Empirical Backing of the theory
Case Study 1 - Family Business without Succession – The theory is illustrated by using it to create models and by testing the veracity of those models. In the following consulting projects a model was created to decide on the First concrete and sustainable step (F) as suggested by the Formula for Change.
Case Study in Corporate Governance: The main local newspaper of Brasilia, CORREIO BRAZILIENSE, writes on the 17th of October 2002, (the original text in Portuguese)
“VENÂNCIO Brothers are in open war over the control of VENÂNCIO 2000 and VENÂNCIO 3000 Shopping complexes. The eldest brother JOSÉ NICODEMOS VENÂNCIO charges criminally his other two brothers because of R$ 1.4 million withdrawal. He calls for injunction for improper uses of companies resources. “This conduct is prejudicial to business” says the son of NICODEMOS, NICODEMOS junior.”
Here we are faced with a traditional real estate and construction business of R$ 200 million worth of assets (US $100 million) in 1988. The main property includes three 12-story buildings and one 6 story building with over 350 shops and underground garages for over 1200 cars, and over 1200 commercial suits. All this wealth has been accumulated by their deceased father for over 30 years. After four (4) years of Mr. VENÂNCIO’S death, brothers still fight in justice. The consultant is offered the responsibility of taking over as the administrative and financial manger of the group.
For the first 30 years, since the formation of the city of Brasilia some 80 years ago, the family business was considered as the biggest construction firm in the Federal District. However as the company has not followed the technological changes, in the last few years it has constantly been losing opportunities to the point of being forced to shrink its operations. Mr. VENÂNCIO was a man from Rio de Janeiro but with many business connections. Even though he had not even finished the secondary school, according to the press, he succeeded in becoming a millionaire as he was a visionary. His first wife died of impaired health, and he was already a rich man by then, he married for a second and a third time having a couple of children from each of these partners. His children being from three different mothers, some being brought up in Europe and some accustomed to a very simple life, and this fact causing cultural shock between his offspring made the issue still more complex. The business lost more than 50% of its assets in five or six years after Mr. VENÂNCIO’S death. Due to family conflict and resulting uncertainty many companies and banks were reluctant to do business with them. The reform of VENÂNCIO Shopping had to stop through court order as other brothers not in powers disagreed with the reform.
At the time the business was run by their father, there was little independent advice from auditors or consultants on issues related to finance or running of the business. The Administrative Financial Manager characterizes the family business as follows:
1) No clear will or testament and no defined succession; 2) No independent board of directors; 3) Little or no business ethics; 4) Little or no Corporate or Individual Accountability; 5) No fair Senior Executive Remuneration scheme in place; 6) The business had no prior experience in involving consultants.
The newly contracted administrative financial manger, initially observed that the business could only survive if it could be helped to take the first concrete steps in a radical cultural change! This was nothing short of a positive cycle of cooperation, exactly opposite to what was happening: Each brother was seeking advantageous information against the other in order to gain control of the business. To resolve this dilemma there was an urgent need for a mutual resolve to initiate a series of informal and formal meetings for mediation. It was also necessary to arrive at a unified vision for innovation and reform with the objective of serving the existing and future clients, so that the business could enjoy the necessary minimum competitiveness in the market.
In this case, UTOE was used as a Theory to spot the areas that were more affected by the deployment of organisational energy. The theory was also used to create models for re-contextualisation of value system. UTOE as a theory, not only describes as to how a cluster of processes and cycles interact and eventually stabilize into a harmonised state but also provides guidelines for diagnosis, and thus providing for means for a necessary requirement analysis in order to design models that help us to increase the chances of success and sustainability of organisational processes, events and their respective products.
UTOE Model for “F” of the Change Formula - In complex processes such as the consulting case cited above, the consultant would need to work on two critical lines at the same time: One is to create mechanisms that slow down the destructive forces inflicted by the existing conflict, namely, the legal proceedings, misrepresentation and distortion of information, inconsistent Business Intelligence and feelings of deception and fraudulence on the one hand and creation of grounds for negotiation, cooperation, integrity, tolerance, prudence, unity of vision and action on the other.
