Leading in a Time of Change

  THE DRUCKER FOUNDATION

  LEADING IN A TIME OF CHANGE

  A CONVERSATION WITH

  INTRODUCTION BY FRANCES HESSELBEIN

  ABOUT THE DRUCKER FOUNDATION V

  ABOUT THE SPEAKERS vii

  INTRODUCTION ix

  Frances Hesselbein

  SECTION ONE LEADERSHIP PRACTICES AND EXERCISES 1

  1. ANTICIPATING AND WELCOMING CHANGE 3

  WORKSHEET 1 Anticipating Change 4

  2. IDENTIFYING MENTAL MODELS 5

  WORKSHEET 2 Examining Mental Models 6

  3. CREATING RECEPTIVITY TO CHANGE THROUGH SYSTEMATIC 7 PLANNED ABANDONMENT

  WORKSHEET 3A Anticipating Change Through Planned Abandonment 9

  WORKSHEET 3B Planned Abandonment II 10

  4. INNOVATION VERSUS PROBLEM SOLVING: ORGANIZED IMPROVEMENT 11

  WORKSHEET 4 Seeing Change as an Opportunity 14

  5. WELCOMING AND EXPLOITING UNEXPECTED OPPORTUNITIES 17

  WORKSHEET 5 Identifying Opportunities and Risks 19

  6. LINKING OPPORTUNITIES TO PEOPLE AND OTHER RESOURCES 21

  WORKSHEET 6 Linking Opportunities to People and Resources 22

  7. PRESERVING TRUST: CONTINUITY WITHIN CHANGE 23

  WORKSHEET 7 Preserving Trust in Organizations: Organizational Values in 24 the Midst of Change

  8. MOTIVATING AND RETAINING TOP PERFORMERS: ATTITUDES 25 ABOUT PEOPLE IN ORGANIZATIONS

  WORKSHEET 8 Attitudes About People 27

  9. CONCLUSION 29

  WORKSHEET 9 Updating Attitudes About Change 30

  SECTION TWO VIDEO HIGHLIGHTS 31

  SECTION THREE SUGGESTED READINGS 43

  ABOUT THE DRUCKER FOUNDATION

  The Peter F. Drucker Foundation for Nonprofit Management, founded in 1990, takes its name and inspiration from the acknowledged father of modern management. By providing educational opportunities and resources, the foundation furthers its mission to lead social sector organizations toward excellence in performance."

  The Drucker Foundation believes that a healthy society requires three vital sectors: a public sector of effective governments; a private sector of effective businesses; and a social sector of effective community organizations. The mission of the social sector and its organizations is to change lives. It accomplishes this mission by addressing the needs of the spirit, mind, and body of individuals, the community, and society. This sector also provides a significant sphere of effective and responsible citizenship.

  In the ten years after its inception, the Drucker Foundation, among other things:

  • Presented the Drucker Innovation Award, which each year generates several hundred applications from local community enterprises; many applicants work in fields where results are difficult to achieve.

  • Worked with social sector leaders through the Frances Hesselbein Community Innovation Fellows program.

  • Held over twenty conferences in the United States and in countries around the world.

  • Developed seven books: a Self-Assessment Tool (revised 1998) for nonprofit organizations; three books in the Drucker Foundation Futures Series, The Leader of the Future (1996), The Organization of the Future (1997), and The Community of the Future (1998); Leader to Leader (1999); Leading Beyond the Walls (1999); and The Collaboration Challenge (2000).

  • Developed Leader to Leader, a quarterly journal for leaders from all three sectors.

  • Established a Web site (drucker.org) that shares articles on leadership and management and examples of nonprofit innovation with hundreds of thousands of visitors each year.

  To realize its vision for the next ten years, the Drucker Foundation will bring together the best leadership and management voices from across the world with a focus on providing social sector organizations with the ideas and tools that enable them to better serve their customers and communities.

  For more information, contact:

  ABOUT THE SPEAKERS

  PETER F. DRUCKER has been a teacher, writer, and adviser for more than fifty years. He is recognized worldwide as the "father of modern management" and has consulted with large and small businesses, nonprofit organizations, federal agencies, and free-world governments. He has been an editorial columnist for the Wall Street Journal and a frequent contributor to the Harvard Business Review and other publications. He is the author of thirty-one books dealing with management, society, economics, and politics, which have sold more than six million copies and have been translated into more than twenty languages. His writings, which the Harvard Business Review calls "landmarks of the managerial profession," describe management of the modern organization and the changing society. His most recent book, Management Challenges for the TwentyFirst Century (1999), presents his thinking on leading change.

  A professor of management at the Graduate Business School of New York University for twenty years, Dr. Drucker is now honorary chairman of the Peter F. Drucker Foundation for Nonprofit Management and is Clarke Professor of Social Science and Management at the Claremont Graduate University in Claremont, California. He was educated in Austria and England and has a doctorate in public and international law as well as honorary doctorates from universities around the world.

