MGT 5391: Session

1
MGT 5391 Session 8Organizational
Re-structuring and Renewal Strategies
2
Critical Organizational Question
Why Do Executives Fail?

• Planning, Strategies, Ideas for Innovation,
  Vision
• Direction, Business Models, Etc. (Input side
  of OST)
• Or
• Execution/Implementation of effective
  Structures,
• Systems and Processes (Transformation side of
  OST)

3
KEY ORGANIZATIONAL ADJUSTMENT STRATEGIES
Adjustment Type Rankings
Scale Values

• 1. Decision making more decentralized
• strategic control remains global 58
• Technology ( IT/Telecom, Web-based technologies,
• etc.) also as an internal driver of
  globalization through
• real-time interaction 51
• 3. Organization structures are flattening focus
  on
• entrepreneurship 49
• 4. Regional integration necessitates corporate
  presence
• in all major markets 43
• 5. Economic liberalization fuels offshore
  investment 43

Scale values were determined by multiplying the
likelihood of an event or issue with its impact
on international Organization, based on
individual responses. The result was then
standardized on a scale ranging from 1-100
4
Six Common Factors as to Why Organizations are
Successful Global Competitors

• Close ties/direct and formalized partnerships
  with customers
• (internal and external).

• Close ties/direct and formalized partnerships
  with vendors/suppliers
• (reduction in number and certification).
• Integrated and simultaneous efforts to improve
  quality, cost, delivery and
• speed (product development) to the
  marketplace.

4. Greater functional (staff and support units)
integration (decentralization) and less
stratification (centralization).

• Integration of technology into manufacturing and
  marketing strategies
• linked to continuous organizational
  improvements that promotes
• teamwork (teams), training and continuous
  learning.

6. Create a broad learning environment that
emphasizes training and re-training,
coaching and development (job, team, pass-offs,
internal customer and supply-chain linkages)
an Organizational University.
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
5
Inputs
Outputs
TRANSFORMATION
Environmental Drivers
Results From High Performance / Exemplar
Organizations

1. External/ Global Business Environment
THE ORGANIZATION DESIGN PUZZLE
HIGH PERFORMANCE LEARNING ORGANIZATION
1. Macro Organizational Structures
Organizational Effectiveness
2.Internal Environment
8. Shared Leadership Decision Making Systems
A.Corporate, Business, Worksite And Individual
Capabilities And Barriers (Culture)
Interdependence and Design FIT
1. Customers 2. Financial/ Business 3.
Employees 4. Organizational Innovation
5. Societal
2. The Job/work
7. Recognition and Financial Reward Systems

3. Technologies
6. People and Human Resource Systems
4. Information and Knowledge Systems
B.Vision Direction (VDSP)

5. Micro Organization Structures Team Design
C. Organizational Strategies
D. Business Models
Organizational Processes (Individual, Group,
Organizational and Business Processes (Total
Quality, Business Processes, etc.)
E. Labor (Employee) Management Mutuality
(Feedback)
Figure 1. High performing organizations Overall
open systems model of critical components
F. Transformation/ Change Processes
________________ Source Modified from Macy, et
al., (1995). Presented to the National Academy
of Management, Vancouver, Canada, August.
6
OST TRANSFORMATION Categories - 1
MACRO STRUCTURE
1. CORPORATE Office 2. S.B.U. (Global and
Regional) 3. Value Chain Demand and
Supply sides 4. Business/Product Teams 5.
Enterprise Teams Concepts Coordination/interfac
e Communication Power Control (Decision
Making)- Redistribution of Power Control
Reporting Capabilities Conflict
Complexity Information Centralization Span
of Control Division of Labor Vertical and/or
Horizontal Structure Others
Todays Focus
Todays Focus
7
Organization Design Terms

• STRUCTURES
• - The formal patterns of relationships between
  units, groups and people.
• - The way tasks, skills, and people are arranged
  to do work
• within and across units, SBUs LOBs within
  organizations.

- Interaction and communication among people
and the various units of the
organization to solve problems, make decisions,
or communicate information.
- Specifically defined sequence of
steps, activities or operational
methods. - Things that put order, control, and
predictability within and across
organizations (vertically and horizontally). -
Formal procedures, policies and practices
(applications of social, physical or software
technologies) that enable the performance of work.

