Internal difficulties, e.g. during complex transformation programs, are a major dilemma within large companies and businesses. While German insolvency law, for example, recognizes three specific instances for initiating insolvency proceedings, the inner workings of organizations are de facto unregulated. Nothing is more acquiescent than a colorful PowerPoint explaining why everything’s fine despite the fact that significant or even massive problems have been bubbling under the surface for a long time. In contrast with the consequences of insolvency law¹, managers may at worst be confronted with a termination of contract when it comes to what goes on within a company.
Four different organizational conditions can be identified, all requiring completely different approaches: explosion, implosion, collapse or standstill. These conditions are actually all already end products. Which condition your company may find itself in depends primarily on your organization’s culture. Let’s take a look at the four conditions in more detail:
Primarily extroverted, very passionate cultures that have subjected themselves to a social assimilation over the years. Things often bubble under the surface and conflicts are palpable, maybe even visible, but have been covered up from above for a while. Once this suppressed energy can no longer be kept in check, the conflicts suddenly boil over.
In contrast to an explosion, when inner pressure explodes outwards, implosions happen through a high level of external pressure impacting the system. These cultures are characterized by significant social assimilation i.e. a few top-level agents² dictate what happens and have usually led the people within the organization with strict rules and regulations to ensure little room for maneuver over many years.
Out of the 4 conditions, this one is the rarer. These cultures seem to work in many ways. Managers and teams feel very comfortable and returns are primarily sufficient so that, although things might seem to change over many years, nothing really substantial ever happens. Then this almost sham system begins to fall in on itself. This could happen very suddenly (business model suddenly doesn’t work anymore) or the collapse may take years e.g. if a parent company makes further cash flow available.
This category is generally home to the biggest fans of the status quo. The whole culture is characterized primarily by any really important change being successfully prevented over many years. Just as in sport, e.g. football, top-level management or the board is changed up but this does not result in the desired change in the medium term let alone the long term.
Standstill, change, decision
Why is categorization using E I C S so helpful?
Each desired change requires a special energy and momentum below the official targets. In our experience, the E type offers the best opportunity for change. Here, there is a lot of energy in the system. You just have to turn this existing energy into effective fields of momentum.
This is harder within the I category. You have two challenging thematic landscapes: on one hand, a clearly socially assimilated culture with standard paths and then just a few top-level agents (managers) that dictate this system.
Things are even more challenging and lengthy with C type situations. It’s clear that you first need to take a long, hard look in the mirror to see the truth. Even here, transformation programs give you a major opportunity to awaken and shape new energies and momentum that could push the company in a new direction.
The S category generally requires a similar level of energy and perseverance. One of the greatest challenges here is to find a motivational basis in order to give the people in the organization a new, motivating goal. In extreme cases, the goal could also be simply to achieve a new status quo, in which the “new normal” can be maintained for a certain time.
A very good initial analysis is therefore essential to ensure that the right screws are tightened and that your transformation program is led down the right path from the very beginning. The good news is that the end stage of each condition can be prevented, and the ship of change can set sail again without heading into an uncontrollable storm.
¹ If the Managing Director or the board fails to initiate proceedings in good time, they could face fines or even jail.
² We at HMC use the term “highest agent” to describe a person or a certain group recognized by most people as the highest level of the hierarchy. In a business, the highest agent is usually the board.