ORGANIZATION and EXECUTIVE DEVELOPMENT

in
CENTRAL EUROPE
1998

Steven J. Kelly and M. Mari Novak

Partners, KNO Worldwide

The question that was posed to us, Partners with KNO Worldwide, was
to comment on the status and usefulness of Organization Development (OD)
as a tool to improve productivity and effect change in Central European
countries. It made us stop and think.

In assessing OD’s use and effectiveness here, supplemented by our recent

research study on what has succeeded in Czech and Slovak firms, several
observations were made. We believe these are significant. We suggest there is
reason to consider the approach your firm uses, how you spend time and
money. The implications should force all executives to shift the nature of
their job, using a new way of thinking.

OD should be both preventive maintenance and resolution of problems that

block people from being able to perform their jobs. OD addresses any and all
‘people’ and communication processes. These, for example, include job
analysis, work flow analysis, organizational structures, communications
systems, etc. It is the critical complementary tool when there are large scale
changes such as new market entries, mergers or acquisition, automation
enhancements or large scale layoffs. And of course, privatization in
transitional market economies.

Our observations have come slowly enough. Over at least the past 15 years
there have been increasing calls for managers to develop a ‘new way of
thinking’. Businesses have suffered from the difficulty of stuffing the current
demands of markets, workteams, competitiveness, and technologies into the
same old organization package. In reality, our structural approach hasn’t
changed much in decades, and fundamentally not for centuries. The latest
vogue responses to these demands have been certification and standardization
programs as ISO 9000 and TQM. Although these programs have helped raise
quality and team issues, they have not addressed the underlying mismatch.

What observations have been so significant, and why haven’t they surfaced
until now? What is the mismatch? Why do executives from the leading
global companies keep crying out for help to apply a ‘new way of thinking’?
What has been put forward that is useful and qualifies as ‘new thinking’?

The short answer to this issue is that we have been taught to perceive an
organization mechanistically, as a system. The entire body of organizational
theory is based on -- and all academically trained human resource

Organization and Executive Development in Central Europe 1998 1

© KNO Worldwide, 1998
development professionals have been trained in -- systems theory. Our
assumption was probably wrong in the early 1900s. It has increasingly been
wrong dealing with ‘knowledge workers’ and ‘learning organizations’. These
terms describe the evolving response of organizations -- their Human
Resources strategy -- to compete successfully in the changing marketplace.

The conceptualization using Systems Theory has enveloped our thinking

about companies, people, success. The aspects are noted here: The system
establishes a normative approach, and that norm is mechanistic.

The situation we are dealing with now in Central Europe is that there are no
norms. Further, to quote the Sears’ CEO Arthur Martinez, “a hallmark of
great companies is an ability to recognize the game has changed and to
adapt.” The ‘game’ , here in Central Europe, has changed!

In addition, we know from all assessment of venture capital and business

development success that business opportunities are most rich when there are
changing circumstances. With chaos, confusion, inconsistencies; with
technological lags or leaps, with knowledge gaps; therein lies business
opportunity. Clearly those of us operating in the Central and Eastern
European sphere acknowledge and utilize this.

Instead of a normative and mechanistic organization, with the executive team

utilizing this base for dependable, longterm growth; a new reality, a new
game is being played. The socio-economic context is changing, but at varying
speeds, resulting in a multimodal situation across the region, and even within
each country. Since there is no recent experience with standard, effective
forms of market economy structures, executives teams are evolving their
own. Since there is no model for successful transition from a planned to a
market economy, companies are evolving their own.
The job of developing and implementing corporate policies, strategies,
logistics, and tactics is delivered on the basis of trial-and-error, intuition,
coaching, and in some cases executive education.

A new way of utilizing organizations is operating here. Executive teams are

doing what they need to do, based on their knowledge and perceptions. OD
should be the tool that assists this situation. OD practitioners have needed to
adjust their conception and reorient their perspective.

The new norms and the new realities have shifted the perspective, but not
radically. But still enough to rethink how we manage organizations. To
extract a quote from a Fortune magazine “Letter to the Editor” by William L.
Miller, VP of Research and Business Development at Steelcase, a producer of
office furniture and equipment, “As we shift to a knowledge economy,
management principles must change...business needs to make way for the
future of knowledge work and adapt processes and measurements
accordingly.”