• PROCESSES

• SYSTEMS

Barry A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA.
(forthcoming)
8
Organization Structure is about - Power and
Control and the Re-distribution of Power and
Control (Less Layers -fewer chiefs) -
Decision Making at the Lowest appropriate level
9
Traditional Organization Environment
Communications
Decision Making
Boundaries of the System
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
10
Organization Structure is about - Effective
Communication - Effective Coordination -
Speed/Responsiveness to the Customer (both
internal external) - Empowerment
throughout the organization
11
Restructure Definition
A step-wise change in the power and control
(i.e., the hierarch, umber of levels/layers,
reward/punishment systems) systems in an
organization. Most organizations go through a
re-structuring effort evry five yers! (but little
changes. Why??
12
Renewal Definition
An incremental change made to organizational
and/or team structure and design (make better
what already exists)
13
There is no silver bullet when it comes to
creating a corporate structure. There is not
one ideal form of organization, and the best
advice I give to people is that they should relax
and stop searching
____________________________ Source B.A. Macy,
Successful Strategic Change, Berrett-Koehler
Publishers, San Francisco, CA (forthcoming)
14
The Star Model The Design Fit Issues - 1

• Major Drivers of High Performance
• 1. Commercial/Customer Changes
• 2. Technological Changes
• Organizational Changes
• Team/Individual

Strategies
Systems
Organization Structures - Macro - Micro
People
Vision Direction Setting
Processes
Rewards
15

• Organization Structure is about
• Being Responsive to Your Customers/Markets
• Networking across units
• - Power and Control and the Re-
• distribution of Power and Control (Less
• Layers fewer chiefs)
• - Vertical and Horizontal communication
• and coordination
• - Decision Making at the
• Lowest appropriate level
• Speed/Innovation
• Learning and information sharing across units

16
TTU Benchmarking Results Typical Hierarchical
Levels in Organizations

• EXAMPLES How many levels?
• GM Levels 19
• Toyota 6
• Typical Fortune
• 200 Organization 11

CEO/ Presidents Senior Management Middle Manage
ment 1st 2nd Line Supervisors Profession
Staff Support Hourly
17
Benchmarking the Good to Excellent Fortune 200
Hierarchy
Span of Control
of Levels
CEO
120 - 22
(1) (2) (3-6) (7-11)
Executive Company VP
110 - 12
11 Total Levels
Global/Regional S.B.U. President
112-15 (4 Levels)
Product Supply Director
115-20 (4 Levels
18
Four Elements for Structural Design
Hierarchical Groupings
Structural Linking Mechanisms
Formal Processes and Systems
Informal Organizations
19
The Six Types of Organization Designs
Entire Global Organizational Design
1. 2. 3.a 4.a 4.b
Strategic Organization Unit (S.B.U.) Design
Supply-Chain/ Product Supply Alignment
Market Focus Alignment
3.b
Value Chain
Site Macro Design
Revised 7/1/99
Organization Center Design
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
20
5 Types of Changes in Macro STRUCTURES

• Corporate Office/G.O.
• S.B.U./G.B.U.
• Value Chain (Supply and Demand Sides)
• Business Centers Business Teams and Product
  Teams
• Enterprise Teams Customer,Channel or Product

