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The Matrix of Change:
A Tool for Business Process Reengineering
Erik Brynjolfsson
Amy Austin Renshaw
Marshall van Alstyne
MIT Sloan School of Management
50 Memorial Drive E53-308
Cambridge, MA 02139
marshall@mit.edu
This Draft: September 30, 1996
Forthcoming in Sloan Management Review, Winter 1996
Copyright © 1995-1996, Erik Brynjolfsson, Amy Renshaw, and Marshall van Alstyne
Business process reengineering efforts suffer from low success
rates, due in part to a lack of tools for managing the change
process. The Matrix of Change can help managers identify
critical interactions among processes. In particular, this tool
helps managers deal with issues such as how quickly change
should proceed, the order in which changes should take place,
whether to start at a new site, and whether the proposed systems
are stable and coherent. When applied at a medical products
manufacturer, the Matrix of Change provided unique and useful
guidelines for change management.
Matrix of Change 2
The Need for a Change
Just as total quality management owes much to tools like statistical process control
and the “House of Quality” (Hauser and Clausing), business process reengineering
can benefit from tools to supplement and focus managerial intuition.
Unfortunately, current tools for managing change don’t do the job (Davenport and
Stoddard).
Effective change management depends on recognizing complements among
technology, practice, and strategy. Interactions play a critical role in affecting
outcomes, a role that leads to new analysis and theory (Barua, Lee and Whinston;
Milgrom and Roberts). In developing a theory of complements, Milgrom and
Roberts show mathematically how interactions can make it impossible to
successfully implement a new, complex system in a decentralized fashion. Instead,
managers must plan a strategy that takes into account and coordinates the
interactions among all the components of a business system. Furthermore,
because new organizational paradigms eliminate time, space, and inventory
buffers, operations become more tightly coupled. These linkages further aggravate
change management problems and process interactions (Rockart and Short).
In this paper, we introduce a new tool, the Matrix of Change, which can help
managers anticipate the complex interrelationships surrounding change.
Specifically, the tool contributes to understanding issues of feasibility (stability of
new changes), sequence (which practices to change first), location (greenfield or
brownfield sites), pace (fast or slow), and stakeholder interests (sources of value
added). The Matrix of Change was inspired by formal analyses of Milgrom and
Roberts while it draws also upon established design principles of Hauser and
Clausing. Implementation steps may already be familiar to anyone acquainted
with qualify function deployment (QFD) or the House of Quality. The resulting
support for process design, analogous to product design, becomes formal and
systematic but remains managerially relevant and intuitively accessible.
The Landscape of Change
An old proverb states that “you can’t cross a chasm in two steps.” The same
wisdom applies to many organizational change efforts. Advances in information
technology (IT) and rising competition have led to new modes of organizing work.
Matrix of Change 3
Many of these new organizational forms depart from past practice instead of
incrementally improving it. The resulting gains for companies can be substantial.
Hallmark, for instance, discarded sequential product development in favor of
cross-functional teams and reduced new product introduction time on one card by
75%. After reorganizing, Bell Atlantic cut service order rework and saved $1
million annually, while simultaneously improving product quality (Hammer and
Champy).
Frequently, however, business process reengineering efforts run into serious
difficulties. Some 70% of such projects fail to reach their intended goals (Bashein,
Markus and Riley; Hammer and Champy), and a program that seeks to become a
“House of Quality” more often becomes a “House of Cards.” Because success often
depends on coordinating the right technology, the right product mix, and dozens
of the right strategic and structural issues all at the same time, near misses can
leave a firm worse off than if the change had never been attempted. While
several studies have documented the importance of coordination (Jaikumar;
Krafcik and MacDuffie; Parthasarthy and Sethi), managers continue to have
difficulty achieving it. Often, the problem is not that the proposed system is
unworkable but that the transition proves more difficult than people had
anticipated (Champy). Too often, managers proceed in a hit-or-miss fashion,
implementing the most visible bits and pieces of a complex new system, unaware
of hidden but critical interconnections.
The path to change has several stumbling blocks. Some companies cannot adapt
or they miss new opportunities, leaving them vulnerable to startups (Henderson
and Clark). Sometimes companies acquire technology without modifying their
human resource practices, mistakenly assuming “technological determinism” –
that technology’s effects are independent of the organizational structure in which
it is embedded. In the 1980s, for example, General Motors spent roughly $650
million on technology at one plant without updating its labor management
practices. As it turned out, the technology upgrade provided no significant
productivity or quality improvements (Osterman). Likewise, as Jaikumar found,
US companies adopting flexible technology often fail to achieve the same gains as
comparable Japanese businesses because they do not alter related operating
procedures. Recently, Suarez, Cusumano and Fine found that the most flexible
plants in their sample of printed circuit board manufacturers were those with the
right combination of human resource practices, supplier relations, and product
Matrix of Change 4
design – not necessarily those with the most advanced technology. Econometric
research also suggests that while IT investments can lead to high productivity,
complementary organizational changes are at least as important (Brynjolfsson and
Hitt).
How the Matrix Works
The Matrix of Change presents a way to capture connections between practices. It
graphically displays both reinforcing and interfering organizational processes.