Organization and Executive Development in Central Europe 1998 2

© KNO Worldwide, 1998
 Shifting Perspectives

The immediate needs of managers, and those OD projects which have been
utilized in this first phase, have been to stave off the burdens imposed by the
old system and the deficit situation of a startup. These two demands create a
period of vulnerability. It is during this transitional, hazardous interim in
which the executive team has ‘cut their teeth’ creating a practical human
resource policy.

The use and concept of the organization that executive teams in Central
Europe have utilized is different. The organization has been conceived more
organically. This has derived from the requirements to deal with so many
issues of change and information exchange, very personal contact. The rules
of that conception begin to indicate what this means in terms of the
manager‘s job.

The executive and management team need to know from whence they start:
what is the status quo. There is no possibility of continuing the status quo
into the future: that just does not happen in organisms. Things change. And
we know that we are operating in a changing evironment.

So the “future status quo” is not a possible state. Either an organization is

progressing or degenerating. Organizations naturally dissemble. This is called
entropy. This happens by the very nature of life. Some familiar examples, we
had a process, we solve a problem with a policy that cannot take into account
every possibility; and therefore, rigidity sets in. This is the very nature of
organisms, and the reason we do ”Spring Cleaning”, and the reason there is a
profession called “Organization Development”. The burdens of the planned
economy in terms of regulation, employees’ mindset, privatized company
policies, productivity, values; the debt incurred in a startup, turnaround, or
market entry situation; all pull the dynamic of the organization down. The
job of the executive team is to level that negative direction and pull it up to
the positive results.

This has been grasped by those managers who have been successful in
Central Europe. In fact, the perception and realization of the job of the
executive has been defined and indicates a shift from the traditional OD
practitioners’ approach and Systems Theory.

It is a recognition of a need to perform in a paradox. At a superficial level we

have been dealing with Crisis Management. What we are faced with is a basic
dynamic of organizational management that focuses on the need to balance
conflicting, critical or competing demands.

Organization and Executive Development in Central Europe 1998 3

© KNO Worldwide, 1998
The executives report that their job is to find the balance point in each step,
for example, between:

• telling vs. listening

• control vs. involvement/participation
• trust vs. proof
• employees vs. clients
• quality vs. regularity, productivity
• authority, as the boss vs. asking

It is at this critical point (not crisis) that the executive focuses energy. The
interesting physical fact, is that no point is ever crossed twice. It just does not
occur in nature. That was part of the normative model: it is not part of the
new way of thinking.

Now we have gotten away from the systems model and toward a first step in
the new way of thinking about organizations: dynamic equilibrium. The job
of the executive then is to handle that critical point in the best way possible.
There are two halves to that job.

Dynamic Equilibrium

The first is the ‘coming to the point’. If dynamic equilibrium is the flow of
work, then being able to roughly predict or understand the nature of the point,
and then ready the organization to cross it as smoothly as possible and to the
benefit of the organization -- that is the new executive role. This opens up the
management toolkit or repertoire of skills. In some ways these skills and
understanding are already in the kit. The shift is significant but not radical.

The second half of job is the denouement or resolution. How do you now
disperse the energies, people, organization of the team gathered to respond to
the critical point? What are the ramifications of the actions that have been
taken? Where are we now, and we begin to gather our resources to prepare
for the next critical point?

There are probably several critical points happening, but I am speaking at the
executive level. The diagram that captures this organization is no longer the
systems model, but the shifting ellipses.

Natural Organizational Dynamic

This, you will remember, is not a radical shift in the perception of the
organization and the job of the management team. It has not resulted in a
sweeping change in the way OD can or is used. It is a subtle shift that
changes the perspective enough to have altered our way of thinking.

Organization and Executive Development in Central Europe 1998 4

© KNO Worldwide, 1998
There are skill sets and job requirements, then, that are already in that tool
kit:

• Problem solving
• Change Management
• Conflict resolution

But to conceive of this from the old perspective is only to see a crisis
management mode, within the normative framework of what an organization
should be: a self-correcting perpetual motion machine. What we would like to
propose is a new way of thinking.