Fewer Layers/Levels
TALL/FLAT
B.A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
21
The Four Main Questions of Horizontal Design
Alignment
Corporate Design
Strategic Business Unit (S.B.U./ G.B.U. Design
Supply-Chain/ Product Supply Alignment
Demand/Chain
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
22
The Typical Five Different Types Organization
Structures in Exemplar Organizations (N102
North America Organizations)
Corporate Office
1.
Macro Business Level
S.B.U.s/GBUs
2.
Value-Chain Design
Business Teams
3.
1, 2, 3, 4, 5
Product Teams
4.
Supply Side
Demand Side
Customer Account Teams (Enterprise Teams)
5.
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
23
21ST CENTURY ORGANIZATIONAL STRUCTURE DESIGN
BLOCKS To Deliver Business Results
Corporation Organization Global Strategic
Business Unit (S.B.U.) Market Focus/Demand Side
Alignment Enterprise Teams (Customer, Product,
Channel, and Process Supply Side Alignment to
Manufacturing Business Centers - Lines of
Business (Process Product Supply
Mini-Businesses) SDWTs to Work
Teams Individuals
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
24
PG Multi-International Consumer Products Firm
Current Structure
Consumer Teams (30) External
Relations Teams (6)
7 Global Teams Customer Business Teams (130)
GBU
Corporate
Key Customers/ Trade
GBS
Consumers
Office
Top Management
Govt.
Core Functions
25
Eastman Chemical Company Matrix Design
Container Plastics
Fiber Products
Product Support Services
Organic Chemical Synthesis Technology
Industrial Business Group Group Vice President
Industrial Intermediates
Specialty Packaging Plastics
Castings Inks and Resins
Flexible Plastics
Specialty Business Group Group Vice President
Core Competency Teams
Polymer Technology
Fine Chemicals
Performance Plastics
Cellulose Technology
Fibers
Site Management
Nutrition Formulation Products
Customer Interface
Europe, Middle East Africa
Polymer Modifiers
Chairman CEO
Information Management
Innovation
Regional Support Services Team
Asia Pacific
Quality
Legal
Supply Distribution
Latin America
Developing Business
Administration and Staff
North America
Strategic Planning
Europe Middle East
Worldwide Business Support Sr. Vice President
Financial Information Services
Worldwide Sales Team
Inter- national Business Dev.
Asia Pacific Lat.. Amer..
Functional Management Executive Vice President
TED/Opr. HDC
Technical Services
Human Resource Comm. Pub.
Special Assignment Southeast Asia
Prop. Mgt.
TEX
Research Development and Technical Service Team
Manu. Facturing Team
CED
Develop- ment
Health Safety Env.
ARK
Research
26
Value Chain
Back
Front
Core Technologies
Market (Customer)
Develop
Design
Conceive
Support
Sales
Market
Procedure
Distribute
27
Value Chain of Wal-Mart
Information/ Finance/Supplier/ Development
Suppliers
Distribution
Consumers
Retail Stores
Wal-Mart
28
Wal-Mart Value Chain Structure
Video Link
Financing
Wal-Mart Headquarters
Organizational Learning
Supplier Payment
Retail Stores
Consumers
Point-of-Sale data
Satellite Communications
Communications Support
Point-of-Sale data
Communications
Suppliers
Distribution Centers
29
Dell Value-Chain
Suppliers
Product Supply
Expertise Centers
Mfg.
Corporate Services
Centers of Competency
Various Business Systems
Customers
Consumers
30
Dells Fast-Cycle Segmentation
Large customers
Small customers (Business and consumer)
In 1994, Dell was a 3.5 billion company
In 1996, 7.8 billion
Large companies
Midsize companies
Government and education
Small customers
In 1999, 18 billion
Consumers
Small companies
Education
State and local
Federal
Midsize companies
Large companies
Global enterprise accounts
31
The CENTERLESS CORPORATION The Real World
Global Core
PEOPLE
KNOWLEDGE
Smaller Corporate Hub
Business Units (S.B.U.s/ Lines of
Business/ Markets/Products)
Power/Control Governance
Centralized Services Group
Source Booz-Allen Hamilton
COHERENCE
32
Nike Another Type of Differentiated
Network (everything outside Nike HQ is outsourced)
Product Design
Product Distribution
Nike Headquarters (Broker)
Product Manufacturing
Advertising
Accounts Receivable
33
ABB (Simplified Structure)-1
CEO (Percv Bamevik) (previous CEO Thought up
this structure)
Executive Committee
Power Transformers
Robots
Power Generation
47 Other Business Areas
Germany
U.S.A
National Companies
Norway
137 Other National Companies
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
34
ABB Four Types of Organization Structures - 2
Corporate Office
A
(Very Small)
B
3 Regions and 4 Businesses Areas (BAs)
Regions-National Companies
1
2
3
1 2 3
1 2 3 4
1
Global Business Areas
2
Corporate Structures
Tight/Clear Accountability/Responsibility
Through a Single Financial Performance
Measurement System
3
4
C
Company Presidents
Local Country Companies and Many Profit Center
Structures
(some are also Country Managers) - 1 or 2 levels
5,000 Profit Centers (lead by Profit Center
Managers 3 levels to lowest person)
D
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
35
Examples of Decentralization (D) and
Centralization (C)