Firstly in order to create the UTOE Model, it was necessary to agree on a set of leadership virtues or a set of business values that is acceptable to both parties and could be gradually implemented. These were values that needed to be concurrently implemented to guarantee the resumption of radical technological reforms to serve the customer base which was constantly interrupted in the past through frequent shift of power amongst the VENÂNCIO brothers.
During the first 6 months of administration, the objective was to pave the way for an imminent 180 degree change in values. During this period to prove the impartiality of the mediator, his ability to resolve complex and conflicting issues, his competence to make rapid and necessary changes to help the business to avoid further losses was the dominant factor. Using the model for diagnosis through direct and indirect interviewing it was found that the following set of values needed to be gradually introduced if the family business was to have any chances of survival. These were high values such as acceptance, cooperation, courage, empathy, fairness (justice), friendship, humour, integrity, loyalty, non-resistance, openness, patience and prudence. But in practice the brothers in power were more reluctant to uphold these values in their leadership style than those who were fighting in justice to regain power.
Using the theory and its model it was necessary to move to a lower level - the emotional layer. Here information obtained by direct and indirect interviewing was used to identify the principal cycles involved in the process of change and the cycles that had been left open (1st principle). Then the emotional discrepancies and similarities of leadership styles (2nd principle) were registered and mapped and based on the historical analysis of this information, with the aid of independent auditors the findings were reported to the directors.
Due to high risks in changes of leadership style characterised by constant disruptions (4th principle), a special focus was drawn on convergent and overlapping interests! The emotional framework, the 3rd layer of the theory, needed to be created to operate on a multi-style leadership platform. For example it was found that leaders have totally different priorities in allocation of resources and in general and the way they would run the business. Some believed that the whole group should have an integrated information system controlled by the boards; others believed that there should be a decentralised leadership with some shopping centres in the hands of certain directors. Using the fifth principle, seeking a unified vision and a strategy with goal-directed value system, their attention was drawn to the customer welfare which in turn was intended to maximize their earnings. Using the 5th principle a series of policy documents were produced in an attempt to unify the groups’ policies on customer relationship and their supplier chain (5th principle). A highly effective integrated system, supported by a real-time daily cash flow analysis connected directly to the banks, also attracted the interest of all parties (6th principle, the multi-functioning).
The implementation of the 7th principle, sharing information, was extremely difficult. The difficulty was twofold: Firstly the directors constantly questioned as to who should be the target personnel that could be considered reliable to receive the new Business Intelligence. Secondly there was no consensus as to the kind of information that should be passed on to them? This was due to high turnover of the personnel, the rate of hires and fires at the shift of power (directors) and the level of confidence that could be placed on these personnel in not leaking information to the directors who were not in power. And this factor was quite disruptive and jeopardise the sustainability of business processes.
The implementation of the 8th principle was equally difficult. It was extremely difficult to balance the resources between the application of the principles: For example to perform data analysis or planning the 3rd principle (positioning ) on data collected and reported by other directors ( the 2nd principle), to allocate resources for possible future interruptions (4th principle) or to set long term plans and priorities for urgently needed change. There was a constant threat by other brothers to accuse the ones in power of not gaining their consent in doing any large scale projects of reforms. In applying the 8th principle the directors in power were constantly confronted with questions such as what kind of information is the minimum they need to pass to other directors without being accused of omission or negligence. Accuracy, reliability and timeliness of sensitive information to non-executive directors was constantly being questioned by lawyers on both sides.
The 9th principle was also extremely difficult to implement. What is the right combination of intellectual and physical resources? The high prices that the directors in power were prepared to pay to disfavour the other non-executive directors were extremely high and totally unnecessary. This was high price they paid for the lack of synthesis and integrity on the leadership process.
