coming collaborative work. These interviews made it possible for the consultant to: understand the players’ interests; optimize their representation in the network; familiarize the delegates with the network organizing plan; prepare a diagnosis on preconditions and specific challenges the collaborative ventures faced at the start; and develop a workshop design for the kick-off meeting. The discussions were also helpful for the partners as they had the opportunity to talk about their ideas and concerns with somebody involved but without any particular organizational interest or stake in the process. First Workshop Approximately 20 delegates from all eleven organizations took part in the first workshop, acting as the core group for the network. Their task

Focusing the Network Business Case 217 Table 10.2. The First Workshop of the Viennese Network for Workplace Health Promotion Focus

Content

Opening

• Presentation of participant interests and areas of concern

Participating organizations

• Name of the organization • Relationship to the network; relative importance of membership • Organizational abilities, resources and potential contribution to the network • Organizational representative to the network (short introduction including profession, function, experience)

Consultant presentation

• Results of the interviews and their evaluation based on the criteria for successful networks • Small group assessment: H What was surprising about what was reported by the organizations? H What strengths and resources are become available to the network? H What obstacles can be expected? • Large-group assessment and discussion

Cooperative network clarification

• Consultant’s input: Critical points of starting cooperative ventures and networks • Small-group discussion of network: H Network name H Meaning of “workplace health promotion” H Network goals H Network success criteria • Large-group assessment and discussion

Developing • Criteria for successful interaction: H Management level (monitoring group, core group, etc.) partner relations H Coordination level (network server) H Commitment to the network’s development (task forces) H Professional expertise (expert groups) H Observers Outlook/next steps

• Further requirements and agenda for second workshop/task forces: H Definition of visions and goals H Ideas for network structure and work methods H Discussion of results and examples of the network

was to develop the basic strategic guidelines for building the network. Table 10.2 presents an overview of the workshop agenda. Reporting Back and Anchoring in the Home Organizations At the end of the workshop, the delegates were asked to report back to their home organizations, in a sense beginning the process of anchoring the ideas developed in the workshop. Discussions about effective tactics for such reporting, however, revealed that some delegates were unsure about the appropriate institutional setting and entry points for such

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reporting. It was clear that although this feedback loop was an essential element for initiating the energy needed to start the network, it also became apparent that each organization had to undertake this task in its own way. At the end of the first workshop two task forces were set up to more deeply explore the issues raised in the initial session. One group focused on network vision and goals and the second group worked on the organizational design of the network. Both documents were to be discussed at the second workshop, but initial drafts would be circulated so that first reflections and feedback from the home organizations could be brought into the second workshop as well. At this stage, the project coordinator was involved in both task forces and helped them to draw up their “position papers.” Finalizing the Business Case at the Second Workshop During the second workshop, the partner organizations provided feedback on the concepts and collaboratively completed the “position papers.” As main elements of the organizational design, a steering group (“cooperative conference”) and operative management committee (“operative panel”) were set up and their members were nominated and elected. This workshop ended with a draft outline of an action plan (see Table 10.3) created by the operative management committee and approved by the steering group “online” (at the end of the workshop). The project utilized processes that emphasized the individual partners’ perspectives on their involvement in the collaborative venture. All parties involved recognized that the initial phase of interviews and subsequent feedback to their home organizations were invaluable because they focused on both overall network and each organization’s specific interests. Following this principle, the initial phase helped the participating organizations balance their own interests and the requirements for successful network development as a transorganizational system. In further development, the network performed a high level of joint activities. These endeavors included setting up the core groups in the initial phase, which fostered the network’s capability to successfully proceed. As this brief example illustrates, networks can gain both stability and progress when clear steps are provided and the consultant is able to form a helping coalition with the client. The double-sided reference to the collaborating system and partnering organization requires careful attention throughout the process. However, even when this dual attention may mean slowing down the process, as the participating delegates may seem to be ahead with their knowledge and attitude, creating this type of extensive feedback loop between the home organization and the collaborative

Completion of position papers • Delegates were divided into four groups made up of two to three organizations. The groups read and evaluated the position papers. People color coded their responses as: H Red: not admissible, changes were necessary H Orange: attention to potential problems and need for discussion H Green: explicit agreement • Following the exercises, the facilitator asked the groups to post their evaluations on an enlarged copy of the position paper, which was hung on the wall H This visual aid clearly illustrated the need for improvement. The consultant reviewed each of the chapters with the delegates and immediately made changes on the computer. Filling key positions and nominating delegates for the committees • Based on the suggestions made in the position papers, the entire group of delegates selected members for the “cooperative conference” as the partners’ strategic panel. The following procedure was adopted: H each organization could nominate a total of two members H the members could provide a short explanation for their motivations H the entire group of delegates selected the candidates • The delegates wrote in and voted on their nominations. Since the results were similar to the ones made by the preparatory group, there were few surprises. H The next phase of committee selection was for “cooperative conference” members to select the “operative panel,” the group responsible for running the network. They adopted more selective procedures for this committee—the five organizations were selected that had dealt with the topic most thoroughly. In order to guarantee a continuing working process no deputies were nominated as personal commitment and continuity was seen essential.

Position papers

Filling key positions

(Table continues on next page)

Organizational reports (recorded on a flip chart): • participating organizations receive the first workshop’s results • discussion of what transpired between the first and second sessions • determination of criteria/results necessary for success; • as appropriate, the introduction of new delegates

Content

Reports

Focus

Table 10.3. Agenda for the 2nd Workshop of the Viennese Network

Determining internal projects and responsible teams • The partners defined the next steps according to a simple task-organization mode based on: H tasks to be completed H who should be responsible for the work H timeframe for the work to be completed • Partners defined the most important topics, which were carried out uniformly, including: H drawing up procedural rules for the cooperative conference and the operative panel H developing a public relations strategy and campaign H developing a logo and design used to implement as part of the PR campaign H adopting and formalizing the position paper H drawing up a follow-on work schedule Concluding round of discussions • Questions answered during the closing round of discussions included: H What have we learned from the process to date? H What is important to us for further development?

Concluding comments

Content

(Continued)

Internal projects

Focus

Table 10.3.

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system is a critical “knot” that helps to bind the different partners together.

MAKING USE OF TEAMWORK Teamwork is another factor that can pull together loosely coupled systems as it provides the individual with intense interaction as well as meaning and relation to the overall undertaking. There is a considerable difference, however, between formal working structures in collaboration and true team work. Although establishing teamwork is an investment that can have favorable results over the short and long term, in collaborative ventures people have to invent the details of their work (content and process) themselves and there is no formal authority that tells them what they should be doing. Rather, they have to continually (re)define their goals, roles, and processes, thus generating a continuous sense of organizing (Weick, 1995), which is vital to success in collaborative ventures. The patterns that result from these reflective processes create a “spirit of collaboration,” a culture that is necessary for innovative action. Productive teambased work relationships can achieve success in collaborative ventures more readily and more sustainably than by individual members alone or even formal work structures. As literal small systems within the larger system, they create both individual and social commitment. When tasks in networks and collaborative ventures become highly interdependent between the partnering organizations, a case for true teamwork is established. Teams, which can be thought of as “cultural islands” (Schein, 2009), create opportunities in which individuals can work together without being too disturbed by differences in roles, hierarchy and culture. As a general rule, the higher the interdependence of the tasks the stronger the need for true teamwork and application of proper working techniques. For the consulting process, the team approach means organizing as many important functions and tasks in a way that creates interdependencies, which serve as the “container” for cross-functional and cross-organizational teams, including management and control, task-specific teams, transorganizational process teams, and planning teams. Facility Management Austria: Applying Team-Work to Leverage the Network A network of companies, research institutes, consultants, and service providers in facility management and real estate (Facility Management Austria, FMA) asked me to help them to redefine their strategy after an

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expert strategy report failed to achieve sufficient commitment within the network. Overall, the network was performing quite well, influential in its field on national and international level with a well developed organizational structure. Basically the structure included a director, managing coordinator, steering group, and number of committees, with institutional and individual members that substantially covered the existing professional field. As typical with most professional associations, however, the performance and attractiveness of FMA was highly dependent on the voluntary commitment of its members. As is often the case, as a consultant I was brought in rather late as previous attempts to advance failed. The time given to define the strategy was already short—the new strategy was slated to be kicked off at FMA’s general assembly in roughly 2 months. Despite the fact that the process of rethinking the strategy needed contributions from all different levels of the network, a fast-paced approach was clearly needed. I suggested starting a strategy process where the content would be developed mainly by cross-functional teams that integrated the different parts of the network. The teams would work on different aspects of the strategy as part of a structured, parallel process. A series of three meetings guided the process, with interim evaluation and feedback built in, and a final meeting for refining and finalizing the strategy. In addition the teams were given assignments between the meetings and were asked to work together, either face to face or virtually as their scheduled dictated. As the strategy teams were seen as essential, the composition of each team was crucial. It was decided that the teams would be chaired by a person with a formal role in the network, but each team would also include “newcomers” and people from the outer circles of the network. The Planning Workshop After the steering group agreed to the framework described above, a planning workshop was held with the steering group spokesperson, the director of the coordination unit, and the consultant. The purpose of the first workshop was to agree upon the basic process principles, define the scope of the project, plan milestones, and specify next steps. The strategy itself was to be worked out in this planned process. There were three basic working principles agreed to during the planning workshop that guided the approach. First, the process was to be built on the existing roles and structures of the FMA, even if they were not performing as well as they could (as was expressed in some interviews at the beginning). The basic assumption was that the strategy work could be used as a means to improve required collaboration through a broad exchange of interests of key persons of the existing subgroups and committees. It was also determined that the association’s value would be

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determined by its development as well as its final results. Questions included: Who should take the initiative? What should the managing board and other committees contribute? How would the members be involved? How would different interests be resolved? Second, it was important to create opportunities for as much participation as possible. FMA’s success depended on a vital exchange between and commitment of people in many different roles and relationships. If an association is interested in encouraging lively exchange, it should systematically strengthen its rules and procedures in ways that foster participation. This principle was seen as especially important as the project focused on shaping future goals. Teams would create an essential format for that participation. Finally, stringent coordination was necessary. The strategy development and refinement process required a manager who would coordinate and support the process, continuously informing the managing board of progress, fulfilling general management duties and helping the teams to proceed in an organized and intercoordinated manner. The discussion about the basic principles for the strategy process led to a trusted relationship between the director of the steering group, the coordinator, and the consultant, as we could agree on a guiding framework that allowed us to break down strategy making into action steps. As a result of the fast paced consulting approach, time and effort for reflection and critique was seen as rather limited compared with the need for action and results. The Kick-Off Workshop At the kick-off workshop one week later, board members and people with coordinative functions in the network (e.g., chairs of working groups and committees) were invited. At that meeting the project was started, working groups were initiated, the working formats were discussed, and the milestones were set. On a content level, six topics were chosen by individual ratings and subsequent discussion. As there were wide reaching ideas for relevant strategic issues, participants worked extensively on narrowing the scope of these issues and setting priorities. Finally they included the need to: (1) define content and goals of FMA; (2) develop a member structure (number and variety) and membership rules; (3) identify services for members; (4) map the association’s internal structures, processes and rules; (5) develop public relations/ lobbying strategies; and (6) develop alliances and partnerships. The task force structure was also introduced during the meeting as a way of stimulating the targeted work and encouraging maximum participation. To foster wide participation in the fast-paced process, as the consultant I conceptualized a special model for the task forces, which set

224 H. LOBNIG Table 10.4.

FMA Task Force Model

• • • •

A mentor chairs each task force to guide the group and keep it on track. Board members can only take on the role of a mentor for one group. At minimum one other person from the managing board will be part of the task force. The managing board’s spokesperson and chair will invite at least one other person from FMA who is not in an official function to join the task force. • All functional branches and initiatives have to be actively involved (meta-perspective) . • A minimum of four people will work together. • The chief operating officer will help coordinate and document the task force’s work.

cross-sectional teams at the center of all activities and defined internal roles to secure connectedness to the overall network (see Table 10.4). The process of appointing task force members was quite challenging for both the group and the consultant as some participants at the kick-off meeting wanted to “duck away” and delegate the task to typically active “usual suspects.” As the consultant, however, I strongly pointed to the principle they previously agreed upon. If they saw a need to change the rules, they had the opportunity to discuss them, but the importance of staying within procedure was underscored. As a result, the task forces were appropriately staffed and each participant at the kick off was involved in some way. On the content side, the tasks included: (1) goal elaboration and clarification; (2) diagnosis of the status quo; (3) developing the need to change the current situation; and (4) developing first solutions and suggesting appropriate work methods. Task force meetings were held after the workshop in dispersed settings (wherever they were able to meet) as the mentors invited the task forces met several times to conduct their work. The consultant was not directly involved in the task force meetings but provided a checklist with tasks and points that reflected the working phase (presented at the kick-off meeting). The coordinator helped the groups by sending templates for documentation of actions and results, “softly looking after them in a caring mode.” Review Meeting The extended managing board hosted a review meeting where the task force mentors presented the results and, as a group, evaluated the task force results. The main part of the agenda was to test the results of the six task forces and examine them in terms of what they could contribute to the future of FMA. The discussions were widely constructive: most of the suggested proposals included commitment by the board as well as the other participants, while others were sent back for deeper analysis or further clarification. As the task forces’ results created a rough image of the future, I raised the question as to how this could be achieved, asking them

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to elaborate on a process model for implementing the strategic proposals. The task force members then met in small groups to exchange their implementation plans and to mutually give feedback to each other. This process enabled the task forces to finalize their conceptual papers in preparation for presentation to the general assembly two weeks later. At the end of the meeting, I helped the board to plan the milestones for preparing the general assembly, decide on the central issues to be communicated as FMA’s strategy (as decided by the board), and those areas that required further clarification and feedback for later work.

Lessons Learned The FMA consulting process design proved to be quite suitable to this type of network building and allowed for a fast paced approach to strategy development: • in a short period of time, many stakeholders were involved in discussing problems and developing solutions; • a trusting relationship between the consultant, managing board, spokesman of the board and coordinator developed quickly; • hands-on work tools made it possible not only to come up with a strategy proposal in time but also with a committed piece of work where most relevant key persons were actively involved in contributing to the association’s future (for the use of instruments in strategy work see Lobnig, this volume); and • the coordinator cared personally about the outcomes, calling the members regularly asking them about progress and difficulties. This kind of action-oriented coordination allowed network members to produced tangible results. Continuous calls between the consultant and the coordinator (two to three times a week) also helped to align the real progress with the interventions on the consultant’s part.

CONCLUSIONS When consultants contract with networks and other forms of collaborative engagements they face a different reality compared to projects in standalone organizations. In many cases they will find a vacuum in terms of existing structures, processes, strategies, and power systems. This void facilitates the system’s receptiveness to the consultant’s interventions in

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many ways. Drawing on the cases presented in this chapter, there are a number of underlying principles that appear to be useful in such interorganizational contexts: • Trust emerges from good relations between the primary client and the consultant. A true interest in and basic knowledge of the content help considerably. • As a guiding principle for designing processes and interventions, it is important to respect the double reference to home organization and collaboration/network. This dual focus is of particular importance in the initial phase. • Interventions should be “simple” but not “simplistic”—networks need a strategy, structure, rules, projects, and so forth, but overly in-depth designs tend to drain the initiative’s capacity in terms of time, resources and content. Modest approaches are more suitable for creating solid and sustainable results. • Instruments for community building, team work techniques and formats, and tools for practically implementing participative structures in cultural islands (Schein, 2009) help to bridge the gap between plans and outcomes (reality). Consultants can be especially influential in those networks that lack stable organizational designs or suffer from imbalances of power. Consultants working with networks also have an increased responsibility to contribute to the good of the whole collaborating system. Drawing on my experience, I see the role of the consultant as positioned on the side of the solution and action rather than on the side of reflective communication. ACKNOWLEDGMENTS The chapter is based on the research program “Organization Development in Networks and Collaborations” of the iff—Institute for Organization Development and Group Dynamics of the Alpen-Adria University Klagenfurt. Members of the research team include Ralph Grossmann, Hubert Lobnig, Klaus Scala and Michael Stadlober (see Grossmann & Lobnig, 2004; Grossmann, Lobnig, & Scala, 2007; Grossmann, Lobnig, Scala, & Stadlober, in press). REFERENCES Chisholm, R. F. (2008). Developing interorganizational networks. In T. G. Cummings (Ed.), Handbook of organizational development (pp. 629-650). Newbury Park, CA: Sage Publications.

Focusing the Network Business Case 227 Gray, B. (1989). Collaborating: Finding common ground for multiparty problems. San Francisco, CA: Jossey-Bass. Grossmann, R., & Lobnig, H. (2004). Projektmanagement und netzwerkentwicklung [Project management and network development]. In R. Grossmann (Ed.), Das öffentliche Organisieren [Organizing Public Goods] (pp. 17-43). Berlin, Germany: Springer. Grossmann, R., & Lobnig, H. (in press). Key criteria for success. In R. Grossmann, H. Lobnig, K. Scala, & M. Stadlober (Eds.), Collaboration in public management. Charlotte, NC: Information Age. Grossmann, R., Lobnig, H., & Scala, K. (2007). Kooperationen im public management: Theorie und praxis erfolgreicher organisationsentwicklung in leistungsverbünden, netzwerken und fusionen [Cooperation in public management: Theory and praxis of successful organization development in alliances, networks and mergers]. Weinheim, München, Germany: Juventa. Grossmann, R., Lobnig, H., Scala, K., & Stadlober, M. (Eds.). (in press). Collaboration in public management. Charlotte, NC: Information Age. Grossmann, R., & Scala, K. (in press). Organizational development and consulting. In R. Grossmann, H. Lobnig, K. Scala, & M. Stadlober (Eds.), Collaboration in public management. Charlotte, NC: Information Age. Königswieser, R. (2006). Kann man netzwerke beraten? [It is possible to consult networks?] In J. Sydow & S. Manning (Eds.), Netzwerke beraten [Consulting networks] (pp. 271-293). Wiesbaden, Germany: Gabler. Manning, S., & Sydow, J. (2006). Netzwerke beraten [Consulting networks]. Wiesbaden, Germany: Gabler. Schein, E. H. (1987). The clinical perspective in fieldwork. Newbury Park, CA: Sage. Schein, E. H. (2009). Helping: How to offer, give, and receive Help. San Francisco, CA: Berrett-Koehler. Sydow, J. (2006). Netzwerkberatung: Aufgaben, ansätze und instrumente [Network consulting: Tasks, concepts and instruments]. In J. Sydow & S. Manning (Eds.), Netzwerke beraten [Consulting Networks] (pp. 57-84). Wiesbaden, Germany: Gabler. Weick, K. E. (1995). Making sense of the organization. San Francisco, CA: Blackwell.

CHAPTER 11

CONSULTING INTERORGANIZATIONAL RELATIONS Collaboration, Organization Development, and Effectiveness in the Public Sector R.Ralph GROSSMANN, K. PRAMMER, AND C. NEUGEBAUER Grossmann, Karl Prammer, and Christian Neugebauer

Networks and cooperation are modes of organization intended to increase performance, enhance problem-solving capabilities and ensure competitiveness. Companies form alliances to implement product development and explore market alternatives. They create alliances with suppliers, wholesalers, development agencies, companies with complementary resources for added revenue, and even with competitive companies. Within this context, clusters might be the oldest form of networking. Drawing on their underlying synergies, they have improved entire regions and branches. Governments promote such regional or sectoral clusters as networks to increase options of specified cooperation between companies. Networking between companies in regional innovative development of economics, the specific service providers, development agencies, and The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 229–255 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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governmental administration are gaining significantly in importance (Grossmann, 2006). In general, the topic of cooperation is especially interesting for the realization of public services (Sandfort & Milward, 2008). There is hardly any social challenge that can be effectively handled by a single organization. Thus to better understand the challenge of cooperation, it is useful to look at the development of public services during the last 2 decades. This period has been marked by political discussions about the deregulation and liberalization of governmental funded and controlled public services. The discussion, with different governments and constitutional traditions, has brought forth different models of organization between government, private, and civil society. Countries with a socialist political tradition have developed a mixture of welfare and support system, even when considered from an organizational point of view. Public services are provided by a multitude of organizations, by the governmental administration itself, out-sourced organizations with different forms of enterprise and legal status, profit-oriented companies commissioned by the state, and nongovernmental enterprises with governmental funding and commission (Grossmann, Lobnig, & Scala, 2007, in press). Although the welfare state may be thought of as a providing state, it doesn’t provide those services by itself but rather guarantees their availability. Like many different countries but also especially in Austria, there are two trends that have become obvious. First, is the out-sourcing of public service organizations by making them relatively independent, creating greater flexibility of labor utilization, delegation of political responsibility, implementation of various management and economical theories across different organizations, real decentralization to ensure an increase of efficiency and competitiveness, and provision of services closer to the customer. Still unsolved is the problem of controlling by the board of management and the service level agreement. This increasing autonomy has led to more individual responsibility in these organizations and has incited internal processes of development as well. Responsibility in leadership and a careful dealing with resources have become a priority. Reforms in structure and clearer definition of profiles and competences have ensued as well. Economic thinking is gaining in importance, sometimes at the expense of quality. The substantial pressure to succeed is increasing as well and there is a competitive fight about identity, in essence creating one’s own brand. The influence of the economic crisis on funding and controlling are yet to be seen. The second trend is the increasing significance of institutions in the realm of civil services. This shift goes beyond classical social service institutions and includes a multitude of newly founded associations and insti-

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tutions, which all provide important services to the community. This socalled third sector (the state and the profit-oriented economy being the other two) has been one of the fastest growing markets during the past several years and is now an enormous international economic factor. Thus, the present situation is captured by a large number of organizations, with different traditions, culture, and modus operandi, working in all social areas on tasks next to and with each other. Their influence and size may be different, but their dependence on each other is growing. Politics and administration are two actors among many others, each with its own specific roles and functions. The organizations’ operations have different systems of competence and organizational structure (e.g., being more centralized or decentralized), with their own logic and connected to different professions with diverse education and specialist traditions. This diversity can be harmonized by laws, streamlining the administration and exacting rules about competences. All of these efforts will help to reduce or minimize problems but they will not generate general change in structure and organizational culture. Attempts to order this diversity through hierarchy and sets of rules have been tried time and again, but with only moderate success at best. Cooperation, in contrast, offers an attractive possibility to effectively manage this diversity. It enables people and organizations to accomplish goals by pooling interests, talent, and other resources, which they would be unlikely to accomplish when trying on their own. Political organizations are increasingly seeking cooperation with other organizations and players, not only in dealing with pertinent issues and complex societal problems, but in ways that allow them to react to their mutual interdependence. As Huxham and Vangen (1996, p. 6) have noted, “For both public and voluntary sector organizations, working with and through other organizations is no longer exceptional; for most it is the norm.” This interdependence between different organizations with their different structures and logics of action—whether they are governmental organizations, nongovernmental organizations, clubs or traditional-profit organizations—must be managed. While base calculations of benefits can lead cooperation, only cooperation that results in mutual benefit will survive over the long term. Egoistic motifs may focus the parties, but there are not sufficient conditions. A more civilized form of egoism is required in which actors refrain from direct assertion of their expectations and interests to achieve long-term benefit. They are taking the role of “enlightened egoists” (Willke, 1995). The basic premise of this chapter is that there is a difference between networks and what might be thought of as benefit alliances, which demand closer cooperation. Networks create options and possibilities to reach common goals, allowing the members to profit from each other. Benefit

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alliances, in contrast, focus on reaching selected options. Not every activity within the network results in such closer cooperation, as some options might not be sufficiently attractive to enable participants to work toward that goal together. The radical aspect of cooperation in the public sector—especially in cooperation that exceeds the boundaries between public, profit, and nonprofit sectors, connecting them together—are horizontal relations based on trust. For true cooperation, organizational behavior cannot be based on the usual hierarchical status of domination and submission or indifferent relationships between buyer and seller. As reflected by recent discussions among management scholars and practitioners, consulting in networks and benefit alliances demands different foci and models than those that are effective in single organizational settings (see Chisholm, 2008; Sydow & Mannings, 2006). Organizations need to consider the interests and terms of their partners and they have to refrain from viewing them as obstacles to overcome. Cooperation thrives on a stable relationship between partners, relationships that are an essential condition for success. Networks and benefit alliances have to form structures and cooperation has to be organized. However, as long as the cooperation is based solely on the participants' individual cultures and structures, the desired cooperation is typically in jeopardy. It is thus vital to create and sustain new forms of organization without holding tight to conventional forms. To cooperate also means to admit an open process. All participants have to endure (1) discrepancies between the various interests and experiences of the participants and (2) the limiting and sometimes competing forces within their own organization. The organizations and their management require strategic maturity with a focus on long-term goals and benefits. The actors need the necessary support from management and at the same time sufficient latitude and flexibility to operate successfully. Adequate clearance and competence must provided by the relevant home organizations, which can facilitate a sense of loyalty to both the organization and the cooperative venture. An effective interorganizational form can only emerge through a common process involving all partners in the cooperation. The chapter examines the processes involved in creating such cooperation through a case study of the Upper Austrian healthcare and social sector.

THE CASE STUDY During reforms in the healthcare system in 2005, Austria tried for the first time to create a legal basis for funding an integral and efficiencyenhancing cooperation structure between the extra- and intramural

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healthcare systems. The counties were encouraged to implement interfaces between these intra- and extramural organizations as a way of improving quality in health services. In the middle of 2007, the relevant actors in health and social politics in Upper Austria—especially the county administration and the health insurance system—decided to work through the complex challenges they faced with assistance of an organizational development (OD) approach to cooperation for the first time. Since early 2008, our research department has been charged with the implementation of this complex cooperation project for the Upper Austrian field of healthcare. The main objective of this cooperation project— referred to as the “NSM—Optimizing the Interface Management in Upper Austria”—is the construction and development of a cooperative effort to optimize the cooperation between the government-based service-provider and nonprofit organizations in the healthcare and social services industries. The project gained particular significance through the inclusion of all sectors, as disputes could take place at the interface between different levels, areas, and institutions in healthcare and social care. Basically, this management project is about the sustained assurance of a rapid, seamless, and medically and economically feasible treatment chain for all patients and clients in healthcare and social services, with the objective of maintaining existing strengths and eliminating weaknesses. There were a number of challenges identified during the evaluation process. First, there were considerable weaknesses in admission and dismissal management, with the weakest link in managing dismissals. There were three possibilities for improvement in the system, focused on standardization in the way in the organization of medical aides, information in the dismissal process (e.g., doctor's notes, letters on long-term care), and the dismissal process itself. Second, attention had to be focused on the set-up of the NSM coordination structure for relevant fields of work and competence issues between the participating service providing organizations. Over 30 organizations from state administration, social insurance, social service organizations, welfare associations, hospital owners, and the medical board were represented in this project. The cooperative venture included players and organizations from the government political system and government-related fields (e.g., the Austrian institution of legally organized social insurance), public service institutions in the healthcare sector (e.g., government-run hospital associations), and nonprofit organizations of the civil society that perform public services. From the outset, it was a central goal to avoid being seen as simply another traditional planning project, emphasizing the development of a stable system based on cooperation and creating a model that could be tested in selected regions.

234 R. GROSSMANN, K. PRAMMER, and C. NEUGEBAUER

Project Design Especially during the first foundation phase and at sensitive points of development, the help of “omni-partisan third parties” can be invaluable. It is important that these external consultants are viewed as neutral by all participating institutions—which normally hail from different fields of work, act on different interests, and follow different logics. Such neutrality enables the consultants to figure out different and common interests, structure appropriate work schedules, define relevant topics and issues, find solutions as problems emerge, develop rules of cooperation, settle conflicts, and establish decision-making processes. To ensure acceptance and grant the necessary capacity to act, experts and organizational consultants who are skilled at developing cooperation are required. The more the participating organizations are dedicated to the formation of cooperation, independent from single persons or institutions, the more efficient will be the set up of the cooperation system. Thus it is important to ensure the impartiality of the external monitoring system within the system of cooperating institutions before the development process begins. Preliminary Design Study A useful first step is a preliminary design study, focusing on framing the project, its content and organization (including the commission of external consultant), which is codrafted by all the cooperating institutions. Representatives of the cooperating institutions meet with a task at hand, before the “hotter phases” that demand decisions concerning direct solutions. These initial task meetings provide a foundation upon which they can begin to form cooperative relationships. During this process the representatives should also be introduced to the consultants and related external actors, with the opportunity to check on their neutrality and impartiality. This preproject phase should be set up in a way that all potential actors have the opportunity to participate, developing and deciding on the content and organization of the project together. Such participation should be carefully planned, as a demanding time commitment can be discouraging to the participating institutions, especially as they calculate the resources that will be necessary to implement the actual project. Thus, some general guidelines to consider include: (1) a controlled and focused preliminary design study; (2) a core team that frames the project, consisting of representatives of the key player institutions; (3) an assessment of other tasks and challenges by an extended preproject team of representatives of the additional institutions; and (4) a decision-making process about the evaluated frame of the project, formed by all cooperating insti-

Consulting Interorganizational Relations 235

Authority

Social work/Health care

Health insurance inst.

Health Platform

Health Fund

Preliminary Project Core Team Preliminary Project Extended Body

Figure 11.1.

Preliminary project set up

Research and Consultancy System iff

Preliminary project set-up.

tutions and consisting of managers of those institutions. Figure 11.1 illustrates an ideal formation of a preproject team. Simultaneous Focus The project was intended to eventually create generally valid guidelines for the entire province. All players were expected to commit to these guidelines, so each player or person/ institution would “operate” in a way that was best harmonized with the other players. At the same time, it had to be possible to render specific services for and to the individual citizen/ patient locally that were based on the general guidelines applicable in the entire province. The wording “possible to render services” was to be taken to mean that on site services could only be rendered successfully if they take into account the specific social and organizational circumstances of the district, which is a result of “organic growth.” Cooperation Commitment In creating a foundation for cooperation, it is vital to consider the necessary commitment of the participating organizations on different axes. To ensure cooperation in the counties between actors of single

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institutions, which, at times, operate only on a local level (e.g., a doctor, local home care service), and at other times in the whole county (e.g., social counselling services of the county administration, mobile services) or even in the whole province (e.g., insurance institutions, mobile sick and home care services, ambulances), commitment to the agreed guidelines, instruments, and future cooperation structure is absolutely necessary: (1) on an operative level between actors of the institutions in a county; (2) on the management level between the managers of institutions in a county, as well as managers of institutions within a province; and (3) on an institutional level, between the actors and their managers in a county and their managers of their province (see Figure 11.2). Commitment, of course, can’t be commanded. It should be created in ways that facilitate everyday situations, through social interaction and team work on and between all the levels captured in Figure 11.2. This can be enhanced by the project organization during the set-up and running periods.

Level of district / Level of Land

Ex ec u tiv es

on

ma na

ger ial

lev e

l

Cooperation / Commitment on level where framework is created and managed for entire Land

Districts Em plo

Hospitals Doctors in practices Mobile services yee Sen. citizens‘ / Nursing homes so no Health insurance inst. pe r atio Authorities nal Politicians lev el NGOs ... Cooperation / Commitment on operational level of doing in districts

Figure 11.2.

Different levels of cooperative commitment.

Cooperation / Commitment between levels of Land and district

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Project Effectiveness To guarantee efficient and creative solution finding processes—and to ensure the functionality of the actual work of the cooperating institutions—it is useful that the diagnosis and validation are accomplished by two separate teams. Different groups of people should be appointed to these teams. For instance, diagnosis should be carried out by representatives of the operative actors, since these people have the necessary knowhow and are the ones who have to deal with the consequences after the implementation. Decision making should be done by representatives of the management, who have the political power and who have to make decisions concerning guidelines within their organizations after implementation. Within this context, the formation of a project hierarchy is intentional. Since the members of the diagnosis team do not have to make decisions for the binding guidelines of their organization, they are encouraged to find alternative, creative, and basically new solutions. The testing of new solutions during the pilot process makes the introduction and testing of totally new solutions easier. Since the members of this team are explicitly commissioned to do so, the possibility of reacting positively to change and innovation increases as the project continues. The consent of the decision makers, who they represent, must be binding. The team members have to be able to rely on them, referring to them during their operative work and during the piloting or later implementation of solutions. In this way: (1) the idea of “conception” and “decision-making” are strictly separated; (2) found solutions will be represented by a large number of actively participating persons within their own organization; and (3) the entire process will become relatively resource conscious, especially concerning the binding of resources at that time (see Figure 11.3). Parallel Transfer of Solutions In a regular noncooperative project, the conceptual phase typically follows clear schematics. Under the guidance of external consultants the solutions, structures, and their necessary instruments will be developed taking the concerned persons into account to various degrees. Sometimes solutions are selected from an existing pool and are adapted as necessary. This is a very popular method for large projects, especially in the public sector. The advantages are clear—solutions are found quickly, external know-how can be used in an excessive way, and there is a relatively low possibility of ensuing conflicts with the concerned parties during the conceptual phase. There are, of course, also disadvantages. There is a limited use of the know-how of the concerned persons within the system, combined with an increased possibility of contempt toward the proposed solutions. Thus

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Regular organization Safeguard project / Safeguard results

Project organization

DecisionDecision-making / safeguarding body

Diagnostic / proposition team Know-how transfer

Figure 11.3. Diagnostic/proposition and decision making/safeguarding work project vessels.

there is a higher risk of dilution of these solutions during implementation since compromises have to be made. Another disadvantage in the de facto separation of solution finding and solution transfer is the missed chance of testing by the actors who will have to deal with the proposed solutions in the future. This loss of field testing within a protected area of an externally guided project during the set up of cooperation system is a double negative effect. Actors in a cooperative system always face the dilemma of “double loyalty”—the loyalty to their own institution and loyalty to the cooperation system. Cooperation can only work on a long-term basis if there is a possibility for the actors to remain loyal to both and the potential to find a balance between those two. The actors of the cooperation system will not manage to do so completely on their own. They will need assistance from their colleagues within their own institution who are not directly participating in the cooperation but who (can) influence it indirectly. This dynamic calls for field testing that allows all directly and indirectly involved participants in the cooperation to be able to act “free of punishment” concerning “double loyalty.” This includes the managerial level as well as the operative level, regarding opinion making, decision making, and voting during the analysis and conceptual work and the first trial runs.

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This approach differs explicitly from other projects in the public service because it does not involve experts who develop complete solutions removed from those concerned. Hence, it is not about developing everything, committing it to paper, having it approved by the top level of the hierarchy, and then transporting it to those concerned and implementing it in the institutions. Solution transfer is a concurrent process from the beginning because the solutions are (1) developed directly by representatives of concerned organizations—done with content and procedural support of external facilitators—and (2) tested directly for their practical value in the course of pilot projects (Prammer, 2009). This means that test runs and parallel transfers create the fitness program for the later life cooperation. To use resources as economically as possible, the actual work on finding solutions only takes place in a few districts brought together in clusters. Within this context, operational players and executives of the other districts are hooked up with the process via occasional transfer events. Creating Cooperative Space In most instances, the underlying conceptual theories are only vaguely known by the majority of the project’s actors. To ensure that their experiences tie into specifications of the cooperative approach and a difference to regular noncooperative projects can be “felt” by the project members, these conceptual linkages should be pointed out and shown as an alternative and motivating way. This is only possible if the approaches are established explicitly and with consent of the project's actors, as useful or dysfunctional actions are noted and appropriate social settings are created. Only through direct cooperative dialogue between all participating actors—supported by the external consultants—can the knowledge be passed on to them. A public discursive exchange with the highest levels of transparency is necessary. This social process should take place as early as possible. The earlier this is done, the faster all considerations will take effect productively. Practicing loops of testing, feedback and learning prior to the start of contentoriented project work will enhance solution-finding and decision-making processes. In essence, cooperative space for manoeuvring has to be created, which marks an emotional and conceptual difference compared to experiences with regular planed projects and normal events in the internal, hierarchically driven business. Thus, there is a need to create a space that allows cooperation within the political system and, at the same time, sets up borders to that political subsystem. This is a necessary condition for any cooperation concerning public goods and work within the political arena, especially if the general idea of teamwork and partnership is to

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flourish. Cooperation is only responsible to itself and its operators and organizations, and cooperation has to develop from its own source. This fine line between connection to and secession from the controlling system of politics is critical for the further advancement of cooperation in the public area. On the one hand, it is necessary to connect to this political system to ensure the required legitimation to make strategic decisions and guarantee the availability of resources. At the same time, however, any attempt to use or influence the cooperative venture by the political system should be limited. Too much political control would endanger the equilibrium of cooperation and could lead to a break-up of the cooperative venture. Cooperation lives on the basis that all involved organizations give up a part of their sovereignty in exchange for common and mutual success. If such success is jeopardized by too much influence by the political side, the individual partners will withdraw and the cooperation will be terminated. Since field testing happens within a protected and externally guided space—within the boundaries of the newly created cooperation structures and its guidelines—the probability increases that actors will work within and with the solutions found during the project. It takes an open handling with transgressions, contradictions, and so forth. Although this is clearly less common in everyday business, it is invaluable for successfully developing and sustaining cooperation. Such “resocialization” concerning action within a protected area of agreed upon goals, modes of operation, and guidelines, as well as an active culture of feedback and constructive conflict, is a vital and permanent project task for cooperation systems. Cooperation must therefore occur in “area in between,” located within the interdependence between politics, the independent outsourced organizations, and for-profit as well as nonprofit organizations. The question as to whether this balancing process between connection and boundaries—better subsumed with the concept of control problems—produces a new system arises, has already been covered elsewhere (see Mayntz, 1993; Scharpf, 1993; Sydow, 1994; Willke, 1995). Nevertheless this functionalizes cooperation at least into an independent project system that offers the opportunities for the system to be tested beyond the legal framework and, up to a certain extent, even beyond efficiency-oriented financial aspects. It is upon this basis that it is eventually constituted into a sustainable state. Mode of Operation To implement the cooperation project, a structure must be selected that has been organized quite centrally in terms of a “bottom up” principle, while also ensuring the commitment of the leadership and management at regional and state levels. In contrast to conventional planning

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projects, it is essential that in cooperation projects the collaborating players on the operational, practical “doing” level develop the substantive and structural design of the cooperation according to the “bottom up” principle. This will ensure that the cooperation actually develops on its own and not, as usually experienced, where external solutions are imposed on existing problems. This is a key success factor for sustainable cooperation. This approach will enable the operative players to solve their problems with their own self-created measures. Our observation suggests that this approach is by no means self-evident and therefore will be received with distrust and even astonishment by the operational players at the beginning. As the project advanced, however, enthusiasm for the approach increased. The comprehensive integration of the control level guaranteed the necessary commitment needed for substantive results and also ensured the anchoring of the cooperation project in the organizations involved. The broad involvement of representatives of the top management level was also critical to ensure that the developed solutions and the cooperation itself were legitimized and politically reinforced. The Set-Up On the highest political control level, a steering committee should be constituted in which the top executives of the participating organizations as well as the main political decision makers of the country are represented. This committee has the responsibility to make the key decisions in the project and also to secure these in the relevant project environments. The presence of respective leaders from every institution involved in the steering committee helps to ensure that these decisions will be made on the basis of a broad consensus and, subsequently, will be implemented by the individual departments and local players. Following the bottom up principle, in order to support the operational level that bears the main burden of preparing the substantive and structural design of the cooperation—in terms of hierarchy, directly under the steering committee—a national project team was trained that laid the cornerstones for the project at the operational level. Within this context, relevant scientific findings were also considered. This team sets the substantive framework and formulates the guidelines as an action guide for the concrete preparation of the operational processing level. Another challenge is for the national project team to adapt solutions and suggestions on the operational level and consolidate them with an overall country focus. In addition, the team carries out the selection and establishment of the processing teams at the operational level. In summary, at the highest control level (i.e., at the federal state level), a dual project system was installed: (1) a committee at the executive level

242 R. GROSSMANN, K. PRAMMER, and C. NEUGEBAUER

A

A

Districts Cluster A

Cluster Steering Committee

Transfer Body

Cluster Steering Committee

Electronic Know-how Platform

Consultancy system iff

Focus on level of district

Scientific system iff

Project Team of the Land

Cluster Project Team Know-how Transfer Events

Focus on level of Land

Figure 11.4.