• Sales Marketing (C)
• Process Development (D)
• Process Engineering (D)
• RD (CD)
• Customer Service (D)
• General Manager/V.P. (C)
• Value-Chain/Supply Chain (C-to SBU)
• Lab/Quality (D)
• HR (D)
• Engineering/Maintenance (D)
• IS/Product Acct./SHE/Training (CD)

B.A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
36
The Question of Centralization and
Decentralization
Design Fit
Centralized
De-Centralized
Not either Centralized or De-Centralized,
but design fit (what is best for the business)
B.A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
37
Twenty-five Trends in Organizational Design at
the Firm and S.B.U. Levels
1
Creation of Separate Companies from S.B.U.s
(sell stock)
2
Corporate Office (significantly smaller)
3
Joint Ventures
4
Development of Shared Vision Direction Core
Values, Philosophies, Principles, etc.
Global S.B.U.s (4 levels - average 16 ) and
Global Business Services
5
6
Some Centralization - Great De-Centralization
10
7
Larger Span of Control (132)
8
Top to Top on-going Relationships from Firm
Leadership to key Customer Leadership
Distributed IT Systems (Supplier- Organization- Cu
stomer) (SAP/EDI/ Consilient E-Commerce)
Creation of E-Learning Systems between Suppliers,
the Firm (all employees) and Customers
9
11
Creation of Dot.coms (going outside - separate
company) - Entrepreneurial Design
12
Creation of S.B.U. Dot.coms (coming inside)
Innovative Changes Structures, Systems, and
Processes
Total Value Chain Organizational Design Demand
Side and Product Supply
13
14
Global Customer Enterprise Teams (Mini-Business
with P/L Responsibility)
Regional Customer Enterprise Teams (Mini-Business
with P/L Responsibility)
15
Other Types of Aligned Enterprise Teams (Product,
Channel, or Process)
16
Teams at ALL Levels
17
Targeted Selection Assessment, Selection and
Hiring System
18
Both Horizontal and Vertical Systems and Processes
19
Integrative Learning/Coaching/Training and Career
Development Systems
20
Innovative and Multiple Pay Systems Profit
Sharing and Stock Options
21
Structural Change
Simple Innovative Business/People/Customer
Measurement Systems
22
Co-Location of Leadership / Key Members
23
Widespread Information and Knowledge Sharing
Access and Usage
24
Direct Employee Involvement with Organization
Design and Redesign
25
B. A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
38
Why Organizational Renewal / Re-invention/Re-struc
turing
Inadequate Financial Control
Uncontrollable Costs Or Too High Costs
Over-expansion or Too Rapid Growth
Poor Management
Slow or No Response To Significant External Or
Internal Changes
New Competitors
Unpredicted Shifts In Consumer Demand
39
Portfolio Analysis
High (faster than the economy as a whole)
Industry Growth Rate (in constant sales dollars)
Low (slower than the economy as a whole)
40
Characteristics of Cash Hogs

• Internal cash flows are inadequate to fully fund
  needs for working capital and new capital
  investment
• Parent company has to continually pump in capital
  to feed the hog
• Strategic options
• Aggressively invest in attractive cash hogs
• Divest cash hogs lacking long-term potential

41
Characteristics of Cash Cows

• Generate cash surpluses over and above what is
  needed to sustain present market position
• Such businesses are valuable because surplus cash
  can be used to
• Pay corporate dividends
• Finance new acquisitions
• Invest in promising cash hogs
• Strategic objectives
• Fortify and defend present market position
• Keep the business healthy

42
Notes of Caution Why Diversification Efforts can
Fail

• Transferring resource capabilities to new
  businesses can be far more arduous and expensive
  than expected
• Trying to replicate a firms success in one
  business and hitting a second home run in a new
  business is easier said than done
• Management can misjudge difficulty of overcoming
  resource strengths of rivals it will face in a
  new business

43
Retrenchment

• Diversification efforts have become too broad
• Lack of resources or skill to support operating
  and investment needs of all businesses
• Misfits (or poorly performing businesses) cannot
  be completely avoided
• Unfavorable changes in industry attractiveness
• Diversification may lack compatibility of values
  essential to cultural fit

44
Options for Accomplishing Retrenchment

• Spin it off as independent company
• Involves deciding whether to retain partial
  ownership or forego any ownership interest
• Sell it
• Involves finding a company which views the
  business as a good deal and good fit
• Leveraged buy out
• Involves selling business to the managers who
  have been running it for a minimal equity down
  payment and loaning balance of purchase price to
  new owners