  PETER M. SENGE is a senior lecturer at the Massachusetts Institute of Technology and is chairman of the Society for Organizational Learning, a global community of corporations, researchers, and consultants dedicated to the "interdependent development of people and their institutions." He is the author of The Fifth Discipline: The Art and Practice of the Learning Organization (1990), which was identified by the Harvard Business Review as one of the five most influential management books of the past two decades. He is coauthor of The Fifth Discipline Fieldbook (1994), The Dance of Change (1999), and Schools That Learn (2000).

  In addition to his work as a consultant, Dr. Senge has lectured throughout the world, translating the abstract ideas of systems theory into tools for better understanding of economic and organizational change. He received a B.S. in engineering from Stanford University, and an M.S. in social systems modeling and a Ph.D. in management from MIT.

  FRANCES HESSELBEIN is chairman of the board of governors of the Peter F. Drucker Foundation for Nonprofit Management and is a member of the boards of other organizations and corporations. She is the former chief executive of the Girl Scouts of the U.S.A. She is the lead editor of the Drucker Foundation's best-selling books, including The Leader of the Future (1996), The Organization of the Future (1997), The Community of the Future (1998), and Leading Beyond the Walls (1999), published by Jossey-Bass. She also serves as editor-in-chief of the journal Leader to Leader. She speaks on leadership and management to audiences around the world in the private, nonprofit, and governmental sectors. She has received fourteen honorary doctorates and was awarded the Presidential Medal of Freedom, the United States of America's highest civilian honor, in 1998.

  MANY OF US don't welcome change. It's more comfortable to do things the way we've always done them, and change often is perceived as a threat. But change has always been a reality of life and is even more so today. The challenge before all leaders-whether they guide nonprofit organizations, government agencies, businesses, or other types of organizations-is the transformation of their organizations at this time of massive, historic change.

  In this video package, two of the most influential thinkers of our time, Dr. Peter Drucker and Dr. Peter Senge, explore the challenges of leadership and change. The subject is how to be a leader of change. These two brilliant, original thinkers explore a range of ideas and focus on several essential practices that will help you lead change successfully. An ideal tool for executive retreats, management training, and personal leadership development, this
remarkable dialogue offers insight into many issues:

  • The discipline of planned abandonment-why you need to phase out established products and services

  • The need to focus on and invest in opportunities rather than problems

  • How to employ windows of opportunity, such as unexpected successes, and match them to the people and other resources in your organization

  • Why preserving institutional values and trust is a key to successful change

  • What organizations need to learn about attracting and motivating highperforming workers

  The leaders of this conversation are true pioneers in thought. In the late summer of 1999, they got together at Peter Drucker's home in Claremont, California, to explore how leaders can prepare themselves to guide their organizations through the inevitable changes that lie ahead. No question is more fundamental to the success of our business and social institutions today.

  This package contains supplemental information on innovation and change, as well as exercises that will help you explore the leadership issues related to these two topics. Whether you use this package for self-development, in a management group, or in a formal training setting, you will find a host of ideas, exercises, and areas to explore that will help you lead your organization to the opportunities found in the necessary changes ahead.

  LEADERSHIP PRACTICES

  AND EXERCISES

  THIS SECTION SUMMARIZES the major points from the conversation between Peter Drucker and Peter Senge and provides additional information as well as exercises for further exploration of the topics. If you are using this package for self-development, we recommend that you complete the worksheet exercises in this section soon after you view the videotape and then follow up by discussing the content with your organizational peers.

  If you are viewing the video with a group of people from your organization, we suggest that you explore the worksheet topics in conversation as well as individually. You may wish to complete your worksheets individually and then discuss them within the total group, or you may wish to complete the worksheets collaboratively in subgroups of four or five individuals each.

  If you are viewing the video as part of a program led by a facilitator, you will be asked to complete pertinent worksheets and conduct discussions in a manner that is most appropriate for your group.

  Each of the discussions and worksheets is designed to introduce you to the concepts and practices suggested by Peter Drucker and Peter Senge and to familiarize you with the recommended steps in welcoming and implementing organizational change. Each organization has its own unique characteristics, and these worksheets represent an attempt to address these characteristics in generic terms, to be widely applicable. You may complete them as best you can in regard to your organization or you may alter the worksheets to better fit your particular organization. When you are familiar with the content, you will be able to create more specific worksheets that reflect your organization and its change issues. You can then ask appropriate individuals within your organization (from senior management to a range of employees representing all levels) to fill out selected worksheets. Their answers and insights can provide you with information you can use in making strategic decisions and in planning and implementing changes within your organization more effectively in the future.