Steering Committee of the Land

B

Cluster Project Team B

Districts Cluster Other districts B

Project set-up.

that secures the current results in the context of the pilot project, with ultimate policy making authority; and (2) a project team to organize and process the substantive, operational agendas (see Figure 11.4). This dual project system is then repeated at an operational level. In both model regions, each composed of several political districts, a committee was then established at the executive level. Both teams were located here at the operational level, which assumes the brunt of the substantive work following the lines of the “bottom up” principle. The operational teams conceptualized the practical tools, instruments, and content suggestions with regard to the relevant performance-related processes in the model regions within the framework of the country project teams. The committee at the executive level provided content-based support for their substantive findings and structural proposals for the design of the cooperation. These findings and proposals had to ultimately be supported by all sides. In this respect, the committee at the executive level makes the necessary decisions in relation to the work of operational teams and secures these results—as would the steering committee at the country level—among the relevant players and organizations in the pilot regions.

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Testing in two model regions was necessary to attain substantive and legitimized results based on the necessary critical range and awareness of the cooperation.

Methods of Operation In the two model regions, which consisted of several political administration counties, the cluster development team faced the challenge to work on the tasks commissioned by the NSM province project team within a few days. Both cluster development teams produced lengthy reports (55- and 45-page papers) and equivalent presentations within 4 days. During the work on the content (e.g., management of allocation, management of dismissal, optimizing of practice of medication and medical aids) the teams tried to create a cooperative understanding between the participating actors and consider the interfaces of the process when working on solutions. This enabled them to work on problems at the interfaces of everyday work and optimize the processes afterwards. To make best use of the limited time window, the team had to utilize the protected space. They were successful, pointing out the differences of perspectives between the current logic of work in the present situation and the planned logic after the solution finding process. The whole process of work on the content of the task was divided up into three substeps: • Step 1: During the first step the development team mapped the ideal state of the relevant paths of clients, which could be separated clearly from the logics of day-to-day routines. Maps for ideal processing were charted in which the relevant steps of the treatment of patients (e.g., management of admission, management of dismissal) were displayed as parts of the complete process. A focal point was that the whole process was shown from the service provider's as well as the patient's point of view. By doing this the team managed to point out new perspectives and work out a new reference system. • Step 2: After finishing the initial step, the ideal picture (i.e., the new reference systems), were compared to the existing modes of operation. In such comparison, the focal problems and weaknesses as well as the existing strengths and advantages could be identified. Based on this analysis it was possible to think about new functional solutions. • Step 3: As illustrated in Figure 11.5, during the final step, solutions were identified and initial regulations and agreements were devel-

–

–

–

Results for “discharge management” in districts in Cluster A: Process Step 1.

Reference form with social history module (Minimum social history aspects: * unknown, * phone number of next of kin, * current nursing/care: - mobile service, relative with care skills, - 24 h care, - no care)

In the interest of quality assurance for these services, a discharge management board is created if needed for Cat. III. It is cmposed of relevant players who have to be involved (intra- and extra-mural; medical, nursing).

Discharge management board

In this part process, handling has to be seen as an initial follow-up care hypothesis. In the course of part processes II/III the category first identified can be adjusted in a dialogue between ward and transition nursing.

Cat.I: no accompaniment; Cat.II: care by ward; Cat.III: care by transition nursing

Care categories:

Tools:

Figure 11.5.

•

Rendering of service: Physician and nurse compile patient‘s medical history in the sense of a haarmonized „team decision“ and do an initial screening to establish the scope of follow-up care. In doing so, they also use material from the reference process.

Responsibility: ward physician in charge of treatment

VI. Evaluation of care case

•

V. Transport carried out

•

IV. Discharge carried out and completed

Initial event: Registration in hospital Closing event: Determination of care category, in case of category III confirmation of takeover by „transition nursing“.

III. Activities in preparation of discharge

II. Medical/nursing decisionmaking and accompaniment of case

Positive evaluation

•

I. Initial screening, disachrge prognosis

Hospitalization

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oped. The initial ideal process map was also updated by these new solutions and regulations, and finalized into a new cooperative process map for the day-to-day work of all actors. During the development of the structure-oriented task of the coordination structure, the team tried a different approach. As part of its preparation, the consulting team interviewed all relevant system players in the model region, a summary of which was shared with the development team as an initial basis of work. Based on this information, the development team tried to institutionalize the cooperative approach, attempting to secure the agreed upon solutions, process agreements, and regulations at the relevant interfaces. As part of this process, underlying goals were to evaluate them, fortify personal contact, and continue conceptual discourse. To facilitate this process, the team developed the structure illustrated in Figure 11.6. Based on the ideas and goals of the cooperation structure and as an analogue to the project structure of the development team, it was suggested to install a coordination committee, with the goal of improving the cooperative approach, ensuring that it is sustained, helping them process

Land NSM Steering Committee

Level of Land NSM Project Team Region District Cluster Steering Committee

optional: Multiple districts up to a maximum of all districts of a region

Cluster Project Team

Level of district

quality circle (QC) „palliative care“ care“ QC „XY“ XY“

Figure 11.6.

Level of district/ district/ Level of region

The developed cooperation structure.

246 R. GROSSMANN, K. PRAMMER, and C. NEUGEBAUER

ensuing ideas, and presenting them to the management. The management of the regions’ task was to take up the improvements, judge them and ensure that they are implemented. On the provincial level, the team encouraged the provincial coordination team to collect all results, discuss them and assess whether they could be implemented in the entire province. Finally, the NSM solutions were to be decided by the executive committee, with a focus on content and organization, and then ensure that they were consistently implemented. The preparation of this task, which was done by us as external project support, turned out to be a professional mistake and points to a vital criteria for the success of cooperation. The content of the task, concerning problem analysis as well as solution finding, was and must be developed by the members of the cooperation system. This involvement provides a basis to generate the necessary commitment, which was reflected when the participants presented and defended their solutions in ensuing discussion with the other project committees. But during the development of the cooperation structure, the problem analysis was taken over by us as the external consultants and we have presented a pregenerated set of solutions for the working process. Although this step was necessary due to lack of time and the reality that the cooperation structure was a strange environment for most of the team members, it was apparent that the pregenerated solutions did not generate the same level of commitment. At the presentation of the solutions to the relevant project committees, there was a major difference—in comparison to the presented guideline solutions—concerning the team’s identification with the presented solutions as well as the dedication with which the solutions were presented. In fact, it was only during the later phase of processing and discussion that commitment was raised to an equal level. A much larger effort was necessary than would have been if the teams had had performed their own problem analysis and developed their own solutions.

The Transfer Committee Besides the content and structure-based working process, another step was taken to go beyond those directly involved actors and also present all solutions to a wider circle of stakeholders. To facilitate this process a transfer committee was created. The team members of the cluster counties tested and presented their solutions to their colleagues as a way of ensuring that the ideas would spread in the cluster counties. At the same time the actors of the project received feedback by the concerned people who were not directly involved in the project. The feedback was content-based as well as on an

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emotional level. The information was used to modify and improve ideas and analyze specifications that had not been taken into account. Further development was also guaranteed as it will be required later during regular business. First test runs were a by-product for later development. Other feedback, which was based mostly on emotions, helped the actors to form their impressions on agreement and consent. This information also helped to shape their thinking about further transfer efforts to their own county as well as helping gathering further material for provincewide implementation. Through the transfer group dialogue, the solutions were able to be spread to the noncluster counties.

Piloting and Evaluation At the beginning of the project a primary claim was that the two cluster development teams would present solutions that had been tested and piloted in the model regions at the end of the conceptual phase. Emphasis was to be placed on the suitability of these solutions for everyday business to ensure that they could be effectively implemented. This piloting, which was done within a 4-month period, created two key opportunities for reflection. First, the members of the development team, as well as all participating actors, had the chance to test and document the results by precise practise work. Second, the piloting and evaluation created a data base, which enabled the development team to give a well-founded feedback. During the testing and evaluation phase, classical benchmarking was not the intended goal. It was never thought to be a standard validated scientific research effort. Instead the focus was on qualitative development and learning-based evaluation of the project as a way of gaining additional insight that would guide adaptation and refinement of the found and tested solutions. Other goals of the piloting were to (1) create a mode of learning for the actors to gain experience for substantial improvements, and (2) simultaneously take a step toward cooperative and longterm activities of development. The testing phase also provided the opportunity to pilot both content and structural ideas, facilitating and supporting the development of cooperative projects. The evaluation by the cluster development team was based on two approaches. First, the qualitative expert interviews on the piloting were executed by us as the external project support and the conclusions were presented to the operative development team. These interviews, which followed standard protocols to ensure uniformity across all actors, were undertaken with at least one actor of every piloting organization. Overall, 37 interviews were conducted. Second, clearly structured evaluation

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forms, which were easy to complete, were given to all pilot participating organizations (e.g., hospitals, elderly and nursing homes, social services, mobile services, practical doctors). At the end of the piloting, these surveys were also analyzed and processed for graphical display. Both methods were used as basis material for interpretation and evaluation by both operating teams. The evaluation then became the foundation for adaptation and improvement of planned solutions. The evaluation indicated that the content and structure of project solutions—especially since they were designed with the “bottom up” principle by actors of the relevant operative levels—were already well-founded. This could be seen clearly by the fact that not a single solution was rejected. This outcome reinforces the intensive problem diagnosis of the operating teams, who were well aware of existing problems, underscoring the importance of ensuring solutions are developed at the operative level. The learning-based evaluation contributed to the task, further defining and refining the solutions.

SYSTEMWIDE IMPLEMENTATION: SECURING THE LONG-TERM EFFECT Since the beginning of the project there was a declared goal to introduce the content and structural results of the project phase to all of Upper Austria. Therefore, not only were the content and structure evaluated during the testing phase but conceptual approaches and reflections were captured at the same time to allow a countrywide roll out of the results. The interaction between the different project teams was shown to be highly beneficial and the project indicated that professional solutions could be found and developed in a comprehensive, organized manner. These solutions were accepted, especially when the relevant experts were challenged together to devise them. It is interesting to see that roughly 165 people, participating in different committees and teams, and additional professionals and managers of the piloting organizations took part in the project, actively working on the topic at hand. The experience of this—and other—cooperation projects suggests that the transfer of project teams and the pilot regions to other professionals and organizations that were not initially involved is a difficult and challenging endeavor. Despite the fact that the solutions were developed and tested by the professionals, these cooperative results, their content and structure are, at first, seen as something foreign when introduced from the outside. This is one of the reasons why expert solutions only get accepted when a common working process is used to introduce them. Thus, it appears that the pivotal challenge of the project roll out will be

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initiating this structural process of cooperative acceptance and use in new regions and organizations. It especially requires an external moderation of the process at the beginning of its development. The piloting phase showed that it can be especially difficult in large organizations to inform and involve all colleagues in the system. As such, managers of the participant organizations need to play a key role in this process. The results have to be integrated formally and initiated by proactive behaviors to facilitate ultimate acceptance by the relevant key players in the institutions. As indicated by the field tests for implementation, the cooperative approach and common work of all participating organizations were the foundation of the project. The role of external consultants, as a neutral third party, during the initial phase was also seen as a necessary requirement for successful roll out of the program. During the implementation phase, and especially in regular operation, it is important to have sufficient professional support (e.g., documentation, evaluation, coordination), which had been handled mostly by external consultants, to transfer this responsibility to the cooperation system. These functions have to be taken over successively by the responsible institutions. Finally the cooperation as a system had to be managed as well. Leadership roles, for example were intentionally not put into place due to concerns that they might disturb the development of partnerships between the organizations during the project phase. As a substitute for this absence, some of the functions were given to external consultants. Moving forward, however, it appears that partnership-based management functions will be needed to guide operations. To facilitate continued cooperation this function should preferably be executed by an organizationoverlapping team.

CONCLUSION Independent from the successful execution of the evaluation for the content-based aspects of the project itself, there are some relevant conclusions about the creation of cooperation. Essential criteria for successful cooperation in the public sector were confirmed (Grossmann et al., in press) and some new ones were identified. This “field test” suggests that that many public services, especially those in public health, can only be realized through cooperation between the government sector, nonprofits and the private sector. For example, with respect to managing allocations or dismissals, the government, as the sponsor and initiator of integrated care processes, must work with outsourced public organizations (e.g., hospitals, social security institutions, physicians, mobile emergency services)

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as well as relatives of the clients. Cooperation and networks can create linkages between these organizations that are stable, flexible and open to self-organization. Thus, cooperation is not only desirable from the perspective of the affected citizens, but it can also be considered a survival condition for individual service providers. Cooperation between organizations provides a chance for an organization to improve its regionally competitive position for public resources and customers. Although cooperation appears to be an obvious answer to many challenges in public services, and is often recommended by experts, successful multi-sector cooperation remains the exception rather than the rule. Adopting the view of potentially collaborating organizations, the prerequisites for cooperation can, at times, appear contradictory. As such, these contradictions must be dealt with for successful cooperation. For example: • Few organizations have real experience in dealing with other professional and organizational entities and have little strategic interest in such experience. • Cooperation is only slightly supported by governmental institutions. Hardly any financial incentives are offered to support such cooperative efforts, though this trend seems to be gradually changing. • Government institutions as well as not-for-profit organizations and businesses are bound to their own recipes for success and indentities. In an increasingly competitive market, they have to distinguish themselves from other service providers by focusing on core competencies and branding. The main challenge is to consider differences between these organizations and how to manage them in relation to growing competition. A starting point for cooperation of organizations can therefore be described as follows—delineation of competition, competitors, partners, customers and contractors on very different levels, and at the same time, cooperation in selected areas. The people involved are especially challenged in dealing with the different traditions, working practices, cultural peculiarities, identity benefits and certain restrictions of potential partners. Successful examples for cooperation between two or more different organizations underscore an underlying reality—cooperation does not function by itself or because of external necessity. On the contrary, the organizations involved and the people responsible have to go through an arduous process to create this rather improbable form of organization. The developments within the project NSM have pointed to five key factors that are relevant for cooperation in public health and social sector:

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• development of good personal relationship between the actors; • well-structured performance processes of the partner organizations; • interlocking teams working within clearly defined areas with precise assignments; • those teams working within a structure supported by good interaction of working and decision-making levels of centralized and decentralized elements; and • support by consultants as external, objective third parties, especially early on in the process. Supportive personal relationships are a necessity for long lasting cooperation, because without them thrust cannot be established. Trust also requires relationships that are transparent and predictable, which perform well under pressure. Trust is generated by actions that justify trust and continuously confirm it. Trust presumes that the actors reveal their conditions of action and establish understanding for the point of view of the others. Trustful cooperation also requires refraining from the direct pursuit of self-interest in expectation of long-term, rather than shortterm, benefit. Visible and comprehensible commitment to common tasks is a key to such trust building. This commitment is shown during common, everyday work processes. Good relationships are needed to ensure trust and, in turn, trust further strengthens the relationships. In essence, successful cooperation fortifies the both relationships and the cooperation itself. Personal relationships, however, are necessary but not sufficient to maintain cooperation over time. Structural anchoring is also necessary. From a structural perspective, for example, ongoing interorganizational cooperation is typically dependent on: (1) a common team set up by the partners of the cooperation; (2) the dispatch and commission of professional colleagues with clearly defined areas of action; and (3) commonly set rules for the cooperation. Teams are another key factor in building cooperation, especially those that are appointed by several partners. Through positive crossorganizational work experiences, an essential source of motivation and energy is created that supports continued cooperation. Such teams should be utilized on several levels: direct working process that deal with the cooperation in general, coordination and decision making, and various special tasks (e.g., preparation of presentation and events, marketing, preparation of working and decision-making processes); and organizational consulting. These teams, formed from different organiza-

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tions and professions, need to be supported in developing their own working structure and culture. Rules that are accepted by all actors are also important for common work. The rules help to ensure continuity and reliability of personal commitment and create a productive environment for both work-related processes and the development of trust. The relevant rules of the NSM project were: obligatory attendance, personal execution of assignments (i.e., no representations), unanimous voting; and jointly designed and created information policy and public relations. The separation of working and decision-making levels (e.g., coordination teams for the districts, control, coordination teams of the counties, executive committee) has a double function. First, it ensures that the work of the operative staff is bound to the leadership level, reinforcing mutual implementation-related decisions. Second, the share of work relieves the professional staff of the burden to answer all results and deal with all consequences within their organization. This approach also encourages and enables professionals to offer unconventional suggestions. The decisions about implementation and obligation should be given to management. In cooperation appointing colleagues in an organization should guarantee a double loyalty—to the organization they work for and to the cooperation itself. To make this possible, they should be assigned direct tasks from their organization with room to manoeuvre for individual developments. They need both independence from and backing by the management of their own organization. At the same time, management faces a dilemma with cooperation, attempting to balance the needs of developing projects and final implementation. While the appointed colleagues must be able to work independently and creatively during the development phase, and, as illustrated by the cased study in this chapter, the project also has political ramifications during the implementation phase. At this pivotal point of the project, the dilemma of consulting cooperation becomes visible—it takes internal development of the organization for interorganizational cooperation to occur. However, consultants can only work on the internal development of an organization in limited ways. It is vital that cooperative thinking and comprehension are introduced to the participating organizations as a way of stimulating the necessity of internal improvement parallel to the cooperation. Cooperation can further benefit from qualified, objective consulting. Cooperation needs an independent third party that is dedicated to the new cooperative system, in essence serving as the solicitor of the new system. At the beginning of cooperation, it is difficult for each participant to set goals and modes of operation without facing distrust and rejection. Counsellors can offer options for forms of organizations and process steps without being bound to individual interests. As they also have a good

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overview of the common system, they can execute evaluations and initial discourse when choosing possible participants in the “due diligence” phase. Since they don't support individual goals, they can be solicitors of the newly found system, building bridges between the different organizations. Professional expertise in organization development is of particular advantage here, especially in terms of offering custom-tailored structures and modes of operation. Yet, while this input should be provided on a continuous basis, in practice its importance is underestimated on a regular basis. Especially during the initial phase, consultants can help structure and moderate the process of work, ensuring that rules and agreed upon steps of the process are followed. As objective third parties, consultants are also in a position to support processes with unknown outcomes, enabling coequal participation and importance of all organizations and/or actors. Providing a foundation for such equality is a decisive factor for the success of any cooperation system. Any partner who captures a special role or surges ahead can unintentionally create mistrust by the others. Since true partnership development has to be advanced actively, consultants can provide this function until the cooperation system is sufficiently stable and an accepted internal share of work has been generated. After that a rotating moderation—with the exception of challenging single situations—can be performed by the members of the relevant committees. Cooperation has to be organized, goals and structures have to be created in a common development process, and an enormous amount of communication and coordination is required. This level of cooperation needs the support of a “server of the net,” a coordinating authority that is appointed by all and accepted by all participating organizations—a critical task that is often underestimated. Another critical aspect of consulting should also be taken into account. During the development and set-up phase, the participating actors require insight into interorganizational know-how. External consultants can offer expertise on relevant structures, provide advice on the organization and development of implementation processes, and help create the foundation for successful cooperation. As the case study in this chapter has suggested, to be effective this required know-how should be offered in form of alternative or unfinished solutions. This approach allows solutions to be designed by participating actors, creating a sense of ownership of the outcomes and further enhancing the necessary commitment between the partners. Finally, successful cooperation requires explicit documentation. Once again, consultants can be very useful in supporting teamwork in teams by compiling such documentation. Active documentation is more than simply transcribing flip charts and capturing comments; it also includes coor-

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dinating, structuring and graphically processing information, uncovering and identifying outstanding issues or contradictory statements. As this chapter has hopefully indicated, cooperation is created as an individual social system of and between the participating organizations. Cooperation requires its own identity, a matching form of organization, its own decision-making and work processes, and a jointly agreed upon set of policies.

REFERENCES Chisholm, R. F. (2008). Developing interorganizational networks. In T .G. Cummings (Ed.), Handbook of organizational development (pp. 629-650). Newbury Park, CA: Sage. Grossmann, R. (2006). Nachhaltigkeit und die Entwicklung von Organisationen [Sustainable development and the development of organizations]. In W. Berger & R. Lauritsch (Eds.), Wissenschaft und Nachhaltigkeit [Science and sustainability] (pp. 16-25). Klagenfurt, Austria: IFF Grossmann, R., Lobnig, H. & Scala, K. (2007). Kooperationen im Public Management. Theorie und Praxis erfolgreicher Organisationsentwicklung in Leistungsverbünden, Netzwerken und Fusionen [Cooperation in public management: Theory and practice of successful organizational development in alliances, networks, and mergers]. Weinheim, Germany: Juventa Verlag. Grossmann, R., Lobnig, H., & Scala, K. (in press). Collaboration in public management. Charlotte, NC: Information Age. Huxham, C. & Vangen, S. (1996). Working together: Key themes in the management of relationships between public and non-profit organizations. International Journal of Public Sector Management, 9(7), pp. 5-17. Mayntz, R. (1993). Policy-Netzwerke und die Logik von Verhandlungssystemen [Policy networks and the logic of negotiation systems]. In A. Héritier (Ed.), Policy-Analysen: Kritik und Neuorientierung [Policy analysis: Critique and re-orientation] (pp. 39-56). Opladen, Germany: Westdeutscher Verlag Prammer, K. (2009). Transformations Management: Theorie und Werkzeugset für betriebliche Veränderungsprozesse [Transformation management: Theory and toolset for organizational change processes]. Heidelberg, Germany: Carl Auer Verlag. Sandfort, J., & Milward, H.B. (2008). Collaborative service provision in the public sector. In S. Cropper, M. Ebers, C. Huxham, & P. Smith Ring (Eds.), The Oxford handbook of inter-organizational relations (pp. 147-174). Oxford, England: Oxford University Press. Scharpf, F. (1993): Positive und negative Koordination in Verhandlungssystemen [Positive and negative coordination in negotiation systems]. In A. Héritier (Ed.), Policy-Analysen: Kritik und Neuorientierung [Policy analysis: Critique and re-orientation] (pp. 57-83). Opladen: Westdeutscher Verlag Sydow, J. (1994). Strategische Netzwerke: Evolution und Organisation [Strategic networks: Evolution and organization]. Wiesbaden, Germany: Gabler Verlag.

Consulting Interorganizational Relations 255 Sydow, J., & Manning, S. (Eds.). (2006). Netzwerke beraten [Consulting networks]. Wiesbaden, Germany: Gabler Verlag. Willke, H. (1995). Systemtheorie III: Steuerungstheorie. Grundzüge einer Theorie der Steuerung komplexer Sozialsysteme [System theory III: Control theory. Outlines of a theory of control of complex social systems]. Stuttgart, Germany: Fischer Verlag.

PART IV IN SEARCH OF PROFESSIONALISM IN MANAGEMENT CONSULTING

CHAPTER 12

CRITICALLY EXPLORING BUSINESS ENGAGEMENT IN ACADEMIA The Case of the U.K. Consulting Industry J. O’MAHONEYJoe AND R. ADAMS and Richard Adams O’Mahoney

The dominance of managerial and business prerogatives in government and the public sector has accelerated over the last 25 years and, especially in the United States and the United Kingdom, has had far-reaching consequences for the priorities of public institutions such as the health service, the civil service, and the academy (Craig & Brooks, 2006; Clark, Gewirtz, & McLaughlin, 2000; ). In the United States, the political impetus for the introduction of business imperatives to the higher education sector were introduced through a change in governance, a reprioritization of funding priorities, and a drive to expand business education as a “cash cow” for university financing (Deem, Hillyard, Reed, & Reed, 2007). Central to the transformation of the higher education sector has been a drive to engage university research, especially in business schools, with the priorities and opportunities presented in various business sectors. In The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 259–277 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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recent years, this has focused especially on what can loosely be termed the “knowledge economy,” which includes professional service firms, knowledge intensive firms, and innovation networks (Alder, Shani, & Styhre, 2004). This chapter critically examines the challenges faced by one industry within this area, management consultancy, and the extent to which these trends have driven and received the research attention of academic researchers. Management consultancy is chosen in part because it is perhaps the most successful of the new economy industries, but also because it has, through its growing influence with central government, helped set the agenda and discourse of business engagement in higher education. The chapter first provides a brief outline of the U.K. consulting industry, tracing its importance in terms of the new managerialism in the public sector and its subsequent prioritization by the U.K. government as a business to be engaged with by academics. Next, using interviews with senior stakeholders in the U.K. consulting industry, the challenges and research priorities for this sector are detailed. These priorities are then compared to the actual academic output in this field. It is found that few academics have researched what the consultancy industry perceives as its priorities and challenges. A number of other concerns dominate higher education research agendas, especially in leading journals. However, rather than concluding that this is an example of the disjunct, and therefore, failure, of the engagement between consultancy and academia, it suggests that the priorities of academics may help to highlight longerterm and more fundamental issues that could help sustain and renew the industry. The chapter seeks to achieve a number of things. First, it elicits the current challenges and priorities of the U.K. consulting industry. Second, it examines the extent to which academic research is meeting these concerns. Third, it examines the issues academics have been prioritizing when studying consultancy, which appear to be removed from the challenges that the industry itself espouses. Finally, it provides a critical empirical examination of the agenda-setting priorities of the “new managerialism” in the public sector.

AN ARRANGED MARRIAGE OR TRUE LOVE? In the United Kingdom, the introduction of “new managerialism” into the public sector, and specifically to the institutions of higher education, was enabled through a number of mechanisms. In the 1980s the funding cuts to higher education made by the Thatcher government necessitated an examination of alternative forms of financing for university governance. Central to this effort was an expansion of the managerialist

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agenda in business schools. Thus, sociological academics found their funding cut and opportunities curtailed while those who sought to explore managerialist agendas or develop master of business administration (MBA) teaching were rewarded by both the funding bodies and the business market (Kaufman, 2004, p. 401). As MBAs demanded a more engaged and managerialist cadre of professors than courses, say, in industrial relations or work sociology, an implicit transformation occurred in business schools. Throughout the 1980s managerial teaching and research were prioritized and promoted over such subjects as sociology or political studies. This change in teaching priorities was paralleled by changes in governance, management, and funding opportunities. In governance, executives from industry and business were increasingly placed in roles previously held by academics. For example, in the Economic and Social Research Council (ESRC), the Department for Education (DoE) and the Higher Education Academy (HEA) there was an explicit attempt to bring a private sector ethos to what was perceived as a bureaucratic and cumbersome public sector (Pierre, 2000). This process was accelerated by the Treasury-funded “Lambert Review of Business University Collaboration” (2003), which among other things encouraged the removal of academics from University Councils and their replacement with “business leaders.” With regard to funding, pressures for further industry engagement came indirectly, from the premium income associated with industry research or business education, and directly, from funding bodies such as the ESRC. Here, funding has increasingly been prioritized for projects in “business engagement,” “capacity building” or “business knowledge transfer,” which are explicitly aimed at driving research that matches the priorities of industry. Of special interest to funding bodies has been engagement with industries that are seen to enhance levels of competitiveness though knowledge creation and innovation, such as e-business, the creative industries, management consultancy, financial services, digital media, and marketing. Of these, the consulting industry is held up as the “best in show” of knowledge generation, innovation diffusion and networking. The U.K. consulting industry, along with that of the United States and Germany, has been one of the great business success stories of the twentieth century. Emerging relatively recently for an influential profession, the growth of the industry gathered pace in the wake of the Second World War on the back of both economic growth and the import of U.S. expertise. In 1956, the U.K. consulting industry was comprised of roughly 800 consultants generating an income of £4 million (Tisdal, 1982). By 2008, this market was worth around £6.3 billion (Management Consultancy Association, 2009). From 1980 to 2000, the growth of the global economy

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combined with large IT and outsourcing projects enabled growth rates of between 10-15% per annum. The industry success in economic terms was paralleled in its political ideology. The coup de grace of consulting, in the United Kingdom and the United States, was to tether itself inextricably with the thinking of the neoliberal governments of the 1990s, promoting an agenda of deregulation, privatization and reform, which guaranteed a decade of product innovation, industry growth, and unprecedented profits (Craig, 2005). Thus, ironically, consultancy itself played a great part in creating the climate and conditions by which academics are now exhorted to seek greater engagement with the industry itself. The success of the consulting industry is all the more palatable for government funding institutions as it epitomizes for politicians and, subsequently, funding-bodies, the dominance of the new economy over the old. Above everything, consultancy represented the emergence of the knowledge economy—a highly skilled, flexible, and innovative change to the manual, heavy, and inconveniently unionized industries that characterized earlier decades. Cast as “innovation factories” (Hargadon & Sutton, 2000, p. 161), consultancies epitomized the type of work that academics, should engage with, if not aspire to emulate. Their generation and dissemination of “management innovations” (Birkinshaw, Hamel, & Mol, 2008) are seen to provide a sustainable and significant improvement to the competitiveness of U.K. clients (Engwall & Kipping, 2002; Haas, 2006; Suddaby & Greenwood, 2001). On top of the natural curiosity any business school academic might feel toward an industry that has been so successful and influential, a number of other factors have encouraged an engagement with the consulting profession. First, as MBAs become more competitive and increasingly tied to the demands of the market, management consultancy, the number one career choice of MBAs, is now often featured as an elective or stream in many degrees. Second, a number of consultants and academics have sought to enhance their credibility or identity by stepping into the territory of the other. Many academics seek to supplement their income with external consultancy work, while many consultants seek to add credibility to their practice through association with a business school. Finally, in the United Kingdom, a number of funding opportunities have been made available to study the consulting industry, or, more generically, knowledge intensive industries. The authors of this chapter, for example, have won over £200,000 of funding in the last 2 years on different funded projects specifically for this purpose. Given these various forces and mechanisms for engagement between consultants and academics, the chapter turns to exploring the success of these exhortations. The analysis examines the extent to which academic

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research has actually been driven by the priorities of the consulting industry and how this has been achieved.

METHODOLOGY The research project, funded by the ESRC, was intended to elicit and understand the challenges of the U.K. consultancy industry and examine the extent to which academia has responded to those challenges. In fact, we “go so far as” (Abrahamson & Eisenman, 2001, p. 71) involving potential consumers of management knowledge in helping to specify areas that would benefit from more scientific knowledge production and dissemination. The challenges were explored through three sources of information. First, two workshops supported by the Advanced Institute of Management (AIM) were run aimed at exploring current themes in the consulting industry (Antonacopoulou, Muzio, Geiger, Patnaik & Roohanifar, 2006a, 2006b). The first, attended by 26 participants, focused on opportunities and challenges in management consultancy. The second, with 21 attendees, honed in on the issues of professionalism, regulation, and procurement. These workshops were attended by academics, professional body representatives and a range of representatives from small and large consultancies. The second data source is a set of semistructured interviews with sixteen senior stakeholders in the consulting industry, including partners and directors at IBM, Accenture, KPMG, PA Consulting, and PWC, each lasting for approximately an hour and focusing on their perceptions of the challenges facing the industry. The sample also included buyers of consultancy services in client organizations, the leaders of the two industry representative bodies, and the head of professional services at the Office of Government Commerce (OGC). These semistructured interviews aimed at eliciting a more detailed understanding of the challenges the industry faces. These data were combined with recent analyses undertaken by media sources (such as the Financial Times, Accountancy Age, and The Economist) to support and develop the themes identified in earlier research. Finally, key stakeholders (n = 29) were invited to a third workshop to discuss, challenge and validate the emergent themes from the previous data gathering and analytic exercises. Discussions were facilitated by an academic or senior industry/policy making representative and captured by a rapporteur. Together with the previous workshops the project involved 75 discrete participants and contributors as several participants attended more than one event. On the basis of this empirical work, five overarching “challenges” were identified as important to the Management consulting industry, which

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were categorized as: strategic change; operations management; procurement; innovation management; and people management. Concurrently, a literature review was undertaken to assess the extent to which published research addressed each of these challenges and to understand the nature of any gaps in the literature. Within the scope of the project, the review was limited and by no means exhaustive. However, it covers most of the major journals, government reports, and industry association publications since 2000. In addition, a keyword search of research from the Social Sciences Citation Index (in January 2008) was undertaken for publications from the period 2000-2008. As many search terms had high levels of ambiguity (for example “operations” can mean different things in the management, military, and medical spheres) searches were only performed in “business,” “management,” “economics,” and “operations management and management science” subject categories. This decision produced a high level of concurrence regarding the meaning of search terms.1 This methodology enabled a comparison of the priorities of the management consulting industry with the research produced by academics. It also enabled the authors to map out academics’ preferred areas of research, if they were not directly addressing industry-espoused challenges. Our methodology has two principal limitations. First, regarding the interviews with stakeholders, a total of seventy-five senior consultants, academics and industry association representatives were involved in identifying the priorities outlined in this chapter. The voices of less senior representatives of the industry (e.g., consultants rather than partners, managers rather than directors) may have elicited a different perspective on the industry—perhaps focused more on operational rather than strategic issues. Second, time constraints limited our ability to perform a thorough systematic review of the literature. Systematic review proposes a rigorous methodology to reviewing the literature that explores a clearly specified question, which is usually derived from a policy or practice problem, using existing studies. To be considered systematic, such reviews are expected to conform to a set of principles as well as adopting specific methods to identify, select, and critically appraise relevant primary research and extract and analyze data from the studies included in the review (Tranfield, Denyer, & Smart, 2003). Consequently, our search may have overlooked some studies with strong contributions to make. While an attempt to rectify this deficiency was made by looking at “left-over” articles, it should not prove surprising if some were missed. Additionally, while the identified themes were examined with reference to the consulting industry, analysis concerning the themes in alternative industries was

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not prioritized. It is possible that opportunities for cross-sectoral learning exist, but this possibility was not the focus of our study. One recommendation for the future would be to examine which of these themes has not yet been adequately studied in a cross-industry context.

U.K. CONSULTANCY CHALLENGES The challenges to the consulting industry identified in the workshops and interviews are categorized by the five groupings noted earlier: strategic change, operations management, procurement, innovation management, and people management.

Strategic Change The environment in which the consultancy sector operates has changed significantly in recent years, creating a number of challenges for the strategic thinking of consultancies. Interviewees identified four core issues that have affected their strategic thinking in 2008: • Competition: Three of the Big Four2 accounting firms have (re)built their consulting practices,3 which has increased the competition for the advisory market and placed pressure on other consultancies. Concurrently, the big system integrators, such as IBM and EDS, as well as a number of niche consultancies are moving aggressively into the advisory space. • Consolidation: Large consultancies are looking to mergers and acquisitions (M&A) to boost their talent in the advisory sector. Since 2003, the volume of M&A activity in the sector has tripled (Equiteq, 2007) and 2008 saw more M&A activity than ever before, with four firms a week being bought and merged.4 For smaller firms, being acquired by a larger organization offers lucrative rewards for partners and shareholders. Interestingly, 2008 was the first time that Private Equity firms outstripped other consultancies as the biggest buyer of small firms. • Globalization: While emerging economies have long been used for outsourcing and information technology development by consultancies, they are increasingly providing a threat for upstream advisory services. IBM, for example, now has 25% of its workforce based in India, while Accenture has over 50% of its workforce in Asia. Although lacking the intellectual longevity demonstrated by U.K. and U.S. consultancies, BRIC (Brazil, Russia, India, and China)

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countries5 are increasingly developing low-cost centers of excellence in advisory services. • Recession: 2009 was the first year for decades where consulting revenues actually fell. The economic downturn has meant lower fees as consultancy services are one of the optional extras firms cut down on in a recession. As the lackluster growth in public sector spending indicated in 2006-07, the boom times appear to be over as far as government is concerned. With margins, and income per consultant, already heading downwards, the industry seems in for a tougher ride in the next 12 months.

Operations Management External pressures from clients have also changed the style and character of consulting operations. Interviewees articulated several concerns that were creating change in the industry: • Client Sophistication: Globalization has made many projects larger, more complex, and much more expensive. With more at stake, clients have become more sophisticated in their dealing with consultants, often employing exconsultants to run internal consulting teams or manage the procurement of consultancy services. One effect of this trend has been a reduction in operating margins (e.g., income per consultant). • Value: For similar reasons, consultancies are also under pressure to demonstrate and quantify the value they add to an organization. However, given the complexity of some projects, many consultants interviewed found this to be a challenge, less so in the information technology and finance areas but especially the case in “people” change projects. • Implementation: As projects have become bigger, clients have become more risk-adverse, favoring incremental to radical change. Since 2000, this trend has “all but eliminated” the market for bluesky “visionary” consulting traditionally undertaken by high-end practices such as McKinsey or Booze Allen Hamilton. Where strategic work is undertaken, clients are insisting that it is closely linked to frameworks for implementation, thus inclining projects toward practical incremental change rather than radical visionary ideas. • Payment Models: In seeking to shift the responsibility for risk from themselves onto consultants, many clients, especially in the private sector, are seeking to utilize incentivized payment systems where

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the consultancy is rewarded for good and punished for bad performance. Although many consultancies welcome the chance to link performance and reward, there is concern that, in some circumstances, this compensation scheme can result in clients downplaying the achievements of the consultancies they work with.

Procurement Another way in which clients have sought to minimize expenditures on consultancies is to develop their own procurement services. Prompted by pressure from the National Audit Office (NAO) and the Public Accounts Committee (PAC) to maximize value for money when contracting consultants, the public sector, and the Office of Government Commerce (OGC) have taken a lead in establishing procurement controls for advisory services—a lead that has been followed by in the private sector. All interviewees agreed that these developments have had a significant impact on their work, though it is thought to impact large projects more than niche advisory companies:6 • Communication: Many believed that the development of procurement functions has placed an intermediary between themselves and the end business user. This raises the question of how the relationship between the consultant and the business user has changed in terms of the project needs being successfully communicated to all parties. • Politics: The trend in communication also means that many of the personal relationships between consultancies and business users that characterized earlier deals are not as useful as they once were. Some consultancies are, therefore, looking for ways of “staying in” the client (i.e., avoiding going through procurement for repeat business). This raises a challenge for consultancies in ensuring they keep within procurement rules and client in ensuring they get the best people for the job. • Education: Some consultants suggested that the emphasis on cost leads some procurers to opt for cheaper options (e.g., contractors) without realizing the “added-value” that they were missing by not using consultancies. There was, some felt, a need to educate procurers about the different forms of consultancy relationship and what each could offer. • Standards: Consultancies, procurers, and clients emphasized the need for clear and open communication between stakeholders at an

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institutional level to ensure that best practice is maintained and understood by all individuals involved. There are a number of mechanisms in place to ensure this happens, but the process of disseminating knowledge is complex and uneven.

People Management Due to the recent boom in the consulting industry and changes in the employment market, recruitment and retention often top surveys where industry leaders are asked to outline their concerns about the consulting market. However, concerns raised by stakeholders went beyond simple supply and demand: • Work-Life Balance: As the industry has got more competitive, hours have gotten longer and consultants are under more pressure. Many of them, seeking better job / life balance leave the industry: some to set up their own consultancies, some to work for clients and some simply to work in less stressful jobs. New recruits were reported as being less likely to put up with unpleasant placements and were more likely to leave if they did not feel at home in a consultancy. • Pay: As margins have been reduced in the consulting industry, companies have found that pay in other sectors is much more attractive to talent than it was 10 years ago. The finance sector is capable of paying around 20% more for talented individuals and some clients are now happy to pay a premium to recruit exconsultants if it will reduce their procurement costs. • Engaging Educators: Some stakeholders bemoaned the lack of science, technology, engineering, and mathematics (STEM) graduates in the United Kingdom, which meant they increasingly had to look overseas for suitable recruits. Some wondered if different ways of engaging with current students might develop realistic expectations and suitable competences among potential recruits. • Culture: There were also some internal issues regarding people management in consultancies. These concerns included: fostering cooperation rather than competition among ambitious employees; balancing the lag between industry boom and recruitment (which can result in capacity issues); and managing the culture change for employees who transfer to consulting from other industries. Others were concerned that transnational consultants might have difficulty crossing cultural barriers.

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• Reputation: The media has always been keen to publicize reported “failures” of consultancy projects, especially in the public sector. Recent books titles have exploited this hype presenting consultants as unethical, profligate, and expensive. Some stakeholders feared that this type of coverage not only impacted clients but also diminished the number of potential recruits for the industry.

Innovation Management Innovation plays a central part in the value that consultancies add to clients and the economy generally. Many of the major business concepts, methods, and theories have been developed by leading management consultancies and passed, through their consultants, into the wider economy. However, several challenges were posed by stakeholders regarding innovation in the current climate: • The Next Big Thing: Several senior consultants noted the lack of a new “Big Idea” in consulting. Concepts such as TQM, BPR, eBusiness, and outsourcing were large, global ideas that made the industry billions and resulted in improved performance of the economy. However, since 2000, some feel the industry has been scratching around for the next “big thing” with little success. • Client Satisfaction: In their survey of the industry, the Management Consultancy Association (2007, 2009) recently noted that clients were unimpressed with their consultants’ ability to think creatively with only 59% satisfied or very satisfied. More than one partner agreed, pointing out that clients often felt they were not getting much in terms of new ideas from the consultancies they brought on board. • Risk: Some interviewees felt that this lack of innovation was a result of client attitude toward risk. They believed that in these riskadverse times, clients were less likely to undertake big adventurous projects or try overly creative (and untested) methods. • Fostering Innovation: Many of the consultants we interviewed found it hard to articulate a consistent source for their own creativity. Although several cited large “knowledge databases” in their organisations, they felt that this was rarely the source for the creativity that was needed when dealing with clients. One partner suggested that joint research between consultancies and academia might seek out new big ideas that were on the horizon.

