Friday, July 15, 2016

The Change Paradox

It was time for a change.

ATM machines had just been invented, but many of the customers were suspicious. I was a bank teller in need of more hours, and volunteered for the job. It was hot - summer in Davis California. So I wore just some cutoff shorts and the "Versateller" sandwich sign as I walked around the bank. The point was to draw people's attention and then explain how the machine worked. The old people crossed the street to stay away from me, wondering why I was wearing so little. The young people were amused, but did not need a lesson. Had I not been so ineffective, you could have said I was working myself out of a job.

It is striking how hard it is to make change happen. And then, once a change takes hold we cannot imagine life any other way - like the ATM machine. But some things are more changeable than others, and this causes problems if you're a leader.

For instance, change was on the agenda when Tracy O’Rourke took over as CEO at Varian Associates back in the 1990s. Varian was one of the original iconic firms of the Silicon Valley, featuring a college-like culture that attracted some of the world’s greatest technical talent.  The Varian patent portfolio was unparalleled, and they gave the world some impressive innovations like radar and the x-ray machine. But by the time O’Rourke took over, the company was out of step with its markets. Tracy acted fast, laying off thousands within a few weeks, restructuring the organization, and establishing new product development and quality systems. None of these changes was trivial, but O’Rourke succeeded by targeting only those things he could change rapidly: staffing, structure, routines, and the like. Given how much we value change, one way to be effective is to target those things that can be changed most easily.

By contrast, some changes are difficult and slow. Consider, for example, how difficult it is to establish a company’s reputation in Japan. A company’s status matters in all cultures, and it matters even more in Japan. But in Japan especially it takes ages to be seen as high-status. This fact is frustrating for many firms who want to enter Japan, since they need to be seen as top-notch if they want to hire the best talent and attract good customers. Many firms take a look at this obstacle and avoid entering Japan at all. But there are exceptions. Many decades ago, IBM made the decision to enter Japan, even if it took time to build up a top reputation there. They stuck to it; ultimately it took over 30 years before IBM was seen as an “A” player among Japanese engineers. 30 years! That means that some IBM managers spent their entire careers trying to break into the Japanese elite, and retired with the job still not done. No wonder you and I avoid such difficult obstacles, preferring instead to change that which can more easily be changed.

So here is the rub. When the next leader comes along after you, what will she try to change?  Odds are, like you, the next leader will also look to change those things that can be changed. But those will be precisely the things that you changed yesterday. So it was that, within a few years of his departure, most of Tracy O’Rourke’s changes at Varian were changed again – and in fact the company was split up and many of its parts sold off. This is the change paradox:  We and our successors change what can be changed, each undoing the work of the one before him. We feel accomplished at the moment of change, but so does the person who comes along tomorrow and undoes all of our work. Ironically, though we all feel we have made a difference, if we go back in a year or two we may see no sign of our efforts.

The lesson? Change those things that are most difficult to change. This will take time, and may fail entirely. But if you succeed – like IBM taking a lifetime to break into Japan – you will have created something permanent; something that the next generation of leaders cannot undo. Better to work at setting one thing right forever, than to easily set many things right temporarily.

The academic work on this topic was triggered by Michael Hannan and John Freeman's seminal 1984 paper.