45
Corporate Turnaround Strategies (Downsizing)

• Objectives
• Restore money-losing business to profitability
  rather than divest them
• Get whole firm back in the back by curing
  problems of ailing businesses in portfolio
• Most appropriate where
• Reasons for poor performance are short-term
• Ailing businesses are in attractive industries
• Divesting money-losers doesnt make long-term
  strategic sense

46
Types of Strategic Change

• Mergers and Acquisitions
• Re-engineering Process
• Design
• Software Development
• Installation
• Business Expansion
  
• Culture Change
  
• All

• Strategy Deployment
• Restructuring and
• Downsizing
• Technology Change
• Mixed Collection of
• Change Efforts
• TQM-driven Change

One or more reports did not state the sample size
47
Figure 1. Summary of Organizational Change Effort
Type of Strategic Change Number of
Sum of Sample Median
Studies Size
Success Rate
Strategy Deployment
3 562
58 Restructuring and Downsizing
9 4,830
46 Technology Change
5 1,406
40 Mixed Collection of Change
Efforts 1 23
39 TQM-driven Change
5
863 37 Mergers and
Acquisitions 9
395
33 Re-engineering and Process Design
7 3,442
30 Software Development and Installation
6
31,480
26 Business Expansion
1 200
20 Culture Change
3 225
19 All
49
43,426 33
One or more reports did not state the sample size
48
Figure 2. Strategy Development
Source Sample
Method Success Rate
Conference Board study (Troy, 1994)
166 US European companies
Survey about experience with organizational change
58 reported success in changing corporate
strategy
Nut, 1999
50 of decisions fail, as indicated by whether
the decision was put to use
Executives and Middle managers in 356 medium to
large organizations in the United States
and Canada
Interviews
Aspesi Vardham (1999)
40 companies that pursue sound strategies
Case studies describing strategy implementation
60 delivered excellent results, defined as top
quartile shareholder returns.
49
Figure 3.1 Restructuring and Downsizing
Source Sample
Method Success Rate
The Economist (1989) (Tomasko, 1993)
135 companies that attempted massive restructure
Not described
Less than 50 achieved significant increases in
their value relative to their competition
Cameron et al (1991) Tomasko, 1993)
30 companies in the automotive industry
4 year study
White-collar productivity improved little and
admin costs remained far above global competitors
Bennett (1991) (Tomasko, 1993)
100 actuarial companies that downsized
Survey
Improvements reported productivity (22), cash
flow (25), decision making speed (15) customer
satis- faction (10) product quality (10)Use
of technology (10) competitive advantage (19)
Firms that down-sized (sample not described)
1993 AMA survey (Mabert Schmenner, 1997)
Survey
50 increased operating profits, 36
increased worker productivity, 2.4
increased moral.
50
Figure 3.2 Restructuring and Downsizing
Source Sample
Method Success Rate
1995 AMA Survey (Mabert Schmenner, 1997)
Firms that down-sized (sample not described)
51 increased operating profits, 34
increased worker productivity, 2
increased moral.
Survey
1192 large and mid- size firms.
Survey on US workforce trends
51 reported increased share- holder value.
49 increased operating profit over the survey
period.
1999 AMA Workforce Survey (AMA, 1999)
Wall Street Journal (Laabs, 1999)
Companies that downsized (number not specified)
Not described
Only 33 of the firms had stock prices that were
at least at the average for their industries two
years after the downsizing.
Wyatt Associates (Appellbaum et al., 1999)
1,005 firms that downsized 1986-1991
Not described
46 reduced expenses, 32 increased profits, 22
improved pro- ductivity, 17 reduced bureaucracy.
Society for HR Management (Appelbaum et al., 1999)
1,468 firms that down- sized
Not described
Less than 50 reported that productivity
improved.
51
Figure 4 Technology Change
Source Sample
Method Success Rate
Survey about experience with organizational
change
20 reported success in changing info technology
Conference Board study (Troy, 1994)
166 US and European companies
The Business Research Group (Computerworld, 1994)
305 information systems managers
Survey (no details)
50 reported cost savings for new versus
replaced client/server systems
Standish Group (Williamson, 1997)
Not described
Not described
Only 10 of SAP projects are completed on time.
Conference Board and Price Waterhouse LLP
(Stedman, 1998)
50 companies
Survey
Less than 40 were successful in imple- menting
data ware- housing. Behind schedule 44..