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THE LIMITS AND OPPORTUNITIES OF ENGAGEMENT Table 12.1 presents a summary of a keyword search of research from the Social Sciences Citation Index (in January 2008) for publications for the period 2000-2008. It is noteworthy that while a search for the challenges returned over 9,170 articles in business / management journals, only 23 of these are also concerned with management consultancy. As Table 12.1 indicates (as of January 2008), on the basis of the evidence of our search academics appeared not to be engaging (in any significant numbers) with the challenges articulated by the consulting industries. Despite the changes to governance structures, funding streams, and teaching priorities, academic researchers have not yet engaged significantly with the challenges of strategy, operations, procurement, innovation or people management in the consultancy industry.

Table 12.1. Published Literature by Theme (2000-2008): Social Science Citation Index, January 2008

Theme Alone

Management: Search Term “Manag*”

Consulting: Search Term: “Consult*”

Management Consulting: Search: “Management Consult*”

Strategic change: Search term: “Strateg*”

4,590

570

8

2

Operations management: Search term: “Operational” or “Operations”

4,641

165

11

0

Procurement: Search term: “Procur*”

4,158

8

1

0

Innovation: Search term: “Innovat*”

2,778

393

8

2 (+9)a

People management Search term: “Recruit*” “Talent”

4,206

12

1

0 (+3)a

Total

9,170

49

20

3 (+12)

Theme

Notes: 1. Search terms as per column and row heads. *Denotes a truncation to permit search for singular, plural or other variants of a word. 2. Searches only performed in business, management, economics, sociology, and operations management and management science subject categories. 3. aDenotes articles which were similar to the relevant theme but were not returned by a keyword search. In the case of “innovation” the additional nine articles were concerned with knowledge management. In the case of people management, the additional three articles were concerned with skill development.

Critically Exploring Business Engagement in Academia 271 Table 12.2.

Analysis of Remaining Consultancy Articles

Theme

Details

Number of Articles

Sector analyses

Overview or history of consultancy sector

15

Practitioner guidance

“How-to” guides for consultants

11

Identity, rhetoric, and control

Identity regulation of consultants through ideological controls and discourse

13

Professionalization

If consultants should professionalize

4

Case studies

Descriptive overviews of consulting

4

Irrelevant articles

Concerned with medical consultation

40

It is interesting to note, however, that when entered as a “stand-alone” search term, “management consultancy” (excluding the themes of strategy, procurement, innovation, and so forth) returned 100 journal articles. The question which then poses itself is—if these articles are not focused on the priorities that consultants themselves express, what are they concerned with? An overview follows in Table 12.2. Although academic researchers have not overly concerned themselves with the challenges of the consulting industry—at least as expressed by the industry representatives in the present study—these studies are nevertheless important and relevant, not simply to the long-term interests of consultants but also their clients and the socio-political environment they influence. The themes of this research, which are identified in Table 12.2, will be briefly examined below, illustrating their importance to the consulting industry and its stakeholders.

Sector Analyses These studies are generally descriptive pieces that give an overview of the development of the consultancy sector in its socioeconomic environment. Many of these illustrate both the legislative, ideological, and social waves that have enabled the growth of the consulting industry and the political, rhetorical, and economic mechanisms by which they have achieved such a considerable impact in such a short space of time (McKenna, 2006). These studies are important because they point to findings that are important to both consultancies, policymakers, and clients, such as the dangers inherent in combining audit and consultancy functions (Craig, 2005), the association of consultancy and western imperialism (Wright & Kwon, 2006), and the importance of structural and

272 J. O’MAHONEY and R. ADAMS

institutional change in sustaining consulting growth (Kipping & Kirkpatrick, 2007). Adams and Zanzi (2005), for example, highlight the increasing risk and pressure associated with the continuing financialization of the consulting sector and the impact this can have as consultancies move away from the partnership model (Epstein, 2005). Practitioner Guidance/Case Studies Although practitioners know themselves to be entirely capable of generating marketable products and exemplar cases for the consumption of clients, the pressure to maximize sales by presenting a favorable picture can often detract from deeper reflection and deliberation on alternative interpretations. Many cases, especially those developed for students and professional bodies, emphasize ethics and how these translate into practice (Collins, 2004; Van Es, 2002). In addition, many academic papers provide credibility and a more robust theoretical back-drop to consultancy products. Many highly profitable consultancy products such as total quality management and business process reengineering were developed in conjunction with business school academics. Rhetoric, Control, and Identity Many academic studies examine how the identities of both consultants and clients are “constructed” through the ideological controls and discourses that consultancies both construct and reproduce in their social interactions. The work in this area is varied, but includes a focus on stress and alienation in consulting work (Costas & Fleming, 2009; Handley, Clark, Fincham, & Sturdy, 2007; O’Mahoney, 2007; Whittle, 2005), which may help consultancies understand and improve the poor retention rates that they currently experience. Other work has shown how the construction of “expert’” and “elite” identities help provide succour to insecure managers faced with operational and personal uncertainty and ambiguity (Alvesson & Robertson, 2006; Robertson & Swan, 2003; Whittle, 2006), while others have demonstrated the importance of consulting rhetoric fitting with social discourses in achieving sustainable success in selling management innovations (Case, 1999; Clark & Salaman, 1998). Professionalization The professionalization of the consultancy industry is something that few large consultancies are interested in as it would lead to an external body accrediting their consultants and, they argue, a commoditization of consultancy work (O’Mahoney, Adams, Antonacopoulou, & Neely, 2008).

Critically Exploring Business Engagement in Academia 273

However, research has indicated that there may be benefits for other stakeholders such as clients, procurement functions, employees, and the wider society (McKenna, 2006; Muzio, Kipping, & Kirkpatrick, 2006). These articles have argued that a professional ethos incorporating bestpractice, a code of ethics, and a codified body of knowledge would help mitigate some of the risks as consultancy projects have grown and potential conflicts of interests have arisen (Berit & Kieser, 2002; Glucker & Armbruster, 2003). Although it has only been possible to provide short summaries of some of the work academics have undertaken that falls outside the scope of “responding to industry challenges,” they do, nonetheless, offer an indication that much of this work, while not perhaps satisfying the strategic immediate concerns of the industry, provides a deeper, longer-term consideration of the wider impact of consulting in many important areas. There are, of course other concerns that may merit consideration that we have been unable to include in this brief review.

SUMMARY This chapter has detailed the business challenges espoused by senior stakeholders in the U.K. consulting industry. Our findings show that despite the rhetoric of business engagement, relatively few academic research papers directly address the challenges that the industry believes it is facing. Abrahamson and Eisenman (2001) argued for management scholars to (1) become more aware of and concerned with current developments in business so as not to lag behind the incidence of phenomena about which they are producing management knowledge and (2) focus on problems with a greater concern for the real issues that management knowledge consumers face or will face in the future. Consequently, an important contribution of this study is in providing a timely indication of managers’ concerns in the management consulting industry. However, we also argue that the identified gap between knowledgeneed and knowledge-provision should not necessarily be taken as a sign of failure. Issues such as identity, stress, risk, control, and professional standards, while not immediately addressing the contemporary challenges identified during our empirical work, are central to the long-term survival of the industry, the well-being of its employees, the credibility of the industry’s reputation, and its impact on the social and economic welfare of both clients and wider society. The analysis also provides an empirical illustration of the segmentation of academic activity envisaged in Ivory et al.’s (2006) recent consideration of the relevance and value of business schools. They proposed four modes

274 J. O’MAHONEY and R. ADAMS

of knowledge production: a social science approach, which focuses on contribution to knowledge; a liberal arts agenda that relates to the fundamentals of knowledge; the professional school whose primary focus is the improvement of management practice; and the business school as an actor in the knowledge economy, where the focus is on the development of management knowledge and the commercialization of scientific and technological discoveries. That small number of academics directly addressing the consulting industry’s contemporary challenges arguably coheres to the professional school/knowledge economy profile while others emphasize the social science model and liberal arts agenda. Each has an important role to play and, by attempting to examine the complexities of the social embeddedness of consultancy, academic research can help highlight some important issues which consultancies, regulators, and clients may miss if they focus solely on short-term horizons. In short, although this chapter accepts that the economic imperatives of industry should be one guide in setting research agendas for the academy, research has a wider responsibility than simply to answer to industry demands. As well as academics asking themselves how they can better engage with the priorities of industry, so too should industry, or at least government funding bodies, be asking themselves how they can better engage and take account of the whole range of academic work in this area. ACKNOWLEDGMENTS This study was undertaken for the U.K.’s Advanced Institute of Management Research and funded by the Economic and Social Research Council. The two authors were the lead investigators for the project. The report is helping guide future government funding into consulting research and to recommend appropriate models of engagement between academia and consultancy that will meet the consulting challenges of the twenty-first century. Richard Adams also gratefully acknowledges support from the Innovation and Productivity Grand Challenge with funding provided by the Engineering and Physical Sciences Research Council and the Economic and Social Research Council through the Advanced Institute of Management Research. NOTES 1.

2.

By “concurrence” we mean the extent to which writers understood each term to mean the same thing (e.g., most analyses mean the same thing when they use the term “professionalization”). Deloitte did not divest its consultancy practice.

Critically Exploring Business Engagement in Academia 275 3. 4. 5. 6.

Some consultancies have termed this “business advisory services” but they appear indistinguishable from management consulting. This list includes Impact Plus, ItemPlus, Hornagold & Hills, Advantage Business Group, Mantix, Orbys Consulting, and The Rossmore Group. BRIC is an acronym that refers to the fast-growing developing economies of Brazil, Russia, India, and China. It is important to note that these points are raised by consultancies. There would be a number of different interpretations from procurers, clients, and government institutions, which are outside the scope of this report. Many consultants are inclined to hold negative views on procurement processes because inter alia procurers are adept at negotiating discounts.

REFERENCES Abrahamson, E., & Eisenman, M. (2001). Why management scholars must intervene strategically in the management knowledge market. Human Relations, 54(1), 67-75. Adams, S., & Zanzi, A. (2005). The consulting career in transition: From partnership to corporate. Career Development International, 10(4), 325-338. Adler, N., Shani, A., & Styhre, A. (2004). Collaborative research in organizations: Foundations for learning, change, and theoretical development. Newbury Park, CA: Sage. Alvesson, M., & Robertson, M. (2006). The best and the brightest: The construction, significance and effects of elite identities in consulting firms. Organization, 13(2), 195-224. Antonacopoulou, E., Muzio, D., Geiger, D., Patnaik, S., & Roohanifar M. (2006a). Challenges and opportunities in management consulting. Warwick, England: GNOSIS. Antonacopoulou E., Muzio, D., Geiger, D., Patnaik, S., & Roohanifar, M. (2006b). Professionalism, regulation and procurement. Warwick, England: GNOSIS. Berit, E., & Kieser, A. (2002). In search of explanations for the consulting explosion. In K. Sahlin-Andersson & L. Engwall (Eds.), The expansion of management knowledge: Carriers, flows and sources (pp. 47-73). Stanford, CA: Stanford University Press. Birkinshaw, J., Hamel, G., & Mol, M. (2008). Management innovation. Academy of Management Review, 33(4), 825-845. Case, P. (1999). Remember re-engineering? The rhetorical appeal of a managerial salvation device. Journal of Management Studies, 36(4), 419-441. Clark, T., & Salaman, G. (1998). Telling tales: Management guru’s narratives and the construction of managerial identity. Journal of Management Studies, 35(2), 137-161. Clark, J., Gewirtz, S., & McLaughlin, E. (2000). New managerialism, new welfare? London, England: Sage. Collins, D. (2004). Who put the con in consultancy? Fads, recipes and ‘vodka margarine.’ Human Relations, 57(5), 553-572.

276 J. O’MAHONEY and R. ADAMS Costas, J., & Fleming, P. (2009). Beyond dis-identification: A discursive approach to self-alienation in contemporary organizations. Human Relations, 62(3), 353-378. Craig, D. (2005). Rip off: The scandalous story of the management consulting money machine. London, England: Original Book. Craig, D., & Brooks, R. (2006). Plundering the public sector. London, England: Constable. Deem, R., Hillyard, S., Reed, M., & Reed, M. (2007). Knowledge, higher education and the new managerialism. Cambridge, England: Oxford University Press. Engwall, L., & Kipping, M. (2002). Introduction: Management consulting as a knowledge industry. In M. Kipping & L. Engwall (Eds.), Management consulting: Emergence and dynamics of a knowledge industry (pp. 1-18). Oxford, England: Oxford University Press. Epstein, G. (2005) Financialization and the world economy. Northampton, MA: Edward Elgar. Equiteq. (2007). Mergers and acquisitions management consulting report. London, England: Equiteq. Glucker, J., & Armbruster, T. (2003). Bridging uncertainty in management consulting: The mechanisms of trust and networked reputation. Organization Studies, 24(2), 269-297. Hargadon, A., & Sutton, R. (1997). Technology brokering and innovation in a product development firm. Administrative Science Quarterly, 42, 716-749. Haas, M. (2006). Acquiring and applying knowledge in transnational teams: The roles of cosmopolitans and locals. Organization Science, 17(3), 367-384. Handley, K., Clark, T., Fincham, R., & Sturdy, A. (2007). Researching situated learning. Management Learning, 38(2), 173-191. Ivory, C., Miskell, P., Shipton, H., White, A., Moeslein, K., & Neely, A. (2006). UK business schools: Historical contexts and future scenarios. Summary report from an EBK/AIM management research forum. London, England: Advanced Institute of Management Research. Retrieved from http://www.aimresearch.org /publications/schools_report.pdf Kaufman, B. (2004). The global evolution of industrial relations: Events, ideas and the Industrial Relations Research Association. Geneva, Switzerland: International Labour Organisation. Kipping, M., & Kirkpatrick, I. (2007). From Talyor as product to Taylorism as process: Knowledge intensive firms in a historical perspective. In D. Muzio, S. Ackroyd, & F. Chalant (Eds.), Redirections in the study of expert labour: Law, medicine and management consultancy (pp. 92-141). London, England: Palgrave. Lambert Review of Business-University Collaboration. (2003, December). HM Treasury, pp. 1-142. Management Consultancy Association. (2007). The UK consulting industry. London, England: PMP. Management Consultancy Association. (2009). The UK consulting industry. London, England: PMP. McKenna, P. (2006). The world’s newest profession. Oxford, England: Oxford University Press.

Critically Exploring Business Engagement in Academia 277 Muzio, D., Kipping, M., & Kirkpatrick, I. (2006). Overly controlled or out of control? Management consultants and the new corporate professionalism. In J. Craig (Ed.), Production values: Futures for professionalism (pp. 184-203). London, England: Demos. O’Mahoney, J. (2007). Disrupting identity: Trust and angst in management consulting. In S. Bolton, (Ed.), Searching for the H in human resource management (pp. 149-192). Newbury Park, CA: Sage. O’Mahoney, J., Adams, R., Antonacopoulou, E. & Neely, A. (2008). A scoping study of contemporary and future challenges in the UK management consulting industry. London, England: ESRC. Pierre, J. (2000). Debating governance. Oxford, England: Oxford University Press. Robertson, M., & Swan, J. (2003). Control—What control? Culture and ambiguity within a knowledge intensive firm. Journal of Management Studies, 40, 4. Suddaby, R., & Greenwood, R. (2001). Colonizing knowledge: Commodification as a dynamic of jurisdictional expansion in professional service firms. Human Relations, 54(7), 933-953. Tisdall, P. (1982). Agents of change: The development and practice of modern management consulting. London, England: Heinemann. Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence-informed management knowledge by means of a systematic review. British Journal of Management, 14(3), 207-222. van Es, R. (2002). From impartial advocates to political agents: role switching and trustworthiness in consultancy. Journal of Business Ethics, 36, 145-151. Whittle, A. (2005). Preaching and practicing flexibility: Implications for theories of subjectivity at work. Human Relations, 58(10): 1301-1322. Whittle, A. (2006).The paradoxical repertoires of management consultancy. Journal of Organizational Change Management, 19(4), 424-443. Wright, C., & Kwon, S. (2006). Business crisis and management fashion: Korean companies, restructuring and consulting advice. Asia Pacific Business Review, 12(3), 355-373.

CHAPTER 13

CHALLENGING UNIVERSAL CRITERIA IN MANAGEMENT CONSULTING When Practices Meet Prescriptions C. LALONDE

Carole Lalonde

This chapter is based on an analysis of two real cases of consultant intervention, the first which seems a priori to have been a failure as it ended rather badly for the consultant, and the second of which appears to have been more of a success due to its positive outcome. These two cases are drawn from a previous research on management consulting in healthcare organizations (Lalonde, 2006). Although both cases are real, we have chosen aliases to identify the organizations and the individuals involved in each case. These two cases are used in teaching MBA students, and are intended to contribute to discussions and reflection on the nature of work of a consultant in organizations. The two cases may be compared to a certain extent as each involves an independent consultant, with some experience, who was invited to submit a proposal through personal contacts with the general director, and who then assisted part of the professional The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 279–307 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

279

280 C. LALONDE

bureaucracy in the public health and social services network, adjust to governmental reform involving organizational mergers. Although the two cases may appear quite similar at first glance, a thorough analysis will show distinct differences. With input from three experienced consultants, the chapter illustrates the importance of going beyond the surface to deepen the study of each case, initially to understand what is going on and secondly to adjust the intervention accordingly. The analysis of these case studies is grounded in a qualitative interpretive approach where the accent is on relational (the dynamic among actors) and processual dimensions (Langley, 1999) through identification of critical incidents (Flanagan, 1954).1 To further the analysis of the cases, we called upon three experienced consultants in the health and social services sector who acted as “experts.” These three consultants were chosen among a panel of members of the professional association of human resources management counsellors notably for their experience in the health and social services sector. These three consultants were not involved in the cases presented. In preparation of a winter course on management consulting in 2009, each were met individually for an interview of approximately an hour and a half in order to summarize their observations on these two cases. They were then invited to a seminar with master of business administration students in March 2009. Meanwhile, the class had to identify three students who have a duty to thoroughly analyze each case and to respond to comments of three consultants prompts in the classroom. It was then possible to compare observations made by students on these two cases to those of the three invited consultants. The analysis of these cases leads to a questioning of conventional wisdom in terms of the consulting services that were offered. The objective is to highlight the importance of taking into account some idiosyncrasies of professional bureaucracies and, more broadly, to contextualize the practice of consulting. A substantial part of the consulting literature attempts to define standards of practice with an assumption of universal factors leading to success (cf. Appelbaum & Steed, 2005; Block, 2000; Czerniawska, 2003; Ford, 1974; Fullerton & West, 1996; Gable, 1996; Jang & Lee, 1998; McKinney Kellogg, 1984; McLachlin, 1999, 2000; Schaffer, 2002; Stumpf & Longman, 2000), and the conviction that adhering to these norms would suffice to ensure perpetual consulting mandates. Among the principal common factors for success in consulting mandates, we generally find the following elements (see Table 13.1): (1) consultant’s integrity and honesty; (2) client’s commitment to accomplish the mandate; (3) definition of a clear mandate; (4) client’s maintenance of control in the fulfilment of that mandate; (5) relevance of consultant’s skills; (6) fit or harmony in the client–consultant relationship; 97) importance of clarify-

Challenging Universal Criteria in Management Consulting 281 Table 13.1. The Pros and Cons of Universal Success Criteria in Management Consulting: Summary of Contributions List of Statements Regarding Universal Criteria of Success

Authors Who Defines These Statements

1. Consultant’s integrity, honesty and/or objectivity

McLachlin (1999); Schaffer (2002); Simon & Kumar (2001)

2. Client’s commitment to Czerniawska (2003); Ford accomplish the mandate (1974); Jang & Lee (1998); McLachlin (1999); Schaffer (2002)

Authors Who Challenge These Statements Grey & Sturdy (2007); Huszczo & Sheahan, (1999); Saxton (1995); Sturdy, Schwartz, & Spicer (2006) Bottin (1991); Lalonde (2006); Rosenblaum & McGillis (1979)

3. Definition of a clear mandate

Czerniawska (2003); Ford (1974); Jang & Lee (1998); McLachlin (1999); Schaffer (2002)

4. Client’s maintenance of control in the fulfilment of the mandate

Czerniawska (2003); McLachlin (1999); Schaffer (2002)

Furusten & Werr (2005); Sturdy (1997)

5. Relevance of consultant’s skills regarding the assignment and the insertion in the profession as a whole

Czerniawska (2003); Fuscass (2000); Jang & Lee (1998); McLachlin (1999); Schaffer (2002); Simon & Kumar (2001)

Abrahamson (1996); Sorge & van Witteloostuijn (2004)

6. Fit or harmony in the client–consultant relationship

McLachlin (1999); Schaffer (2002)

Clark & Fincham (2002); Fullerton & West (1996)

7. Importance of clarifying the responsibilities of both sides

Block (2000); Czerniawska (2003); Ford (1974);

8. Atmosphere of mutual respect and trust

Czerniawska (2003); Stumpf & Longman (2000)

Bell, Oppenheimer, & Bastien (2002)

9. Transferability of skills from consultants to client and/or improvement in client capabilities

Czerniawska (2003); Schein (1999)

Abrahamson (1996); Appelbaum & Steed (2005); Carter & Crowther (2000); Smith (2002); Sturdy, Clark, Finchman, & Handley (2009); Williams (2004)

10. Commitment and experience of team members

Jang & Lee (1998)

Ginsberg & Abrahamson (1991)

11. Understanding of the internal and external environment of the client’s organization

Schein (1999)

Appelbaum & Steed (2005); Beeby & al (1999)

282 C. LALONDE

ing the responsibilities of both sides; (8) atmosphere of mutual respect and trust; (9) transferability of skills from consultants to client and/or improvement in client capabilities; (10) commitment and experience of team members; and, finally, (11) understanding of the internal and external environment of the client’s organization. This literature is “seductive” for students aspiring to become consultants to the extent that it suggests that remembering these few straightforward and easy principles will ensure that a consultant’s mandate proceeds smoothly. However, there are several other studies that illustrate the limits of such principles, challenging a number of general criteria for success and questioning their universality (see last column of Table 13.1). Indeed, part of the published research ignores the inherent difficulties associated with the insertion of a third party, usually presumed to be neutral (Huszczo & Sheahan, 1999), into an organization (Saxton, 1995). It also tends to obscure the impact of internal political games on the consultant’s work (Cobb, 1986; Jang & Lee, 1993; Verstraeten, 2007), especially in professional bureaucracies where power is disperse (Buono, Nurick, & Hoffman, 1995; Lalonde, 2006) partially due to the autonomy conferred to professionals in their practice (Abbott, 1988; Bucher & Stelling, 1969; Freidson, 1988). Furthermore, many writings in the sphere of management consulting present the client as unifaceted and fail to situate the consultant in a wider client-system perspective (see Buono & Poulfelt, 2009; Schein, 1997; Schwarz, 1994; Sturdy, Werr, & Buono, 2009). There is a similar problem with the notion of consultant, with no distinction made between the independent worker, the senior consultant associated with a large firm, and the young consultant under the mentorship of a more experienced consultant. Finally, this literature tends to place all types of organizations on the same footing, whether public or private, large or small; in that regard, many writings can be criticized for their acontextual and a-temporal perspective (Ridley & Mendoza, 1993; Verstraeten, 2007). Consequently, the question of whether or not a consultant needs to operate differently according to the situation remains unanswered (Chapman, 1998). The presentation of the two case studies in this article reveals that matters are not so simple and that, while certain basic principles may guide consultants’ practice, they must be squarely placed in context and not applied in a mechanistic fashion. In essence, consultants must be sensitive to what could be seen as “insignificant” details and should take care over each step of the consultation process (Kurb, 2002; Schein 1999, 2009). The chapter is structured as follows. First, the two cases are presented and then analyzed in terms of the criteria for success identified in the literature and through the observations of the three expert consultants and three MBA students registered in a course on consulting in organizations.

Challenging Universal Criteria in Management Consulting 283

The chapter concludes with a discussion of notions of success and failure in the provision of consulting services.

CASE 1: SAINTE-CAMILLE SOCIAL SERVICES FOR YOUTH CENTRE At the beginning of the 1990s, the Department of Health and Social Services undertook a major reform, redefining a number of aspects of the new law on health and social services. Among the changes wrought, redefining the missions of a number of establishments is noteworthy, as is the legislative incentive to combine certain categories of establishments that had previously been autonomous. One of the reform’s objectives was to harmonize services and improve accessibility. It was also hoped that this would counter the fragmented approach that tended to characterize independent establishments, presenting an obstacle to collaboration and the direct provision of services to children and youth in difficulty. In integrating psychosocial services for children and youth, and rehabilitation services offered by educators and psycho-educators in a single establishment, the ministry hoped to resolve the thorny issue of waiting lists. In the wake of this reform, the Sainte-Camille Social Services for Youth Centre, a product of the administrative merger of eight rehabilitation centres for youth in difficulty and the Regional Centre for the Protection of Children and Youth, were created. The new administrative structure included approximately 40 midlevel managers and six senior managers, the latter based in the establishment’s administrative offices. There are twenty locations where services are offered, covering a fairly extensive geographical territory. The senior managers in the administrative offices are all located in the head office. As the need arises, they travel to one or the other of the service centres. In each of the service centres, internal management on a day-to-day basis is provided by one of the midlevel managers. Before the merger, the ministry of the day had placed the Regional Centre for the Protection of Children and Youth under trusteeship, given the significant problems of administrative governance that prevailed within the center. It designated Mr. Lapierre, with experience in the field of child and youth protection, as trustee. This trustee was an experienced, tough manager who had held a number of managerial positions in other centers, as well as within the department. This period of trusteeship lasted a year. During this time, there were a number of changes: the former director general, blamed for administrative inadequacies and dubious practices, was dismissed; most upper management was replaced; certain members of the staff were suspended; and the organizational structure and the designation of new upper and middle managers was

284 C. LALONDE

revised. The person in charge during the period of trusteeship was finally named director general in June 2000. All the former upper management, with one exception, were replaced, the exception being the director of human resources, Mr. Thibault, who survived successive waves of change. As the new general director, Lapierre undertook a number of changes within the new organization. Among the initiatives he pursued, it is important to note the development of a solid new management team, aimed at creating an operational style integrating social workers and specialists in rehabilitation to a greater extent. In the past, the social workers and rehabilitation specialists worked in separate structures and did not share the same philosophy of intervention. Thus, the general director hoped to harmonize the services offered and, consequently, improve the service provided to clients. To help in attaining his objectives, Lapierre decided to engage a management consultant, Ms. Bédard, a professional consultant who had been working independently for 7 years, primarily in the national health and social services system. Bédard was part of Lapierre’s network of professional contacts, and the two had already collaborated closely when they held other functions in the health and social services sector. They had also met informally over the years. During these casual meetings, the general director told the consultant of his desire to eventually call upon her services, and he was attracted by a flyer describing training workshops that Bédard offered to managers in the health and social services sector. In September 2000, the general director’s secretary contacted Bédard to set up a breakfast meeting. During this first formal contact, Lapierre outlined the situation of his establishment with a brief history of the organization, the situation of trusteeship, the turnaround that had been required, and the strategic orientations that remained to be consolidated. Having become aware of the services offered by Bédard, Lapierre told her of his intention to establish a training program for his new managers with a view to strategic revitalization. His goal was to adequately train them for their new management functions and, ultimately, to induce them to adopt the objectives of updating the new operational structures and clinical practices, a number of which, according to him, were outdated and not appropriate for the new context of social services reform. At this stage of the discussion, Bédard proposed that the training project emerge from individual coaching sessions and that the management committee closely monitor two aspects of the process: first, an evaluation of the training with respect to the acquisition of vital new management skills; and, second, an evaluation (or diagnosis) of the degree to which these new managers adopted the new operational styles based on cooperation and the mobilization of personnel. Based on her experience, Bédard believed that training alone would not be sufficient to attain the

Challenging Universal Criteria in Management Consulting 285

general director’s objectives. He agreed and was very satisfied with the proposal. Following their discussion, Lapierre asked Bédard to establish contact with the human resources director, Mr. Thibault, given that the training fell under his area of jurisdiction and that the latter had not been informed of the process initiated with the consultant. Bédard took down his contact information and, as agreed, contacted him. According to Bédard‘s field notes, the contact with Thibault proved difficult from the outset. He seemed reluctant to collaborate in a project that, clearly, he did not initiate. During subsequent conversations with Bédard, Thibault seemed to give little credit to the general director for human resource management. Moreover, it seemed clear that Thibault had his own contacts with other consultants with whom he would, doubtless, have preferred to collaborate. The first formal contact took place in Thibault’s office. He was obviously in control of the situation and gave directions with respect to certain themes that he wanted integrated into the management training project. In terms of process, it was agreed that Bédard would develop a proposal which would be first submitted to both Lapierre and Thibault, and then given to the management committee. The initial offer of service elicited a rather spirited reaction from Thibault. He considered the cost of the project too high and asked for a reduction in price. Bédard explained the details of the costs, but Thibault was intransigent. Finally Lapierre intervened to settle the dispute, with a reference to the limited financial resources at the disposal of his organization and their need to see the price of the submission brought down. Bédard then explained that the reduction in costs requested would have an effect on the activities organized, and could hinder the attainment of the strategic objectives as initially formulated. Lapierre said that he was aware of these limitations and insisted, regardless, that Bédard reduce the cost. Bédard was very disappointed to see Lapierre apparently align himself with his director of human resources, at least with regard to the financial aspects of the project. While clearly upset, Bédard agreed to this request and submitted a more limited plan, sacrificing certain elements of the “personalized” content sacrificed to meet the establishment’s financial constraints. This second offer seemed to correspond better to the expectations of both Lapierre and Thibault. The second stage of this initial phase was to submit the proposal to the management committee. From this point on, there was a certain shift in responsibility for the project from Lapierre to Thibault, who then began to exercise tighter control over the project. After the presentation to the management committee that seemed, all in all, to be more of a formality, Picard appeared to “divest” himself of the project, and Thibault became

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the contact person for the project. Bédard found this behavior rather surprising, considering the strategic objectives described at the outset by Lapierre, emphasizing the need for a commitment to a new, more integrated management style among various elements of the organization. It was evident that the “training” element was at the heart of Lapierre’s strategic objectives, yet Bédard had understood that there was more involved than simply training managers for their tasks. It was her understanding that the intention from the outset, a point raised during their first formal contact, was much broader. She told herself that she would clarify this point with Lapierre at the appropriate time. The third and last stage of the initial phase consisted of presenting the project to managers who were to be offered this professional support. Ten managers were identified as participants in the project, a rather small group considering that there were approximately forty intermediate level managers in this establishment. According to the information provided to Bédard, the project was solely for those with a year or less of experience as intermediate level managers. All these individuals had already been professionals in the organization before becoming managers. Only one person had not, a more experienced manager who was rumored to be having problems with his new team and who was, thus, in need of support. Bédard was surprised that this manager, facing very different challenges, was included in the group, but Thibault seemed to think that this would not have any impact on the rest of the group. He decided to keep this individual as a participant in the training project. The 10 managers encountered expressed great satisfaction and were very happy to receive such support from their organization and seemed very motivated to participate. In general, they agreed with the training themes and the principle of individualized coaching during the process. Bédard’s mandate extended over 6 months. Five days were devoted to training on such matters as conflict management, professional support, running meetings, and so forth. Ten days were spent on individual coaching sessions of an hour and a half each. The implementation of the project went very smoothly and all the managers seemed satisfied with the content, the personalized encounters, and, in general, Bédard’s work. Bédard and Thibault had meetings at various stages of the process to ensure that he was informed of the progress being made. These meetings were usually quite brief and Bédard felt uncomfortable each time she had to meet Thibault, although he seemed satisfied with the training process. In the course of the engagement, there was a formal evaluation of the project by the managers who received the training. The results were extremely positive. Bédard’s final report containing various observations made throughout the process, as well as follow-up recommendations, was submitted to Lapierre and Thibault. She was anxious to discuss the fruit

Challenging Universal Criteria in Management Consulting 287

of her observations with the director-general, whom she had not seen for a number of months. In particular, Bédard believed that the mediation of social workers’ and rehabilitation educators’ viewpoints was far from accomplished, and she was not at all certain that the training of 10 new managers would suffice to change old practices. The final meeting took place with Thibault alone. There was no followup with Lapierre or the management committee—although this had been planned from the outset. It was clear that, from Thibault’s perspective, any future training activities would be redirected to more clinical aspects for which he had identified other resource-people. During the meeting, there was no reference to the observations contained in Bédard’s final report. She asked for explanations but Thibault remained rather vague, seemingly uninterested in this section of the report. This encounter was polite but cold, and Thibault was a bit condescending, letting it be understood that he could put in a word for her with regional authorities who found the project very interesting and innovative. For Bédard, it was not clear whether the management committee and the director-general would ratify the “clinical” reorientation of the management training file or whether this had been dictated by the human resources director. Shortly after this final meeting, Bédard tried to contact Lapierre to determine his view of the content of the final report and the follow-up to the project, which, as noted above, was accomplished to the satisfaction of the participants. Yet, since Picard did not return her phone calls, it wasn’t possible discuss the project and to debrief it more fully. Bédard was never contacted again, either by the director of human resources or the general director.

CASE 2: HIRONDELLES HEALTH CENTRE In 1998, the Hirondelles Health Centre was created as a result of the merger of the St-Benoît Health Centre and the St-Amable Health Centre. In 1999, a new general director was officially named. The chair of the board of directors announced that Mr. Langlais would henceforth act as general director of the Hirondelles Health Centre. Shortly after his nomination, Langlais, who was the former general director of the St-Benoît Health Centre, informed the board of directors of his intention to proceed to rapidly develop a new strategic plan and his desire to use the services of a consultant to assist him in this task. Considering the probable stakes in redefining the organizational architecture, Langlais concluded that it would be useful to rely on a neutral, competent expert. Therefore, he submitted a proposal to his board of directors, who agreed that a pro-

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posal for such an offer of services would be discussed at the next board meeting. During the month of September 1999, Langlais directly telephoned Mr. Sinclair, with the firm Consult’action, to discuss a project focused on changing the establishment’s organizational structure as a consequence of the merger. Sinclair had been a manager for more than 10 years in the health and social services sector, and had been an independent management consultant for 5 years. This telephone contact allowed Langlais to briefly inform Sinclair of his needs and to arrange a meeting. The first meeting took place over a dinner, during which Langlais thoroughly explained the issues underlying the functional restructuring of the new organization. As the general director explained, before the merger the two establishments had very different management philosophies and operational styles. While the St-Amable Health Centre had a decentralized structure in a number of small municipalities in its territory and offered, at each of these service locations, a relatively complete array of the services under its jurisdiction, the St-Benoît Health Centre was organized in terms of programs and target population (e.g., youth programs, seniors’ programs, mental health programs). In contrast to the StAmable Health Centre, the St-Benoît Health Centre offered its services in a single physical location. Moreover, within the various administrative units, personnel could be assigned according to territory, which was the case especially for home care services for senior citizens or for persons with reduced mobility. From the time the merger took place (roughly 1 year earlier), the two establishments had, more or less, conserved their respective characteristics: the personnel of the old administrative units were still under the responsibility of their supervisors; and the cohabitation of two managers at the head of similar services took place, in certain cases in a spirit of collegiality, and, in others, in the most complete indifference. Upper management from the two former establishments were waiting for their roles and responsibilities to be confirmed. They were well aware that some among them could lose their current positions and acquire other functions, especially since two people were not going to be in charge of the same work unit. One of the managers from the St-Amable Health Centre, Ms. Laliberté, harbored the ambition of eventually becoming general director, and was in almost open conflict with Langlais’ appointment. Like other more discreet managers, Laliberté did not appreciate what she felt was Langlais’s controlling management style. Langlais preferred an organizational structure based on client programs, whereas Laliberté favored a geographically decentralized structure. There were two warring visions of the new organization and organizational members were themselves divided. Therefore, the challenges of creating a unified organisa-

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tion were very great and the director-general was perfectly aware of this problem. Langlais did not want to unduly prolong this transitional situation, and cherished the idea of seeing the entire establishment function on common ground as quickly as possible. He had a very clear conception of the type of structure that he wished to establish. He knew that all the employees, including the managers, were waiting to hear about the new organizational structure. He also wanted to commence a process under the auspices of a committee composed of employee representatives, managers, and various authoritative bodies (e.g., unions, councils of professionals present in the establishment, the board of directors), and a representative committee of members from both merger partners. Langlais hoped that, in the context of this mandate during which he would serve as a resource person, Sinclair, in his role of consultant, would formalize the process. In fact, Langlais envisioned submitting an overview of the changes at the next board of directors’ meeting. Both parties deemed the four to six month timeline for accomplishing the mandate reasonable, especially in a context in which the process was jointly led by the directorgeneral and the consultant. As the two individuals had collaborated effectively in the past on other mandates, they were both confident of being able to work synergistically, in as much as Sinclair supported Langlais’ vision of an organizational structure by programs and agreed with his decisions. Therefore, it was agreed that Sinclair would prepare a plan to be submitted to the director general the following week, which he did. Langlais expressed great satisfaction with the document prepared by Sinclair, which specified the activities in which the consultant would engage, as well as the costs associated with the engagement. In fact, Langlais only suggested minor changes. Everything was submitted to and ratified by the board of directors, as planned, and the process of developing a new organizational plan for the establishment was set to begin. The various bodies represented in the establishment began to nominate their representatives to the consultative committee, the committee reforming the organization. Between September and December 1999, this committee met five times. During the first meeting, a timetable, as well as a planned table of contents for the report, was created. The members of the committee expressed great satisfaction and were pleased to be able to begin with an idea of the relevant dates and specific issues to be considered. This information would allow them to plan their own consultations. Between meetings of the committee, Langlais and Sinclair discussed steps for the next meeting and they jointly prepared each meeting. Thus, the two parties collaborated closely throughout the process, and had quite open discussions about issues associated with the development of the organizational

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plan. In addition, at the same time, the various representatives on the committee tested the “pulse” of their respective bodies and returned to the committee with their comments. It was clear from talk in the corridors that members of the former St-Amable Health Centre felt mistreated because they were smaller and had less influence on Langlais, who had been the former director general of the St-Benoît Health Centre. Nonetheless, in their professional interaction, employees maintained open and friendly relationships. Throughout the process, Sinclair had the responsibility of capturing the orientations adopted by the committee and producing a coherent document to be submitted eventually to the board of directors. Thus, to some extent, Sinclair played the role of executive secretary of the committee. However, it was the general director himself, rather than Sinclair, who met with the board. In essence, he participated in the process of developing the organizational structure but not in its implementation. According to the Loi sur les services de santé and les services sociaux (Law of Health and Social Services), the development of the organizational plan of the establishment was the prerogative of the general director. Langlais, however, was careful to listen to the various points of view raised by the different representatives on the committee. Only Laliberté expressed openly disagreement with the orientation of the new organization; the other managers and employees were more in a “wait and see” position. As one of the managers of the former St-Amable Health Centre, Laliberté favored a structure based on geographic decentralization, somewhat similar to the way her former establishment functioned. Laliberté took every opportunity to explain the advantages of such a structure to other members of the committee. For his part, Langlais clearly favored a programbased structure, similar to the way the former St-Benoît Health Centre had worked, with only minor adjustments to take account of the continued existence of the surviving service centres. The disagreement between Laliberté and Langlais was such that she decided to resign from her role as representative of the managers on the committee. As the committee’s work was practically complete, she was not replaced. Having been previously informed by Langlais of Laliberté’s ambitions, Sinclair had advised him to allow her to explain her point of view quite openly and to carefully present the committee members with the advantages and disadvantages of the different options. Aside from advising Langlais on this approach, Sinclair had no other specific role to play in the management of these differences. On the other hand, he was energetically courted by certain managers who sometimes confided in him about the internal tensions underlying discussions of the future organizational structure. But ultimately, he remained loyal to Langlais.