Case Study 2 - Model for Key Performance Indicators (KPI) derived from the Theory
In order to illustrate the applicability of the UTOE, the following is an illustration that the Theory was successfully applied to a case where the client requests the creation of a KPI model to evaluate a Help Desk of a computational park of a large Saving Bank in Latin America. As the intention is to illustrate rather than to test the model we have selected only two or three of KPI measures in the original work. The help desk was designed to provide a continuous service to 41 large mainframe systems for different demands of the population including that of popular housing loans to over 20 million people. This service was passed onto the population through some 1700 branches throughout the country. After a benchmarking and its analysis, it was discovered that the KPI mechanisms offered by more sophisticated dashboard software ignored at least the following indicators:
1st principle, the Cycle - The external cycle of client satisfaction: Are the external users satisfied with the rhythm of service delivery?
2nd principle – the register: what is the clients’ feedback? How is this being registered? Are levels of satisfaction being registered on a daily basis? If not, what is the frequency?
3rd principle – the positioning: Do the registered cycles meet the ethical standards? How do they compare with the services offered by other banks? How frequently or regularly should the benchmarking be used? The dashboard software only considered initial benchmarking to set the goals and was not used to dynamically change the goals.
4th principle – the interruption: How does the help desk operate to attend the clients when different types of interrupting situations are simulated? Not only physical and technical but also the emotional and ethical - as the business rules relate to the customer base.
5th principle – the DNA: To what extent the Help desk operation is functioning in accordance to established Business Rules, Quality Audit, ISO, or other values and code of ethics?
What where both the positive and negative incidents which stood out during the period? With what frequency this occurred? The help desk only recorded complaints and negative incidents. Eulogies and achievements in problem solving were not set as goal.
6th principle – the Multi-functionality: What was the level of multi-functionality that characterised the Help Desk service deliveries or its associated processes?
7th principle – the Sharing: What was learnt or taught within this chosen cycle? This exited in a passive form. The information was there to avoid redundancy or error duplication. Proactive teaching or learning was not happening
To what extent other departments or units followed the example of model units in improving their weak cycle?
8th principle – the general balance: What is the general rating which could be given to a successful interplay of the above seven questions? The excessive use of buffers did not trigger off new register and control cycles.
9th principle – the synthesis: What was the level of resource availability as different stages of Help Desk service cycle: material, technical, emotive and ethical conformity which was characterised by the help desk unit?
There are many sophisticated software offering effective dashboard solution to the above help desk problem that could be coupled with the above questions to make the KPI for Help Desk more exhaustive.
In summary, the Theory was used to create a questionnaire that grouped the responses in 6 levels: namely, 1) Very high, 2) high, 3) adequate, 4) inadequate, 5) low and 6) very low. KPI was then used to diagnose and identify the problem areas. In the above example the questions that are not normally picked up by other models were identified. Having used the new model the bank chose software which used AI on a SQL platform. Furthermore a complementary system was coupled to the new software to cater for some of the controls identified and recommended by the UTOE Theory and KPI model
Case Study 3 - When Change has the leader’s support but not of the senior staff or supervisors’↑ - (See Appendix 2) what is the “F” of the change formula when the change does not have the supervisors’ support?
In this specific case the same bank is faced with what is called resistance to change, but now in a more global project. The departmental supervisors rightly argued that they could barely tolerate the pressure of the existing workload, leave alone considering any requests for change!
Here the 6th principle explains this resistance and is diagnosed to be the weakest point of the chain (process)! As it was explained earlier the 6th principle emphasises a need for the process owner or their agents (in this case the supervisors and managers) to be able to cope with other activities without significantly affecting the outcome of the core activities.
It was readily observed that the departmental supervisors were all overloaded in their activities and they could not support any additional projects, more specifically that of change (multi-tasking). So according to the Theory, non-conformity to this principle pointed to a need for strengthening more than any of the other principles!