On hold 14. Cost over- runs 20
Survey sponsored by MERIT (Dryden, 1998)
886 information Systems managers
Survey
54 of ERP applications had no outages that
caused significant revenue loss or loss of
potential customers.
52
Figure 5. Mixed Collection of Change Efforts
Source Sample
Method Success Rate
23 major international companies
Survey
Executives in 39 of the companies judged change
to be completely successful
Templeton (MCB University Press, Ltd., 1997)
53
Figure 6 TQM Driven Change
Source Sample
Method Success Rate
141 European and Japanese Companies in
automotive supply industry
Companies scored on process quality and
design quality
38 of the companies designated in top two
categories, identified as Prevention and
Perfection
McKinsey survey (Rommel et al., 1994)
Conference Board (1991) (Carr, Hard, Trahant,
1996)
133 companies trying to institute total
quality management
Satisfaction survey about TQM implementation
29 rated satisfaction with progress as high or
very high
Prabhu et al. (2000)
294 manufacturing companies in the United Kingdom
Survey of business practices and results versus
world-class standards
37 of TQM companies have achieved world- class
or potential-winner status
Huq Martin (2000)
7 hospitals attempting to Implement TQM.
Case studies that documented TQM implementation
process.
14 successfully implemented TQM based on
researchers ratings of case reports.
Casadesus Gimenez (2000)
288 Spanish companies
In-depth study, descriptive analysis, cluster
analysis.
65 of the companies obtained very high levels of
internal (e.g., management control) and
external benefits, e.g., market share)
54
Figure 7 Mergers and Acquisitions
Source Sample
Method
Success Rate
Earnings before and after merger market share
return vs. capital expense stock price
operational efficiencies
Estimates of success ranged from 25 - 33.
Mirvis Marks (1992) cite 10 studies to support
their Estimate of the success rate
Most samples not described
80 earned their cost of capital. Acquirers
averaged more than 18 per year in total
return to share-holders over 10-year period
Studied 21 companies that made 829 acquisitions.
Analysis of financial performance ranging up to
ten years.
Anslinger Copeland (1986)
Sirower (Drake Beam and Morin, 1999)
Not described
Not described
Only 30 of mergers achieved anticipated value.
KPMG report (The Economist (US), 2000)
Sample not described
Not described
Only 16 of mergers added shareholder value.
More than half destroyed shareholder value
one-third made no difference.
72 mergers in financial services industry across
19 countries.
Anderson Consulting report (Dinkin, 2000)
Analysis of financials from one year before to
two years after the merger
33 of the merger companies were designated as
MA value capturersbased on return on equity
and revenue growth.
70 said their deals fully achieved revenue and
market penetration goals but 40 failed to
realize anticipated savings
Pricewaterhouse Coopers survey (Doucet, 2000)
125 companies worldwide
Survey (details not described)
Conference Board survey (LI Business News, 2000)
HR managers in 134 companies that had a merger
since 1990.
Respondents rated their experience with mergers
since 1990.
67 consider merger to be very successful or
successful
Arthur Anderson survey (Ryan, 2000)
43 executives in 31 companies in communications,
media
Survey (detail not described)
37 without significant problems. 63 said that
MAs caused a variety of negative impacts
ACG Network study (Cheung, 2000)
Not described
Survey (detail not described)
Only 30 met expectations of architects
55
Figure 8 Re-engineering and Process Design
Source Sample
Method Success Rate
350 executives involved in business re-engineering
Interviews
16 fully satisfied with results. 68 said
that projects had unintended negative side
effects
A.D. Little survey (Caldwell, 1994)
Conference Board Study (Troy, 1994)
166 US and European companies
Survey about experience with organizational
change
27 reported success in changing
business systems/processes
Institute of Management Accountants
(Computer- World, 1994)
2,200 members of the institutes
Controllers Council
Survey (details not described)
25 said they were satisfied with their companys
re- engineering efforts.
Hall et al. (1994)
2o projects in different companies
Detailed analysis, but few details given.
Only six companies (30) achieved an average of
18 reduction in business-unit costs
Strebel (1996)
Practitioners of radical corporate reengineering