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All the committee members felt well informed on the various possible options and Laliberté, while frustrated by the rejection of her option, did not appear to harbor any resentment toward Sinclair. The disagreement was directly handled by the parties concerned and was settled by Laliberté’s departure, who obtained a post in another organization in the health network. In the course of his work, Sinclair was congratulated by all members of the committee, who appreciated the comments, advice, and lessons provided throughout the process. The members said they valued the consultant’s ability to listen and to communicate. As a result, Langlais was very pleased with the work accomplished and thanked the consultant for his contribution. A few months later, Langlais again sought out the consultant’s services. Two mandates stemmed from the initial process of developing an organizational plan for the establishment. These mandates aimed to go further in the organization of services in the two main departments newly added to the organizational structure. In the eyes of the director general, Sinclair’s participation in this second stage guaranteed respect for the orientations adopted by the board of directors, preventing any possible risk of drifting from the original intentions in configuring the two new departments. Langlais had full confidence in Sinclair’s ability to accomplish these mandates and knew that he would be loyal.

ANALYSIS OF THE TWO CASES In analyzing the two cases, it is useful to look at them through two different lenses, from the vantage point of (1) universal success factors and (2) critical incidents.

Analysis of Universal Success Factors In this section, we analyze the case study data as a function of what certain authors deem common factors for success. The results of this exercise are captured in Table 13.2. Upon reading this table, we would be tempted to claim that Case 2 was almost a total success while Case 1 was fraught with difficulty due to ambiguity from the outset in defining an agreement, interpersonal difficulties with a key member of management, and the control exercised over the process of the consultant’s intervention. The experts’ observations, which are discussed more fully in the next section, raised important nuances to this general interpretation.

292 C. LALONDE Table 13.2. Analysis of the Cases Through The Universal Success Factors Perspective Success criteria

Case #1

Case #2

1. Consultant integrity

Yes, but not necessarily neutral

Yes, but not necessarily neutral

2. Client involvement

Yes, moderately involved

Yes, highly involved and quite directive

3. Clear agreement

Ambiguity at the departure point, followed by a shift to a narrower assignment

Yes, needs have been clearly exposed to the consultant, who in turn didn’t ask questions

4. Client control

Yes, in the definition of the assignment but not in the delivery of services

Yes, completely in control. Consultant almost in a “performer” role

5. Consultant competence

Yes, at first sight.

Yes, if consultant accepted to play a less prominent role

6. Interpersonal fit

No, the human resources director was very stand-offish toward the consultant

Yes, good and positive fit between the consultant and the general director

7. Clarity responsibilities of both sides

The role expected of the consultant is quite clear but the client’s role has not been discussed as extensively

The role expected of the consultant is quite clear but the client’s role has not been discussed as extensively

8. Respect and trust

Mixed feelings

Overall, yes as long as the consultant accept to be subordinated to client needs and management style

9. Transferability of skills Satisfaction was evaluated but Satisfaction was evaluated but not transferability not transferability 10. Role of team members Human resources director and middle managers have been involved in some aspects

A committee was put in place, but the process was under the control of the general director

11. Understanding of the Presumably, yes; but the cliPresumably, yes; but the cliinternal and external ent didn’t check prior perfor- ent didn’t check prior perforenvironment of the cli- mance of the consultant mance of the consultant ent’s organization

As the experts suggested, “integrated” consultants are not necessarily the same as “neutral” consultants, since they may be influenced to offer opinions and take sides on controversial questions that divide the members of an organization. A client strongly committed to a mandate may take control, to the point of relegating the consultant to the role of one

Challenging Universal Criteria in Management Consulting 293

who simply carries out orders (Case 2), thus not taking full advantage of the consultant’s skills (Cases 1 & 2). They also pointed out that previous mutual acquaintance with the client is not an automatic indicator of success over the course of an engagement, and the entire client system context must be taken into account (Cases 1 & 2). Consultants must also be permitted a degree of autonomy in the execution of their assignment, particularly when hired as an outside, expert-trainer. Moreover, despite difficult relationships between the consultant and the director of human resources in Case 1, managers who participated in the training workshops and coaching encounters said that they were highly satisfied with the consultant’s services.

Analysis of Critical Incidents A different way of analyzing the two cases is to identify critical incidents in the process. This approach is inspired by Flanagan (1954), who describes the critical incident technique as a collection of observations on human behavior oriented toward the resolution of practical problems that arise in modern life. The technique consists of listing certain facts in a given situation that prove determinant for the unfolding of participants’ activities. As the technique is grounded in observations, the quality of analysis is largely based on the observers’ competence and the extent of their knowledge of the current situation.2 Secondly, the identification of critical incidents allows for the formulation of a certain number of inferences that could serve to improve the future course of an action, given that it is difficult, indeed, impossible to determine one sole and ideal way to resolve a problem or practical dilemma. Looking at the two case studies presented in the chapter through the critical incident technique allows us to highlight precise moments in the consultation process when the consultants were faced with choices in pursuing their mandates, and the points at which the course of their actions might have been different if they had chosen a different avenue or approach. Table 13.3 summarizes the principal critical incidents identified in each of the cases. At each of the stages summarized in Table 13.3, the consultant is expected to determine whether there is sufficient information to proceed to the next stage. Thus, in the initial phase, consultants may choose to base the intervention solely on information provided by the first interlocutor (in the two cases the director general), or they may decide that information is missing and, thus, continue the discussion in posing more questions, asking to meet other people within the organization before submitting a proposal (following stage), and so forth. As an example, Table 13.3 suggests that in Case 1 the consultant had a number of occa-

294 C. LALONDE Table 13.3. Analysis of the Cases Through the Critical Incidents Perspective Critical Incidents

Case 1

Case 2

Initial phase

• First contact with the general director • First contact with the human resources director • Development of the proposal • Meeting with the management committee • Discussion of the proposal with managers affected by the project

• First contact with the general director • No other contacts before submitting a proposal • Development of the proposal • No meeting with the management consulting • No discussion with other managers or employees

Implementation phase

• Periodic meetings with the human resources director • Managers’ evaluation of the consultant’s intervention

• Meetings with the committee established by the general director • Regular meetings of the consultant and the general director

Final phase

• Final meeting with the human resources director • Attempts to recontact the general director received no response

• Final meeting with the committee and general director • Follow-up for subsequent mandates

sions to clarify the request—first, with the director general, then with the director of human resources, the management committee, the principals concerned, and the managers affected by the project. In Case 2, a single meeting was deemed sufficient for the consultant to formulate a proposal. As the experts brought in to analyze the two cases underscored, these initial contacts are especially important in consulting as they allow the consultant to clearly define the request, assess the client’s level of commitment and motivation, and to eventually identify the key individuals or groups affected by the consultant’s intervention. It is also during these initial contacts that consultants may see the role they play or would like to play in the implementation of the recommendations. Will the consultant simply carry out the requests of the client or will the consultant have a more active and strategic role? Will the consultant’s skills be employed for the benefit of the client(s)? Managers often have expectations that their consultants will transfer their knowledge and skills to organizational members, so that they will be able to increase their own organizational capacity to address problems or dilemmas. Paradoxically, consultants are often excluded from the implementation phase or only marginally involved. How can we explain this?

Challenging Universal Criteria in Management Consulting 295

One hypothesis advanced by Robey, Ross, and Boudreau (2002) is that managers are facing knowledge barriers at the time of implantation and tend, therefore, to envision the implementation phase in a piecemeal fashion—or as Kakabadse (2002, p. 15) also points out, in a “partial consultant utilisation strategy.” Kakabadse (1983) also believes that, once they have reached this phase, the very need for client and consultant to continue to work together may be questioned (Case 1) or, simply, the consultant’s help and/or expertise are no longer necessary (Case 2). Plans may have changed (Case 1), and other members of the organization may want to be involved in the process of implementation (Case 2). A last hypothesis advanced by Kippings and Armbruster (2002) and Schein (1999, 2009) relates to the lack of a deep knowledge by the consultant of the core competencies, culture, and daily operations performed by the organization to the point that managers may prefer not to involve them in this phase. For their part, Shapiro, Eccles, and Soske (1993) believe that it is wise at a certain point for managers themselves to intervene alongside the consultant, as the indefinite involvement of consultants can be seen as maintaining the organization dependent on their services. Finally, the conclusion of a mission is also an important stage, both for the consultant’s future reputation and also for the development of client loyalty (e.g., the same clients or organizations giving the consultant additional mandates). At this final phase, most authors (Lescarbeau, Payette, & St-Arnaud, 2003; Kubr, 2002) consider a formal evaluation of the consultant’s intervention to be essential. A follow-up undertaken a short time after the consultant’s intervention is also seen as a factor in maintaining successful business relations. According to Kakabadse (1983), there are three rules to ensure an effective disengagement: disengagement should be a mutually acceptable decision to both consultant and client (Case 2 but obviously not Case 1); it is performed in such a way that the client’s position in the organization is reinforced (Case 2); the door is kept open for further work (Case 2).

Expert Commentary Five major themes emerge from the assessment by the three experts: (1) the importance of initial contacts; (2) the identification of the clientsystem; (3) the general director’s commitment and motivations; (4) the dynamic within the management team (political games); and (5) the utilization of the consultant’s skills. Clearly, some of these themes intersect. The experts agree that initial contacts are important, not only for the nature and extent of the consulting assignment but also for identifying all the individuals who will be affected directly by the consultant’s interven-

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tion. In professional bureaucracies, such as those in the health and social services sector, the role of the general director is, of course, important, but he evolves in a larger collective leadership group, a constellation (Denis, Lamothe, & Langley, 2001) in which members play complementary roles; in such “constellations,” authority relations are quite diffuse and individuals have different type of expertise and influence In this sense, our experts believe that the concept of the client needs to be further defined; the paying client is not necessarily the client who will benefit the most directly from the consultant’s intervention or the client with whom the consultant will be most in contact (see Case 1). Knowing those in authority like the general director is helpful but not sufficient to adequately accomplish the consulting mission. In this sense, a previous positive acquaintance (or reputation) vis-à-vis the client, in these two cases the general director, is not a guarantee of a harmonious consulting process (Grey & Sturdy, 2007). Indeed, this previous mutual acquaintance might even contribute to the loss of objectivity of the consultant, who might be perceived as the client’s “right hand” (see Case 2). Furthermore, merger contexts tend to lead to the emergence of intense political games. The arrival of a third party, according to our experts, could be greeted with distrust and skepticism. To avoid becoming alienated from members of the management team, the general director could have a tendency toward avoidance or failing to act on certain issues or having tacit expectations toward the consultant (Verstraeten, 2007). The consultant called upon to intervene in these contexts must be able to develop a close reading of the power games among the various actors and getting the client to make more explicit his expectations. Our experts believe that the consultant’s so-called “neutrality” will be rapidly put to the test. The consultant could even be relegated to a more technical and less strategic role to avoid openly stirring up latent conflicts (Cases 1 and 2). The following section captures comments collected during the discussions on the two cases. The Importance of First and Diversified Contacts [In Case 1] I believe that Ms. Bédard did not commit any serious errors. How could she have known that the human resources director would be so hostile? Of course, the general director could have notified his human resources director of his intention to hire a consultant whom he knew well to train the managers. But, between us, what would that have changed? No, I believe that Ms. Bédard paid the price for a more or less latent conflict between the two directors. Happily, the managers who were trained were very satisfied and will possibly in the future represent Ms. Bédard’s best hope in terms of future mandates. (Expert A)

Challenging Universal Criteria in Management Consulting 297 Mr. Lapierre put Ms. Bédard, who was apparently a friend or at least someone he knew quite well, in an embarrassing position. He should have known that he was treading on the territory of the human resources director. Furthermore, his method of trying to wriggle out of it is highly debatable on moral grounds. (Expert B) Perhaps, during her very first contact with the general director, Ms. Bédard too readily agreed to the idea of discussing the means (the training) before agreeing on the goals and conclusion of the mandate. I have trouble seeing how training only 10 managers out of forty could be seen as a mandate with strategic scope. This is the whole aspect that needed to be scrutinized and analyzed to obtain a better idea of the commitment to the general director’s new strategic orientations. But perhaps during the first meeting with Ms. Bédard, the general director only explained the general context and the establishment’s evolution. In that case, Ms. Bédard could have misinterpreted his remarks. Indeed, he hoped for a limited, inexpensive intervention and, from the point when Ms. Bédard was in contact with the human resources director, he no longer saw the need to be involved. (Expert C) In the initial phase, during the first contacts, you have to be careful to precisely determine not so much the formal structure of authority, but the informal dynamic of the management team. This is important to be sure from the outset of being in contact with the right people and subsequently obtaining their cooperation. Now, this might seem curious to say but the right people are not always the general directors. (Expert B) Certainly, at the outset, you have to clarify why they would call upon a consultant if they wanted to avoid confusion, ambiguity and misunderstandings. But, even with one’s best efforts, there will always be grey areas and that is what, as consultants, we will be led to discover during the process. (Expert B)

The Identification of the Client System is Crucial in Professional Bureaucracies Personally, before committing to a mandate, I like to have a clear picture of the various types of people who will be affected by a consultant’s eventual intervention. In both cases, the consultant tended to quite quickly adopt the director general’s perspective. In Case 1, Ms. Bédard promptly chose a method—training workshops for new managers—without knowing who these managers were and why only 10 managers and not all forty. In Case 2, Mr. Sinclair could have taken the trouble to first obtain the two former organigrams [organization charts] and collect data on who the managers of various units were. This would have allowed him to see the advantages and disadvantages of the model recommended by both parties—Mr. Langlais and Ms. Laliberté—and perhaps even to propose a third option that would be more likely to be greeted with enthusiasm. (Expert A)

298 C. LALONDE In professional bureaucracies, it is not uncommon for leadership to be shared and for managers of the main units to be the principal clients and not the intermediary clients. In Case 1, Ms. Bédard believed that the director general was the principal client when he played the role of an intermediary between the consultant and his human resources director. (Expert C) Certainly, it is simpler to be in a relationship of equals with the director general. But you have to adjust to reality. The general director of an establishment in health and social services interacts with a multitude of independent actors with significant power and fairly significant discretionary authority in carrying out their work. Consequently, the notion of client system becomes important for the consultant. (Expert B)

The General Director’s Underlying Motivations: Being Able to Go Beyond the Surface We can definitely not cast doubt on the commitment of the director general to this project (Case 2). After all, defining the architecture of his organization is not only a prerogative based in law but also constitutes an eminently strategic task. Nonetheless, the consultant should be attentive to the effects of the general director’s omnipresence in as much as he appears to be seen as having a particularly controlling style. The consultant readily agreed with the general director but adopting the orientation by program that the general director recommended from the outset was at the price of the consultant’s objectivity. (Expert B) It is a shame that the general director (Case 1) lets things go like that and does not take advantage of his relation with Ms. Bédard to go further in his reflections on his organization’s strategic orientations. I know from experience how complex mergers are and that it is difficult to “marry” the various cultures that are present. The perspective of a consultant, especially one who is trustworthy, can allow participants to see various facets of an issue. I believe that in relegating Ms. Bédard to the role of a technical expert, Mr. Lapierre deprived himself of valuable advice. (Expert A) I had a mandate where I almost never saw the general director. It was his assistant who put me in contact with the various interveners to meet in the course of my mandate. My colleague and I had to insist on meeting the general director at certain critical points that required his decisions. It was a mandate where the managers did not agree amongst themselves and the general director had trouble deciding and imposing his view. We quickly noted that, in fact, he hoped that we would take the decision in his place. It seems to me that, in public professional bureaucracies like the ones in healthcare sector, general directors don’t want to commit too soon and too quickly to a course of action. But this conduct has a price especially for taxpayers in my opinion. (Expert C)

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The Management Team’s Dynamic and the Collective Character of Leadership in Professional Bureaucracies Perhaps Ms. Bédard did not do a sufficiently detailed, careful study of this organization’s political map. A human resources director who is the sole survivor of an organization under trusteeship and who is contending with a turbulent environment surely emerges with enhanced power. He becomes the “living memory” of this organization! In addition, this human resources director saw himself “rescued” by the current general director since he was the one acting as trustee. So, of necessity, there has to be a relationship of complementarity, indeed a bond of sorts between these two individuals. Between a consultant who is an acquaintance and his human resources director, I believe that the general director’s choice will be clear and that it will favor his human resources director. (Expert C) Mr. Langlais wasn’t very proactive in Case 2. Although all the people with whom he was in contact expressed great satisfaction with his work, he kept to Mr. Langlais’s choice and did not try to discover whether the opposition between the latter and Ms. Laliberté did not translate into an even broader malaise within the organization, especially given that Mr. Langlais was reputed to be quite controlling. (Expert B) You have to be comfortable with what I call “the ambiguity of power” when you intervene as a consultant in a health and social services establishment. Indeed, you may share the general director’s vision but this will not be enough to bring about the changes management wishes. Furthermore, a close and favored relationship may be poorly perceived by other members of the organization who will be inclined to question our objectivity. (Expert A)

Utilization of the Consultant’s Skills The skills of each consultant, Ms. Bédard in Case 1 and Mr. Sinclair in Case 2, seem to me to have been utilized, if we go by the great satisfaction expressed by the members in contact with them. The problem is that Case 1 did not give rise to additional mandates for the consultant, due to the human resources director’s attitude and the general director’s indifference, which is a real shame. Unfortunately, to a certain point, this is one of the risks of the trade. )Expert) B

Student Commentary Three main themes emerged from discussions with the students: the client-consultant relationship dynamic, the consultant’s objectivity and the lessons to be learned from these case studies.

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The Client-Consultant Relationship Dynamic When we present these two cases to the students, they are generally astonished by the behavior of the general director and the human resources director in Case 1, while they are thrilled with the behavior of the general director in Case 2. It’s really not fair! Ms. Bédard is doing her best and is appreciated by everyone; she doesn’t deserve such treatment, i.e., to be dropped by the general director and have to submit to the human resources director’s paternalism. As a future consultant, I admit I don’t know whether I would be able to stand such behavior! (Student A) According to what I have read, the factors associated with success often refer to the mandate being clear and matching the consultant’s skills. In Case 1, the consultant listened carefully to the general director, and suggested some activities in which she would plainly be competent and, despite this, the general director never called her again and the human resources director, for his part, was rather haughty in his approach. I pity the employees who have to work with this kind of management that seems to say one thing but do another. I hope I will not come across too many individuals like that when I am a consultant myself. (Student B) I really like Mr. Langlais’s way of doing things (Case 2). He clearly presents his needs; he carefully reads the consultant’s proposal and gets it ratified by the board of directors. Then, he gets all members of the organization to define a new organizational structure. I believe that this form of commitment from the director general and his participatory management style bode well for the consultant. (Student C) I find there is a nice complementarity in Case 2 between Mr. Sinclair and Mr. Langlais while there is rather a certain animosity in Case 1 between Ms. Bédard and Mr. Thibault and even Mr. Lapierre since the latter never returns his calls. A situation like Case 1 must be especially difficult for the consultant. I wonder whether, faced with the attitude of the human resources director, it might not have been better to decline the offer. But I don’t really know if that’s something a consultant does. (Student A)

The Consultant’s Objectivity The issue of the consultant’s objectivity is also raised in discussions with the students. I have always believed that objectivity was an important aspect of the consultant’s work. After all, aren’t consultants called upon because it is believed that their judgment is not biased and more neutral? (Student A) It’s true that the fact that it is management that hires the consultant may tie the hands of the consultant. Nonetheless, I believe that it is up to consul-

Challenging Universal Criteria in Management Consulting 301 tants to preserve their objectivity or at least be rigorous in their analysis of organizational situations. They must sensitize managers to this dimension of their work and perhaps also make this a condition for accepting the mandate. (Student B) In Case 2, I didn’t see the notion of objectivity as compromised. But in examining this more closely, with the experts’ insight, it is true that the consultant could have done more to preserve a certain objectivity. (Student C)

Lessons Learned: Reflecting on the Case Studies The students also appreciated a more qualitative reading in the sense of observations of an experiential nature of the cases and thought that this was very enlightening. When I hear the experts’ comments, I realize that the consultant’s work is more complex that what is presented to us in books. Experience on the ground allows us to become aware of dimensions that, a priori, I would not have seen. (Student A) Analysis of the two cases allows us to see the importance of a consultant’s interpersonal skills. I already thought this but I see it even more when, as students, we discuss this with consultants themselves. (Student B) Each of the two cases entails successful elements: in Case 1, the managers who received the training and the coaching were very satisfied with the consultant’s services; in Case 2, the director general, as well as the members of the committee with whom the consultant worked, claimed to be satisfied. It must be very gratifying for a consultant to receive only such positive comments. But I imagine that each case is different and that what worked well in one place will not automatically function the same way elsewhere. As a consultant, you have to constantly make adjustments and this must be very demanding. (Student C) The experts made us aware of the importance of initial contacts and accurately identifying those directly affected by the consultant’s intervention. This gives us much food for thought, and I imagine that these are reflexes or abilities that we can acquire only through experience. Maybe for us, students hoping to become consultants, we would be better off starting our careers working with some sort of mentor, a more experienced consultant who could initiate us into the art of exercising this craft. (Student A)

CONCLUSION The chapter used case studies and comments from experienced consultants to challenge some universal and generic ideas on consulting. The goal was to illustrate the difficulty in defining a consultant’s intervention

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solely as a function of following and attempting to fulfill universal criteria. To fully analyze and understand a consultant’s intervention, it must be contextualized to grasp the dynamic underlying requests for consulting— especially in professional bureaucracies. As an example, a criterion of practice often highlighted in the literature is the importance of the client’s commitment throughout the process of consultation. However, when this commitment takes the form of control of the consultant’s activity, we might wonder about consultants’ objectivity, margin of manoeuvre and ability to make full use of their expertise. A number of scholars also consider objectivity as an important criterion to put in practice. The literature also often refers to serving a single client. As indicated in the cases discussed in the chapter, however, it is important to consider the entire client system if the consultant wants to avoid getting caught up in political games. This dynamic seems especially relevant in contexts where the model of the professional bureaucracy emerges from the inverse pyramid of authority (Mintzberg, 1983), where various actors have significant discretion in the accomplishment of their work. Furthermore, this type of organizational milieu poses particular challenges in terms of leadership and the exercise of authority (Anderson & McDaniel, 2000; Wikström & Dellve, 2009) as the manager tends to develop a more collective approach to management issues (Denis et al., 2001). Consultants called upon by managers to intervene in this type of milieu must consequently be advised of this collective dynamic and consider it in their interventions. Considering the strategic position as an external intervener in the organization, it seems difficult, indeed impossible, that a consultant can remain immune to these games of influence games so characteristic of organizational life. However, there is very little discussion of this dimension in the normative literature defining universal success criteria in the practice of consultation. Sometimes consultants list factors they think contribute to their “success” where it is impossible for an outsider to know about the contexts to which they apply. Thus, in an indeterminate fashion for research and educational purposes, they tend to infer generic factors related to success from particular cases. Real case studies of consultants’ intervention allow us to relativize the universal character of these factors. Not only are all these criteria rarely found together in actual situations (Appelbaum & Steed, 2005), but some of these criteria could well be mutually contradictory (Bottin, 1991; Whittle, 2006). For instance, how can we reconcile the control of the mandate by the client and the independence or objectivity of the consultant? What are the signs that differentiate a harmonious relationship and empathic friendship? How can we reconcile the entrepreneurial/ marketing side of consultancy and the sustainability of knowledge transmitted to the client? How should the consultant manage the rela-

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tionships with different stakeholders without being trapped in political games that will interfere with ethics and integrity, in a context of change (Beeby, Broussine, Grison, James, & Shutte, 1999; Hatcher, 2001; Pettigrew, 1975; Smith, 2002)? To better understand these dilemmas in the practice of management consulting, an approach based on the critical incidents is not only useful but also essential; it permits to future and junior consultants to identify potential pitfalls in the overall process of consultation. For the teacher, it seems that the nuances raised by qualitative analysis, based on relational and processual dimensions of consulting practices, could be rich in lessons for students hoping for a career in consulting. This approach could prevent their interventions becoming problems rather than solutions (see, for example, Shapiro et al., 1993).

ACKNOWLEDGMENTS This research benefited from the financial assistance of the Social Science and Humanities Research Council of Canada. The author would like to thank Rémi Lachance, Gabrielle Duharte-Lacroix and Chloé Adler who acted as research assistants.

NOTES 1.

2.

As Butterfield, Borgen, Amundson, and Maglio (2005) rightly pointed out, the notion of a critical incident as conceptualized by Flanagan in 1954 remains the main reference for researchers. Although there has been many studies based on this qualitative research method, its use in management consulting, particularly in a thorough examination of the process and the development of a mission, is still uncommon. For instance, Klein, Calderwood, and MacGregor (1989) draw upon this notion but in a very different purpose and field of study (the development of expert systems in decision making for nonroutine environment). This approach for the analysis of critical incidents influenced the decision to bring in the experts used to analyze the two cases.

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CHAPTER 14

DEVELOPING EXPERTISE AND SOCIAL STANDING IN PROFESSIONAL CONSULTING A. JANES

Alfred Janes

What does professional consulting knowledge consist of? As a way of exploring this question, this chapter examines the nature of consulting knowledge, how such “know-how” develops over the working life of a consultant, and how this development relates to the evolution of a consultant’s social standing in the field.

LEVELS OF KNOWLEDGE AND EXPERTISE Considering this question from a practical point of view, which means on the level of a consultant’s direct operating knowledge, one can distinguish three different “levels” of insight: (1) the basis for expert know-how, (2) general process models of knowledge-based services, and (3) personal linking patterns between expert know-how and general process models of knowledge-based services.

The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 309–327 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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Level 1: The Basis for Expert Know-How Expert know-how concerns itself with the relevant field for the consultancy. This know-how reflects the applicable expertise relevant to provide the consultation. Business administration, industrial management, human resource (HR) management, and business law are examples of this kind of expertise. The expertise is primarily acquired—in standardized form—within the scope of university or similar environments. The translation of this knowledge into know-how takes place in practical application, either preceding the consulting activity or within the scope of professional consulting.

Level 2: General Process Models of Knowledge-Based Services The particular importance of general process models is based on the fact that expert know-how is never conveyed or applied, so to speak, by itself. Conveying it or applying it always takes place step by step; it always takes place within a process. Yet, however different these processes may appear in comparing the activities of different consultants, it does not work without them. For example, some consultants might begin their work with a long questioning period, while others get into the assignment very quickly with input based on their experience, the job of “consulting” always takes place according to a process. Therefore, in consulting it is actually irrelevant to differentiate between “process” and “specialist” consulting, which has become common in the German-speaking consulting scene. Regardless of the distinct professional focus, at least retrospectively, each consulting task can be described as a specific set of answers to the following three questions: 1. Generally, how was the consulting process structured (architecture, macro level)? 2. How were individual sections of the consulting task actually realized; what instruments and methods were used for the task (design, mesolevel)? 3. What happens if something “didn’t go the way it’s supposed to” (intervention, microlevel)? In principle, however, consultants do not always develop their professional approach—the way in which they implement their expert knowhow according to a process—in a new way. In actually designing their

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approach, they fall back on a set of “principle approaches” that is available to them. These principle approaches can be thought of as “general process models of knowledge-based services.” An example of such general process models of knowledge-based services used worldwide can be seen in the method and tools of “project management. These tools and models are very popular in the area of professional consulting, especially in planning and managing projects. Another general process model with high empirical importance, particularly in the area of “systemic organizational consulting,” is the set of available architectures and designs in the area of T groups and group dynamics-oriented organizational laboratories. Large consultancies, such as McKinsey, typically have their own general process models, which enable them to standardize the implementation of their actual consulting tasks (Handler, 2007). Not all of these process models, of course, are exclusively used by consultants. Concerning the example of project management, this point is obvious, yet even the above-mentioned process standards from the tradition of group dynamics are also used by trainers in the course of their sessions.

Level 3: Personal Linking Patterns Between Expert Know-How and General Process Models of Knowledge-Based Services Despite all the available standard processes and general process models, in practice consulting work does not fall back fully and in all details on these standards and process models. In an actual professional situation, consultants link certain aspects of their individual expert knowledge with process steps—which usually plays out as “more or less” or “this as well as that.” However they proceed, consultants do not always do this consciously, comprehensibly, completely, or in full detail. It is consistent with the character of professional consulting that when consultants are confronted with an actual, distinct task, professional content, and process elements are always put together along the lines of individual “linking patterns.” These personal patterns, the way consultants—when faced with an actual professional situation—individually combine their expert knowhow and the repertoire of general process models available to them, is an important component of their overall consulting know-how. As we will further explore, the link between these two levels of consulting know-how frequently takes place more intuitively than consciously.

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DEVELOPING PROFESSIONAL KNOW-HOW IN THE WORKING LIFE OF A CONSULTANT In order to create a practical reference that is useful to explore the question of how consultants develop their skills and capabilities, this section outlines the development of the personal basic know-how of a consultant along three phases: imprinting, optimizing professional standards, and innovation.

Phase 1: Imprinting On a general level concerning all professions focusing on knowledge, Mintzberg (1979) refers to the first phase of professional conditioning as “indoctrination.” With respect to the development of a consultant’s basic know-how, this consideration appears particularly appropriate. The transformation of knowledge acquired in a curriculum, usually academically, into applicable concrete knowledge does not come to consultants in their first years of professional practice abstractly or theoretically but always “by doing.” Moreover, this transformation takes place in the operative combination of content and process steps described above. Viewed theoretically, in any case such a scheme would open up a more or less unlimited diversity of possible combinations, even for smaller tasks. In order to reduce this diversity so that it is manageable, a number of paths can probably be taken, but there are two paths that appear to be important. The first is when a young, inexperienced consultant imitates a consultant with more experience. This copying takes place within the scope of the personal integration of the young consultant in some kind of professional context in which inexperienced and experienced consultants cooperate. Whether this cooperation takes place in a consulting company or collaboration in a consulting network does not make a major difference. It is only important that the young ones cooperate with colleagues, peers whom they accept as experienced and who are seen as experts. The second path is the lonely one of trial and error. One or several inexperienced consultants, usually equipped with expert know-how that is in demand, somehow manage to figure it out, and, in as far as they are successful with it, begin to copy themselves. In any case, as Mintzberg (1979) points out, only to a small extent do these acquirement processes unfold in a conscious manner. Imitating others or oneself does not require language or terms. This is mainly a matter of an unconscious process of tacit learning (Nonaka & Takeuchi, 1995). This initial phase of the professional development of a consultant is primarily characterized by imitation and professional socialization. In the

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first 5 to 7 years of the consultant’s professional development, and in coming to grips with the first engagements, the professionally relevant basis of standards and values, and the operational patterns that combine expert know-how and general process models mature. This combination of professional norms in connection with the operative, personally acquired linking patterns constitutes the core of one’s consulting knowhow. In essence, this combination represents what is available in the way of expert and process knowledge as the result of previous or simultaneous parallel training, which is processed as raw material in this phase of professional socialization. Using the term imprinting to describe this phase seems appropriate for two reasons. First, imprinting refers to the implicit imitating conservative aspect of professional socialization. Secondly, imprinting points to the fact that the result of such a socialization process has now, figuratively speaking, deposited itself in the professional genetic make-up of the socialized consultant. In line with the motto “you can’t teach an old dog new tricks,“ the operational linking patterns and professional norms and values that are now available constitute the personal-professional DNA of a consultant. The practical impact of what is described here is far reaching. For each consultant the possibilities—but also the limits—that arise from future professional cooperation with other consultants could very well be established at the end of this phase of imprinting. Professional Islands In connection with questions regarding organization culture, Schein (1987) introduced the term “cultural islands.” Taking this metaphor further and applying it to our topic, the image of a young consultant, who after successfully completing his or her imprinting phase, becomes an inhabitant of a “professional island” is completely apt. The prerequisite for which the consultant is awarded “citizenship” on this island is his or her professional DNA, through which the consultant’s know-how is defined. This know-how now provides the basis for effective and simple cooperation with colleagues. This dynamic concerns the development of consulting architecture as well as translation into a distinct design. It also concerns carrying out effective interventions while working with clients on site. When consultants get along well together, when everything flows smoothly, it could be argued that they have identical linking patterns, they were coined in the same mint, they have the same upbringing, and so forth. Whoever has tried to work closely with colleagues who are inhabitants of other professional islands knows how difficult and tedious, and often also unsatisfying, such an undertaking can be. Emerging barriers that fre-

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Linking expert and process know-how

Process know-how

Expert know-how

Imprinting

Phases in one’s working life Figure 14.1.

Structure of the development process in phase 1.

quently cannot be overcome practically are not due to different personality traits but—and this is also part of the assumption—in the implicit quality of the different personal operative linking patterns of the participating colleague. This phenomenon has already been explicitly described or implied from various perspectives (cf. Froschauer & Lueger, 2006; Handler, 2007; Janes, Schulte-Derne, & Prammer, 2001; Wimmer & Kolbeck, 2001). Each group of consultants—whether it concerns a large or small company, or a professional network of colleagues is not important— can be deemed to be a professional island. If we keep to this image, the bird’s eye view of constancy consists of a multitude of small, larger and large islands and groups of islands spread over the world. The structure of the development process in this initial phase is captured in Figure 14.1.

Phase 2: Optimizing the Professional Standard (Optimization) The next phase in the development of consulting know-how is to create and continuously optimize professional standards by reflecting on them.

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Primarily this goal is pursued by means of two tools. The first is the eventdriven exchange between colleagues, which can be organized as an informal talk between colleagues or in the more formal structure of a consultation between colleagues. Talks like these are always triggered by actual practical events and experiences, for example, by: • challenging new tasks that a consultant is faced with, but without the requisite practice to solve them; • negative, noncomprehensible experiences or those that are difficult to understand in the consultant’s own consulting work; • uncertainty in the relationship with a client; • hypotheses developed in a distinct consultancy that do not seem sufficiently sustainable to be able to develop practical solutions; • problematic feedback on the part of individual internal cooperation partners in a change project; and • conflicts between different internally relevant environments of such an undertaking. Exchange of views and consulting among colleagues implies describing, explaining and assessing one’s own actual practice, development of hypotheses, suggesting, and recommending distinct procedures and solutions. My own experience with hundreds of conversations of this kind has taught me that the majority of topics discussed in such peer groups does not concern questions of content. It usually has to do with general process questions (particularly with architectures, designs, and interventions) as well as—and this is by far the predominant portion—with linking process elements and content in an actual applicable case. In the outcome of such conversations, considerations for standard procedures in the area of personal linking patterns arise, as well as subsequently on the levels of general process models and expert know-how. These participating peers can be colleagues from one’s own company, members of one’s own consulting network, or even professionally-contracted coaches, who are normally consultants themselves. The second tool for the development and ongoing optimization of professional standards is setting up, developing, and maintaining operational know-how databases. Here the focus is on carrying out one’s own work efficiently and successfully by means of easy access to existing work materials, methods, and instruments such as interview guidelines, diagnosis tools, sample offers, and standard processes for process phases that frequently recur. Simultaneously this tool also has to do with the enhancement and development of a knowledge pool from external sources.

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Levels of professional know-how

The practical importance of the differentiation proposed here between the second phase of know-how development and the phase of professional imprinting lies in the change in the quality of the learning mode that takes place. While professional imprinting, as described above, takes place on the basis of an implicit learning mode, the mode of optimizing professional standards is explicitly language based. Only now in this second phase does a consulting theory evolve that is directly available and practical. Only now the result of professional socialization is verbally available by means of models, and thus can be discussed, standardized, and optimized. The impact on a consultant’s know-how is considerable. The main prerequisites for the professional success of a consultant—professional expert know-how, general process models of knowledge-based services, and especially their connection in an order-related situation—can now be named, described, evaluated vis-à-vis colleagues and clients, and justified with regard to their application (see Figure 14.2). In the core of one’s knowhow, the consultant is now able to provide information to colleagues and clients. The toolbox has now taken on an explicit shape.

Linking expert and process know-how

Process know-how

Expert know-how

Imprinting

Optimization

Phases in one‘s working life Figure 14.2. Structure of the development process: Phases 1 and 2.

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Professional Islands In the past 5 to 7 years, the three levels of know-how have become even more deeply “embedded” in the professional DNA of a consultant. Simultaneously, this is now verbally and consciously accessible in all dimensions. In the meantime the consultant has been inaugurated into the clan of experienced residents of his or her professional island. The consultant has acquired a reputation and influence and is now sought after as an advisor for important questions.

Phase 3: Innovation What is challenging in the innovation of the consultant’s existing basic operational know-how has to do with the essence of innovation. Within this context, it is important to consciously differentiate between the constant developments and standardizations described in Phase 2. Despite all attempts at trivialization, the “divine spark” remains divine. A comment attributed to the Columbian writer Gabriel García Márquez states that the first sentence of a novel is God-given grace, the rest craftsmanship. There is, of course, a “wide field” between grace and craftsmanship, especially in the context of consulting work. There are two paths to lead through this field that seem possible: the first through planned confrontation with strangers, and the second through planned encouragement of a dialogue culture between consulting colleagues. First Path: Confrontation with “Out-of-the-Box” Thinkers The most important “instrument” regarding a consultant’s basic operating know-how is the face-to-face confrontation and discussion with concepts not pertaining to consulting, presented by reputable “out-of-thebox” thinkers. Here we have a kind of inspiration or spark for something fundamentally new that evolves. The innovative transformation of this “explosion” into one’s own profession—the craftsmanship in the innovation process—subsequently requires the activity of a group of colleagues, recruited from a peer group working together on the base of a nonhierarchic dialogue.   An example as to how this process unfolds, which I was part of, is captured in the renewal of the group-dynamic principles of professional organizational consulting, particularly through the paradigms of systemic family therapy and the constructivist thinking of the late 1980s in Vienna. At that time there were numerous self-organized weekend get-togethers between members of the Viennese consulting scene—all of whom were “seasoned” sociopsychological-thinking consultants, well versed in general systemic theory according to Ludwig von Bertalanffy. And all of them

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were in touch with the representatives of what were then new and fascinating schools of thought—the Milan School of Family Therapy along the ideas and concepts of Mara Selvini-Palazzoli, Boscolo, Cecchin, and Prata (1977), the work of the constructivist biologists Humberto Maturana and Francisco Varela (1987), and the theory of social systems by the German sociologist Niklas Luhmann (1988). With each of these personalities, we organized a varying number of workshops, which culminated in individual task forces formed in the different consulting firms and in companyspanning networks. The goal was to attempt to integrate these new ideas into the store of operating know-how of the participating consultants, both helping to prepare them for consulting practice and to accompany them in practicing consulting. An additional benefit was to assist them in more fully reflecting on what transpired. The results of this succession of planned, organized, irritations through face-to-face contacts with unconventional thinkers and the subsequent operative integration caused a profound change in the genetic consulting make-up of the participating colleagues. Subsequently there were numerous innovations in terms of how to operate, including: • general process models (primarily individual concepts of systemic intervention techniques according to Selvini-Palazzoli et al., 1977); • professionally relevant norms and values, primarily those concerning consulting attitudes from a more distant, “systemic” point of view and the concept of the “multidirectional partiality” (Boszormany-Nagy, 1973), and the personal pattern of linking these elements with existing basic expert know-how (primarily in terms of integrating system-theoretical concepts regarding organizational theory according to Luhmann, 1988); and • reorientation of personal linking patterns of the participating colleagues. This interaction resulted in the consulting concept of the Vienna School of Organizational Consulting (Wiener Schule der Organisationsberatung; Krizanits 2009). All other professional innovations in the Viennese consulting scene—such as the concept of Ciompi’s (1998) “affektlogik” and the integration of solution-focused therapy (de Shezar et al., 1986) and the concepts of systemic structural constellations (Sparrer & von Kibéd, 2000), as well as the current discussion with Scharmer’s (2009) “presencing” concept—follow the same successful development pattern again and again: • Step 1: “Irritation” of the existing basis of operational know-how through an organized face-to-face meeting with a recognized “out-

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of-the-box” thinker from a different field within the circle of colleagues. The fact that these unconventional thinkers are “gurus” from a different field is a prerequisite for success. The reason for this is that consultants—at least those from my generation, and this is a conviction I have acquired from years of experience—will not allow themselves to be changed dramatically by “their own peers.” • Step 2: Reappraisal and translation of the foreign knowledge into one’s own professional context. Subsequently there is also integration into one’s own basic operational know-how through the work of the self-organized, nonhierarchal structured dialogic working task forces. • Step 3: Explicit transmittance of the newly evolved concepts and instruments into the available know-how databases. Second Path: Planned Structured Dialog Processes Between Colleagues (“Presencing”) There is scientific discourse even in consulting networks and companies, which orient themselves on the communicative traditions of universities where scientists learn to “successfully” defend their work. Drawing on Scharmer (2009), I refer to this form of scientific discourse—a kind of “intellectual martial arts” based on attack and defense—“debating.” Recently, under the concept of “presencing,” a group of researchers at the Sloan School of Management explored the possibility of exchanging views between participants in such a way that something profoundly new can arise (see Senge, Scharmer, Jaworsky, & Flowers, 2004). Senge and his colleagues propose an approach that is almost the direct opposite from what I have just outlined above as being a prevalent culture of scientific discourse. Innovation and new ideas should come about in presenting concepts and ideas in such a way that without reservation the participants would go beyond their own interests, interpretation and perception patterns and let themselves become intellectually and emotionally involved in the ideas introduced by others. This type of emphatic dialogue on its own should lead to new, profound innovative ideas and movement. While clearly an attractive concept, it is too early to judge the practical innovative power that the task forces, which have currently established themselves in Vienna-based consulting firms, will ultimately have. They are currently examining their own basic know-how, attempting to further develop their expertise and skills by applying such presencing concepts (see Figure 14.3). Professional Islands Through dialogue with fascinating personalities and their exciting ideas in a circle of selected peers, a mutation of the professional genetic

Levels of professional know-how

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Linking expert and process know-how ? !