After considering the recommendations of the consultant, the planning manager assured them of additional resources in order to alleviate their pressure: 8 divisional supervisors accepted to be interviewed for the proposed change. This was 8 out of a total of 29 supervisors or managers of this IT computational park. A total of 144 analysts and 115 technical staff members reported to these 28 supervisors or managers.
The interview resulted in 30 requests for change (RFC) that were summarised to 7 major changes. The consultant assisted these supervisors to identify the total number of hours of delegable and non-delegable workload. The accumulated work that was not being executed (work lag) as a result of overwork or buffer exhaustion was also registered on a fortnightly basis. This total amounted to some 85 hours which was an average of 10 hours per supervisor. After negotiation and the necessary adjustments by the planning manager, relief staff and other resources were allocated to help them with their tight schedule. They were now prepared to allocate 8 hours of their newly relieved time for the changes proposed by the planning manager. This case clearly demonstrates that when we strengthened the 6th principle by ensuring its conformity, the first concrete step for change could then be securely taken.
Case Study 4 - University Foundation:↑ In this case a university foundation followed the advice of the chancellor’s advisor and chose a consultant with extensive commercial experience over consultant’s with PhD’s from amongst their peers who were academics (concept of complementation by contrast)! The board and the newly hired consultant chose a 7-faceted-model which had a widespread acceptance for evaluating organisational excellence. A prize could be won by organisations that obtained the highest total marks for best practices.
In this model, seven aspects of an organisation were considered: 1- Leadership, 2 - Strategic Planning, 3 – Market and the Client, 4 – information system, 5 – Human Resources, 6 – Processes, 7 – Results (financial, Administrative, client base, processes and products). Here the Theory was used to have complementary effect on the chosen model. The 7-faceted-model resulted in a final report at the conclusion of 6-months- consulting period. The report emphasised a need for implementation of new processes in project management, selection process, hiring of new managers and finally stressing the draft of strategic and action plans.
However by using the 5th and 8th principles for the formulation of a consistent value system endorsed by the directors, the administrative/financial director was found to be lacking the right profile consistent with the new set of values. Despite the popularity of this 7-faceted-model’s, the Theory helped to identify a lack of leadership traits in the administrative/financial director. This implied that, there, the organisations sustainability was at high risks. Some months later, due to this incompatibility, the president of the foundation resigned, and new directors were appointed. This also illustrates the increased predictability that could be expected of the theory when it is coupled to complement other models.
Case Study 5 - Analysis of a post-reengineering report by a sociologist: (for questions see Appendix 1)
After 9 months of BPR, the National Press Association in a Latin American country, requested a consulting firm who uses UTOE to evaluate the effects of re-engineering project. There were 12 major questions of which one worth mentioning. The question was related to one of the factors that were measured during the diagnosis phase: the level of irritability and impatience that characterised the interviewed staff members. This they reported that had significantly been reduced. The finding was that: Even though the level had not reached the ideal level, however it was significantly reduced.
The result obtained by the initial diagnosis was analysed and the result of this analysis was summarised by a sociologist. This document is the result of a conceptual framework, which would be quite useful for mapping of emotional and ethical goals in a change model for any future research consistent with the UTOE Theory.
Initially a diagnosis model was successfully created from the theory. A number of questionnaires were created to test the organisational health by level of their conformity to the nine principles crossed with the 4 layers of the Theory, namely, physical, intellectual, emotional and spiritual, proposed by the Theory.