The initial phrase that we are using to describe this transition in the way to
think about an organization is “Ad Hoc Management”. A new way of
perceiving results in a new way of thinking about managing the organization.
Therefore, of course you must evolve your way of addressing organizational
blockages.

Six elements of Ad Hoc Managment will be identified, so that we can begin

to understand the shift in perspective and thinking for the executive and when
addressing organizational blockages. These are:

• Skill sets/balance
• Function and Form
• Synthesis
• Trusting what you do not understand/Abscence of loyalty
• Organizational Policy
• Strategic Planning

The helpful triangle of Skill Sets has skewed the executive role in the
direction of communication skills, while lessening the attention and use of
technical skills. This balance will be even more skewed as the technical and
“knowledge workers” become more specialized and a larger percentage of
staff. However, the real challenge is that basic business skills have changed.
Organizations that are managed as Dynamic Equilibrium organisms, demand
different -- and subtle -- perceptions of the group. That changes the basic
rules.

Organization and Executive Development in Central Europe 1998 5

© KNO Worldwide, 1998
management /communications

technical/professional

basic business skills

Skill Sets

The phrase ‘form follows function’ as an axiom has been accepted as a given,
even outside of its original architectural application. In human affairs, the
form is the stronger. Once set function follows. That is the reality in
organizational charts. So as water finds its level amidst the rocky forms, so do
functions evolve. This is the single biggest reason to restructure. It is also the
‘natural law’ the dictates not to set an organization in a bound copy of the
company’s structure. The shifting dynamics will need new forms.
Old forms will inhibit productive functions.

The single biggest demand on the role of the executive will be flexibility.
The teams and experts working in the organization have technical information
and perspectives that must be synthesized. Only an executive who can bend
to see, understand, and integrate perspectives will survive.

The dynamics of organization, the realities of transition, the demands of

global companies shake the premises of the concept of Employee Loyalty. On
the flipside, you have the need to trust -- if for no other reason -- technical
knowledge and opinions that you are not conversant in.

The way we use, think about, and develop organizational policies is a direct
outcome of perceiving the organization as a self-correcting system, our
mechanistic model. The balance between ‘no rules’ and ‘a rule for every
possibility’ must be made, to the comfort level of the executive and the
usefulness to the organization’s productivity.

The strategic plan is simplified by responding to this new way of perceiving

an organization. The ellipse demands ‘readiness’. Are the skills, capacity,
and organization of the business ‘ready’ to take on the next critical situation?
Have you developed capability to handle, for example, a new market entry, a
new ad campaign, a new client; or an overhaul of the employees’ mindset to a
free market.

Organization and Executive Development in Central Europe 1998 6

© KNO Worldwide, 1998
The alternative theoretical framework is that an organization should be
understood as being organic. The dynamic within an organization is not a
self-correcting mechanism using internal and external feedback, but a
balancing of competitive, critical points. The resolution of each point or
issue evolves the organization: you never are at the same point twice. Laid
on top of the dynamic equilibrium is -- not a repetitive cycle -- but a
spiralling system. If you are not getting better, you are getting worse!

The immediate impact of this ‘new way of thinking’ should alter your
priorities for your staff. There is, then, no perfect organization. Any -- every
-- structure is temporary. So don’t cast those charts in stone: you have to
shuffle workflow and responsibilities often. You have to evolve your way of
doing business, constantly.

Secondly, the key to executive success lies in anticipating the critical point --
and preparing for it in the best way. That is half the job. The second, equally
important, part is to resolve the results and ramifications from having crossed
that point. |This is the hardest part. Multifaceted: everything from
redeployment to restructuring to encouraging some down time for exhausted
staff.

The Human Resource job can be simply stated; that person is responsible for
the readiness of the organization. Do you have the people capable of taking
on the next challenge? That can be the next day of operations, or a new
market entry. A new client, or a new production process. Readiness,
perceived in this new way, redefines your measures of effectiveness, your
success. It also matches what is important with what is real. Instead of
ignoring your ‘people processes’ because you think they are set you must
face the fact they are constantly being redefined, and will continually be so.

Organization and Executive Development in Central Europe 1998 7

© KNO Worldwide, 1998