Process know-how

Expert know-how

Imprinting

Optimization

Innovation

Phases in one‘s working life Figure 14.3.

Structure of the complete development process.

make-up—the DNA of a consultant—takes place. This mutation concerns all three of the know-how levels discussed above. The impact on cooperation with the other natives of one’s own professional islands can be dramatic, and a kind of a selective retention movement (e.g., Mayer, 1942) can evolve. At the same time, operational cooperation with colleagues who have not taken part in these innovation processes can become increasingly difficult, less efficient and, in direct consulting work with customers on site, increasingly strained by conflicts. To the same extent as the exciting new cooperation with colleagues from the task forces is quantitatively increasing, the cooperation with those “who are left behind” quantitatively decreases, for psychodynamic reasons as well as those regarding content. In my experience, the consultant is now really only happy working with his or her task force colleagues. A clear subsystem, defined by the new consulting know-how, has now been formed. This development leads to an organizational spin-off, as colleagues who are putting enormous amounts of energy into working and cooperating take pleasure in implementing and using the new concepts. These individuals literally emigrate and settle on a new, as yet unpopulated professional island—an island which is now their own. After they become

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successful on the global market, soon other parties are interested in immigrating as well—young, highly qualified, adventurous colleagues who apply for “citizenship” in the newly populated island. Some of them acquire a resident’s permit and begin, under the leadership of experienced island inhabitants, to learn the consulting trade by imitating it.

CONSULTANT KNOW-HOW AND THE PROFESSION OF CONSULTING: SOME CONSIDERATIONS ON THE SOCIAL STANDING OF CONSULTING In the course of this chapter, I have frequently used the adjective “professional” with regard to consulting, which raises considerations about the relationship between professionalism and consulting. In the everyday use of the term, “professional” means “within the scope of a job-oriented activity.” This should be a constant reminder that “consulting” is the term for a quality of activity that does not only take place in a business context. After all, each of us has probably tried time and again, more or less successfully, to give advice in a private context. It is thus important to ask ourselves whether consulting is a “profession,” such as that of a doctor, teacher or stone mason, and if we raise these concerns—according to the application of consulting—from a global perspective, there is not an obvious answer (Hasenzagel, 2009). In my opinion one cannot answer this question—to any extent whatsoever—until the criteria for the definition of “profession” have been clarified. Moreover, it is also necessary to clarify whether or not these criteria are relevant for consultants, for their clients, and for the consultant-client relationship. Indeed, starting at a deeper level of reflection—in light of the social standing of consulting—one could begin by asking whether this basic question even makes sense. In exploring this issue, we should begin with some observations and assumptions. First, when consultants living in the German speaking world are asked about their profession (e.g., when filling out a registration form in a seminar hotel), only a very few give “consultant” as an answer. Second, if a consultant does give “consultant” as an answer, the semantic content of the label “profession: consultant,” as opposed to the above mentioned examples (doctor, teacher, stone mason), is extremely vague. This has to do with the fact that—at least in the German speaking world—the semantic content of the terms “consultant” or “consulting” is still largely unclarified. Whenever a consultant says that he or she is a consultant, the comment does more to open an association process than to provide the basis for a meaningful understanding of what the profession

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actually is about. It is part of my theory that this is a general, widespread phenomenon. Third, taking the second point a step further, if there is no shared experience between a consultant and client, the statement “I am a consultant” does not provide the client with any relevant information about the services, professional standards and service quality that can be expected from the consultant. At the present time, the most important process to determine whether a consultant is “good” and works “professionally” is “blind tasting.” If a client believes that the results of a paid consultation are “good” then the consultancy was good, the consultant is good, and under certain conditions the consulting firm is also good—regardless of the details about how the consultant actually managed to do it. It is like tasting wine—the main thing is that it tastes good. If the price is also acceptable, then the product and producer can be recommended. What “normal” consumer—when tasting wine—tries to analyze the chemical ingredients of the delicious wine that he or she has just tasted? In fact, if that individual did attempt to analyze it, what would be the point? With respect to consulting, especially against the background of the vast number of different offers by the “inhabitants” of all the “professional islands” strewn across the globe, the diversity of professional norms and values, linking patterns, general process models and expert competencies is absolutely boundless. The most important process to evaluate consulting quality—which influences the consulting market considerably—is accordingly related to both need and output. Consultants and their work are given ratings by their clients, such as “quality” or “that was very professional,” primarily according to their concrete expectations (“need-related”) and perceived outcomes of the engagement (“outputrelated”). In my experience, input-oriented criteria, such as (1) the existence and empirical assessability of the effectiveness of proven methodical and process-related standards (process know-how, general process models, personal linking patterns), (2) scientific recognition of applied theories (expert know-how), and (3) state-of-the-art of these methods, processes and theories (innovations), all play a rather subordinate role. Fourth, attributing a defined professional competency to a consultant or a consultancy—and by this I mean reputation—is not derived from the fact that we are dealing with a consultant or consulting company, or that the consultant or firm is competent (How is one supposed to know what this means?). Reputation primarily comes from a client’s appraisal of the consultancy provided by a distinct person or company, which distinguishes consultants from the above-mentioned doctors, teachers, and stone masons. Fifth, even in the social segments (e.g., managers in industrial enterprises) in which consultancies and consultants have a “socially established

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standing,” the reputation is often extremely ambivalent (e.g., O’Mahoney & Adams, 2009). There are quite a few negative traits that are also attributed to consulting—dubious, quacks, “don’t take responsibility,” overpaid, penguins (behavioral pattern), PowerPoint artists, and so forth.

International Certification and Consulting’s Social Standing Against the background of the above-described need-related and output-related evaluation practice it is not surprising that as part of its certification process the International Council of Management Consulting Institute (ICMCI) requires compulsory proof of this type of evaluation by clients. Yet, even though candidates are required to present such customer evaluations in written form (output-related), it seems all this information suggests is that a consultant is good simply when he or she is good. The certification standards in terms of input-oriented criteria concerning the personal competence of the consultant, again not surprisingly, are only expressed very generally. The definition, interpretation, and way in which this interpretation is used in the actual certification process are subject to the autonomy of the regional certification institutions (Incite GmbH, 2009). For instance, let’s imagine that the ICMCI wants to define a concrete set of behavioral and verifiably formulated consulting competencies. Further imagine that as part of the certification standard the ICMCI also verifies that each candidate possesses these criteria. In a similar way that doctors, as part of their education and before they are let loose on humanity, have to prove that they know that, for instance, a person has a liver, where the liver is located, and so forth, consultants would be required to exhibit a certain base of knowledge. What would be the impact of this? At least two things—and this is still part of the “gedankenexperiment”—seem foreseeable. First, the majority of inhabitants of all the professional islands spread across the globe would most likely not even notice this initiative. Second, those who did notice the initiative would probably only agree to these standards—particularly if they were inhabitants of large, market-powerful islands—if they corresponded to their own ideas of professional consulting. Although this assessment paints a rather dismal picture of the certification process, the question remains as to what effect such efforts might have on the social standing of consulting. Many of the consultants who undergo a certification process have practiced consulting for several years. For them the course of study that usually precedes a certification hearing is their first opportunity to reflect on their own consulting practice within a circle of colleagues and supported by a “teacher.” In my experience, the focus is usually on questions of general process models

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and personal patterns of linking such models in particular situations with the elements of their expert know-how (“personal linking patterns”). Here the candidates can develop a practical theory and methods language coherent for themselves and thus get the opportunity to optimize their own professional standards (Phase/Level 2 discussed earlier). For “young” consultants who are not yet well versed on the market, formal proof of professional qualification connected to a certificate can help them attain more professional assurance vis-à-vis clients. It thus appears that the most important contribution of international certification initiatives to develop the social reputation of consulting has evolved through an examination of (1) quality standards in consulting and (2) client expectations toward consultants. As such, an institutionalized, open dialogue has been initiated and continued, and through this process momentum is evolving in the right direction.

CONSULTING AS A PROFESSION In conclusion, we can draw several considerations on the professionalism of consulting, which also focus on the relationship between consultant know-how and its social standing. In the European tradition of guilds, associations and registration bodies, a profession is the result of an institutionalized standardization achievement, which releases individual members of the profession to a considerable degree from having to provide personal proof to a client of his or her professional ability. In terms of content, this standardization concerns a defined system in every profession consisting of: (1) at least a rudimentary theory concerning the subject of the profession; (2) products and services offerings; (3) proven professional methodologies; (4) tried and true tools and technologies; and (5) binding and, at least principally enforceable, quality standards. For these reason we know, for example, that when we go to the dentist with an infected tooth, send our child to primary school, or hire a stone mason to build a garden wall what we can expect. At this point it is useful to, once again, conjure up the island metaphor. If one observes the communication and professional exchange among all the inhabitants of the professional islands across the globe, we have the following situation. Despite all the politeness (generally one doesn’t speak badly of other professional islands to clients) and at times selective curiosity of each other (one is naturally interested in knowing how business is with “the others” and why business is going like it is; hypotheses are even developed about it), the exchange among colleagues is primarily characterized by competition and rivalry. This reality, due to the growth in the number of providers, is consistently increasing and the resulting relationship has a

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considerable impact on the field of professional consulting. Due to the “cautious” strategic-tactical manner of dealing with one another, there is literally no substantive or emotional dialogue that would make it possible to make meaningful connections between the professional islands. As it currently stands, the field of consulting does not have any transparent standards along the lines of the above-mentioned five levels of standardization criteria for professions. This void holds, whether the focus is on regional, national or global standards, or even inward(between the consultants of different professional islands) or outwardfocused (toward the market) initiatives. As mentioned above, there is no island-spanning joint concept on the prerequisites of what competencies a consultant should possess. Above all, and this is fundamental, the inhabitants of these islands do not have a common, practical language of methods and theories. One could, of course, question how this situation could have evolved, but the reality is that the field of professional consulting simply does not have a common, professional “lingua franca” in which everyone is proficient. Although professional consulting can look back at roughly 100 years of history (Handler, 2007), professional consulting is still a long way from becoming a profession. Unfortunately, I cannot empirically prove my personal assessment of the impact of these findings on the social reputation of professional consulting. Yet I am convinced that what I have described here limits this reputation. Stating it differently, the development potential of “professionalism,” which principally is still open to the field of professional consulting, also contains the potential of increasing reliability of expectation and thus—building on this—social standing as well. For this to take place there must be an increase in systematized, practical language of theory and methods about consulting. Consultants, in essence, have to learn their “Latin.” Of course, those who further develop and formulate this practical theoretical language do not necessarily have to be inhabitants of one of the professional islands concerned. Indeed, the underlying challenge is that few, if any, consultants are prepared to confide in the competition about something that would have such a major impact on their own practice—as a globally understood and practiced practical theoretical language would undoubtedly have.

REFERENCES Boszormenyi-Nagy, I., & Spark, G. (1973). Invisible loyalties: Reciprocity in intergenerational family therapy. London, England: Harper & Row. Ciompi, L. (1998). Affektlogik [How feelings work and the effects they can have]. Stuttgart, Germany: Klett-Cotta.

326 A. JANES de Shazer, S., Berg, I. K., Lipchik, E., Nunnally, E., Molnar, A., Gingerich, W., & Weiner-Davis, M. (l986): Brief therapy: Focused solution development. Family Process, 25(2), 207-221. Froschauer, U., & Lueger, M. (2006). Ergebnisse der begleitforschung: Die reflexiv-differenzierende beratung [Outcome of research: Consulting that reflects and differentiates]. In R. Königswieser, E. Sonuc, & J. Gebhardt (Eds.), Komplementärberatung: Das zusammenspiel von fach- und prozess-know-how [Complementary consulting: The interplay of expert and process know-how] (pp. 57-68). Stuttgart, Germany: Klett-Cotta. Handler, G. (2007). Konzept zur entwicklung integrierter beratung [Concept on developing integrated consulting]. Wiesbaden, Germany: Deutscher Universitätsverlag. Hasenzagel, R. (2009, June). Professionalism in consulting: Theoretical considerations and empirical survey. Paper presented at the 4th International Conference on Management Consulting, Vienna, Austria. Incite GmbH. (2009). CMC—Certification—Requirements. Retrieved from http:// www.incite.at/ausbildung/de/zertifizierungen/cmc-zertifizierung/ Janes, A., Prammer, K., & Schulte-Derne, M., (2001). Transformationsmanagement: Organisationen von innen verändern [Transformation management: Changing organizations from the inside]. Wien, Germany: Springer. Krizanits, J. (2009). Die systemische organisationsberatung: Wie sie wurde was sie wird [Systemic organization consulting: How it became what it became]. Wien, Germany: Facultas. Luhmann, N. (1988). Soziale systeme: Grundriss einer allgemeinen theorie [Social systems: Outline of a general theory]. Frankfurt, Germany: Campus. Maturana, H., & Varela, F. (1987). Der baum der erkenntnis [The tree of knowledge]. Frankfurt, Germany: Scherz. Mayer, E. (1942. Systematics and the origin of species from the viewpoint of a zoologist. Cambridge, MA: Harvard University Press. Mintzberg, H. (1979). The structuring of organizations. Englewood Cliffs, NJ: Prentice Hall. Nonaka, I., & Takeuchi, H. (1995). The knowledge creating company. Oxford, England: Oxford University Press. O’Mahoney, J., & Adams, R. (2009, June). Critically exploring business engagement in academia: The case of the UK consulting industry. Paper presented at the 4th International Conference on Management Consulting, Vienna, Austria. Senge, P. M., Scharmer, C. O., Jaworsky, J., & Flowers, B. S. (2004). Presence: Human purpose and the field of the future. Cambridge, MA: Society for Organizational Learning. Scharmer, O. C. (2009). Theory U: Learning from the future as it emerges. New York, NY: McGraw-Hill Professional. Schein, E. H. (1987). What you need to know about organizational culture. Training and Development Journal, 41, 38-41. Selvini Palazzoli, M., Boscolo, L., Cecchin, G., & Prata, G. (1977): Paradosso et contraparadosso [Paradox and counter paradox]. Milan, Italy: Feltrinelli.

Developing Expertise and Social Standing in Professional Consulting 327 Sparrer, I., & Varga von Kibed, M. (2000). Ganz im gegenteil: Querdenker und solche die es werden wollen [On the contrary: Out-of-the-box thinkers and those who want to become one]. Heidelberg, Germany: Carl Auer. Wimmer, R., & Kolbeck, C. (2001). Stößt der beraterboom an seine grenzen? Oder aufbau und dekonstruktion von autorität in organisationen [Is the consulting boom reaching its limits? Or construction and deconstruction of authority in organizations]. In W. Wüthrich, W. B. Winter, & A. F. Philipp (Eds.), Grenzen ökonomischen denkens [The borders of economic thinking] (pp. 527-549). Wiesbaden, Germany: Gabler.

CHAPTER 15

ACTING AS A LONG-TERM CONSULTANT Challenges for Professional Practice D. UNTERMARZONER Dagmar Untermarzoner

The ways in which management consultants work vary considerably and there is no one ideal model that serves all business purposes, the different preferences and views of clients, or how to plan and implement change (Caluwé & Vermaak, 2003). Within this broad context, this chapter focuses on a particular challenge that I have seen become increasingly relevant through my work in recent years—the difference between acting as a consultant within a defined, limited, and often project-based contract and the more inclusive and comprehensive consulting activities I refer to as longterm consulting. The majority of consulting contracts include specific tasks, such as designing and facilitating workshops where a special need for external support is seen, assisting in selected areas where the consultant can contribute particular advice, or helping a client master specific critical phases of a change process. In contrast to these engagements, long-term consulting includes a more integrated and evolving approach, where consultant The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 329–349 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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and client create the consulting process together. This model of consulting does not make any claim to being the best or logical future trendsetter. It may best be seen as one branch within different roles consultants can take in their professional activities. The aim of this chapter is not to brand a new type of consultancy practice or to criticize existing ones for their shortfalls. Rather it is intended as a contribution to the ongoing discussions of professionalism in consultancy and the addition of some ideas for professional qualifications. The basic premise of the chapter is that consultants focusing on longterm commitments need to consider carefully their professional roles as well as the way they perform their services. Given the long-term nature of the relationship, there are significant implications for the role the consultant takes throughout the process, the client-consultant relationship, the consultant’s business model, and the expertise the consultant is able to contribute. SHAPING THE PROFILE OF THE LONG-TERM CONSULTANT Over the last 15 years I have learned, practiced and observed a wide variety of consulting approaches within the management consulting community. I have witnessed a number of dilemmas, which tempt the consultant away from being relevant and real time.

Dilemmas in Short-Term Consulting Three ways out of these dilemmas, which every consultant knows from personal experience, are limiting oneself as a “service provider,” seeing consulting as a “competitive discipline,” and playing the “transcendental therapist.” Way Out 1: The Consultant as “Service Provider” “Don’t try to educate your client; do what the client asks for and don’t push your own ideas.” “It is important that the client is satisfied.” Here the consultant focuses only on serving the needs a client stipulates. This approach suits a specific type of client, who “knows” what he wants and is looking for someone to provide it. He wants consultants to work for him, not with him. As illustrated by the following comments, consultants in this role attempt to meet the expressed needs of a client, even if they do not sincerely believe that the client actually knows what he or she needs: In medicine patients ask the doctor for healing, not for a special treatment. Good doctors don’t sell treatments. But senior managers and internal con-

Acting as a Long-Term Consultant 331 sultants often deeply believe they know what “treatment” they need. I worked in the organizational consulting department of a management institute that provided management training. Most of the clients that called us requested management training to support their change processes. In 80% of these cases training was not the right treatment for their problem, but in this situation I was forced to work “for” the clients, who were totally fixated on training.

Although the long-term consultant knows that this starting point is not optimal, in many cases it serves as the beginning of a consulting contract that later on may allow for deeper cooperation. As will be described later, moving from service provision to true cooperation is not trivial and requires specific attitudes and skills on both sides. Sometimes it works, but oftentimes clients do not change their minds, even when the consultant tries hard to convince them otherwise. Way Out 2: Consulting as a “Competitive Discipline” Consulting takes place in a highly competitive field and the criteria for what constitutes successful consulting are not clear at all. Two visible criteria for success are the ability to charge high fees and high name recognition—as opposed to delivering top quality service. This is a huge challenge for relevant consulting. “Who earns the highest fees and who is most famous?” This egocentric dream of being number one among consultants is the equivalent of management’s fixation on increasing shortterm shareholder value. You could even say that success breeds this attitude. Making money is, of course, a legitimate goal, but as the consulting industry has grown in recent years, so have the desires of consultants to earn ever-increasing fees. There are two problems with this position. First, less is sometimes more, since small interventions can have substantial impact when they are combined with personal learning opportunities for the clients involved (Schüller & Untermarzoner, 2002). Second, in a more psychodynamic view as developed by Laske (2005), the client is used as an instrument for the consultant’s own need gratification. Way Out 3: The Consultant as “Transcendental Therapist” In German-speaking countries, there has recently been a considerable tendency toward “alternative” methods in organizational consulting. As an example, translating the methods of family constellation into organizational life is seen as an attractive approach for many consultants and clients striving toward unorthodox solutions. The attraction of this approach lies not only in the systemic tradition of its founders, which are highly appreciated by systemic organization consultants, but also in the increasing complexity of organizational situations. The missing link is the

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dynamic of relationships and relational constellations within organizations and the growing influence of persons who produce dynamics that are not easily to handle. Managers and consultants are confronted more often with situations that elude any rational approach to change. This calls for oracles who can fulfill two functions: reducing anxiety in a complex situation where deciding and finding clear ways out is not easy; and creating an authority that legitimates a decision or strategy (Zirkler & Berreth, 2006). Systemic constellation is a kind of oracle that creates a context where solutions can evolve with different players and a consultant that directs the process. In a constructivist view, organization constellation creates solutions that fit. The problem is that the way the solution is created is beyond explainable scientific discourse. Either you believe or you don’t. This clearly moves this approach toward spiritual functions and elevates the consultant to a transcendental position. There are of course positive aspects to these alternative methods. They help to integrate “the person” and “the invisible” into the organization. From the viewpoint of psychological expertise, however, the danger lies in the degree of professionalism. Usually psychotherapists practicing constellation work are highly educated and extremely professional. Consultants tend to invest only a couple of weeks in this process of professionalization and avoid a solid psychological professionalization path, which is time consuming and also involves the development of the self as instrument (Cheung-Judge, 2001). At the same time organization constellation elevates the consultant to a meta-position. In a long-term perspective this consultant-client relationship structure keeps the client in a dependent position emotionally. Such relationships with strong connections to transcendental theories create a climate of dependency that must carefully be handled by the professional players.

Attitudes of Long-Term Consulting Long-term consulting is another way out of the dilemma of how to be relevant and real-time. Long-term consulting aims to speed up the process (through working simultaneously on very different dimensions) and to empower the client to take over as soon as possible on a higher level (through consistently combining services the consultant provides with learning opportunities for the client). The key to such speed and empowerment lies in the specific client-consultant relationship. Long-term consulting orients itself to the client organization’s underlying needs, combined with the consultant’s own approach to what sustain-

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able development can be for a specific organization. In practice this means paying careful attention to the client’s business, opening the client to the idea of the general development of the organization, and integrating strategic processes and human resource development. Understanding the Client’s Business Even when consultants move from sector to sector without specializing, they must pay honest attention to the client’s business. This can be done by exchanging experiences with colleagues, by surfing current internet sites and newspapers, by interviewing clients about their products and services, and by accompanying clients when they meet their client. The challenge is to learn enough about the underlying logic of the client’s business without necessarily going into great detail. Opening the Client to the Idea of the General Development of the Organization Opening the client to the idea of general development of the organization is best done by working simultaneously on four dimensions: strategy, processes, structure, and people. Consulting projects focusing on only one of these dimensions produce unbalanced results, which in turn risk being rejected or isolated by the system. Bridging the gaps of strategy, structure, process, and people also has considerable impact for the qualifications needed (Galbraith, 2008), a point which we will return to later. Working on all these dimensions simultaneously requires more action-orientation on the part of the consultant. Integrating Strategic Processes and Personnel Development Processes can be perfectly described, but when staff does not know how to cooperate in those processes, they will be of little use. The same dilemma arises with strategies that are not combined with learning processes (Lobnig, this volume). There are three essential entry points to the general development of an organization: the vision, the core competencies, and the processes—these three working fields strengthen the identity of an organization. They are “language builders” that explicitly identify the organization’s heart and soul. Long-term consulting provides one process that integrates the above mentioned organizational issues with human resource development. Many managers focus on strategy work and restructuring, and when these approaches fail to gain acceptance they call in a consultant. In such situations starting with the personal development of the managers themselves—especially those at the top of the organization—can bring valuable insights into why change processes stumble. The personal development effort requires: (1) development of a business-oriented require-

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ment and qualification profile; (2) analysis based on the principles of selfinsight (i.e., not testing people but letting them understand their talents and limitations in relation to the strategy); (3) managers who take responsibility for creating structures for learning (instead of delegating learning to the human resource department); and (4) individualized development programs monitored through feedback and dialogue between the developers and the staff. Another reason for combining organizational and personal development lies in the dynamics inherent in today’s change processes. In recent years, it has been my experience that it is often impossible to finish a change process with a client organization, since most of these change processes suddenly take a new direction as they develop further. There are at least three reasons for such changes within changes: (1) there are changes at the very top of the organization (e.g., new owners); (2) unanticipated consequences occur (e.g., people resist, key managers lack skills, products lose selling potential); and (3) goals set at the beginning turn out not to be the right goals. Burke (2008) describes this as the paradox of planned change: unexpected situations require “looping back” and the ability to deal with these new situations. This means that concentrating only on organizational issues is not satisfactory. It is also important to concentrate on the development of key players: finding talented people, supporting them, providing them with knowledge and broad expertise, letting them take responsibility for their skills training, and getting them to collaborate during the change process by teaching them, shadow-consulting or even by taking on management responsibilities in projects. The result is an increased maturity of both the organization and the people involved.

INVESTING IN COOPERATIVE BONDING: SPECIFICS OF THE CLIENT-CONSULTANT RELATIONSHIP IN LONG-TERM CONSULTING When the cooperation between client and long-term consultant begins to comprise more aspects it needs to shift from occasional to continuous involvement. The paradox is that a long-term consulting process cannot be planned; it must evolve step by step along with mastering the different challenges in the consulting process and the client-consultant relationship. However the relationship between consultant and client is one of the essential elements for the efficacy of consultancy. Concepts from psychodynamic, developmental, and social psychology are of help in understanding some facets of the relationship long-term consultants go through with their clients.

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Investing in Cooperation: Suspending Ambivalence The consulting relationship in most cases is not a linear process; some consulting relationships even remain ambivalent for a long time. In many instances, it seems that as soon as a reliable cooperation is established with a client that client suddenly begins to resist the consultant again. This relates to the psychodynamics of the consulting relationship: the change required produces ambivalence on the client’s side. Clients may recognize that help is needed but simultaneously reject that help, at least to some extent, fearing that it shows limitations or incompleteness in their own capabilities. Ambivalence leads to resistance and the energy of that resistance is projected onto the client-consultant relationship: the greater the resistance, the greater the distance between the client and consultant. During first contacts with a client the consultant must draw an inner picture in order to meet the client’s problem or even just to treat the symptoms. Drawing on personal experience, the following case illustrates the small steps that are taken to shift the client’s attitude from requesting services for a single problem to cooperating toward a general development of the organization. Developing Cooperation I was engaged by a political organization to help solve a conflict between the representatives of the local political party and their deputy mayor. During the initial consulting sessions I developed a clear impression that this organization lacked a vivid vision, procedures for decisionmaking, and skills in team work. Although they worked hard on finding a concrete solution for the conflict, it was apparent that solving this problem would not help them to be successful in the future. The conflict between the deputy mayor and the representatives of the party was only a symptom of the underlying problem. However, it is amazing how organizations sometimes split their problems into different sections—and then engage different experts for these different problems. They call for help within their already settled view of the problems and how to solve them. From the vantage point of the long-term consultant, it is quite challenging to work with such clients. The ambivalence and sometimes resistance toward viewing the problem more broadly or comprehensively are quite high. In this case, there was a strong second power group that had one candidate (backstage) waiting to take over the deputy mayor’s role in the upcoming election. They added fuel to the fire by attacking the deputy mayor. The second group had already engaged another consultant to work with them on visions when they had succeeded in successfully

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excluding the present deputy mayor. In essence, they wanted me to get rid of the incumbent and then exit the scene. During one of the consulting sessions, I described the broader picture I felt they had to work on. I told them clearly that they would not be successful by simply replacing their deputy. Additionally, I made them aware that one team member (the backstage candidate) was acting in a less productive and even destructive way, taking a position Wageman, Nunes, Burruss, and Hackman (2008) refer to as a “derailer.” According to them, “derailers” are individuals who destroy change processes by working against those processes in the background, unrecognized or even protected by the management. Usually these are people with good reputations within the organization. On the surface they add value to the organization, but underneath they are driven by opposing energies and sometimes by destructive behavior. After I presented my hypotheses the group was shocked, but some of them seemed to understand. As some group members did not want to support the hidden candidate for the next election, they did not dare to criticize the incumbent deputy mayor. However, after I left I was not sure whether they would continue the consulting contract. I felt that I was putting the contract at risk and was in danger of being viewed as a very strange consultant. Nobody said an especially cordial goodbye and I felt really depressed by the idea of losing the contract after starting with such a “bang.” Two days later “Peter,” the group leader, called and asked me to continue to work with them and I was really happy. I asked Peter to meet me before the next session as I wanted to discuss with him the broader picture of their situation and the general steps I felt they would need. This led to shared assumptions between us and served as a basis for determining the next steps in the process. The next meeting was quite different. With the help of a highly structured design, every member could talk about his or her concerns and the chances and risks of different conflict solution strategies. The group finally decided not to exclude the deputy mayor from their political party and a new member dropped in nominating himself as a new candidate. He was not part of the “second group” and had a solid reputation as a team leader in his home organization and as a well-balanced person. In my view this member had a chance to lead the group in the direction needed. He did gain acceptance and after half a year he won the next election. In an evaluation meeting, this new deputy mayor told me that it had been my intervention addressing the long-term perspective that had encouraged him to take this step, surprising even himself. This case shows clearly that sometimes it is necessary for the consultant to put a contract at risk, and it was my good fortune that Peter was a person who was interested in the party’s long-term development. In this case a long-

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term oriented consultant met a long-term oriented client, a constellation that is not often the case.

Integrating Intimate and Strategic Interactions A second ingredient of a productive working relationship is building a relationship that combines intimate and strategic interactions (Nevis, 2008). Strategic interactions aim at meeting goals through good cooperation and intimate interactions focus on real interest in the person, it is about “caring” for people. This combination is especially significant for overcoming change initiatives that become stuck, as stagnation of change processes rarely originates at the content level. To work on such stagnating change processes, it is necessary to build a sustainable relationship— among managers and between the managers and the consultant—which allows them to delve deeply enough to diagnose what does not work and find ways to overcome the problem. Managers and consultants who have problems in building rich relationships also have trouble succeeding with their change initiatives. This dynamic is captured in another case vignette that exemplifies how the inability to maintain a long-term relationship between the key client and consultant is at the same time a symptom of a stagnating change process. Constrained Relationships and Unsuccessful Change I was engaged after a long consulting project by a well-known international consulting firm was finished. It was obvious that almost everything was done: they had a well-defined strategy, an interesting vision, and a set of projects to meet their goals. The top executive, “Mark,” asked for help because the newly merged top management team seemed not to be as productive as they should be and the staff had asked for more orientation. I started with two interventions: whole-system meetings to initiate a dialogue between the two newly merged units and an analysis of each top management team member to develop insights into the dynamics of the people at the top. For both activities it was not possible to develop a longterm relationship with the key client. Although it would be easy simply to place the blame on my own shortcomings, the case illustrates how the relationship dynamic is a symptom of problems throughout the organization and its change effort. After the first meeting among Mark, the human resource manager and me, where we discussed the basic approach and general steps needed and Mark espoused how interested he was in personally supporting his staff. Mark’s secretary called and told me I could start. From my point of view, there were several open questions to discuss with Mark as my primary cli-

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ent. Interestingly, he had the idea that I would start my work without working out the details of the process with him in advance. This led me to believe that he was focused on a strategic relationship and expected me as his consultant to work for him rather than with him. I asked Mark to design the consulting process together with me. During this session, he told me about his ideas and experiences and he had quite good ideas for designing the process. I developed appreciation for Mark as a person and hoped also to initiate this type of dialogue between him and every member of the team. The evaluations of the analyses of the managers showed clearly some development needs and indications why the change processes were not advancing as planned. After holding his first individual face-to-face meeting with each member of the management team, Mark suddenly stepped back from “caring” about the people. He explained very formally that he would support the development, but not take the responsibility for the necessary steps being taken. He assumed that that they were all well-educated managers, they were “ready” and it was each individual’s responsibility to take the next steps. It is easy to imagine what happened next. Some members of the management team tried to take steps accordingly, but a guiding and caring hand was missing. As a next step, a team meeting was planned to share the results and conclusions for steering the change. This next step, however, never took place. As Mark did not openly share his strategy, there was no chance for dialogue about the change within the planned whole-system meeting or even with the team of managers. Although Mark’s career was highly successful, the integration process was not. It appears that Mark’s personal limitation in building the more intimate part of a relationship was a basic limitation in the whole process. The kind of relationship he evidently desired was for others to work for him, but not with him, and in that sense he clearly preferred unilateral strategic relationships with others. With this type of behavior, Mark is a typical example of the well-educated manager whose driving ideas of change are kept under wraps. With this lack of transparency, he maneuvered his team into a position where certain aspects of power remain untapped. Thus, collaborating with this type of client restricts the efficacy consultancy can provide to the organization as a whole—although not necessarily to the key client himself.

Bonding With the People in the Client’s Organization A third concept that is instructive for generating insights into mastering the relationship with clients in a long-term perspective is bonding.

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Originally formulated within maternal developmental psychology, it describes how relations can be empathetic without the partners becoming entangled with each other. How does an external expert commit to his client’s organization while keeping the distance that allows him to step back whenever needed? By bonding with the people in the client organization. Why is bonding needed? Change requires relationships that can be maintained while risks are being taken. Nowadays managers are having more and more trouble bonding with the organizations for which they work, especially in situations where they are only with the organization for a couple of years. In such situations, they bond to their networks rather than to their companies and do not connect emotionally with their colleagues. Yet it is important for them to learn to bond quickly, even if they do not intend to remain with the organization for the remainder of their careers. Here the consultant should act as role model. Although committing to a client’s organization means bonding with its members, it is a process the clients themselves do not observe directly. The long-term consultant is interested in the people he or she works with without becoming their friend. Unfortunately, clients often believe that friendship is the easiest and fastest way to bond and invite consultants who are in the field for a longer period of time to “be friends.” The long-term consultant can maintain the proper distance by avoiding small talk about private issues with clients and carefully limiting informal times together, while still being deeply interested in their development as professionals. In fact, the consultant often pays more attention to their personal development than they do, because they are concentrating on the current project. For a long-term perspective both developments—the organizational and the personal—go hand in hand. A special challenge that long-term consultants face is bonding with “difficult” or aggressive individuals in the client system. Such clients can create an adversarial environment for the consultant’s work (AhlersNiemann, Beumer, Redding Mersky, & Sievers, 2008). The consultant has to make clear that he or she will not accept such treatment, neither toward him/herself nor toward other members of the group during the sessions. The consultant should behave assertively but not aggressively toward such an individual, continuing to offer to build a relationship. The difficulty lies in keeping the offer open while the client continues to fall back into aggressive behavior. Being able to understand and deal with such neurotic tendencies of managers as described by Motamedi (2008, 2009) is a central issue and a challenge of organizational consulting.

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THE CONSULTANT’S BUSINESS MODEL: IMPLICIT AND EXPLICIT ASPECTS OF RUNNING THE BUSINESS Practicing a long-term consulting approach also has consequences for the business related aspects of consulting. Some of these consequences, with which I have had in-depth, and at times quite challenging, experience in my long-term projects, are described in detail below.

Typical Patterns in Assignment The first point to be considered is the type of contract on which longterm consultancy is based. The assignments I have encountered in longterm consulting in recent years have varied considerably, but overall there seem to be some typical patterns in the assignment of consulting: • the entire consulting process lasts between 1 and 4 years; • there are alternating phases of intensive and occasional involvement; • the lead consultant’s assignment varies between 1 or 2 days and as much as 7 to 9 days per month; • the lead consultant’s interventions range from 1-hour meetings to 2-day workshops, from 5 to 15 meetings per month, and from 5 to 20 people from the client organization attending; • the number of further consultants engaged for different roles (e.g., consulting a special project, coaching a manager, providing specific training activities, carrying out assessment) can range from 1 to 7; and • these contributory consultants/trainers invest between 2 hours and 5 days per month. Working in long-term consulting processes requires that both the consultant and the client organization have the capacity to invest considerable time and energy in one project. On the client’s side sufficient funds need to be available for consulting, and a purchasing model allowing for a flexible and nonbureaucratic process is of more help than a contracting process, where the content as well as the expenditures have to be approved beforehand in some complicated processes. On the consultant’s side, sufficient time and energy are needed for creating and maintaining extensive cooperation within a limited period of time.

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Different Phases When going through a long-term consulting process, I regularly experience different phases of work that call for different types of consultative interventions. The patterns can be summarized as follows: • creating a highly structured process design at the beginning, combined with training of talented people; • instructing talented key people as internal project managers; • empowering talented people to do your job step by step; • stepping back but keeping time free for the client—knowing he or she will call you soon; • helping in times of crisis and chaos; • helping to get things off the ground, maintaining momentum, and ensuring completion; and • being regularly available for feedback and additional help. Types of Clients Long-term consultation is not possible with all types of clients in all industries. Besides the aspects explained above involving psychodynamic relations, there are others which rise to the surface when a perspective on business dynamics is applied. To put it bluntly, long-term consultancy calls for clients who are already well developed in terms of their awareness of the importance of development processes in the company. Furthermore my experiences show that they: • run their business in a dynamic and prospering sector (or industry); • have high ambitions and take high risks with their business; • have a clear professional vision about the client-customer relationship in consultancy; • have high expectations regarding commitment and operational availability of people working with them; and • are highly interested not only in implementing facts but also in learning through the consulting process. Managing One’s Calendar Successfully managing a career as a long-term consultant means successfully managing one’s calendar. Right from the start of their careers, consultants have the idea that being a successful consultant or trainer is equivalent to having a fully booked calendar. This orientation probably

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relates to the second position described above: paradoxically, consultants feel safe when they have little time left for clients. The practice of long-term consulting, however, requires professionals who are also sometimes available at short notice. Long-term consulting means taking a great deal of responsibility for complex processes whose length and direction cannot easily be predicted. Long-term consultants must hold significant amounts of time open in their calendars in order to be available to clients at short notice. A good long-term consultant has a calendar which is never fully booked over a long period; he or she can always make an appointment within one to two weeks. As an illustration, a colleague recently commented to me that her calendar was only full for the next 2 or 3 months and that this bothered her; she was worried about the future. I replied that I had the same open calendar and believed that it was necessary for consulting. The consulting projects I am engaged in are normally not planned half a year in advance. Usually I step in when processes get stuck, conflicts arise or when there is a sudden change in a company’s situation that requires immediate external help. She was happy to hear that this is not unusual for long-term consulting. The nature of long-term consulting is such that it cannot easily be combined with extensive training activities or a lot of other parallel activities. Also, the number of clients the consultant is able to work with over longterm processes is limited. The demands on the consultant’s energy level must also be carefully considered. Realistically, it is impossible for the consultant to give top quality performance all the time. The time needed to recover from an intensive session is easy to underestimate, so combining different activities can be both challenging and dangerous. There is an inherent paradox in stepping back and being available for the client. As the following vignette illustrates, the resultant tension can be highly challenging for the consultant’s business. After 1 year of cooperation, a consulting project came to an end and I “stepped back” from the client. I told them that they could always call me when they felt they needed help. One manager asked, “But how can we be sure that you will have time for us, when you begin your next project?” This was a legitimate question that I considered for quite some time before coming to the conclusion that there is an implicit, perhaps even an ethical, expectation on the client’s side that the consultant will be there when needed. At that time I was starting new processes with new clients, and was unsure as to the time commitment that would be involved. How can one handle this tension? Over the years it has been my experience that it was better not to contract another large process when you feel that it could be too challenging. The biggest enemy in such decisions are naturally one’s own narcissistic feelings (e.g., if I am in demand, I am

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important), but experience shows that one’s instincts say that this could perhaps be too much. Being open to this inner dialogue and watching out for oneself are surely key competences of consultants (Hofmann & Hofmann, 2008). Just as there are busy periods with more intensive commitments in different processes, slower times must be planned far in advance. This way of running a business is very different from regular work schedules and more similar to professions with project-oriented jobs such as experts in the film industry. To be able to perform well over a long period, cyclical involvement is crucial. Consultants who try to maximize the level of their capacity utilization run the risk of facing the short-term dilemmas discussed earlier.

Stepping Back as Developmental Intervention Today more and more managers and experts have proper education in managing change and/or in organizational development. As such, there is more internal capacity to carry out such processes successfully. The educated client has theoretical knowledge and the consultant can help him or her to put it into practice effectively. On the consultant’s side, this means stepping back earlier in the process and incorporating the model of empowerment into one’s own practice. Stepping back is especially necessary when the talented people within the organization feel ready to take responsibility for the work the consultant has been doing thus far. This process of empowerment goes hand in hand with a developmental crisis from childhood—the “I want to do it myself ” threshold. Ambitious managers are especially eager to manage the change themselves in order to reap the benefits of their organizational change. It is a special challenge for the consultant to stop short of becoming “the one who did it.” My experience shows that the more ambitious the managers are, the more necessary it becomes for the consultant to keep time available to step in again when the activities lose direction. But applying an empowerment approach does not simply mean turning away and letting them try, but also focusing on integrating as much know-how transfer and learning as possible during the intervention.