Methodology: The methodology consisted in colleting the answers to the above questions. The results was then grouped according to the level of their conformity to the Theory: A - in total conformity (grades 7), B - in acceptable conformity (grade 6), C - in a need for improvement (grade 5), D – unsatisfactory (grade 4) or in E - critical conditions (grade 3). This information was then used to produce a series of strategic and action plans with appropriate timetables and schedules. The Diagnosis using this methodology was then analysed by a sociologist, a PhD researcher. The Structured Thinking and UTOE concepts were explained. A referential structure and a conceptual framework for analysing emotional and spiritual concepts was devised in the form of a table (see Appendix 1 – UTOE interface Table
In this diagnosis all items with grades less than 5 in each cycle were identified as follows:
Comments made by sociologist on the UTOE Diagnosis Model
Here is a translation of some of the comments made by sociologist on a diagnosis made by the consultant using the UTOE Diagnosis Model
Due to the fact that the sociologist was duly trained on the theory, the diagnosis model and its methodology, his comments naturally follow the same methodological framework. His contributions stay on the UTOE platform and the theory is used to facilitate its interplay in an interdisciplinary trans-disciplinary manner. A small section of his 20 page report which included an interface table is provided below as an illustration of UTOE.
Relationship between the Psychological and Sociological Concepts as they relate to justice (as a virtue) or fairness (as a value) and sensibility (emotional intelligence) in an organisational diagnosis using the methodology of Structured Thinking
Items that received grades less than 5 in each cycle:
2 Physical cycle
2.5 Work pace – grade 4
2.6 Criteria for personnel selection – grade 4
Work Rhythm or work pace could be related to:
Social Action – Based on the expectations that one has from others.
Question: Is there an expectation that others would work slowly and he would act believing in this?
Understanding: Shared expectations take us to a mutual understanding.
Question: Is there a belief in the culture of this organizational that it is normal to work at a slow pace? This belief would be unofficial, never spoken openly, and internalized from observed behaviour of slow pace, resulting in an understanding that it is this way at preconceived levels.
The concept of general acceptance is already implicitly implied here.
. . .
Social Role – Considering the criteria for personnel selection – grade 4
Question: Does the selection process demonstrate it clearly what is expected of the candidate in the organisation?
3. Intellectual cycles
3.3 Frequency (and effectiveness) of meetings – grade 4
3.4 Feedback from staff – grade 3
The frequency of meeting could be associated to:
Sociability: Quality that intensifies the cooperation. It implies in seeing others as companions.
Question: Do the members of the organisation that are required to meet have a cooperative posture or in reality want to pull each others legs? If they see each other as adversaries probably would want to see each other the least possible.
Feedback could be related to Comprehension – shared expectations leads to a mutual comprehension, opening many channels for cooperation.
Question: the feedback being low (grade 3), isn’t that the employees understand what the leadership expect of them so that they could act accordingly?
Consensus – general conformity of thoughts and feelings that leads to order
Conclusions: Considering the above interpretation of data by the sociologist the result of our finding is intended to be less biased. These comments were considered when requests for change were made by process owners.
Case Study 6: Small Shopping Complex
A business of small shopping complex in this case carried over 3000 types of high quality and numerous innovative products and services employing 85 staff members in total. There were six departmental supervisors and the owner acted as the general manager! At the time the change consultant was involved, in 2004, the organization was already operating as the only one-of-its-kind in Brazil to bring tens of different types of businesses in Gastronomy under the same logo and under the same roof: Restaurant, Breakfast Veranda, Pasta & Pizza shop, Coffee shop, Delicatessen and Savoury, Bakery, Catering Services, Cheese, Wine and bottle Shop, Bar, Imported groceries and Kitchenware all operating as on department store in a huge specially designed building with only two entries. The business had emerged out of a profitable and successful award-winning franchised bakery in Brasilia in 1980s. The reason the diversity of the businesses involved is explain here is firstly because small businesses customarily do not have such a number of legally separate business units with respective cost centres agglomerated in this manner, and secondly as ULRICH (2006, P. 196) puts it, Shared Service Centres (SSC) are normally implemented for large organisations - as much as 80 percent of the top 20 Fortune 500 used shared service by the year 2000 - and consequently its implementation could only be justified under special circumstances.