  Anticipating and Welcoming Change

  Although many people accept that change is unavoidable, they still view it negatively. However, experience proves that the most successful people and organizations are those that welcome change as an opportunity and know how to work with it. Peter Senge predicts that the next ten or twenty years will bring even more change than the last ten or twenty years. Understanding the forces at play will be essential.

  Peter Drucker says that every organization will have to become a change leader. He says, "You can't manage change. You can only be ahead of it. You can only meet it."

  This video program is designed to help you think about and plan how you can welcome and deal with change more successfully.

  Effective change leaders:

  1. Institute policies to make the present create the future (planned abandonment).

  2. Provide systematic methods to look for and anticipate change (organized improvement).

  3. Know the right ways to introduce change, inside and outside their organizations (exploit opportunities).

  4. Balance change and continuity (preserve trust).

  5. Motivate and retain top performers and create a positive change mind-set among employees.

  Each of these topics will be discussed in detail in this program.

  ANTICIPATING CHANGE

  Identifying Mental Models

  In the video, the topic of mental models comes after planned abandonment. In print, however, it serves as a useful introduction to discuss mental models first.

  Peter Senge points out that the weight of maintaining old strategies and practices holds you back from innovating. This is because we have "mental models" of how we do things, and we haven't thought of other ways to do them. It is extremely difficult in many organizations to challenge these ingrained assumptions.

  EXAMINING MENTAL MODELS

  Creating Receptivity to Change Through

  Systematic Planned Abandonment

  Peter Drucker stresses the need to make change, not just manage it. The best way to do this is to build organized abandonment into the system. This means freeing resources from being committed to what no longer contributes to performance or produces results-or will soon stop contributing.

  He says that, on a regular schedule, every organization should sit down and look at every product and every service and every policy and say, "If we didn't do this already, knowing what we now do, would we still do it?" The following are some critical areas to examine:

  • Products

  • Services

  • Processes (for example, production processes)

  • Policies (for example, personnel policies)

  • Training and development

  • Use of information

  • Markets

  • Marketing strategies

  • Distributors

  • Distribution channels

  • Customers

  • End users

  • Service technology

  If the answer to the key question is no in regard to anything, it is time to do something differently.

  Timing

  Peter Senge and Peter Drucker agree that most organizations don't abandon early enough. Peter Senge says that the time to abandon a product, service, or policy is much earlier than when it begins to cause problems. Peter Drucker adds that the time to get rid of a product is not when it no longer produces but when somebody says it still has five good years to go. As a rule, it is time to abandon when any of the following conditions apply:

  • The product, service, market, process, or whatever "still has a few good years of life." Don't tie up resources keeping it alive.

  • Its greatest virtue is that it is 'fully written off." Over time, the costs of an asset may disappear for tax purposes, but maintaining the product or service still entails costs everywhere else in the organization. The question is not "What does it cost?" but "What does it produce?"

  • An old and declining product, service, market, or process is being maintained at the expense of new and growing products, services, markets, or processes. For example, to its detriment, General Motors attempted to bolster the declining Oldsmobile and Buick markets rather than put its resources into the successful new Saturn market.

  The whole organization need not be examined at the same time. For example, you can employ a rotation scheme, in which the focus is on one area of the organization each month. In this manner, you can examine the entire organization in one, two, or three years.

  ANTICIPATING CHANGE THROUGH

  PLANNED ABANDONMENT

  PLANNED ABANDONMENT II

  Innovation Versus Problem Solving:

  Organi
zed Improvement

  Peter Senge points out that there is a difference between innovation and problem solving. He says that we grow up thinking that life is about solving problems and getting the correct answers. Many organizations are so dominated by a focus on problem solving, it undermines their ability to be flexible and innovative.

  Peter Drucker adds that most organizations squelch creativity and that a willingness to experiment, to try things out, is very important. He says that we have to infuse the entire organization with the mind-set that change is an opportunity and not a threat. That takes hard work. It means encouraging employees to look for changes that can be exploited as opportunities for different products, businesses, processes, and services.

  Systematic innovation and improvement is a purposeful, organized search for changes and a systematic analysis of the opportunities such changes might offer for innovation. Generally, these are changes that have already occurred or are under way. The overwhelming majority of successful innovations exploit change. The key words about opportunity are search for it, organize for it, and manage so that you can exploit it.

  In Innovation and Entrepreneurship (1985) and throughout much of his work, Peter Drucker describes several sources to monitor for innovative opportunity. The first four sources are within the industry or service sector and are basically symptoms of change. They are

  1. Unexpected successes, failures, and outside events. This is the easiest arena to explore and offers the richest opportunities for innovation. Look at other uses of a product, side markets, and unexpected successes and failures of competitors. When something unexpected occurs, analyze it, then look for the possibilities. Report your findings widely in the organization so that others can explore these opportunities.