Expanding the Consultant’s Team As consulting processes on a multidimensional level overreach the capacity of a single consultant, long-term consulting professionals seek cooperation with other consultants or trainers. This type of network

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building is essential, as it allows coordinated action and adjusted approaches. Unbalanced action among cooperating consultants can lead to confusion and splits within the client system and may hinder progress. It is essential to have at one’s disposal a network of consultants and trainers primarily chosen for the knowledge they can add to the tasks to be accomplished rather than how well they are acquainted with the lead consultant. Multidimensional change processes require a number of experts who are able to cooperate, each in his or her specific way (see, for example, Buono & Jamieson, 2010). In my projects I have encountered some rather practical challenges in forming this type of cooperation with colleagues. First, the timing of training activities is crucial. Training for social and organizational skills in fast change processes cannot be planned a year in advance. When planning starts, implementation should take place immediately after decisions are made. Yet professional trainers who are available on short notice are not easy to find. Usually trainers fill their calendars far in advance in order to feel financially secure. Second, the long-term consultant recruits the best expertise for each process, also focusing on the combination of expertise in the required area and fit of cultures and personal approaches. In many instances, this dynamic means building new relationships, which in turn carries the risk that the consultant does not fully know the potential or limitations of the trainer/consultant selected. It is therefore necessary to be ready for a lot of background discussions. There are also some underlying psychodynamic challenges within these types of cooperation: • Independence and alignment: A contributory consultant has to be true to his or her own style while simultaneously aligning with the general approach of the leading consultant. This requires an attitude of cooperation with mutual interest, curiosity, respect and help. It is not helpful to reduce conflicts to an internal hierarchy among the consultants. It is more about playing one’s part and searching for the broader rhythm of the whole process. As not every consultant has experience in long-term consultation, they often need help to understand the context of a long-term consulting process. This means that the lead consultant has to talk extensively about the approach and establish a unique bond of cooperation. Not every issue can be worked out in detail, so it is crucial for the participants to get a feel for each other, for what is and is not important to share. • Handling the ambivalence: Clients tend to split their ambivalence toward the consulting team. Consultants must be very conscious of this process and not become involved in it, which is only possible

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when a truthful dialogue and openness in the cooperation within the group of colleagues exist. In the role of the “second consultant” (the one who has been brought in by the lead consultant) it is crucial not to be seduced by the client’s compliments and offers to move in a new direction. Loyalty to the lead consultant is essential, since such client systems whose style involves avoiding direct communication in order to divide their own group will likely treat the consultant group in the same way. As the lead consultant you are sometimes confronted with critical feedback about a “second consultant’s” work. It is crucial to pass on this critical feedback to the second consultant without involving the client. At the same time it is helpful to meet for reflection all together (the key clients, the lead consultant and the second consultant) in order to explore what is working and what should work better. This creates a role model for handling problems in order to improve in a nonpunitive fashion. Multioriented relationships: Multioriented relationships exist between clients and consultants, and the reality is that there is no single client-consultant relationship. Every contributory consultant should align his or her interventions with the others with respect to content, importance and number of hours spent. Simultaneously acting wholeheartedly, quickly, and cost-consciously: Multidimensional processes create a framework for how the consultant’s days must be invested overall. This requires creativity in order to design each single process faster. It also requires modesty in order not to sell as much as possible. Extended analysis and diagnostic phases are inadequate, and not every service requested by a client is really necessary. Using internal resources and sometimes taking action instead of spending more time on a well-designed process is crucial. Business-dynamic aspects of cooperation: Contributory consultants and trainers need to commit themselves fully as entrepreneurs for the client, but at the same time not expand their involvement more than necessary. Structuring the contract between the lead consultant and the contributory consultants is critical. Billing procedures: It is important to realize that each method of accounting sends a different message to the client and creates a different psychodynamic situation between the consultants. The longterm consultant has to decide after careful consideration which of these is the most appropriate approach for any given assignment. Within this context, there are four basic approaches to accounting and billing in long-term consulting projects: (1) the lead consultant

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does the complete accounting for the consultant’s team and allocates the expenses arising accordingly; (2) the lead consultant runs a “business” assigning tasks to other consultants; (3) the contributory consultant is asked to account for himself and deliver an agreed contribution to the lead consultant; and (4) the contributory consultant is asked to bill the client directly.

Copyright: Ownership of Ideas and Concepts At its best, long-term consulting means that clients identify with the models proposed by the consultant. In essence, the consultant’s model becomes the client’s model. Although this type of convergence is clearly beneficial, ownership and copyright of these models can be infringed when ambitious managers sell them to other audiences as their own. Cooperating over a long period also means that sometimes consultants enhance their own models while engaged in the consulting process. This way of cooperating opens the competitive dynamic in the client-consultant relationship. Making the copyright clear to the client helps to demystify the use of knowledge in business work and allows for clarity in the client-consultant relationship. The copyright question works both ways, however. When consultants publish projects or insights they have gained from a project they should acknowledge the special input they received from their clients, especially from highly educated clients on organizational issues. Such knowledge development should be discussed with clients—even if it increases the consultant’s vulnerability. Long-term bonding and relationships are often enhanced by such openness and sharing.

FINAL COMMENTS: QUALIFICATION PROFILE OF THE LONG-TERM CONSULTANT The role of the long-term consultant is one aspect of the dazzling field of management consultancy that has not yet been extensively described. The style of long-term consulting described in this chapter has emerged during intensive work with a number of clients in various industries over the past several years. The core competencies for long-term consulting as described here were derived from Schein’s (1998, 2009) model of process consultation and helping. Experienced consultants know that truly being able to perform according to the model of process consultation requires many years of intensive education accompanied by extensive professional practice.

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This long-term consulting approach raises further practical challenges, which are essential to the consultant’s qualification profile, including the need for: • broad experience in understanding and intervening in all four dimensions of corporate development (strategy, processes, structure, people); • the ability to learn quickly about industries and products on a general level; • creativity to produce more than one benefit at a time (e.g., a process designed for change resulting in a handbook for managing future processes, involving people in carrying out a specific change while helping them develop capabilities for managing similar processes); • basic management skills (e.g., being able to set goals, take action, and fill in for lack of managerial action in the client’s system), while being able to step back as necessary; • the ability to develop easy but sustainable structures and people with a long-term perspective; • understanding the psychodynamic of people in change and being able to intervene at a psychological level; • recognition of the developmental stages of key managers and designing change they can sustain (e.g., “A chain is only as strong as its weakest link”); and • the capability to bond quickly with the client system without overstaying one’s welcome. Given the nature of these skills, it is obvious that they cannot be acquired by the usual methods of teaching. Perhaps even more importantly, some of them are more ethical than technical and thus require ongoing dialogue with inspirational people and continual self-reflection so that this type of knowledge and wisdom can emerge. The challenges faced by the long-term consultant are clearly different than those faced with more limited, time constrained interventions. The underlying key is to understand more fully the nature of this particular form of consultation and the requisite skills and capabilities that long-term consultants must have for success.

ACKNOWLEDGMENT The chapter was honored with the “Best Paper” award in the “experienced-based papers” category at the Vienna Conference.

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REFERENCES Ahlers-Niemann, A., Beumer, U., Redding Mersky, R., & Sievers, B. (2008). Organisationslandschaften: Sozioanalytische gedanken und interventionen zur normalen verrücktheit in organisationen [Organizational landscapes: The normal madness in organizations—Socioanalytic thoughts and interventions). Bergisch Gladbach, Germany: EHP Organisation. Buono, A. F., & Jamieson, D. W. (2010). Consultation for organizational change. Charlotte, NC: Information Age. Burke, W. (2008). Organizational change: Theory and practice. Los Angeles, CA: Sage Publications. Caluwé, L., & Vermaak, H. (2003). Learning to change: A guide for organizational change agents. Thousand Oaks, CA: Sage Publications. Galbraith, J. (2008). Organization design. In T. G. Cummings (Ed.), Handbook of organization development (pp. 325-352). Thousand Oaks, CA: Sage Publications. Cheung-Judge, M. -Y. (2001). The self as an instrument—A cornerstone for the future of OD. OD Practioner, 33(3), 11-16. Hofmann, N., & Hofmann, B. (2008). Selbstfürsorge für therapeuten und berater [Take care for oneself as challenge for therapists and consultants]. Weinheim, Germany: Beltz. Laske, O. E. (2005). Measuring hidden dimensions: The art and science of fully engaging adults. Medford, MA: IDM Press Motamedi, K. (2008). Seven neurotic styles of management. Graziadio Business Report Journal, 9(4). Retrieved from http://gbr.pepperdine.edu/064/neurotics.html Motamedi, K. (2009). Neurotic styles of management: Consultants be aware! In A. F. Buono (Ed.), Emerging trends and issues in management consulting: Consulting as a Janus-faced reality (pp. 241-253). Charlotte, NC: Information Age. Nevis, E. C. (2008, October). Connecting intimate & strategic in organizations interactions. Paper presented at the OD Network Conference: “Advancing the Theory and Practice of OD,” Austin, TX. Schein, E. (1998). Process consultation revisited: Building the helping relationship. Reading, MA: Addison-Wesley. Schein, E. (2009). Helping: How to offer, give, and receive help. San Francisco, CA: Berrett-Koehler. Schüller, A., & Untermarzoner D. (2002). Verzicht als option in beratungsprozessen [Sometimes less is more in designing consulting processes]. In H. Lobnig, J. Schwendenwein, & L. Zvacek (Eds.), Beratung der veränderung— Veränderung der Beratung: Neue wege in organisationsentwicklung, training und der gestaltung sozialer systeme [Consulting change—Changes in consulting: New challenges in organization development, training and designing social systems] (pp. 194-202). Wiesbaden, Germany: Gabler. Wageman, R., Nunes, D. A., Burruss J. A., & Hackman R. J. (2008). Senior leadership teams: What it takes to make them great. Boston, MA: Harvard Business School Press.

Acting as a Long-Term Consultant 349 Zirkler, M., & Berreth, A. (2006). Systemaufstellung als modernes orakel [System constellation as modern oracle]. Unpublished paper. Retrieved from www .zirkler.ch/-dl/systemaufstellung_orakel.pdf

PART V NEW APPROACHES TO MANAGEMENT CONSULTING: FRAMEWORKS, TOOLS, AND INSTRUMENTS

CHAPTER 16

SOLUTION-PREVENTING TOOLS VERSUS SOLUTIONSUPPORTING TOOLS G. LUEGER AND P. STEINKELLNER Guenter Lueger and Peter Steinkellner

Change and flexibility are, more and more, essential components of successful organizations in turbulent environments, especially those faced with strong competition. The resource-based view (RBV) of the firm explains the importance of developing valuable and scarce resources and capabilities, which are said to be the source of sustainable competitive advantage (Barney, 1991; Barney & Wright, 1998). Within this context, a key goal for the human resource management (HRM) function is to create and develop capabilities and competitive advantage. There is evidence that HRM generates “human capital advantage” through recruiting, developing, and retaining exceptional human talent, providing value that cannot be easily imitated by other organizations (Barney & Wright, 1998; Boxall, 1996). To recognize exceptional human talent and competences, the use of viable assessment instruments is crucial. However, questions linger about the extent to which traditional performance appraisals in HRM support or prevent such development. Our thesis is that most of the instruments in HRM are a poor fit for postmodern approaches to change such as systemic thinking. These The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 353–369 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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instruments and traditional approaches rely on mechanistic assumptions and very often focus on deficits, analyze failures and weaknesses, and/or concentrate on particular traits. Consequently these instruments often prevent change because they stabilize the perceptions of the actors, in essence creating organizational pitfalls. The chapter explores how these pitfalls can be overcome through “solution-supporting” principles, drawing out ways in which new instruments can be designed (and traditional instruments redesigned) into solution-supporting and development-supporting tools. HRM instruments, such as 360-degree feedback and staff surveys or evaluations, are used with the aim of effecting change and development among organizational members. The main focus of the use of HR instruments should, therefore, be to ensure there is motivation and commitment to implement change in the workplace (Lueger, 2002). In reality, however, classic HR instruments often achieve the opposite. Traditional instruments focus too much on the current situation (in fact, the past) and force the assessors to commit to individual values (e.g., based on scales). Additionally, the factors (differences) that are important for finding real solutions are typically neglected. In many cases it thus becomes impossible to focus properly on the future and the next steps to be taken. As such, changes effected through procedures used in business practice that settle on values that do not take such differences into consideration become more difficult. Therefore, a fundamental change in the design of HR instruments is called for. This type of modification must overcome such difficulties as unwillingness to change or an unmotivated staff. Solutionfocused assessment (SFA) is thus presented as an alternative based on the principle of detecting and analyzing those “differences that make a difference” (Lueger, 2006a, 2006b). The purpose of this chapter is to examine how the RBV and SFA can improve traditional HR instruments, especially appraisal methods, and to explore how SFA can provide an accessible bridge between RBV theory and HR practice. To accomplish these objectives, the chapter begins with a brief review of the application of RBV to theoretical HRM. The discussion then turns to current criticism of traditional assessment methods and their possible negative effects. We then introduce an alternative approach—the SFA—as being more compatible with RBV theory and a better way to develop people and organizations.

THE RBV OF THE FIRM AND HRM The RBV of the firm is one of the most central theories in the field of HRM, blending concepts from organizational economics and strategic

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management (Barney, 1991; Conner, 1991). A fundamental assumption of this view is that organizations can be successful by gaining and maintaining competitive advantage (Porter, 1985). It shows the importance of developing valuable, unique and scarce resources and capabilities, which are argued to be the source of sustainable competitive advantage (Barney, 1991; Barney & Wright, 1998; Collis & Montgomery, 1995; Wright, McMahan, & McWilliams, 1994). Competitive advantage is gained by implementing a value-creating strategy that competitors cannot easily copy and sustain (Barney, 1991), and for which there are no ready substitutes. To gain such competitive advantage, two conditions are needed: first, the resources must be variable among competitors; and second, these resources must be difficult to obtain. The basic objective is to generate and retain these strategic resources (Jackson & Schuler, 1995). The growing acceptance of internal resources as sources of competitive advantage helped to justify HR’s assertion that people are strategically important to a firm’s success, and it has provided the traditionally atheoretical field of HRM a profound theoretical foundation. Thus the integration of RBV into the HRM literature should be of no surprise (Wright, Dunford, & Snell, 2001). HRM greatly influences an organization’s human and organizational resources and can therefore be used to gain competitive advantage (Schuler & MacMillan, 1984). This influence is supported by concepts such as knowledge (Argote & Ingram 2000; Grant 1996), dynamic capability (Eisenhardt & Martin, 2000; Nelson & Winter, 1982; Schreyögg & Kliesch-Eberl, 2007; Teece, Pisano, & Schuen, 1997), learning organizations (Fiol & Lyles, 1985; Fisher & White, 2000) and competence (Czerny, 2009; Erpenbeck & Rosenstiel, 2005; Heyse & Erpenbeck, 2007; Steinkellner & Czerny, 2008) as sources of competitive advantage, which all indicate an intersection between strategic resources and HR issues (Wright et al., 2001). There is also increasing evidence that HRM can generate “human capital advantage” through recruiting, developing and retaining exceptional human talent that provides value and cannot be easily imitated by other organizations (Barney & Wright, 1998; Boxall, 1996). The RBV has proven to be integral to the conceptual development of the HRM literature and RBV-based HRM research has evolved in the last decade. The main cause for this might be the recognition that RBV provided a compelling explanation for why HR practices lead to competitive advantage. As such, the theoretical application of the RBV has been successful in stimulating a substantial amount of activity in the HRM field (Wright et al., 2001). Thus far there are only a few studies that demonstrate that HR practices actually impact the skills or behaviors of the workforce, or that these skills or behaviors are related to performance measures (Wright, et al,

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2001). Arthur (1994) and Huselid (1995) found a positive relationship between HR practices and turnover. Wright, McCormick, Sherman, and McMahan (1999) found that appraisal and training practices were related to the skills of the workforce. We need to recognize, however, that the inimitability of these competencies may be caused by unobservability, complexity and/or path dependence. So there might be no simple causal relationship between HR practices and sustainable competitive advantage, and HRM systems might impact this advantage in a variety of ways (Wright et al., 2001). These difficult aspects explicitly invite a more complex, less reductive view of organizations, their system-level, intangible resources (Colbert, 2004) and their HR instruments. System-level resources (Black & Boal, 1994) are those organizational capabilities that exist only in relationships—in the interactions between persons and/or things. The importance of system-level, intangible resources has been highlighted throughout the RBV literature (Colbert, 2004). On a general level, many studies confirm that a clear pattern is emerging in HRM research suggesting that HR systems geared toward increased commitment and employee-involvement can have a significant positive impact on organizational outcomes (Lepak, 2007). For example, a consistently positive relationship between high investment HR systems and aggregate performance measures has been found (e.g., Arthur, 1994; Delery & Doty, 1996; Guthrie, 2001; Huselid, 1995; Ichniowski, Shaw, & Prennushi, 1997; Koch & McGrath, 1996; Richard & Brown Johnson, 2001; West et al., 2002; Wolf & Zwick, 2003; Youndt, Snell, Dean, & Lepak, 1996). These consistent findings support the view that people, more than other organizational resources, may be a strong potential source for achieving a sustainable competitive advantage (Barney, 1991; Pfeffer, 1994; Lepak, 2007). In summary, the RBV demonstrates the importance of human resources and HR practices for achieving competitive advantage. HRM greatly influences an organization’s human and organizational resources and can therefore be used to gain competitive advantage. It highlights the importance of system-level, intangible resources and the importance of the interactions between persons, inviting to a more complex, less reductive view of organizations and their HRM instruments. EFFECTS OF TRADITIONAL PERFORMANCE APPRAISAL METHODS Performance appraisal is the ongoing process of evaluating and managing both behavior and outcome in the work place (Carrell, Ellbert, & Hatfield, 1995, p. 348). In most companies, performance appraisal is an essential part of performance management. The process serves three purposes: feedback, development, and documentation. Several years ago the

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main purpose was feedback—to tell employees how they had done over a period of time and to let them know what pay raise they would receive. Today performance appraisal also needs to focus on development concerns (DeCenzo & Robbins, 2010), and from an RBV view this development function becomes even more important. Most observers recognize that no performance appraisal system can be perfect as there are many known factors that can distort appraisals. In many instances, this problem may be the result of poor appraisal training or obsolete measures. Problems for appraisals can also be caused by the dynamic environment in which employees work. Some jobs change so frequently that it is almost impossible to properly define job descriptions and objectives for the next year (DeCenzo & Robbins, 2010). HR executives are also often dissatisfied with their current performance appraisal systems (Schrage, 2000) and, as result, performance appraisal come under attack (Bröckermann, 2001; Curth & Lang, 1990; Grassl, 1996; Grote, 2000; Nelson, 2000; Pfau, Kay, Nowack, & Ghorpade, 2002; Schrage, 2000; Segal, 2000; Ulmer, 2000). In fact, yearly performance appraisals frequently result in a decrease rather than an increase in performance (Latham, Almost, Mann, & Moore, 2005). One proposal for improving performance appraisals is to focus on the provision of performance feedback, designing the performance review more as a counseling activity than a judgment process (Robbins & Judge, 2007, p. 627), taking the social context (e.g., feedback culture) more explicitly into account (Levy & Williams, 2004). Other critics suggest avoiding appraisal systems altogether and instead use employee dialogue, meetings and the use of systemic language (Brandt & Schache-Keil, 2000; Bröckermann, 2007; Grassl, 1996; Steinkellner, 2007, in press). More optimistic are Marcus and Schuler (2006) who write that some of the criticism is justified, but that the potential of performance appraisal is higher than the risk. Similarly, DeCenzo and Robbins (2010, p. 232) argue that “Regardless of potential problems, one can expect performance management systems to survive in some format.” Latham et al. (2005, p. 85) suggest a shift from traditional annual performance appraisal to continuous performance management with coaching included: “Together, performance appraisals that lead to ongoing coaching ensure a highly trained, highly motivated workforce. It is the essence of performance management.” These authors also believe that performance appraisal methods will survive, but we do not think that enhanced assessor training or trying to avoid known distorting factors will be a successful way forward. In addition to the above-mentioned concerns, these traditional assessment methods have more fundamental problems. They prevent change and development because they are too static and they tend to stabilize current situations—in

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essence, preventing the achievement of competitive advantage instead of supporting it as called for by RBV—the central thesis of the chapter. Instruments like 360-degree feedback produce a “stability trance” because only one value can be indicated (e.g., on a 5-point scale the rating for performance or teamwork is 2 ). When people involved in that rating see and analyze the result of the rating they construct a specific reality—they assume that this dimension is stable (the performance is 2 not 3 or 1). They also do not consider that there are always differences in behavior (i.e., performance is sometimes a little better and sometimes a little bit worse). In other words they neglect a basic theorem of change management, which goes back to the Greek philosopher Herclit—the only thing that’s constant is change (Lueger, 2005). They cannot see what they cannot see (Foerster, 1979); it is difficult for them to focus on the differences because the format of the instruments creates assumptions of stability. If something is stable it is more difficult to find steps of change, because the phenomenon is stable. As a consequence the development of change targets becomes more difficult and often even impossible. HRM practitioners and managers know that there are two typical variants of reactions when using HR instruments. First, if the results shown by the respective instrument are “good,” the participants tend to be satisfied and everything remains as it is. Second, if the results are mediocre or “bad,” the persons concerned often do not, or only perfunctorily, accept the assessments (e.g., in staff interviews, surveys). As a result, no real changes take place. Studies (e.g., Bernardin, Kane, Ross, Spina, & Johnson, 1995) also support the existence of this pattern—bad results lead to demotivation and prevent behavioral change. This means that the objective of HR instruments is not achieved, despite the purported emphasis on improving performance and bringing about change. The central problem lies in the fact that the procedure in both quantitative and qualitative assessment forces the assessors to make an “either/ or” determination, which results in a person being either “good” or “bad.” This, in turn, creates deficits and weaknesses (e.g., when a superior tells his employee: “you are only moderately customer oriented”) that are solely the result of the method used. Put differently, concept and design of the HR instruments result in constructions of reality that create attributed weaknesses and thus results in higher resistance. THE CREATION OF A “NONCHANGEABILITY TRANCE” THROUGH TRADITIONAL HR INSTRUMENTS As HR instruments consistently concentrate on the question “What is it like?” and neglect any differences, the participants develop a construction of reality resembling a “stability trance” concerning the features under

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analysis. As a consequence, the development of change targets becomes more difficult and often even impossible. The question “What is it like?” rests on the wrong assumption that it can be meaningfully answered by using traditional survey methods. The basic principle of change management (”The only thing that’s constant is change!”) is undermined by the method in which HR instruments are used in practice. Change processes and conversations (e.g., in workshops, performance reviews) based on traditional ratings tend to be difficult especially when the rating is low (especially when change is important). People involved in such processes start to argue and list examples of differences in behavior or performance. An example illustrates a very common pattern of conversation: Assume the assessment with an “overall performance” scale of a staff member is 2 (on a 5-point scale). If the employee and his or her superior discuss this value, the employee refers to examples where the performance was “very good” or at least “good,” while the superior counters with examples and experiences where the performance was difficult and problematic. The more examples are given by one person that refer to positive experiences, the more examples and details referring to negative events are listed by the other person. It is fairly obvious that this reinforces latent or manifest conflicts and that any subsequent definition of steps for change is very difficult. This pattern is the result of a “conceptual trap of the tools” of the methods of diagnosis and assessment that are in use. The conversation takes place in a “prison” of “either/or” and the participants are unable to escape to a “possibility space” of “as well as” because of the traditional design of the instruments. Analyses involving traditional HR instruments and the range of methods used thus have a reality-stabilizing nature and are inherently averse to change—they guide our perception toward establishing “What is it?” and therefore toward one individual value. These differences naturally exist (see Figure 16.1) and need a conceptual and instrumental framework of “as well as,” as an employee's performance (and every criterion for analysis like leadership, sales or customer satisfaction) is sometimes better and sometimes worse. These differences and especially the positive differences constitute the ideal basis of finding solutions for change, as positive differences signal confidence because it has already been sometimes better. In addition, focusing on differences provides a link between past and future, as well as between “better” and “worse.” Making use of these differences, however, requires other methods of analysis and rating. Traditional HRM instruments can therefore be seen as “machines” that create a “nonchangeability trance” by their methods. The reality-stabilizing effect of focusing on single values results in the “neglect of differences that make a difference” (Bateson, 1972), suggesting that relevant phe-

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Figure 16.1.

Stability versus variability of dimensions.

nomena such as the behavior of people are constant in all situations. The methods used result in assigning stable characteristics to things or employees focused on in a particular situation. But this stability has been created through the method and the conceptual procedure. The unpleasant effect now is the perception that phenomena are constant and that stable phenomena are difficult to change. For this reason, change becomes more difficult when using traditional instruments. It is clear to see that resistance, frustration and conflicts in companies emerge through this conceptual trap. Possible alternatives to overcome this trap are positive approaches to change (McKergow, 2005), such as positive psychology (Buckingham & Clifton, 2001), appreciative inquiry (Cooperrider & Whitney, 2005; Cooperrider, Whitney, & Stavros, 2003; Haar & Hosking, 2004) and solutions focus (de Shazer, 1988, 1997; de Jong & Berg, 2001). We suggest the application of Solutions Focus to design or redesign tools by putting differences to work (de Shazer, 1997). Therefore we refer to two “solution supporting principles”: (1) visualizing positive differences in instruments; and (2) focusing on the concrete differences that can be recognized when it is a little bit better. The following section presents these alternatives that more closely resemble the important basic principles of change and development. Solution-Focused Assessment The approach used within the framework of SFA is a methodological alternative that integrates systemic solution-focused basic attitudes into

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instruments. It is not only an instrument, but a different approach in devising instruments, which can easily be applied to existing assessment instruments. SFA (Lueger, 2005) is based on the following principles: • Information is a difference that makes a difference (Bateson, 1972); and • The basic ideas of the “solution-focused approach” (de Shazer, 1997), and in particular the idea that language creates reality. This change-supporting design for HR instruments is based mainly on two additional principles: o Assessments should refer to “something” (the situation), not “someone” (the person); and o Terminology in assessments should focus on categories of “interaction.” The use of these solution-oriented principles enables a focus on other realities that take more complexity into consideration. The first principle focuses on differences instead of determining individual values (which is enforced by traditional instruments). The focus here is on the rating (e.g., performance, behavior) differences occurring over time. The above example of a staff member illustrates that things occasionally can be worse or become disastrous, and sometimes goes better. This difference can be seen as a potential, when the method supports the client system in finding out what the specific difference regarding “better” is. For this process to be successful, two subcomponents are necessary: (1) recording and visualizing the relevant differences; and 2) exploring the positive differences, finding and inventing (de Jong & Berg, 2001) specific details regarding what is different if things get better. SFA captures these differences by quantitative and qualitative procedures, reproducing the difference of better/worse. To put it simply (see Figure 16.1), the areas right and left of the line are shown to be an important difference and so it is symbolized that at different times it is different (after many practical applications of SFA it has turned out that it is mainly the area right of the line and thus the positive difference that is central). In this way a resource- and solution-oriented view is practically ingrained within the instrument, because it is signals that there are sometimes positive developments. This outcome furthers confidence, as the participants see that sometimes their actions lead to positive effects. After having described the theoretical background of SFA, we are now able to show how standardized HR instruments can be adapted to better serve change and development. One easily implementable redesign procedure to visualize positive differences is a rating that takes variations in

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the relevant dimension (e.g., performance) over the period reviewed into account. Traditional rating instruments can be modified for example by asking a rater to distribute 100 points across the scale or by using lines which represent the positive differences (Lueger, 2005). With quantitative methods, scales are not (just) answered by ticking boxes, but their different nature is directly reproduced on the scale (Lueger, 2002, p. 471) (e.g., when the performance behavior of a staff member is assessed, the range of occurrences [between the values] is shown). The SFA focuses on the positive difference by using “solution talk” as described below. This makes it possible to work out either in workshops or in individual conversations, what exactly is different, if something gets better. The second principle is the use of a language focusing on the positive differences. De Shazer (1994, p. 85) refers to this as “solution talk.” Again using the example above regarding the performance of a staff member, the following questions illustrate a conversation focused on positive differences: • What happens specifically when the rated criterion (e.g., performance) is “better”? • What do the top management, customers, and so forth notice when something is working better? • What specifically is different? • How did you accomplish that? What was helpful? • What should happen to increase the likelihood of “better events”? • How do you prevent bad things from happening? The use of solution talk helps to work out concrete steps of change, thereby enhancing the probability of successful change. Particularly helpful in this context are the techniques and principles of the “solution-focused approach” (de Shazer, 1997; de Jong & Berg, 2001), which in a short time can create confidence for change and specific starting points for activities. The “first basic theorem” of solution-focused guidance (”If something works, do more of it”) provides very useful orientation for formulating the specific questions. It makes sense to implement the principle “the clients are the experts” here, as the participants in a change project have the most detailed know-how on what is different when it works better. Working out these details also strengthens the competence perceived and facilitates the necessary identification and commitment. Naturally, in proceeding in this manner, time and again results will be generated that refer to problems, often pointing to worse values (e.g., if an employee/department lies within the negative area of a dimension, for

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instance, customer support, does not work properly). In this case, the difference-oriented approach can help visualize the range of performance concerns, as problems can be discussed in a slightly less demeaning manner. Then, following a period of “lament,” the positive difference can be addressed and worked on again. Accusations are less likely, as they rely on the assignment of characteristics, as mentioned earlier, which require stability (e.g., the employee is unreliable, the R&D department does not cooperate.). These assignments, however, become less likely, as stabilizing assignments are liquefied. The range of depictions of differences can go from two to N items on a scale (with N being the length of the scale). This approach can, of course, also be combined with “ticking” individual values, which then represent some mean value of the range. This is helpful, for instance, when 360degree evaluations require a “value on the scale,” with the related expectations from the HR department. In companies with technical/exacting corporate cultures, a variant of this approach has proved useful in which points are distributed along a scale. In this example, 100 points are allocated to the existing values, which in turn represent their range. Thus the frequency of the differences occurring is depicted (Lueger, 2005). The description necessary in many change projects and the comparison of several dimensions and/or several departments/units when describing the initial situation can also be facilitated through this type of SFA. In this context, Figure 16.2 shows the analysis of six dimensions on the topic of leadership. Of course, in such cases, just like in the traditional approach, differences can be seen that also show less “good” values. In the example given, support from the management, in the view of the staff, works far better (7.0) than the information flow (4.1). By integrating the range and the differences between better/worse, it is somewhat easier to consider the “difficult” subjects—that is, not so good values—as again a signal is given that sometimes things work better. If consultants/moderators attempt to continually put the main focus on the positive differences, regardless of the setting, in most cases much more positive dynamics are likely to follow.

Evaluation of Solution Supporting Tools In a recently conducted evaluation study (Kotrba, 2006) on the effect of the use of solution supporting tools, a group of employees and supervisors were examined concerning the difference before and after the implementation of the solution-supporting principles in performance appraisals. The most important findings were: (1) the people involved felt that the rating was fairer; (2) they believed the process was more objective

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Figure 16.2.

Difference-oriented analysis.

(although the rating is done by the same observer); (3) goals and steps for change had been defined more specifically and precisely; and (4) appreciation for the performance was provided more often compared to earlier periods. These results are also supported by the findings of effects of solution-focused work. Hoffmann and Luisser (2007) showed in a study at Kraft Europe that solution-focused training, using the same principles, led to more effective leadership behavior and an increase of performance indicators such as fewer customer returns after failure in production.

CONCLUSION The chapter illustrated how SFA can improve traditional HR instruments, such as performance appraisal or 360-degree feedback, to support positive organizational change and development. The SFA process is based on the following basic principles, emphasizing the need to: • record positive differences, taking more variety into account; • use terminology that focuses on the situation and interdependences (fit and interaction) to enhance acceptance; • create links between “better” and “worse” by implementing the “as well as” principle in instruments;

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• link the past and future; and • improve confidence that change is possible, which supports acceptance among the people concerned. The most important stimulus for constructing principles of SFA is probably de Shazer’s (1988) proposition that we can know what is better without knowing what is good. The examples used in the chapter (further examples in different management contexts are available in Lueger, 2006b) were intended to outline and illustrate the flexibility of the SFA process, emphasizing its strength as a development-supporting tool. The flexibility of SFA allows the modification of existing HR instruments and helps to find “differences that make a ‘difference’” in order to support development and change. As an HRM method, it supports the achievement of competitive advantage while improving existing performance appraisal systems. As this chapter has argued, SFA can provide an accessible bridge between RBV theory and HR practice.

ACKNOWLEDGMENTS Each author contributed equally to this work. We would like to thank Elfriede Czerny for her insightful comments on earlier drafts of this manuscript.

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Solution-Preventing Tools Versus Solution-Supporting Tools 369 Schuler, R. S., & MacMillan, I. C. (1984). Gaining competitive advantage through HR management practices. Human Resource Management, 23, 241-255. Segal, A. J. (2000). 86 your performance process? HR Magazine, 45, 199-206. Steinkellner, P. (2007). Systemische intervention in der mitarbeiterführung [Systemic intervention in leadership]. Heidelberg, Germany: Carl-Auer. Steinkellner, P. (in press). Führung systemisch gesehen [Systemic leadership]. In R. Sichler, P. Andel, & M. Taschlmar (Eds.), Psyche und wirtschaft [Psyche and business]. Lengerich, Germany: Papst Science. Steinkellner, P. & Czerny, E. (2008, November). Erfolgreiche kompetenzentwicklung durch lösungsfokussiertes kompetenzassessment und coaching [Successful competence development through solution focused competence assessment and coaching]. Paper presented at Congress Best, NET.KONGRESS 2008, Universität Linz. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18, 509-533. Ulmer, G. (2000). Leistungsbeurteilung—Spiel mit dem Feuer [Performance assessment—Play with the fire]. IO Management [IO Management], 69(3), 5759. West, M. A., Borrill, C., Dawson, J., Scully, J., Carter, M., Anely, S., … Wairing, J. (2002). The link between the management of employees and patient mortality in acute hospitals. International Journal of Human Resource Management, 13, 1299-1310. Wolf, F., & Zwick, T. (2003). Welche personalmaßnahmen entfalten eine produktivitätswirkung [Which personnel practices effect a productivity improvement]. Zeitschrift für Betriebswirtschaft [Journal for Business Administration], 57, 43-62. Wright, P. M., Dunford, B. B., & Snell, S. A. (2001). Human resources and the resource-based view of the firm. Journal of Management, 27, 701-721. Wright, P. M., McCormick, B., Sherman, W. S., & McMahan, G. C. (1999). The role of human resources practices in petro-chemical refinery performance. International Journal of Human Resource Management, 10, 551-571. Wright, P. M., McMahan, G. C., & McWilliams, A. (1994). Human resources and sustained competitive advantage: A resource-based perspective. International Journal of Human Resource Management, 5, 301-326. Youndt, M. A., Subramaniam, O., & Snell, S. A. (2004). Intellectual capital profiles: An examination of investments and returns. Journal of Management Studies, 41, 335-361.

CHAPTER 17

MATURITY GRIDS AS TOOLS FOR CHANGE MANAGEMENT Practitioner Guidance Through Field Experience A. M. MAIER, MOULTRIE, P. J. CLARKSON Anja M.J.Maier, JamesAND Moultrie, and P. John Clarkson

Changes riddle an organization. We observe them and we are part of them. Every change, big or small, has an impact. We might take a different route to work, opt for a different negotiation strategy during the next meeting, hire a different contractor, and focus on a different set of service offerings in our product portfolio. All decisions will have an effect. To ensure continuous “fitness for purpose” and enable foresight, we need to adapt—and so do organizations. Organizations evolve in accordance with their own vision, mission, strategies, and operations. To abandon this orientation in the face of every change would be costly and could result in imbalances. Too sluggish a response, however, would also be costly (Miller & Friesen, 1980, p. 612). As the rate of change is increasing, we are confronted with an ever-greater need to manage both incremental and transformational change (Hayes, 2007, p. 15; Nadler & Tushman, 1995). While searching to find the right balance between following well-known The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 371–397 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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ways and walking undiscovered paths, we might need to reprioritize, which, in turn, might tell us to reorganize and recreate. Yet, where do we start to reorganize or recreate? Where do we initiate change? If it is unknown where internal changes need to be initiated, maturity assessments of organizational capabilities could be considered. In doing so, we start with the assumption that there is a relationship between higher levels of maturity and improved performance in organizational capabilities (Herbslerb, Zubrow, Goldenson, Hayes, & Paulk, 1997). Capabilities are the collective skills, abilities, and expertise of an organization. Examples of organizational capabilities include innovation, collaboration, leadership, design, knowledge management, and interfacing with customers, suppliers and vendors (Teece, Pisano, & Shuen, 1997; Ulrich & Smallwood, 2003, 2004). Organizational capabilities can be improved in many different ways, including process reengineering, total quality management (TQM), continuous-improvement and process excellence initiatives, and through the use of a number of performance assessments. Assessments identify the “as-is” situation and support the journey along the “to-be” trajectory; the journey, ideally, constituting improvement. One method to assess organizational capabilities is a maturity grid.

MATURITY GRIDS AS TOOLS FOR CHANGE MANAGEMENT A maturity grid assessment is typically structured around a matrix or a grid. It consists of a series of cells where levels of maturity are allocated against key aspects of performance or key activities. An important feature of a maturity grid is that it provides descriptions for the characteristic traits of performance at each level, referred to as a “behaviorally anchored scale” by Grant and Pennypacker (2006). It is a flexible assessment technique that has its origins in TQM (see Table 17.1; Crosby, 1979) and is used by practitioners in industry, consultants and researchers in academia for diagnostic, reflective, and improvement purposes. It is both an assessment tool as well as a tool for improvement. A maturity grid can be used as a stand-alone assessment or as a subset of a broader improvement initiative. Maturity grids are thus important tools for change management. Change management may be defined as modifying and transforming an organization in order to maintain and/or improve effectiveness (Hayes, 2007, p. 30). Managers may need help in identifying what needs to be attended to through a process of diagnosis. Maturity grids support diagnosis by identifying areas for improvement. Further, maturity grids are tools which engage people in the process of change. They are deceptively

Maturity Grids as Tools for Change Management 373 Table 17.1.

Quality management

The Quality Management Maturity Grid

Stage I: Uncertainty

Stage II: Awakening

Stage III: Enlightenment

Stage IV: Wisdom

Stage V: Certainty

We don’t know why we have problems with quality

Is it absolutely necessary to always have problems with quality?

Through management commitment and quality improvement we are identifying and resolving our problems

Defect prevention is a routine part of our operation

We know why we do not have problems with quality

Source: Crosby (1979).

simple in terms of format and use, but their development poses significant challenges. Yet, although maturity grids are high in number and broad in application, there is little documentation on how to develop a maturity grid that is theoretically sound, useful, rigorously tested, and widely accepted (DeBruin & Rosemann, 2005).

Objectives The main aim of this chapter is to give practice examples that describe our personal experience with developing and applying two different maturity grids: the “design audit” to assess product development capabilities, and the “communication grid method” to assess communication in product development. For a detailed review of existing maturity grids guidance on how to devise maturity grids refer to Maier, Moultrie, and Clarkson (in press). This chapter is intended primarily for practitioners in industry and consultants as change agents expecting to establish or review organizational capabilities. It is also intended for academic researchers concerned with intervention and change management in organizations.

Structure The chapter examines the origins, benefits, and shortcomings of maturity grids, and presents the generic phases required for development, drawing out key considerations as decision points at each phase. The next section provides two illustrative examples of the process of developing and applying the design audit and the communication grid method

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respectively. The chapter concludes with a brief discussion on the role and responsibility of the academic practitioner and consultant as potential developers and facilitators of a maturity grid assessment.

MATURITY GRIDS: ORIGINS, EXAMPLES, BENEFITS, AND SHORTCOMINGS The idea of capability or process maturity has its roots in the field of quality management, pioneered by Crosby (1979, 1996). His quality management maturity grid (QMMG) advocates a progression through five stages: uncertainty, awakening, enlightenment, wisdom, and certainty (see Table 17.1).