Armed with this knowledge, a change agent can use intuitive principles to seek
points of leverage and design a smoother transition. Once the broad outlines of
the new system and the transition path have been charted, authority can once
again be decentralized for local implementation and optimization.
The Matrix highlights interactions and complementary practices. Critical
complements include, for example, the use of flexible machinery, short production
runs, and low inventories (Dudley and Lasserre; Milgrom and Roberts).
Emphasizing one such practice increases returns to its complementary practices.
Likewise, doing less of a given complement reduces returns to its operating
dependents. In this example, more flexible machinery draws value from and adds
value to shorter production runs. Trouble starts when change agents fail to
identify negative feedback systems that push business units back toward old ways
of doing business or when they miss synergy that would strengthen the new and
better ways they wish to establish.
Ironically, the bottom-up, continuous improvement principles associated with
TQM can also be counterproductive – it may be that no single isolated change can
improve a process, but a coordinated change can. Incremental change can
sometimes be more painful than radical change. Twenty-five years ago, the
Swedish government decided to shift from driving on the left side of the road to
driving on the right. The scope of the change was enormous. When faced with
dramatic change, affected parties often plead for time to adapt. But, imagine the
consequences of asking the trucks to drive on the right-hand side during the first
month of the transition and then the cars in the second month! Some transitions
are smoothest when everyone changes their behavior quickly and at once.
Although empowerment and decentralized decisions are popular, this practice can
certainly fail – imagine each driver independently determining the best side of the
Matrix of Change 5
road for driving. As it turns out, Sweden made the change quickly during the least
trafficked hours of night.
The Matrix of Change functions as a four step process. It provides a systematic
means to judge those business practices that matter most. It highlights
interactions among these practices and possible transition difficulties from one set
of practices to another. It encourages various stakeholders to provide feedback on
proposed changes. And, it uses process interactions to provide guidelines on the
pace, sequence, feasibility, and location of change. These procedures were used
successfully to reengineer a large medical products company (Austin), which we
call “MacroMed.” Steps from their implementation experience are presented to
illustrate this process.
Use of the Matrix at MacroMed
In the early 1970s, MacroMed, a producer of medical products, had enjoyed close to
a 100% market share for “Betaplex,” sterile adhesive compound mass-produced in
its New Jersey facility. Between 1989 and 1991, however, the market share for
Betaplex fell nine percentage points to about 48%, the fastest rate of decline in the
previous 16 years1. Competition in the form of private label and new Japanese
products were proving more cost effective and responsive to consumer demand
(Austin). Senior management at MacroMed became increasingly alarmed.
To make matters worse, rising materials costs exerted upward cost pressure on
Betaplex, resulting in an 18% price hike over the same period. Although Betaplex
enjoyed excellent brand name recognition and a modest quality premium, the
accelerating loss of market share was a spur for action.
MacroMed faced critical problems in their need for greater flexibility and modern
manufacturing methods. They produced five varieties of Betaplex but had not
invested in new equipment for years. Setup times for changeovers averaged
almost 90 minutes and certain designated equipment could not switch product
types at all. When certain products experienced low demand and others moved
briskly, facilities utilization became very poor. MacroMed’s union contract also
enforced rigid and narrowly defined job categories, contributing to a lack of
flexibility.
1 Source: Nielsen.
Matrix of Change 6
In response, senior management decided to design a new generation of
manufacturing equipment and to stop using the relatively inflexible equipment
available on the open market. They understood, too, that simply changing the
technology without also rethinking their work organization, market strategy,
supplier relations, and other aspects of their business would not lead to success.
Accordingly, they wrote an explicit vision statement that outlined new policies
and procedures in each of these areas. In realizing process interdependence, they
were already ahead of many other firms.
Unfortunately, however, their early experience with the new system was not good.
Despite a considerable investment in new capital and explicit calls for new
approaches to work, productivity did not significantly improve and by some
measures actually worsened. Clearly, the new equipment was not being used to
its potential, moreover, there was some grumbling about poor management and
leadership.
In an effort to coax more efficiency out of the equipment, MacroMed’s managers
put significant effort into formal modeling of equipment changeover times,
capacity requirements and optimal queuing strategies. Factory visits, however,
revealed that the core problem had more to do with intrinsically difficult product
transitions than suboptimal machine scheduling or the actions of particular
individuals. Despite instructions to the contrary, workers continued to use new
equipment much as they had used the old, thus wasting its flexibility. Although
piece-rate incentives had been eliminated, workers let large work-in-process and
finished goods inventories build up rather than allow higher downtime. Their
mental models still led them to keep the machines running at maximum capacity
with minimal changeovers. Similarly, line managers were reluctant to cede real
authority to the operators. While they spoke of teamwork, empowering the
workforce, and maintaining open and trusting communications, some managers
suggested privately that operators did not really understand what was happening.
There were also mismatches in the skill sets of some operators, who lacked any
desire to assume decision-making responsibility, just as there were mismatches in
contracts with suppliers and numerous other aspects of the work.