in Fortune 1000 companies. Number not given.
Not described
Success rates are well below 50 - as low as 20
in some companies
CSC Index, Inc. survey (Tenner DeToro, 1997)
600 large firms in North America and Europe.
Survey (details not described)
Companies pursuing cost reductions met their
goals. 75 of those pursuing cycle time
reductions and productivity increases achieved
their goals
Schultz Eierman (1997)
106 companies with at least 1000 employees.
Usable returns were less than 10 of initial
mailing
Mail survey
57 classified their re-engineering efforts as
successful
56
Figure 9 Software Development and Installation
Source Sample
Method Success Rate
500 information technology Project managers
Survey
Only 24 reported no major project failures.
Suquent Computer Systems, Inc. (Moad, 1998)
The Standish Group (1995) and Johnson (2000)
8380 software projects Described by 365 of
Information technology executives
1994 Survey supplemented with personal and
focus group interviews
16 are fully success- ful in terms of
time, budget and with the promised features
and functionalities
The Standish Group (Johnson, 2000)
Approximately 7500 soft- ware projects
Survey in 1996
27 are fully success- ful in terms of
time, budget and with the promised features
and functionalities
26 are fully successful in terms of time,
budget and with the promised features
and Functionalities.
The Standish Group (Johnson, 2000)
Approximately 7500 software projects
Survey in 1998
The Standish Group (Johnson, 2000)
Survey in 2000
28 are fully success- ful in terms of
time, budget and with the promised features and
functionalities
Approximately 7500 software projects
Only 33 can be classified as success in terms of
value creation, cost-effective- ness, tangible
financial impact, and goal attainment.
Boston Consulting Group (Booker, 2000 Hayes,
2000)
100 users of enterprise software projects
over previous three years
Interviews
57
Figure 10 Business Expansion
Source Sample
Method Success Rate
Worldwide sample of 200 pharmaceutical companies
Survey about drug discovery, development, and
production practices
20 were identified as most innovative based
on product introductions and sales
Puhlman, Gouy
Figure 11 Cultural Change
Source Sample
Method Success Rate
166 US European companies
Survey about experience with organizational change
33 reported success in changing vision, values,
and culture
Conference Board study (Troy, 1994)
Study not described
Study not described
Only 10 of corporation that attempted to
change management styles were successful
in institutionalizing the new style
Bennis (Carr, Hard, Trahant, 1996)
Smith Mourier (2000)
59 North American managers who described a
culture change
Survey about the factors affecting the success
of organizational change
19 of the culture change efforts were rated
among the top quartile of successful organizationa
l change efforts
58
Figure 12 Success Rates Over Time
Success
59
Figure 13 Success Rates by Type of Measure
Ratings (n11) Project (n 13) Operations (n
13) Management (n 4) Customer (n
2) Enterprise (n 16) Owner (n 7)
0 10 20
30 40 50
60
Figure 14. Sample Measures of Organization Change
Category Sample Measures
Ratings of Overall Success
Satisfaction with change, stakeholder
expectations met
Implementation scored against world-class
standards, project completed on time, on budget,
with promised features unanticipated negative
consequences.
Project Management
Operations Performance
Cost reduction, cycle time reduction,
productivity gain, product/service quality, rate
of product introductions, rate of technology
deployment, employee morale improvement.
Control, speed of decision-making, reduced layers
of bureaucracy
Management Behavior
Customer satisfaction, sales
Customer
Enterprise Performance
Earnings, ROE, revenue growth/loss, operating
profit, market share/penetration, competitive
edge, customer loss, cash flow, stock price.
Shareholder value (dividends plus stock
appreciation)
Owner
61
Figure 1. Summary of Organizational Change Effort
Type of Strategic Change Number of
Sum of Sample Median
Studies Size
Success Rate
Strategy Deployment
3 562
58 Restructuring and Downsizing
9 4,830
46 Technology Change
5 1,406
40 Mixed Collection of Change
Efforts 1 23
39 TQM-driven Change
5
863 37 Mergers and
Acquisitions 9
395
33 Re-engineering and Process Design
7 3,442
30 Software Development and Installation
6
31,480
26 Business Expansion
1 200
20 Culture Change
3 225
19 All
49
43,426 33
One or more reports did not state the sample size