Origins The best known derivative is the capability maturity model (CMM) for software development, which was developed by the Software Engineering Institute (SEI) in the United States (Paulk, Curtis, Chrissis, & Weber, 1993). It was originally developed to assess the capability of a supplier to design and develop software, but it has since been extended and used in many different disciplines and has now reached the level of a compliance standard (Mutafelija & Stromberg, 2003). Maturity principles are also incorporated into ISO 9004:2000 as a measure of the maturity in quality assurance. Differentiating between capability maturity grids and capability maturity models is difficult. While they are complementary assessment frameworks with a number of similarities, key distinctions can be made with respect to the work orientation, the mode of assessment, and the intent. Work Orientation Maturity grids differ from other process maturity frameworks, such as SEI’s capability maturity model integration (CMMI) which applies to specific processes like software development and acquisition. The CMMI model identifies the best practices for specific processes and evaluates the maturity of an organization in terms of how many of those practices it has implemented. By contrast, most maturity grids apply to companies in any industry and do not specify what a particular process should look like. They identify the characteristics that any process and every enterprise should have in order to design and deploy high-performance processes (Hammer, 2007, p. 118).

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Mode of Assessment Typically an assessment using the capability maturity models consists, among other instruments, of Likert or binary yes/no-based questionnaires and checklists to enable assessment of performance. In contrast, an assessment via a maturity grid is typically structured around a matrix or a grid, which creates a series of cells with each one allocated a level of maturity against key aspects of performance or activities. An important feature of a maturity grid approach is that it provides descriptive text for the characteristic traits of performance at each level, also known as a “behaviorally anchored scale” (Grant & Pennypacker, 2006). Intent Many capability maturity models follow a standard format and are internationally recognized. As a result, they can be used for certification of performance. Maturity grids tend to be somewhat less complex as diagnostic and improvement tools without aspiring to provide certification. Accordingly, the intended use by companies differs. Companies often use a number of approaches in parallel and a maturity grid assessment may be used as a stand-alone assessment or as a subset of a broader improvement initiative.

Examples of Maturity Grids Over the last 10 years there has been a rapid growth in the number of maturity grid assessments developed by academics, professionals in industry and by consultants (for an overview and analysis see Maier et al, in press). Each of these assessments focuses on a specific knowledge domain and, as a result, is normally published in specialized journals relating to the domain addressed. Consequently, this body of work is characterized by a diversity of approaches, prescriptions and practices that can be confusing and sometimes contradictory. Maturity grids, with few exceptions, are presented without reference to that which precedes it and new descriptions are developed for concepts that have already been described. Extant grids are therefore difficult to locate and useful conceptual developments go unnoticed. These tools address a diverse array of areas including: quality management (Crosby, 1979), software process management (Radice, Harding, Munnis, & Philips, 1985, p. 94), energy management (Building Research Energy Conservation Support Unit, 1993), research and development effectiveness (Szakonyi, 1994a, 1994b), product development management (McGrath & Akiyama, 1996), process management (Kahn, Barczak, & Moss, 2006), innovation management (Chiesa, Coughlan, & Voss, 1996), design capability

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(Bruce & Bessant, 2002), design management (Moultrie, 2004, 2007), design safety (Strutt, Sharp, Terry, & Miles, 2006), communication management in product development (e.g. Maier, Eckert, & Clarkson; Maier, Kreimeyer, Lindemann, & Clarkson, 2009), data and information management (Hackos, 2004), risk management (Hillson, 1997), collaboration (Fraser, Farrukh, & Gregory, 2003), teamwork (Constructing Excellence, 2004), knowledge management (Kulkarni & St. Louis, 2003), project management (Crawford, 2002; Fincher & Levin, 1997; Fraser, Moultrie, & Gregory, 2002; Gareis & Huemann, 2008; Grant & Pennypacker, 2006; Ibbs & Kwak, 2000; Kwak & Ibbs, 2000), sustainability management (Woodall, Cooper, Crowhurst, Hadi, & Platt, 2004), business process maturity (Fisher, 2004), patient safety (Ashcroft, Morecroft, Parker, & Noyce, 2005; Parker, Lawrie, Carthey, & Coultous, 2008; Parker, Lawrie, & Hudson, 2006), and process and enterprise management (Hammer, 2007). Examples of maturity grids are briefly discussed below. In no particular order, application areas include organizational culture in the healthcare sector and teamwork in the construction sector, risk management in general and data security in specific. Organizational Culture Parker (2006, 2008) developed a maturity grid to help organizations reflect on their progress in developing a mature patient safety culture. This initiative was part of a broader drive toward cultural change within the U.K. National Health System (NHS). The idea was that organizational culture would shift from one of blame to one that is open, fair and continually encouraging improvement. Team Management Reacting to a report on the U.K. construction sector, a maturity grid was developed to assess effective teamwork (Constructing Excellence, 2004). The report concluded that the construction sector does not use successful collaborative working strategies and that this can lead to animosity between consultants over territory or between contractors during the tender process. The maturity grid aims to improve teamwork and collaborative working between professions, in this case, engineers, architects, surveyors and planners and others involved in contributing to the design of a project. Risk Management Good risk management practice, including assessment of health and safety, environmental and financial risks, is essential for businesses. In the United Kingdom, for example, the management of safety and environment are subject to regulatory controls which ask for appropriate prac-

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tices. This, in turn, can have implications for an organization’s capability to manage safety and risk. To address these concerns, a number of maturity grids that assess risk and reliability have been developed (e.g., Hillson, 1997; Strutt et al., 2006). Data Management Companies frequently collect information about their customers, products, suppliers, inventory and finances. However, over time, it can become increasingly difficult to accurately maintain that information in a usable, logical framework. Further, outsourcing, off shoring, mergers and acquisitions, demands for increased productivity and reductions in work force—all events that have increased in the past decade—often are accompanied by data management problems. Therefore, Hackos (2004) developed a maturity grid to help companies improve information development practices. Benefits of Using Maturity Grids Maturity grids are attractive intervention tools for a number of reasons, ranging from helping to create a high-performance environment to providing a guiding framework for decision making. Supporting Creation of a High-Performance Environment Akin to an overarching goal in quality management (Deming, 1988), the idea behind many maturity grid assessments is to elicit requirements for systems that help people do their best work. Conducting a maturity assessment is about creating an environment that allows and, at the same time, encourages people to do their best work. For example, discussion during the assessment or as a result of the assessment will expose potentially misaligned individual goals and move toward a formulation and understanding of common goals. Eliciting Different Perspectives Despite differences in set-up and execution, most maturity grids assume that perspectives of employees in the organization will differ and present a structure for exploring these different viewpoints. A maturity grid may be used to capture both the as-is and the to-be situations intersubjectively, while at the same time taking note of the individual perspectives of the participants. Intersubjectivity between people is defined as agreement on a given set of meanings or definitions of the situation. Providing and Stimulating Reflection Conducting and participating in the process of assessment provides the possibility to mirror back individual and aggregated assessment scores

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and thus triggers active and collaborative thinking and learning experiences. This can be accomplished by going through the exercise, by seeing the individual and later aggregated scores from other participants, and by discussing rationales for why certain scores have been placed. Providing a Guide for Decisions and Identifying Areas for Improvement A maturity grid provides an organizing principle which helps direct attention to important issues, raises problems that need further investigation, and provides some structure to work out where to improve an organization. Deciding where to intervene is often not easy as there might be many starting points. A maturity grid assessment aids in providing starting points in that, based on the participants’ scores, it exposes discrepancies between the as is and to be, which in turn allows the joint formulation of actions toward a desired situation. Flexibility A maturity grid is an inherently flexible technique, generic and adaptable at the same time that is widely used within industry as an evaluative and comparative basis for improvement. A maturity grid can be applied to a range of organizations and teams associated with the process under assessment. In addition, capability assessment can be conducted at any stage in the design of a product or a service offering. Speed The technique is appealing as it is quick, graphical and allows for instant feedback for and from the participants. Although it is a type of questionnaire, a maturity grid is an exercise that captures the as-is situation in a quick and engaging way. Often—and perhaps ideally—a maturity grid assessment is conducted in a workshop setting. Thus, participants have the opportunity to talk to each other and find out why tasks are done a certain way. The assessment is engaging as there will be instant feedback on the scores from the other participants. Shortcomings of Maturity Grids Although there are clear benefits with the use of maturity grids, they have also been criticized for a number of reasons, ranging from concerns that the approach oversimplifies complex problems to questions about causal connections. Oversimplifying Complex Issues A maturity grid needs to strike an appropriate balance between an often complex reality and the simplicity of the underlying model

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(Siponen, 2002). A maturity grid that is oversimplified may not adequately reflect the complexities of the domain and may not provide sufficiently meaningful information for the audience. At the same time, a grid that appears too complicated may limit interest or create confusion. Along these lines, a grid that is too complicated raises the potential for incorrect application, resulting in misleading outcomes. Lack of Causal Connections An inherent limitation of the maturity grid-approach is the lack of a straightforward causal connection between the process areas. In reality, process areas may mutually influence each other, which should be accounted for. Results are not usually interpreted from preestablished hypothesized patterns of interrelations (other than improvement higher maturity levels of process areas have a positive effect on performance, whatever performance is defined to mean). For example, in assessing product development capabilities, one process area might be “requirements analysis” and another might be “handling of engineering changes.” Scores will be placed for each process area independently and whether the performance in one is dependent on the performance in the other remains an open question. Yet, issues such as these can be addressed in the discussion. Implied Approaches to Change Finally, the implied notion of how a process ought to change might not be adequate or conversely too suggestive in a particular case. Approaches differ in their definition of the notion of maturity and process to reach maturity. Also, the underlying rationale for maturity levels may differ from maturity grid to maturity grid. All maturity grids agree that at its most basic, “maturity” suggests a passage through a number of growth stages on the journey to “ripeness” (Shapiro, 1996). Yet, we can discern a number of different underlying notions of how improvement through change in an organization may come about. They are change through: • existence and adherence to a structured process (infrastructure, transparency, formality); • alteration of organizational structure (e.g. job roles, policy); • people (skills, training, building relationships); and • learning (awareness, mind-set, attitude). The chosen perspectives on how to achieve organizational change— ideas of goodness based on certain paradigms of goodness—embedded in the rating scales of maturity grids and the text descriptions in the cells

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affect reliability, validity, ease and clarity of interpretation of data resulting from assessments using maturity grids (see Maier, Moultrie & Clarkson, in press). DEVELOPING AND APPLYING MATURITY GRIDS: A ROADMAP WITH FOUR PHASES AND DECISION POINTS In case of a voluntary evaluation of performance levels, companies often look for assessments that do not take long and do not cost too much, characteristics that make maturity grid assessments especially attractive. However, while managing organizational capabilities is a significant and complex issue for many companies and is featured prominently in the organization literature, the contribution of maturity grid assessments has so far been overlooked in the academic literature. It seems as if maturity grids have been in the shadow of the more widely known capability maturity model (CMM) (Paulk et al., 1993; Paulk, Weber, Curtis, & Chrissis, 1995) and its derivatives, including the CMMI (Chrissis, Konrad, & Shrum, 2003) and the People-CMM (Curtis, Hefley, & Miller, 2002). Although recent maturity grids have often been influenced by the CMM, there is currently no guidance that helps developers of maturity grids. In order to develop maturity grids, we suggest a roadmap consisting of four phases: planning, development, evaluation, and maintenance. Transitions from one phase to another may be fluid. For each phase, a number of decision points are depicted in Figure 17.1 (for details on each phase and decision point, see Maier et al., in press). While these phases are generic, their order is important. For example, decisions made when planning the maturity grid will impact the research methods selected to populate the grid or the manner in which the grid can be tested. In addition, progression through some phases may be iterative and earlier work might have to be revisited. Although courses of action with respect to decision points within the phases of this roadmap may vary, the phases are consistent. Consequently, they lend themselves to being applied across multiple disciplines. Although predominantly aimed as guidance for future developments of maturity grids, the roadmap may be used for evaluative purposes of existing assessments. This four-phase roadmap for developing maturity grids draws on our comparison of extant maturity grids as well as our own field experience. Phase I, the planning phase, encompasses early decisions about the use and intent of a maturity grid, including decisions on the intended audience (user community and assessment entity), the purpose of the assessment, its scope, and success criteria. Phase II, the development phase, defines the architecture of the maturity grid. The architecture has a significant impact on its use. An author makes

Maturity Grids as Tools for Change Management 381 Phase I : Planning

Phase I I : Development

Phase I I I : Evaluation

Phase I V: M aintenance

1)

1)

1)

Validate

1)

Check benchmark

2)

Verify 2)

Maintain results database

3)

Document and communicate development process and results

Specify audience

Select process areas

2)

Define aim

2)

Select maturity levels

3)

Clarify scope

3)

Formulate cell text

4)

Define success criteria

Figure 17.1.

4)

Define administration mechanism

Phases and decision points of roadmap to develop maturity grids.

decisions about the process areas to be assessed, the maturity levels (rating scale) to be assigned, the cell descriptions to be formulated and the administration mechanism to be used (see examples provided in the next section). Phase III, the evaluation phase, is an important stage in the development of a maturity grid and serves a number of functions. For example, tests are used to validate the grid, to obtain feedback on whether the grid fulfilled the requirements when applied in practice, and to identify items for refinement. Ideally, evaluations are conducted by companies or institutions that are independent of the development phase. During this phase it is important to test input into the grid (choices made during Phases I and II) for validity and the results acquired by applying the grid in practice for correctness—and in case of benchmarking also for generalizability. The final stage, Phase IV, the maintenance phase, reflects an ongoing process. Continued accuracy and relevance of a maturity grid will be ensured by maintaining it over time. Access and provision of necessary resources (e.g., a facilitator who documents changes) to maintain the grid will affect its evolution and use. Maintenance becomes necessary as domain knowledge and understanding broadens and deepens. Similarly, current best practice becomes outdated, for example, due to new technological developments.

TWO EXAMPLES: THE DESIGN AUDIT AND THE COMMUNICATION GRID METHOD This section describes the development and implementation of two maturity grid approaches: the design audit (Moultrie, 2004; Moultrie et al., 2007) and the communication grid method (Maier et al., 2006, 2009).

382 A. M. MAIER, J. MOULTRIE, and P. J. CLARKSON

Good design is important to company success. Yet, especially in small and medium- sized enterprises, design skills are often marginalized. Emphasizing the design process as a component of the wider new product development (NPD) process, Moultrie (2004) and Moultrie and his colleagues (2007) developed a design audit in form of a maturity grid. The tool aims to raise awareness of good design issues and to support managers in improving both products and the design process that deliver them. The communication grid method focuses on the reality that many problems of project management, engineering accidents, and healthcareassociated harm are attributed to poor communication. However, it is often difficult to ascertain whether communication as such is the problem or whether it is a manifestation of influences, such as lack of common understanding of goals and objectives or use of differing terminology (Blundel & Ippolito, 2008). Maier et al. (2006; Maier, Kreimeyer, Lindemann, & Clarkson, 2009) developed a maturity grid to assess and increase awareness of factors influencing communication in engineering design. Development of the two tools will be described using the phases of the roadmap discussed above.

The Design Audit This section describes the development and application of a maturity grid targeted at improving design and new product development in small firms. This maturity grid was created, tested and iteratively improved over a period of 2 years. It involved working closely with 26 firms, including four firms during the exploratory planning stage, 12 during the development stage which was in this case preceded also by tool creation and feasibility, and 10 firms during the evaluation phase (for details refer to Moultrie, 2007).

Planning: Audience, Aim, Scope, and Success Criteria The audience for the audit tool was the product development team but also for senior managers with a responsibility for product development. As such, one of the key aims of the audit tool was to bring together the different perspectives and opinions of the various stakeholders in product development. The design audit’s primary aim was to focus attention on improving both the design process in new product development, and also the way in which that process might be managed. It was specifically designed for use in small firms, using language and concepts that might be recognized by

Maturity Grids as Tools for Change Management 383

managers in small firms. The results of the analysis and discussions aimed at improving the ways in which product development is conducted and managed. In terms of its scope, although it was developed with small firms in mind, many of the concepts and ideas are equally applicable in larger firms. Finally, looking at success criteria, the maturity grid had a number of goals, and at its simplest, it sought to raise awareness of widely accepted “good practice” in product design and development. In applying the maturity grid, the primary indicator of success was that improvements were made to the design process, which in turn would lead to improved product designs. However, it was not possible to measure this latter criterion within the timeframe of the intervention. From the user’s perspective, other goals might also be apparent, and, in many applications, the manager who first championed the engagement had an underlying aim of improving communication between functional departments. Development: Process Areas, Maturity Levels, Cell Descriptions and Administration Mechanisms In creating the maturity grid, the underlying aim of the research was to improve product development practices in small- and medium-sized firms. This need has been identified as important in earlier case studies, and the research team observed many instances where companies failed to adhere to commonly recognized best practices. Thus, in creating a maturity grid, the research team did not anticipate that we would provide original insights into an area that was little understood. Instead, the team sought to package leading practice in a form that was easily digestible in small firms. This point is an important one—if the project focused on a new area, especially one in which little was currently known, then different evidence would be needed to inform the choice of process areas. As the topic under consideration has been the subject of extensive research over the preceding 20 years, this extant knowledge was used as the initial basis for selecting appropriate process areas. Thus, the research team collected examples of “product development management success factors” from over 50 studies, published since the 1950s (for details, see Moultrie, 2007). Informed by findings from both the literature and exploratory cases, a prototype audit tool was created. This prototype tool was then developed and refined through a process of application, review and modification. During this stage, the audit tool underwent four major changes of its architecture and presentation and roughly 50 smaller changes (e.g., phrasing, presentation). The result can thus be viewed as a model of “good design,” capturing key design management activities (including project generation and project management) and design execution activi-

384 A. M. MAIER, J. MOULTRIE, and P. J. CLARKSON

ties (including requirements capture, concept design and implementation). Design activities were chosen to address aspects of design execution and management that were consistently poorly performed and were also judged as important to success. This model forms the structure of the audit tool, which develops these activities in the form of simple maturity grid. The activities chosen reflect a synthesis of issues from multiple strands of literature and case evidence. The final audit tool is constructed in the form of a maturity grid of 24 key design activities. In making this selection of 24 activities, the authors were conscious that other activities might justifiably be included. Indeed, at different stages in the evolution of the assessment tool, the number of activities ranged from 20 to a maximum of around 40. In case applications, respondents commonly became weary with more than 20 activities, and thus, there was a prioritization of the activities that were believed to be most important. It is arguable that there was some bias when making those choices and that the rationale for the selection of the final 24 items is perhaps not as transparent as it could be. The process audit classifies performance against four maturity levels: none, partial, formal, and culturally embedded. These four levels were chosen to reflect the researcher’s perspective on organizational change, based on the establishment and use of processes. Within the domain of product development management, the existence of an effective process is a commonly identified success factor. The lowest levels of maturity describe practices that happen on an ad hoc basis. The next level of maturity suggests that formal processes are the solution to this partial performance. At the highest maturity level, the implication is that practices have become embedded in the organization, and thus the process, while necessary, is not a constraint. In adopting this approach to maturity, this audit tool is consistent with the definitions adopted in standard capability maturity models. It is interesting to reflect whether all of the process areas would genuinely be improved by the existence of a formal process. For example, one of the process areas is teamwork. It is conceivable that a formal process might mandate certain meetings or activities that would “enforce” crossfunctional activity, but this might fall well short of enabling genuine teamwork. The alternative, however, would be different conceptual approaches to maturity for different process areas, and it was felt that this would introduce too much ambiguity or confusion on behalf of the users. Perhaps the hardest task in producing the audit tool was the description of performance for each activity at each level of maturity. This aspect is also the most difficult to defend academically. The maturity grid is presented in two forms: summary grids and detailed grids. The summary grid captures the performance of each activity in a simple statement, designed

Maturity Grids as Tools for Change Management 385 Table 17.2. Excerpt of the Design Audit: Summary Grid for “Requirements Capture” Design Execution: Requirements Capture Level 3: PerformanceBased Segmentation

Level 1: None/Ad Hoc

Level 2: Price-Based Segmentation

No obvious segmentation

Price-based segmentation

Performance- Benefits-based based segmentation segmentation

Competitiv Little up-toe analysis date competitive information

Compare numbers on brochures

Good understanding of competitors

Deep understanding of competitors

Investigating user needs

Rely on anecdote and opinion

Opinions sometimes sought

“Voice of customer” a standard process

Range of methods including empathic research

Ongoing user involvement

Users rarely involved

Users sometimes involved at start

Users Relevant involved at stakeholders start and end involved throughout

Product specification

A poorly defined wish list

Different market and technical specs

A single, testable specification

Activity Market segmentation

Level 4: Benefits-Based Segmentation

Current Desired Score Score (1-4) (1-4)

Unambiguous USPs

to be succinct and to the point. The detailed grids expand on this heading to provide a richer description. An example of a detailed grid is shown in Table 17.2 and a summary grid of one of the process areas listed in the detailed grid is illustrated in Table 17.3. To standardize the approach, the text descriptions in the cells were based on five concepts: • Benefits perceived: whether the activity is perceived as being beneficial in the firm; • People involved: who is involved in the specific activity; typically, it was assumed that multifunctional teamwork was most appropriate; • Timing: when in the product development cycle the issue was considered. For most activities, it was concluded that consideration was necessary early in the development process;

386 A. M. MAIER, J. MOULTRIE, and P. J. CLARKSON Table 17.3. Excerpt of the Design Audit: Detailed Grid of “Market Segmentation” Market definition, segmentation, and product positioning based on a clear understanding of customers and their needs Level 1: No Obvious Segmentation

Level 2: Price-Based Segmentation

Level 3: PerformanceBased Segmentation

• What is mar• Segmentation • Segmentation ket segmentabased on price based on tion? – “Top end” product func• No clearly “middle” and tionality or defined mar“entry level” performance ket products • Clear under• Not sure who • Some overlap standing of buys our prodin products the profiles of ucts or why • No accurate customers in data on mardifferent segket size and ments share • Understand the competitors in each segment

Level 4: Benefits-Based Segmentation

Current Desired Score Score (1-4) (1-4)

• Segmentation based on the benefits offered to different types of user • Deep understanding of the needs of users in each segment • Reliable data for each segment

• Degree of formalization: the degree to which the activity was embedded in the formal product development process, recognizing that this is necessary to prevent ad hoc performance across the business; and • Level of expertise: whether the firm considers itself to have specific expertise in an activity. This schema helped to ensure consistency in description of performance across activities. However, it begins to suggest an evolution of the pre-assumed definition of maturity that focuses explicitly on the fourth aspect, process formalization. Furthermore, it was also evident that such a rigid prescription would not work uniformly for every activity. In the example in Table 17.3 for market segmentation, the descriptions include statements such as “no accurate data on market size and share.” This statement does not fulfill any of the above criteria, but it is a valid and sensible observation of a characteristic of poor performance. Similarly, for Level 3, there is no obvious indication in the description that a formal process would be an advantage. Choosing multiple characteristics as the basis for description raises potential problems in scoring. For example, it is feasible for a participant

Maturity Grids as Tools for Change Management 387

to score highly for team involvement, but to note that the activity is performed on an ad-hoc basis. This difficulty was observed in application of the maturity grid. An alternative to this approach would be to take each element and assess it individually. This approach was tested and— although it resulted in an assessment tool that had a high level of conceptual consistency, that consistency came at the expense of accessibility. Despite the disadvantages of multiple “ideas” contained within one cell, participants consistently noted that these descriptions captured the essence of performance in their firms. The audit tool has been designed for use in a workshop setting, requiring roughly one half of a day, with representatives from a variety of functional groups. Workshop participants are first introduced to the range of activities and asked to identify any which in their view might be missing. Participants are then asked to score current performance and identify opportunities for improvement. Various strategies for scoring current performance have been tried. In early applications, individual participants scored each activity alone, and later collated responses to identify activities for further discussion. This approach was effective in highlighting differences in opinion, but was also divisive. In later applications, participants were split into subgroups to discuss each activity, using the summary and detailed grids to agree on scores for both current and desired future performance. These subgroups then shared views and discussed alternative priorities. This approach proved more useful in generating practical outputs. The workshop culminates with the capturing and prioritization of actions for improving the design process. Evaluation and Maintenance To evaluate the wider applicability of the audit approach, ten companies were identified from the local industry network around Cambridge University in the United Kingdom to provide feedback on the feasibility and usability of the audit tool. In all cases, the respondents were given a copy of the design audit (in workbook form) before being asked to make comments. Multiple data collection methods were used, including recorded semi-structured interviews, questionnaires, and written feedback. This stage did not seek to determine the usefulness of the approach, instead exploring whether the concepts and descriptions remained valid in different contexts. The audit tool has since been applied in many different contexts, and feedback is collected systematically regarding the delivery, content, choice of activities and presentation. For consistency, the audit tool is not modified iteratively as a result of this feedback, but undergoes a major revision when sufficient feedback has been collected.

388 A. M. MAIER, J. MOULTRIE, and P. J. CLARKSON

The Communication Grid Method We devised a maturity grid to assess communication management in engineering design (Maier et al., 2006), spanning 4 years of development and application. We conducted three exploratory studies during Phases I (planning) and II (development) and undertook five applications as transition between Phases II and III (evaluation). The method is now in continuous improvement (Maier et al., 2009). Planning: Audience, Aim, Scope, and Success Criteria Companies that took part in the exploratory studies on communication in new product development came from the aerospace, information technology, and engineering tools sectors. Our observation studies comprised eight weeks and 63 semi-structured face-to-face interviews with junior engineers and senior personnel. Our interview results showed that when comparing engineers’ perceptions on factors influencing communication from different departments, the views were misaligned. Therefore, the assessment tool needed to focus on communication across one interface. The improvement goal was enhanced awareness and understanding of factors and misaligned views across the specified team or department interface. The same people providing the scores were the recipients of the results. Human communication in complex product development projects is based on manifold configurations of people, products and processes, which make each communication situation different. Best practice benchmarks or generally applicable indices for communication against which a particular situation can be compared are perhaps impossible to find. Therefore, we decided the assessment purpose was to raise awareness among participants and diagnose improvement opportunities for their current practices. We devised the tool to be discipline specific, that is, the assessment was predominantly aimed at communication within engineering firms. However, the focus on factors influencing communication at a team or departmental interface rather than centred on particular product development phases also enables cross-disciplinary assessment. A number of success criteria, in the form of high-level and specific requirements, were defined. In general, the maturity grid was to be usable by and useful for industry. Success criteria for usability emphasized clarity of language and ease of scoring and analysis. We determined the tool’s usefulness by its ability to trigger reflection and learning episodes among the participants in the assessment. As an example of a specific requirement, during the interview the engineers mentioned a myriad of factors that influenced communication. We

Maturity Grids as Tools for Change Management 389

collected their responses and found factors ranging from individual capabilities and information handling skills to differences in format of information representation, mutual trust, roles and responsibilities, decisionmaking, handling of technical conflicts, hierarchies, and a general overview of sequence of tasks and terminology. The number, diversity, and variety of issues made it difficult to decide where to intervene first. Consequently, the maturity grid assessment needed to provide multiple entry points for organizational change initiatives. Development: Process Areas, Maturity Levels, Cell Descriptions, and Administration Mechanisms The main objective was to assess communication within engineering firms. We used Luhmann’s (1995) system-theoretic notion of communication as the theoretical backbone. Communication, encompassing the three aspects information, utterance and understanding, constituted an emergent property of the interaction between many (at least two) individuals and is characterized in this view as coordination of behavior. A number of factors influenced this coordination, ranging from individual capabilities and information handling skills to differences in the various issues noted above, including mutual trust, roles and responsibilities, decisionmaking, handling of technical conflicts, and so forth. More than 40 empirically elicited factors were used as key process areas for assessment (for details, see Maier et al., 2008). Inductive coding of the interview data yielded more than 40 factors influencing communication that were grouped under the headings “product,” “information,” “individual,” “team,” and “organization” (Maier, 2007) and subsequently mapped against Luhmann’s three aspects of communication. The resulting framework presents a comprehensive, arguably not exhaustive, selection of factors that forms input to the audit method. We see these factors as levers for change, forming the components of the maturity grid. We decided to use a modular system and have a base of roughly 40 process areas in which a selection is used in negotiation with the users. From a system-theoretic perspective, it is particularly important to choose an approach that triggers internal processes within the system under assessment. Change can be initiated, yet not fully controlled. Change initiatives, however, are only processable if they are phrased in the “language of the system” (Luhmann, 1995, p. 401). Social systems develop their own perceptions of reality, which they use to orientate and position themselves in relation to their environment. This perception of reality creates the system’s knowledge base, which, at the same time, functions as an indicator and benchmark for its own behavior. Learning is the act of developing this knowledge base further. In the most successful cases, learning leads to a coherent reality construction of a system, and

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thus the system development keeps up with changes in the environment (Glasersfeld, 1985). The maturity levels were based on an adaptation of the three learning types described by Argyris and Schön (1978a, 1978b). In addition to these three learning types, an extra, preliminary stage was added: • Level A describes situations where participants do not engage with the questions asked in the grid (i.e., they do not reflect on the connection between the factor in question and communication). • Level B corresponds with the first type of learning described by Argyris and Schön, and points out that some action is changed in order to correct a mistake but other than that tasks are carried out as usual. • Level C matches Argyris’ and Schön’s second type of learning; people at this stage modify their actions, as well as thinking critically about existing norms, procedures, policies, and objectives that govern their actions. This means that a mistake is not just corrected once, but that the general situation that led to a mistake is taken into consideration. • Level D corresponds to the third type of learning and signifies a stage where employees (1) are aware of the influence of a given factor on communication and (2) continuously check whether the way things are handled or set-up is still appropriate for the given situation. At this stage, learning does not only happen when a mistake needs to be corrected—participants have the general mind-set of continuously adjusting and improving the situation. Given the complexity of communication and the unique nature of each project and company it is difficult to specify in detail what behavior every team should adopt. Therefore, it could be argued that Level D is not necessarily the best. Participants decide what is most adequate for the given project and resources available. In summary, the concept of learning permeates the assessment approach put forward here in two ways. First, individual participants in the assessment will learn about their colleagues’ perceptions by going through the assessment exercise. Second, maturity levels in the assessment follow the underlying rationale of specific learning types. Once we identified the factors that influenced the communication process and levels of maturity assigned to each factor, we devised the matrices of cells that we referred to as scorecards or grids. An example of one scorecard is shown in (Table 17.4). Aiming to use the right language, we first suggested the cell descriptions and subsequently elicited feedback

Maturity Grids as Tools for Change Management 391 Table 17.4.

Excerpt of the Communication Grid Method: Grid for “Teamwork”

Please answer for your project team B: Change of Action

C: Change of Action and Attitude

D: Continuous Adaptation

Collabora- Everytion one looks solely after his or her tasks

Collaboration happens only if asked for in order to fulfill tasks

Collaboration happens proactively in order to learn from others and improve own approaches

Common goals and objectives

Not known. No thinking about it

Known but everyone follows just his or her own goals

Known and sometimes consideration of the way common goals can be reached through working together

Collaboration is constructive, happens regularly whenever necessary and there is continuous effort to improve it Entirely clear and identification which it which is expressed in communication and continuous effort to assess and adjust goals and objectives and the way to reach them

Team identity

There is none. Nor is it seen as necessary

Small groups form depending on the task and these groups get their identity through the tasks

Attitudes with respect to team identity are continuously reflected upon in order to find a common denominator

Information sharing

It just happens. No thinking about the procedure

Ad hoc and will be changed depending on success or failure

We consciously try to make information sharing transparent and focus on continuity

Factors

A: No Action

Current Desired

There is strong belonging to the team and continuous reflection on how team identity can be kept up and strengthened for the project There is a clear process of continuous improvement of documentation and regular information sharing

from users until there was no hesitation on the part of the people doing the scoring—a laborious process of iterative refinement. Our main emphasis was to enable learning by following the assessment. Due to the trade-off between time and cost constraints and wanting

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to situate numerical scores within the context of occurrence, we experimented with a number of administration mechanisms. In the end, individual 30-minute interviews were combined with a 2-hour group workshop in which the result of the completed scorecards, causes and solutions for identified problem areas and gaps between the current and desired states were discussed.

Evaluation and Maintenance This assessment method was used in a variety of settings, including: (1) enhancing collaboration between software and service design more effective (Application Case 1: Information Technology; see Maier et al., 2006); (2) the management team of a small engineering company (Application Case 2: Engineering Tools Manufacturer); (3) design and service of an aero engine (Application Case 3: Aerospace Manufacturer Defense); (4) embodiment design and simulation of the design of an automotive vehicle series (Application Case 4: Automotive Manufacturer; see Maier et al., 2009); and (5) preliminary design and detail design of an aero engine turbine blade (Application Case 5: Aerospace Manufacturer Civil). The audit tool was tested using member validation (Bloor, 1997), and the results were fed back to the participants of the study through a workshop, final presentation and, in some cases, a written report. Participants felt the statements accurately represented the actual status of communication between the team interface chosen. Results were cross-referenced with a questionnaire on the same topic. In addition to validating the results obtained from the method, we evaluated the method according to set criteria, such as functionality, usability and usefulness. Interviewees’ comments were used for iteration refinements between the individual versions. For a comprehensive description of the evaluation process see Maier (2007). The basic objective with the communication grid method was to raise awareness. The method may be used to compare teams and departments within companies but does not posit a best practice benchmark. Cell-text is descriptive and, therefore, the maturity grid will remain up to date.

SUMMARY AND CONCLUSIONS In this chapter, we provided examples of maturity grid assessments and, following a dearth of guidance in the literature on how to develop such assessments, presented a structured approach for their development. The roadmap consists of four phases: planning, development, evaluation, and

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maintenance; and there are a number of considerations attributed to each phase. Our two practice examples—the design audit to assess product development and the communication grid method to assess communication in product development through influencing factors—demonstrate the roadmap in action. The cases also showed our experience with developing and applying maturity grids in industry. As a way of concluding this chapter, we would like to sketch some of the lessons learned from our experience. First, when developing maturity grids, one is likely to encounter the issue of academic rigor versus logistical feasibility and practical utility. We encountered it particularly with respect to the selection of process areas and the number and comprehensiveness of those process areas. For academic purposes, the list of process areas chosen needs to be comprehensive, complete, correct, consistent and, above all, theoretically justified. For industrial applicability, however, certain flexibility for adaptation and tailoring needs to be designed into the method. It is necessary to strike a balance between developing an exhaustive method and a usable one. Second, we encountered the need for continuous dialogue with the potential user of the assessment. Interests, wishes, needs, ideas and priorities of the involved parties may shift in change initiatives. Similar to a requirement analysis, often people learn as they go along and only by engaging with the activity do they find out what they really need and want. Third, when applying maturity grids participants need to be informed about the purpose of the assessment and the results must be “taken back to the field.” Engagement will be higher if participants know how they will benefit from the assessment. For successful preparation and implementation of an externally administered assessment, it is important that management personnel within the company inform participants. Finally, consultants may be both developers and facilitators of maturity grid assessments. As maturity grid assessments are not just performance measures but also mechanism for change, both roles assume great responsibility. As developers, for example, our choices of underlying rationale for what makes a mature organizational capability and how to progress form an initial to a more advanced state have an impact on organizational change initiatives. Assessing organizational capabilities requires a model of what constitutes organizational effectiveness. Definitions of organizational effectiveness are closely linked to the way we conceptualize organizations (Goodman & Pennings, 1980). Each maturity grid assessment has its own mental model of an ideal organization, which is visible in the formulation of the rating scale. Different models of change can affect the focus for change efforts, sequence of steps in the change process and the locus for change (Hayes, 2007). Being careful not to be too suggestive,

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conversely, as facilitators of assessments, however, we noticed that it is also necessary to give direction. We need to steer the discussion while at the same time adapt to a certain extent to the specific situation. Developing and applying a maturity grid makes the consultant more of a “doer”’ rather than a “mere” analyst. Consequently, we need more than ever to be aware of the remit of our choices in general and the sensitive recognition of our conceptualizations of an organization in particular— first steps having hopefully been taken with this chapter and adjacent publications.

ACKNOWLEDGMENTS The authors wish to acknowledge the support of the Engineering and Physical Science Research Council who funded the research on which this chapter is based. Further, we wish to thank our interviewees for their time and commitment. Our thanks also goes to all our colleagues who have supported us along the way and commented on earlier drafts. Finally, we thank the organizers of the International MCD 2009 conference and the editors of this volume for their support and guidance.

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396 A. M. MAIER, J. MOULTRIE, and P. J. CLARKSON Herbslerb, J., Zubrow, D., Goldenson, D., Hayes, W., & Paulk, M. (1997). Software quality and the capability maturity model. Communications ACM, 40(6), 30-40. Hillson, D. A. (1997). Towards a risk maturity model. The International Journal of Project and Business Risk Management, 1(1), 35-45. Ibbs, C. & Kwak, Y. (2000). Assessing project management maturity. Project Management Journal, 31(1), 32-43. Kahn, K. B., Barczak, G., & Moss, R. (2006). Perspective: Establishing an NPD best practices framework. Journal of Product Innovation Management, 23, 106116. Kulkarni, U., & St. Louis, R. (2003). Organisational self assessment of knowledge management maturity. 9th Americas Conference on Information Systems (pp. 2542-2551). Tampa, FL: Association for Information Systems. Kwak, Y. H., & Ibbs, C. W. (2000). Calculating project management’s return on investment. Project Management Journal, 31(2), 38-47. Luhmann, N. (1995). Social systems. Palo Alto, CA: Stanford University Press. Maier, A. M. (2007). A grid-based assessment method of communication in engineering design (PhD Thesis, University of Cambridge, Cambridge, England). Maier, A. M., Eckert, C. M., & Clarkson, P. J. (2006). Identifying requirements for communication support: A maturity grid-inspired approach. Expert Systems with Applications, 31(4), 663-672. Maier, A. M., Kreimeyer, M., Hepperle, C., Eckert, C. M., Lindemann, U., & Clarkson, P. J. (2008). Exploration of correlations between factors influencing communication in complex product development. Concurrent Engineering Research and Applications, 16(1), 37-59. Maier, A. M., Kreimeyer, M., Lindemann, U., & Clarkson, J. P. (2009). Reflecting communication: A key factor for successful collaboration between embodiment design and simulation. Journal of Engineering Design, 20(3), 265-287. Maier, A. M., Moultrie, J., & Clarkson, P. J. (in press). Assessing organizational capabilities: Reviewing and guiding the development of maturity grids. IEEE Transactions on Engineering Management. doi: 10.1109/TEM.2010.2077289 McGrath, M. E., & Akiyama, C. L. (1996). PACE: An integrated process for product and cycle-time excellence. In M. E. McGrath (Ed.), Setting the PACE in product development: A guide to product and cycle-time excellence (pp. 17-30). Boston, MA: Butterworth-Heinemann. Miller, D., & Friesen, P. H. (1980). Momentum and revolution in organizational adaptation. Academy of Management Journal, 23(4), 591-614. Moultrie, J. (2004). Development of a design audit tool to assess product design capability (Doctoral thesis). University of Cambridge, Cambridge, England. Moultrie, J., Clarkson, P. J., & Probert, D. R. (2007). Development of a design audit tool for SMEs. Journal of Product Innovation Management, 24(4), 335-368. Mutafelija, B., & Stromberg, H. (2003). Systematic process improvement using ISO 9901:2000 and CMMI. Boston: Artech House. Nadler, D. A., & Tushman, M. L. (1995). Types of organizational change: From incremental improvement to discontinuous change. In D. A. Nadler, R. B. Shaw, & A. E. Walton (Eds.), Discontinuous change: Leading organizational transformation (pp. 15-34). San Francisco, CA: Jossey-Bass.

Maturity Grids as Tools for Change Management 397 Parker, D., Lawrie, M., Carthey, J., & Coultous, M. (2008). The Manchester patient safety framework: Sharing and learning. Clinical Risk, 14(4), 140-142. Parker, D., Lawrie, M., & Hudson, P. (2006). A framework for understanding the development of organisational safety culture. Safety Science, 44, 551-562. Paulk, M. C., Curtis, B., Chrissis, M. B., & Weber, C. V. (1993). Capability maturity model SM for software: Version 1.1. Report: CMU/SEI-93-TR-024 ESC-TR-93177, Carnegie Mellon University. Paulk, M. C., Weber, C. V., Curtis, B., & Chrissis, M. B. (1995). The capability maturity model: Guidelines for improving the software process. Boston, MA: AddisonWesley. Radice, R. A., Harding, J. T., Munnis, P. E., & Philips, R. W. (1985). A programming process study. IBM Systems Journal, 24(2), 91-101. Shapiro, A. R. (1996). Stages in the evolution of the product development process. Setting the PACE in product development: A guide to product and cycle-time excellence. In M. E. McGrath, M. T. Anthony, & A. R. Shapiro (Eds.), Product development, success through product and cycle-time excellence (PACE) (pp. 147159). Boston, MA: Butterworth-Heinemann. Siponen, M. (2002). Towards maturity of information security maturity criteria: Six lessons learned from software maturity criteria. Information Management and Computer Security, 10(5), 210-224. Strutt, J. E., Sharp, J. V., Terry, E., & Miles, R. (2006. Capability maturity models for offshore organisational management. Environment International, 32(8), 1094-1105. Szakonyi, R. (1994a, March-April). Measuring R&D effectiveness—I. ResearchTechnology Management, 27-32. Szakonyi, R. (1994b, May-June). Measuring R&D effectiveness—II. Research-Technology Management, 44-55. Teece, D., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Management Journal, 18(7), 509-533. Ulrich, D., & Smallwood, N. (2003). Why the bottom line isn’t!: How to build value through people and organizational change. Hoboken, NJ: John Wiley & Sons. Ulrich, D., & Smallwood, N. (2004). Capitalizing on capabilities. Harvard Business Review, 82(6), 118-127. Woodall, R., Cooper, I., Crowhurst, D., Hadi, M., & Platt, S. (2004). MaSC: Managing sustainable companies. Engineering Sustainability, 157(ESI), 15-21.