Business Process Reengineering (BPR) - Initially called Business Process Redesign (DAVENPORT AND SHORT, 1990), is a fundamental rethinking and redesign of operating processes and organisational structure, focused on the organisation’s core competencies, to achieve dramatic improvements in organisational performance (LOWENTHAL, 1994, p. 62).
How does Strategy relate to processes – A critical Analysis of this question at this point is necessary. SCHMIDT (1998) argues that, in contrast to a traditional “process follows strategy” view, which entails that strategies are implemented by means of processes to achieve competitive advantage through core competencies, there is an opposite direction, “strategy follows process”, that is implemented by transforming a company’s core processes into strategic capabilities that provide superior value to the customer.
On the other hand, HUIZING et al. (1997) studied how organisations align their strategy to their environment and bring internal factors, such as structure, systems, style and culture, in line with their strategy, in order to maintain a balance in the process of BPR-related organisational change.
UTOE tend to relate strategy and processes by using the same platform. In this way one could say that “process follows strategy” as much as “strategy follows process”? By using a mathematical metaphor, strategy would be a kind of a “moving average” resulting from a constant interpolation and extrapolation between historical information and the relevant and probable future scenarios.
Customer who triggers a business process - According to Davenport and Short’s (1990) definition, it is the customer who triggers a business process – which should be the earliest business event that the activity can be traced back to (NELLBORN and TOLIS, 1999, p. 56; SHARP, 2002, p. 20). Having been triggered off by such an event, a business process which is defined as a sequence of steps complemented by decisions and determinations are initiated to produce a specific, identifiable result or output (NELLBORN and TOLIS, 1999, p. 56; Sharp, 2002, pp. 20-1).
Considering the above, the redesign of some core processes that were totally cost effective from the customer’s point of view was initiated. This enabled the consultant to get the BPR and its automation formally approved and lead it to a successful conclusion.
Incremental Change successfully led to the BPR and SSC. Shared Services (SSC) gathers a selection of common and well-defined services to provide these services to an organization's units, acting independently. This is somewhat similar to outsourcing. The change process involved some soft and hard changes. The consultant initially introduced a systematic training program on quality control which at the same time gave me an ample opportunity to observe the core processes and indirectly interview, assess and train the key personnel who supported them. As a result of these soft changes a Subsequent hard changes involving BPR and SSC automation proved to be sustainable.
In order to ensure timely register of requests on relevant information for change, a simple task control system, the corporate Microsoft Outlook which operates under Exchange was put in place. By implementation of a new reporting system the newly appointed managers and nutritionists were requested to report to the consultant over the net. This initially occurred on a daily basis which was later reduced to a weekly and monthly basis. This helped the process of data collection using client-oriented inquiry, incident management, which in turn provided a prelude to departmental identification of problems. Subsequently this lead to the organisational development phase which allowed participative and continuous interventions for change. It also helped formalising a change trough RFC (Request for Change). Two other important contributions of this reporting system were to encourage managers to develop more problem awareness and to try to develop problem-solving skills. These managers’ feedback specifically helped the change consultant to collect the relevant data for new system specification, as well as the cost-benefit analysis.
In the second month the managers and consultants could already discuss with the owner incremental changes in each sector by proposing departmental action plans.
One of the problem areas was the catering sector, where punctuality in delivery of orders was crucial. Some of the customer’s complaints could have embarrassing consequences in our credibility. In this respect not even one percent error was admissible. Delays in catering or delivery service could turn a marriage ceremony, ministerial function or a diplomatic reception into a nightmare. We needed to carefully choose the scope and scale of change in deliveries and bring about the necessary changes in a modulated form.
By implementing these incremental changes in the core processes, the owner decided to negotiate one of the two contracts with other consultants and cancel the other. A new contract for the implementation of SSC was signed. These processes were concurrently automated and after two months of parallel running and system tuning the old system was discontinued.