CHAPTER 18

CONSULTING BY EXPERTISE IN ORGANIZATION SCIENCE A Special Use of OD Know-How for Transorganizational Collaboration Systems in Public Services K. SCALA,Klaus M. STADLOBER, ANDStadlober, H. FIBY and Hans Fiby Scala, Michael

Public services are complex and interrelated. In the present environment, most public goods cannot be adequately handled by one organization alone. From this point of view, collaboration between independent organizations offers an attractive way to deal with interrelated problems in a manner that improves the quality of public services and fosters sustainable development. Indeed, societies are increasingly developing into a coexistence of highly specialized systems and organizations, which can be very effective at doing what they do. Yet a new challenge has emerged— dealing with interrelated issues that exceed the existing boundaries between organizations, competencies, and professions. Patients in the health care sector typically require services that are provided by different professionals from different organizations. Programs The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 399–415 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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dealing with unemployment need collaborative action of public policymakers as well as public and private organizations. Traffic control management of an entire region requires a coordinated and sometimes collaborative effort of different organizations. As these brief examples suggest, collaborative relationships and networks as a specific type of social system in modern society have become increasingly important. Managers of organizations perceive collaboration as an opportunity for growth and innovation, as a means of exploiting synergies, and as a way to protect their own organizations when faced with a turbulent environment. The ability for an organization to collaborate with others and to participate in networks is increasingly becoming a strategic success factor. And society increasingly depends on the capability of its organizations to collaborate.

COLLABORATION SYSTEMS: A NEW PHENOMENON OF ORGANIZING Decision makers are increasingly relying on transorganizational networks, which are often seen as a universal remedy. The public sector promotes collaborative relationships and networks in order to attract new resources and to outsource services from management—the public-private partnership—as sought-after collaboration between profitable enterprises, publicly funded service organizations and nonprofit organizations is on the rise. Despite these demands, our practice as organizational consultants and our OD research indicate that networks and other types of transorganizational systems are more successful if they meet specific success criteria, which are different from those of traditional organizational development (OD). Organizations do not merely cooperate. In cooperating, they create their own social systems, whose goals, rules, and structures distinguish them from other organizations. These social systems work according to their own logic—collaboration through negotiation. This concept reflects the challenge of building relationships, one that differs from coordination through tight hierarchical control as well as from the loose seller-buyer relations of the market economy. In public services the focus on profits produces undesirable side effects, such as unequal access to public services and lack of services in unprofitable or too risky fields. Privatization shifts gains to the private owner and risks and losses to the public. Hierarchical control, in contrast, tends to be inflexible, bureaucratic, and incapable to achieve gains through efficiency. As an example, this is very true for traffic as a public good, not only public transportation and its infrastructure but the individual use of cars as well.

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Traffic is not simply the issue how to get from one place to another, but deals with a far broader array of challenges, including air pollution, noise, and the transportation infrastructure. Collaboration, of course, does not function by itself. Many collaborative relationships and networks are launched with great momentum, without ever having to show any effect. As our main thesis, collaborative relationships and networks must be deliberately formed, developed, organized, and controlled. This premise underscores a new, very demanding task for managers and consultants—the challenge of creating communication structures with a strong commitment and decision-making processes between organizations. How should such systems be introduced? How can collaboration and competition be balanced? How loosely or tightly should collaborative ventures and networks be linked? What rules are needed? What are the conditions and skills needed within the organizations and by the persons involved, and how can they be developed? What role will the initiating political institutions play? In order to be successful sufficient attention must be paid to these various aspects of the collaboration, from creating a collaborative system, to focusing on the partners’ performance and efficiency, preparing the business case, and managing the cooperation, to carrying out comprehensive teamwork, taking people and their connections into account. Shaping communication processes is clearly a key activity.

ITS VIENNA REGION: COOPERATIVE TRAFFIC CONTROL MANAGEMENT ACROSS SYSTEM BORDERS Efficient and comprehensive traffic management in urban areas needs collaborative ventures, which have to be built and managed carefully. The case of ITS (Intelligent Transport Systems) Vienna Region provides a good illustration of how technological and organizational innovations must go together to create public profit. In the widening gap between expanding mobility and negative ecological effects within the population, traffic problems in urban areas are pressing. The capacities of the infrastructure (e.g., roads, railroad lines) are exhausted and can no longer be extended. The further development of transport can only be managed by implementing a more intelligent system of steering the transportation behavior of the citizens and organizations. Given these challenges, in 2006 three Austrian provinces jointly founded the project ITS Vienna Region to develop an innovative traffic information and management system in the Austrian Eastern region, which consists of the three provinces of Vienna, Lower Austria, and Burgenland. This region consists mainly of a large city (Vienna) and its sur-

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rounding areas, with its usual heavy traffic with more than 200,000 commuters moving daily to their work place. The joint effort of the three provinces rests upon the following basic principles: • Traffic management is a core public task and cannot be provided adequately by private business organizations. At the same time, private-business partnerships are needed in various aspects. • Traffic management requires comprehensive, regional, intermodal, and dynamic traffic information accessible for all traffic participants, which calls for a unified approach for the implementation of an integrated concept throughout the entire region. • As responsibilities are split and interests are different, this level of cooperation can only be achieved by a collaborative and innovative effort of diverse stakeholders. These stakeholders include (1) political entities (cities, counties, municipalities), each with its own administrative institutions and traditions, (2) national, regional, and local transportation companies, each with different customers, (3) promoters of public transport and public transport authorities and (4) lobbies for private transport. Traffic management systems require high technology, hence the integration of technology companies and scientific institutions. • The processes needed to run traffic management and information services should be integrated tightly into the e-government initiatives of the administrative bodies (provinces, municipalities), assembling the common network of ITS Vienna Region from the subnetworks of the involved municipalities in order to capture synergies. The technical objective of the project was to establish a complete tactical image of the current traffic situation (which would be recalculated every 15 minutes) as a basis for an intermodal (including public and private means of transport) and dynamic traffic information and routing service. This was based on an intermodal network representation for all traffic modes (individual car traffic, public transport, cycling, walking), which could be used in many ways, and by diverse target groups, to enhance day-to-day traffic information, adjust traffic behavior, and serve as the basis for more directive traffic management measures by public authorities. The main objectives included: free online traffic information (see, for example, Figure 18.1); dynamic and intermodal routing for all modes of traffic; a shift toward environmentally friendly transport modes; optimized traffic management based on a common traffic data pool; enhanced road safety as a result of dynamic information and regulation;

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Figure 18.1. Dynamic and intermodal routing service for park and ride: Suggesting a route in response to user request.

intelligent solutions for public transport in rural areas of the Vienna Region; and comprehensive data for traffic policy and planning. The techniques needed are innovative but available, and the main technical challenge was to put together and adjust various modules, define interfaces, establish the needed data sources, manage data complexity and calibrate the model. The underlying challenge, however, was also a social one. Questions lingered as how to: establish a widespread collaborative system that integrated a multitude of actors; manage the various differences, emerging from the different positions and perspectives; and use them as resources. In 2001, concepts of traffic management were drawn by the city of Vienna. It quickly became apparent that a traffic management system would not succeed without the active involvement of key stakeholders in the surrounding area. Thus, what began as a project of the Vienna city administration was expanded beyond the city itself. Beginning in 2004, the municipality of Vienna (as the main player) attempted to foster a collaborative arrangement through a joint limited company, the VEMA GmbH, bringing together regional and national transport operators and the authorities of the province of Lower Austria. That attempt, however, failed because the decision makers were not successful in formulating a

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viable common business case—the interests, cultures, and approaches were too varied, the fear of losing control was too great, and there was too little confidence in each side’s professional skills and the possibility of successfully negotiating the differing points of view. The discussion of an appropriate organizational model gave any content-related work secondary priority. There was significant conflict between the national transport operators (the federal railways and the highway commission) and the other actors in the region. During this process, the initially Vienna-centered perspective was expanded to incorporate the province of Lower Austria (which completely surrounds the city of Vienna) and the neighboring province of Burgenland. This expanded view provided a more realistic perspective on the challenge of traffic management. In 2006, a second attempt to launch a joint initiative began in a very different manner. Instead of attempting to create a new organization, the regional authorities (Vienna, Lower Austria, Burgenland) focused on a less complex project—ITS—with the goal of creating an integrated transport data pool and traffic information system. In essence, the process was structured to achieve gradual steps instead of one big, sudden move. The core project team began with only three employees. It was situated in the organizational context of an existing joint venture between Vienna, Lower Austria and Burgenland—the VOR (Public Transport Association of the Vienna Region; see Figure 18.2)—which managed selected comprehensive aspects of the regional public transport (e.g., selling tickets). The project used current resources (e.g., financial control, administrative support, information technology administration) and gained direct access to all data, technical facilities, special expertise and well established data management routines of VOR. Although formally situated in VOR, the project was governed strategically by a steering committee consisting of high-level representatives from the three provinces, and managed operationally by a subgroup of that board, referred to as the working committee. The project-manager was a technical expert with experience in organizational development. To secure the connection to the various administrative departments of the provinces involved, two of their traffic information experts were assigned to the ITS staff on a part-time basis. They played an important role in securing mutual connectivity in both directions. The project also had the opportunity to build on additional resources. The policies in the three countries, despite an affiliation to different political parties, offered a uniform approach, creating a supportive environment and allowing the experts to work independently. The attempt to extract the project out of any ostensibly political conflict was successful,

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VEMA

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Legend: Vienna, Lower Austria, Burgenland = federal provinces; Vienna transport = regional public traffic operator; ÖBB = national public railway operator, ASFINAG = national public highway operator; VOR = public transport association of the Vienna Region.

Figure 18.2.

From VEMA to ITS.

largely due to the insight of the political authorities that the support of this project would bring great popularity. Questions lingered, however, as to how to reincorporate the other needed players in this rather narrow structure. A research project (Traffic Information Project -VIP) funded by Federal Ministry of Transport, Innovation and Technology (BMVIT) provided financial incentive and impetus to establish a more widespread collaboration system around the ITS project. VIP, in addition to the already mentioned institutions, comprised about 10 other organizations with very different main interests, including: publicly funded research institutions (heading toward reputation and scientific gains); private technology companies of very different sizes (heading toward financial and market share gains); regional public traffic operators (heading toward autonomy or more involvement); and national transport operators (heading toward own proprietary traffic information solutions for their customers).

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By means of the double structure of ITS and VIP, more flexible arrangements of partners and stakeholders were possible. Players, who only wanted to cooperate on a limited basis, were thus able to still be involved—for example, in the research project—which kept their options open. For instance, the rather skeptical national transport operators participated through individual data supply contracts, in the beginning more or less forced by their public proprietor—the Federal Ministry (BMVIT). At the start of VIP, the partners had difficulties in negotiating the consortia contract. Nevertheless, they immediately started with their work in flexible bi- and multilateral task-forces along 15 work packages, coordinated by the ITS project team (see Figure 18.3). The process moved forward, mainly due to the work and interest of the high-tech experts in the various organizations involved, who successfully implemented sophisticated data collection and data networking among the organizations in a step-by-step progression. Many important experts knew each other from the informal “transport management community,” and they shared similar technical interests and professional identities, although they were based in different organizations. In addition, several members built on existing, long-established collaborative relationships that have withstood the test of many years. In summer 2007, the first prototype of a dynamic traffic information system, combined with a door-to-door journey planner, was established for all traffic modes. It had its first real test in June 2008 during the UEFA European Football Championship 08, when the prototype for Vienna was tested as a free internet application on www.its-viennaregion.at. To improve this prototype, ITS Vienna Region was involved in several research projects developing data models for simulation and prognosis of traffic conditions (see Figure 18.3). While the municipalities of the federal states continued their decentralized data management and update, ITS Vienna Region focused on quality management and efficient communication routines among the almost independent subnetworks. The first concrete results indicated that a comprehensive and collaborative traffic management system was possible, both technically and socially. What seemed difficult or even impossible to implement was suddenly a reality and attracted significant attention in the professional community—putting pressure on skeptical stakeholders (e.g., the national transport operators). By the time VIP was finished (September 2008) it had lost its core booster function—ITS was already involved in a multitude of other research and development projects and collaborative activities. Given this situation, combined with the end of the first term of ITS, important questions regarding the future were raised:

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Legend: Vienna, Lower Austria, Burgenland = federal provinces; Vienna transport = regional public traffic operator; ÖBB, ASFINAG = national public transport operators and data suppliers; VOR = public transport association of the Vienna Region.

Figure 18.3.

Double project structure of ITS and VIP.

• What should be the future role of ITS in traffic information and management of the eastern Austrian region, and which organizational form was appropriate for this role? • Which services should ITS provide as a public venture? Which of these services should be offered in cooperation with private service providers (e.g., routing services on mobile phones)? • How could cooperation with the national transport operators, whose data were clearly needed, be further developed after the end of VIP? Once more, the foundation of a joint limited company was discussed, and, once more, this alternative was dismissed in favor of the established project organizational model and its greater flexibility in the complex dynamics of technical, political, and market development. ITS was still organized as a project in VOR, slightly more embedded in the latter’s organizational structure, but still equipped with its own steering commit-

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tee, operative management, and corporate identity. Regarding its tasks, ITS was to maintain the public and collaborative character of providing traffic information and management, an approach which had proved to be an adequate answer to a comprehensive problem. It was also expected to collaborate with administrative bodies to support them in traffic management affairs, as well as with business organizations to develop specialized services. During 2009 ITS Vienna Region started to provide complete dynamic information about traffic conditions and an intermodal routing service for all three provinces of the Vienna Region, including a routing service for cyclists and park and ride information. With the accompanying technical, social, and political capital, it became easier to negotiate future data transfer and a strong cooperative spirit began to emerge.

Key Success Factor I: Organizing Collaboration as an Independent Social System The ITS case can be regarded as a successful example of improving public services through the collaboration of various organizations. One of the most important learnings from this and other cases is that collaboration between systems should be processed as a social system—defined as a system between systems, run by the participant organizations and involving the process of joint development. By collaborating successfully, organizations create their own social systems that distinguish themselves from other organizations, not least from the participating organizations. These “collaboration systems” come into being when organizations start tackling and solving problems together. Collaborative systems are not created externally; rather, they are developed within a process. They require constant maintenance and methods for constructively dealing with differences. The most important components of system formation are the definition of boundaries and the creation of identity. The way in which a cooperative arrangement is organized is a decisive factor in its potential for success. Both the processes and agreements about structure result from the formation of cooperative systems that comply with the logic of management and the prerequisites of successful relationships. Collaborating partners follow the principle of equality between partners, while building trust and implementing consensus-based decision making. The participants in any collaboration have to balance double memberships of their organization of origin and the emerging identity of the partnership with divided loyalties. Collaborative systems also need to distance themselves from the part-

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nering organizations and make decisions to build and maintain their own identity. At the same time, they also must open up and remain closely related to their home organizations and take into account their expected benefits and associated decisions. They require stability in order to work properly while also remaining flexible and open to the participants’ interests and decisions. These differences between distancing and restarting, being independent and connected, and being tightly structured and resilient need to be continuously managed. The foundation of a new organization derived from a collaborative system marks the end of it. We see collaborative systems as connected social systems, not as independent organizations. New organizations might be their result—for instance, a joint partnership creating a new venture or a company with shared ownership. Collaborative systems may also run a joint service organization quite well, provided that sufficient distinction is made between the service organization itself and the collaborative system. This also requires a permanent “marketing” of the new system within the whole relevant community. Many of these characteristics are found in the ITS case. For instance, the three provinces financed and steered it collaboratively, but ITS also developed prominent independence and its own identity. The project drew strongly on the resources of its host organization (VOR) and VOR also benefitted from new joint processes and available technologies. This selective connectivity and mutual input-output relationships also characterized the relationship to the provinces and many other stakeholders. For collaboration systems like ITS, no familiar organizational and legal forms exist today. They have to be developed on a case to case basis. As the ITS case amply illustrates, quick decisions (e.g., foundation of a VEMA GmbH) often hinder the necessary development process.

Key Success Factor II: Emphasizing and Balancing the Benefits for Stakeholders As part of the management challenge in such joint endeavors, it is important to ensure that benefits for all stakeholders, persons, and institutions are kept permanently in mind. They must be communicated and made visible for all. Differences in the amount of benefits across different stakeholders have to be balanced—for instance, ensuring that the longterm process brings about such balance or that stakeholders who profit more are also those that contribute more. In order to attract new partners, an appropriate investment must be made by the other stakeholders that will create benefit for the newcomer.

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THE ROLE OF CONSULTING: NEW CHALLENGES As suggested by the ITS-project, there is a high level of complexity involved in interorganizational ventures. Yet, while such complexity underscores the need for consultancy, questions linger as to the appropriate type of consulting, for example: (1) what are the specific dimensions that create a need for consultancy?; (2) what type of consultancy is appropriate to satisfy those needs?; (3) is the system aware of these special needs and is it capable of selecting the right consultants?; (4) how should the consultancy system be linked to the project?; and (5) how can consultants with different areas of expertise be linked together? Mapping the ITS-project and its organizational environments facilitates the ability to create an overview of the entire system and its complexity. As illustrated by Figure 18.4, there are quite a few differences and contradictions to integrate and manage. It can be conceived a transorga-

Administrations of federal provinces

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Legend: Vienna, Lower Austria, Burgenland = federal provinces; Vienna transport = regional public traffic operator; ÖBB, ASFINAG = national public transport operators and data suppliers; VOR = public transport association of the Vienna Region.

Figure 18.4. ITS and its important environments.

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nizational project in many ways: between urban and rural areas; between the policymakers in three different regions and their administrations; between market-oriented high-tech companies and publicly funded research institutions; and between local, regional, and national public traffic services. The project claimed to be a pioneer in technology and had a highly experimental character; at the same time, it had to meet the expectations of customers who wanted a tool that was easy to handle and without mishaps. Even small failures in delivering correct data would undermine the needed trust of the customers. The system, however, required a high level of technical expertise because the core task itself was a highly technical one: to develop a new, intermodal, and dynamic system for traffic management, delivering a complete image of traffic situation as an important tool for the routing service. Therefore the management and consultation of the project had to incorporate content expertise and process expertise, focusing on facilitating the complex process of communication between different organizations, professions, and regions. In the ITS case, the differences and challenges included: • regions with different political goals and affiliations with different political parties; • tensions between innovation and routine—the project brought innovation to forefront of the traffic departments of the different regional administrations with the accompanying challenge of managing readiness for change; • the promise of technology, which was linked to customer expectations of a functioning system without any mishaps; • enthusiastic experts, focused on the technical challenge and the chance to enhance their reputation within their professional community, juxtaposed with the financing public administrations challenge to limit costs; • the reality that the project partners (ÖBB, ASFINAG and Vienna Transport) had their own prominent traffic information services and saw ITS Vienna Region as a competitor; to truly succeed they must see themselves as partners in a cooperative service system; and • national public transport operators with limited interest in adapting to regional solutions. Considering this complexity, external consultancy on a transorganizational project can be very helpful. Support from the outside can be very effective because collaborative projects often require an objective “third party” who can act as a committed advocate for all parties involved. At the

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same time, the initial phase of a collaborative venture requires an authority responsible for shaping processes that are capable of facilitating open and targeted reflection and negotiation processes, with appropriate design and presentation skills. Since consultants do not represent individual network interests, they can more easily function as advocates for the new system and forge meaningful links between the participating organizations. Organizational development professionals would be useful to facilitate the application of both proven and tailored structures and methods in the collaborative system. The special expertise that a consultant brings to the venture can provide proven structures and working methods that can be adapted to the individual situation and special needs of the client. This structure-developing work is a (service) provision, which must be continuously supplied and is often underestimated, both in terms of technical quality requirements as well as concerns about expense. Collaboration consulting is more than just facilitating meetings and supporting negotiations. The role of advisors in networks and cooperative systems extends clearly beyond a moderating approach. Along with supporting the design of appropriate communication and decision-making processes, it also requires impartiality and technical assistance in dealing with difficulties and differences that may arise. Compared to the specific requirements of “inter-organizational relations” processes, consultancy must become familiar with an intervention repertoire that will be more likely to succeed with loosely coupled systems. It has to be emphasized, however, that traditional approaches to consultancy will likely fall short of the demands of a project like ITS. The consultants must be competent in handling two different levels of knowhow—with the ability to effectively integrate content and process expertise. Expertise on the content level has to be combined with the know-how of managing the collaborative process. Conventional consulting usually provides clients with analysis and expert solutions, but neglects the social dynamics in organizations. It also does not involve management and other members. Organization development and other process-orientated consulting approaches are concentrated on the social dynamics between different management levels and other members. They develop solutions together with the client, but frequently do not provide sufficient expertise for the technical problems to be solved. Both approaches reduce complexity, but this reduction is not appropriate to meet the clients’ needs. It is not enough to add them on, by having an expert consultant and a process consultant (“complementary approach”). A new approach is necessary integrating content and social dimensions. While working on content issues with the client, social dynamics should always be observed and be part of the process. Effective consultants not

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only build a strong working relationship with the chief executive officer, but also involve other organization members. They must be able to support their clients in developing and implementing relevant concepts, without taking over managerial roles and decisions.

A CONSULTING MODEL FOR TRANSORGANIZATIONAL VENTURES To meet all these challenges the decision makers at the beginning of the ITS project (e.g., the CEOs in the traffic departments of the provinces involved) utilized a special consultancy model, drawing on using external expertise in two different ways. First, they hired an external expert in traffic and IT who, as mentioned above, had OD education and experience. He had worked in a well known technical consulting company, which had worked for the municipality of Vienna on several projects. He was involved in the concept phase of the project as a technical consultant (starting in 2003). At first the consulting approach was that of “part-time manager” of the ITS project, gradually turning into a full- time job (the contract was only for the time of the project ending 2009). Through his job in this company, he was a technical expert with knowledge about the specific organizational context within the regions involved. Through his knowledge he was an “insider,” but coming from a private enterprise he was “external” to the organizations that created the new collaboration system. Entering the system as the project manager it was clear that he left his external position and became part of the system in a core role. In order not to lose the important resource of an external perspective a second step was taken—within the VIP research project two university institutes were integrated into the project. The Institute for Highway Engineering and Transport Planning from the Technical University of Graz covered the technical and content expertise and the Department of Organizational Development of the University of Klagenfurt contributed through their expertise in organization science. Both institutes had a specific work package in the context of the VIP. The project used a combination of external organizational expertise through a special contract: the consultants worked as observers and researchers who gave feedback to the management (see Figure 18.5). They also documented the process and produced a paper that described and evaluated the process through an OD perspective. There were numerous advantages of this model. First, management coming from outside the involved organizations had the same “distance” to all stakeholders. Second, the project manager combined three different competencies: (1) expertise in traffic management through IT, which was very important in order to manage a large group of technical experts

414 K. SCALA, M. STADLOBER, and H. FIBY

Change of position from outside to inside

Traffic Consulting Company

ITS Vienna Region Project Manager traffic & IT expert MSc in OD

process expertise

Department for OD and Group Dynamics, University of Klagenfurt

Figure 18.5.

content expertise

Institute Institute for Highway Engineering and Transport Planning, Technical University of Graz

A model of transorganizational consulting.

from various organizations; (2) education and experience in process-oriented consulting techniques; and (3) familiarity with the complex organizational contexts in which the traffic was managed in the regions involved. The integration of expertise in content and process in the role of the project manager was very helpful for the success of this project. Third, the external expertise was integrated through a research project. For the client it was important to have scientific support from a renowned university institution specialized in organizational development. Also the funding of scientific expertise could be organized more easily by a consortium of public institutions than for a process consultation initiative. The role of (OD) scientists as consultants differed in some ways from the usual model of process consultants, as the interventions were focused and limited to: (1) observing meetings and sessions of all kinds; (2) giving feedback to the management (project manager, ITSTeam); (3) interviewing different experts and stakeholders within and outside of the project’s system; and (4) producing a report evaluating the project’s organizational structure and process. Finally, the work package of the research project—“Consulting by Expertise in Organization Science”—emphasized the importance of the organizational and process dimension of this type of project. It paid special attention to the process itself—reviews and reflection phases within the meetings were held regularly during the whole project. The paper by

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the OD experts was part of the research report, which captured the knowledge gained for future projects, setting standards for this type of research project. The main disadvantage of this model appears to lie at the end of the project—in essence, who will replace the project manager when his assignment is completed. The solution they found in the ITS project was that the project manager did not return to his home consulting company, but contracted for another three years in the ITS/VOR context. Other solutions would be to hire a trainee for this role with the perspective of a permanent management role when the consultant goes back to his or her company. The key is to ensure sufficient continuity to encourage and support the collaborative spirit that underlies successful interorganizational initiatives.

ACKNOWLEDGMENT The chapter draws from material in Grossmann, Lobnig, Scala, and Stadlober (this volume).

CHAPTER 19

MANAGEMENT CONSULTANT INTERACTION WITH PRIVATE EQUITY The Impact on Growth Development Patterns in Southeastern Europe V. MANEV, Viktor E. TODOROVA, Manev, Elena AND Todorova, M. MANEV and Milen Manev

The chapter is based on the experience of MM Consult, drawing on more than 10 years of operations in the area of corporate finance and management consulting. The underlying assumptions in the discussion are based on MM Consult’s practice and hypotheses about the changing nature of the Southeastern Europe market and its future development. The chapter’s predictions of expected changes in the business models used in this region are drawn from information from major banks and companies with expertise in the field. These projections were developed mainly by MM Consult’s analysis, experience, and industry expertise, and supported by the projections of our colleagues. The chapter is thus built on the knowledge and background of industry experts and professionals.

The Changing Paradigm of Consulting: Adjusting to the Fast-Paced World pp. 417–429 Copyright © 2011 by Information Age Publishing All rights of reproduction in any form reserved.

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CRISIS, UNCERTAINTY, AND MANAGEMENT CONSULTANTS IN SOUTHEASTERN EUROPE In times of crisis and uncertainty, management consultants and private equity (PE) professionals have played a vital role in preserving and increasing value in Southeastern Europe companies. The growth of the economy will be driven by execution, backed by management, and supported by industry knowledge transfer—growth that will require close interaction between management consultants and private equity (PE) funds through the postclosing stage of the investment transaction process. Precrisis Scenario During the precrisis period, corporate growth was mainly driven by PE financial investments within their portfolio companies. Major deals included leveraged buyouts (LBO) and PE funds were not directly involved in the management and operations of their portfolios. Private Equity Funds: Business Model Historically, private equity funds made investments directly into private companies or conducted buyouts of public companies, which resulted in a delisting of public equity. Capital for private equity was raised from retail and institutional investors, and used to fund new technologies, expand working capital within an owned company, make acquisitions, or strengthen the balance sheet. The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an initial public offering or sale to strategic rivals. Prior to the 2008-2009 financial crisis many private equity firms conducted LBOs, where large amounts of debt were issued to fund a large purchase. The companies generally used the funds for investments in the company itself and realization of their expansion plans, financed with the so-called expansion capital. Private equity firms then tried to improve the financial results and prospects of the company, in the hopes of reselling the company to another firm or cash out through an initial public offering (Arnold, 2009a, 2009d). Management Consultancy Firms: Business Model Management consultants help organizations improve their performance, primarily through the analysis of existing business problems and development of plans for improvement. Organizations benefit from man-

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agement consulting though gaining external advice, access to the consultants’ specialized expertise, or temporary project-based help. Management consultants may also provide a range of other services, including organizational change management assistance, developing coaching skills, technology implementation, strategy development, or operational improvement services. Management consultants generally bring their own, proprietary methodologies or frameworks to guide the identification of problems and serve as the basis for recommendations for more effective or efficient ways of performing business tasks. Interaction and Impact on the Growth Patterns in South East Europe PE funds and management consultants play a vital role in the overall transaction process. Management consultants have greater impact on the “preparation” of a company for a transaction as they provide professional advice and guidelines on company performance, plans and future development. They assist their clients with knowledge and specific management expertise in the preinvestment phase (Figure 19.1). During the next stage of the investment process—marketing and negotiation—management consultants have the closest interaction with the PE fund. This stage involves a lot of communication and negotiation between the management consultants, PE funds and company’s management, in order to finalize the deal, execute due diligence, and so forth. The final stage of the investment transaction is the postclosing, where the PE funds manage their investment and implement the business plan. At this stage PE funds add value to the companies’ performance through various management tools, such as financial management improvements, controlling and evaluation procedures, and so forth. The PE professional focuses on the investment in the company, rather than the specific operations of the company itself. For the PE professional, the investment in the company is

Figure 19.1.

The transaction process.

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the key instrument for making a profit and/or achieving the goal. First and foremost the focus is on managing that investment. From this moment on, the PE professional manages the investment and monitors the investee company (Nagtegaal, 1993). In Southeastern Europe (e.g., Bulgaria and Romania) a lot of entrepreneurs began their start-ups during 1991-1992. Since then, except for a period of financial crises in Bulgaria during 1996-1997, the markets were growing, consumption was rising and there was a continuous growth in sales across the sectors. This led to an overall growth of businesses, which boost entrepreneurs’ confidence in continuing doing business with a vision of ongoing growth, increased market share and increased sales. These favorable market conditions did not force both entrepreneurs and PE funds to focus on internal company management, processes optimization, and so forth (Ivanov, 2006). Over the last 5 years, companies were still performing with steady, sometimes double-digit, annual growth without the explicit need for the professional service support of management consultants during the postclosing stages of PE transactions. This was especially true for small- and mid-sized PE deals. Private equity funds were sufficiently confident with these favorable conditions that they felt they could extract additional value through the easily-accessible leverage in their business model, thus creating investment opportunities with high exit multiples. This business model was centered on grabbing market share, powered by cheap capital and abundant liquidity. Delays in target achievement did not hamper overall business plan implementation and the value creation model. The projections, which were made during the planning and preparation stages—the preclosing phase—were often missed. The need to focus on strengthening investee companies’ operational performance, however, was not as crucial as the target of gaining higher market share, which was easily backed by the rapid deployment of cheap capital. This scenario began to change as a lack of liquidity and the resulting tension in the relationship between lending institutions and investee firms forced managers to focus on working capital management and optimization of internal processes and resources. In the prefinancial crisis period, the relative lack of cooperation between PE funds and management consulting companies often resulted in missed operational targets, which were set in the preinvestment business plan. The companies fell short of these goals during the postclosing investment management and monitoring stage. As an example, Boliari EAD was a regional supermarket operator in Bulgaria, with total estimated sales of approximately €21 million in 2003. The company was established in 1994 and it operated three supermarkets under the Piccadilly Supermarkets brand in the city of Varna. It currently operates a number of stores across Bulgaria.

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Figure 19.2.

Boliari EAD—Deal details.

In 2003, Boliari decided to expand its Piccadilly brand to a national retailer, which required the support of growth capital. The project was supported by EBRD (European Bank for Reconstruction and Development) in the summer of 2004, which provided €14.5 million in financing, including loan and equity financing intended to expand Boliari's operations in the cities of Varna and Bourgas, alongside the Black Sea coast, and eventually support the transformation of the company into a national chain. The company, however, consistently missed its preinvestment business plan targets for operational margins, although it outperformed revenues and market share targets, reaching revenues of €110 million in 2007 at the time of the PE investor exit. During the initial investment (20042005) there was a delay in the expansion plan execution, due to tactical delays in strategy implementation. Current Market Overview: Southeastern Europe In the beginning of 2009, Central and Eastern Europe (CEE) experienced the world’s largest negative cash flows. In the Baltic and Southeast-

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ern Europe, 2009 account deficits were running at 10-15% of GDP, while domestic credit had been growing at over 40% annually. This borrowing spree was largely financed in foreign currencies (not just Euros and Swiss Francs, but also U.S. dollars and yens)—and the creditors were major banks in Scandinavia, Austria, Germany, and Italy. The CEE countries were extremely vulnerable to tighter liquidity conditions due to overvalued real exchange rates and much smaller reserves than Asian emerging markets (Emerging Markets Private Equity Association, 2007; Gave, 2009). Banking System and Eastern Europe Borrowings The Eastern European binge was almost exclusively financed by Western European banks. For a banking sector that was already struggling under the weight of exposure to U.S. toxic assets, this was a troublesome situation (Gave, 2009). The bank headquarters were pulling out euros from Southeastern Europe branches, which additionally limited liquidity and increased the value of funds. This decision impacted local branches and they began to call back the installments from the companies. Another problem was that the price of money rose and the banks refused to provide financial support. As illustrated in Figure 19.3, the overall expectation among PE professionals was that the economic climate would continue to decline (92%); only 7% of the PE funds expected it to remain the same. These concerns contributed to a decrease in overall market activity: 80% of PE funds predicted a decrease in activity, 12% expected to have the same level as in 2008, and only 8% of PE funds were positive, expecting an increase in

Source: Central European Private Equity Confidence Survey (Byrne, 2008).

Figure 19.3.

Changes in market activity expectations.

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market activity. These expectations also shape the change in business model of PE funds. Financial Flows At the 2007 peak, Europe was the largest recipient of net financial flows to emerging markets with 40% of total flows, equivalent to 13% of gross domestic product. In 2008, net private flows to emerging countries in Europe declined 35% compared to 2007. The forecast for 2009 was a decline of 90%. Banks are responsible for over 50% of flows, accounting for a significant part of the decline, as banks dramatically reduced their loan book and repatriated profits to Western Europe as financial flows turned negative in 2009 (Butcher, 2009). There was also a swing in expectations regarding debt financing and 78% of PE funds expected to experience decreases in availability of debt financing. The rest believed that in 2009 the availability would remain the same (Byrne, 2008). Global risk aversion reduced the deal flow for private equity companies, virtually eliminating the large end of the buy-out spectrum as well as shunning noncore markets. PE Funds Focus Areas A major piece of the PE value-added investment strategy was multiple arbitrages. Prior to the financial crisis, PE funds were able to enter deals at five to six times EBITDA and then exit at 10 times EBITDA. Investors began to focus on portfolio management (55%) and new investments (42%). PE fundraising has slowed significantly (down 68% from Q1 2008 to Q4 2008) and it is not expected to change in the near-term (Byrne, 2008). In fact, in 2009 only 3% of PE funds said they would focus on raising new funds. The acquisition multiples were expected to decrease in 2009, together with the average size of the deals. The market activity consisted of mid to small deals with low level of leverage. Leverage significantly declined, requiring more equity infusions. Moreover, confidence in PE’s ability to generate superior returns was strongly challenged in the current environment. We expect to see cross-border industry consolidations in 2010 (Arnold, 2009b).

CHANGING BUSINESS MODELS These broad changes had repercussions for the business models of both private equity funds and management consultants. The new business models reflect the changes in the overall economy, the performance of the portfolio companies, and the new growth approach.

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The Private Equity Fund Business Model After the collapse of the LBO model operation of PE funds, the latter began to look their core model of operation. The “new” success formula is, once again, expected to be a combination of growth capital and venture capital. However, value is now seen to be created by developing companies’ strengths rather than through multiple arbitrages. The PE funds are changing their value creation approach, thus moving closer to a hands-on management of their portfolio companies (Arnold, 2009c). In order to successfully manage their portfolios, the funds will require more sector expertise and operational management knowledge. We project that only those companies with dedicated management in these fields will bring superior value to their shareholders—and the financial crises will literally take out underperforming firms. As part of our research and practical experience, we identified two key areas of concern: knowledge management and company execution. Knowledge Management In our interviews, fund managers expressed their view that at times they did not have sufficient specific industry and sector expertise. The external environment has changed, which requires flexibility and at least adaptation to the new economy. Only proactive companies will achieve growth, and the active ones will survive the crisis. PE funds are also using external expertise and advice from management consultants. There is a need for the development of new growth and survival plans and their subsequent execution. These plans should be created by the management of the company, with the support of external and specialized consultants and the strict monitoring from the PE fund. It is also viewed as extremely positive to have external independent directors who are industry experts to support the company’s growth, which is perceived to stabilize the PE fund’s portfolio. Thus, the way to improve a company is now based on an improvement of its operations and procedures. This happens though a change management plan, lead by talented management teams who are able to provide knowledge and expertise to the management and the teams within the company. Based on a deep analysis, a remodeling of the company’s operations should happen, in order to improve its competitive position in the current market, linked with strong execution. Execution The major focus of the PE funds is to review and improve management operations in their current portfolio companies. We project that board members will have a more active role and should be deeply involved in

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the management of the company. The PE fund will also have to make sure they have a closer observation of how a company is managed, with a focus on its internal processes and operations. The PE fund will have to strictly monitor the plan, regularly revise the deliverables and keep the management accountable for the results achieved. A major issue in the current state of the economy is cash generation and its availability. The management should focus on cost optimization, cash flow management and servicing the company’s liabilities. We project that this will probably be the toughest task for managers due to the lack of bank financing combined with an overall decrease of consumption and sales (down with 25-30% from the previous year). Managers in Southeastern European companies are not in favor of linking their payments with the performance of the company. Thus, there should be a clear definition of expected deliverables, which should be prepared with the support of external experts and controlled by the shareholders. One of the most important aspects of execution is speed. We see a dynamic market, which literally changes every day. In such an environment companies simply do not have the luxury to postpone the execution of the plan.

The Management Consulting Business Model Management consultancy companies provide their clients with professional advice on improving their overall business performance. Through deep analysis and understanding of the nature of the business, management consultants develop strategies for growth, improving processes and operations, creating solutions for specific problems, and so forth. In times of crisis, management consultants tend to focus their efforts on long-term relations with their clients. We believe that a change in the business model is required and management consulting firms should build their revenue structure on a performance-based approach rather than the traditional retainer-based approach. This means that they need to take higher risk, and be paid on delivery of specific results. However, this should be very clearly defined, managed and monitored effectively. Knowledge Transfer The role of the consultants is to add value to their clients’ business by providing skills and expertise for the company’s management. Consultants should bring in knowledge that is currently missing and/or highly needed during tough times. Consultants also should focus on providing services for a limited period of time, transferring that knowledge to their clients through teaching and facilitation. The expected result is that the

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client should be able to manage its business after a period of advisory work without the support of the management consultancy company. Consultants are increasingly sought today for advice and expertise on the operational level, working very closely with the management of the company. Major fields of development include cash-flow management, working capital management, operations optimization, and creation of survival (and then growth) strategies. We see as major areas of consulting: (1) transferring specific industry knowledge; (2) operational knowledge (working capital, liabilities, cash flow, etc.); and (3) distress situational management. Execution We project that in 2010, the companies in Southeastern Europe will focus on survival rather than growth strategies. The growth plans are projected to be implemented until 2011 at the earliest. Management consultants do not have control over the execution of a company’s plan. In fact, it is a common investment practice in Western Europe to attract external, independent professionals as board members, representing PE funds in their investee companies. We also have an early example of this happening in Southeastern Europe. The role of the management consultants, serving as board members, with specific knowledge transfer activities, could be mandated by PE investors. Being part of the board, management consultants would have greater control over the plan execution, directly impacting the company’s performance. In this case, their role would not be limited to providing advice and skill, but also focused on the overall growth development of the company: on an operational level, focusing on processes and resources management, as well as a strategic vision for growth. The financial crises of 2008-2009 rapidly changed the economic conditions for PE funds, management consultants and entrepreneurs, which all have to adapt to the new environment. PE funds should focus their efforts on execution through strict monitoring over their portfolio companies (Economist Intelligence Unit, 2008). The fund should set clear targets and measurable goals towards the management of the companies—although this is something that entrepreneurs generally want to avoid. Another issue that emerged during the precrisis period was the lack of a clear accountability system. All parties must have clear and measurable deliverables that are expected from them, and that performance should be measured and evaluated. PE funds will need to implement a hands-on approach towards their current portfolio. However, they tend to be limited with respect to their knowledge capacity to support these companies, especially considering the broad spectrum of

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