These complex interactions became apparent with the benefit of hindsight, but
most were not explicitly considered in advance. Furthermore, it was unclear how
to correct the problems given the significant investments that had already been
made and the loss of forward momentum these difficulties were causing.
Matrix of Change 7
We developed the Matrix of Change to help organize and sort through these
issues. The Matrix process has evolved since its inception as a consulting project
originating in the Leaders for Manufacturing program at the MIT Sloan School of
Management. Its development has therefore involved academic researchers,
senior managers, and operators from the shop floor. Building on this experience,
the Matrix of Change is our effort to combine academic rigor with economic
relevance.
Building the Matrix of Change
The Matrix of Change system consists of three matrices and a set of stakeholder
evaluations. The matrices represent (1) the current collection of organizational
practices, (2) the desired collection, and (3) a transitional state that bridges these
two. The stakeholder evaluations provide an opportunity for persons within the
firm to state the importance of these processes to their job activities. Matrix
construction then proceeds in four steps.
Step 1 – Identify Critical Processes
Managers should first list their existing goals, business practices, and ways of
creating value for consumers. Current practices are then broken into constituent
processes suggesting how they are accomplished. A process is “a structured,
measured set of activities designed to produce a specified output ... a specific
ordering of work activities across time and place, with a beginning, an end, and
clearly identified inputs and outputs. (Davenport, p. 5)” A second list will act as a
“clean slate” and describe new or target practices.
Identifying the most important processes can be quite difficult, but certain
guidelines can help. James Champy has told us that in change management, the
most important success criterion is “to start with the end in mind,2” that is,
identify the purpose or business objective of change, whether it is organizational
learning, market share, flexibility, customer satisfaction, or something else. Since
MacroMed already enjoyed high quality and brand name recognition, senior
manager settled on decreased costs and increased flexibility as their principal goals
2 Personal communication June 18, 1996.
Matrix of Change 8
– improvements that would permit both lower retail prices and the pursuit of
niche market margins.
Another guideline is to choose members of the redesign team both for their
knowledge of functions essential to business objectives and their ability to secure
support from these functions during subsequent phases. One organizational
change effort, for example, sought to cut 90 days from a corporate supply chain
(Sterman). The change effort involved only order fulfillment staff, yet close
examination revealed that total cycle time consumed 75 days of manufacturing
lead time, 85 days of customer acceptance lead time, and 22 days of order
fulfillment time. If the design team had eliminated 100% of the order fulfillment
time, it still would have fallen 76% short of goal.
At MacroMed, senior managers assembled a SWAT team from a cross-section of
the workforce consisting of managers, design engineers, and union workers across
several different functions. The team began by enumerating specific aspects of
their existing hierarchical production techniques, as well as forming their vision
of a new organization based on the perceived benefits of a flatter more flexible
production line. Then, from general statements of practice, they defined subtasks
or constituent practices (see Figures 1a and 1b for an example).
EXISTING PRACTICES
Designated equipment, separated by type
Narrow job functions
Salaried employees make all decisions
Hourly workers carry them out
Functional groups work independently
Keep line running no matter what
Run an efficient,
low-cost operation
Meet product requirements
(quality and quantity)
Thorough final inspection by QA
Raw materials made in-house
Large WIP and FG inventories
Pay tied to amount produced
Vertical communication flow
Several management layers
Hierarchical structure to clearly
define roles & responsibilities
Figure 1a: Break existing practices into constituent parts.
Matrix of Change 9
24-Hour conversion of raw
materials to finished goods Areas organized in work cells
All materials outsourced
Flexible equipment, jobs
Supervisors can fill in on line
Systematic problem solving
All employees contribute ideas
Concurrent engineering
Vision given from top
Operators responsible for quality
Stop line if not running at speed
All operators paid same flat rate
Zero non-conformance
to requirements
Low JIT inventories
Few management layers (3-4)
Line rationalization
Elimination of all non
value-adding costs
TARGET PRACTICES
Energized, empowered
organization
Figure 1b: Break target practices into constituent parts.
The steps of any process can be broken down farther and farther, if this is helpful.
The existing practice of “designated equipment,” for example, can be further
broken out to “sterilizing,” “manufacturing,” and “packaging.” To keep
explanations simple in this article, we will stop at two levels. Processes can also be
grouped into categories by function (e.g., marketing, human resources, and
manufacturing)3 as well as by strategic initiative (e.g. elimination of non-value-
adding costs and speed). MacroMed preferred the second classification, as Figure 1
illustrates.
Step 2 – Identify System Interactions
After describing existing practices, the team creates a horizontal triangular matrix
to identify complementary and competing practices as illustrated in Figure 2.
Complementary processes reinforce one another whereas competing processes
3An illustration of this grouping is illustrated in the Appendix on transitioning between
organizational structures.
Matrix of Change 10
work at cross-purposes. Doing more of one complement increases returns to the
other. Narrow job functions in the existing system, for example, made tasks easy
to specify and increased MacroMed’s ability to offer piece-rate pay tied to hourly
output. These practices were reinforcing. On the other hand, doing less of a
competing practice increases returns to the other. A flatter managerial hierarchy,
for example, would shift some strategic decisions to workers; this, in turn, would
decrease MacroMed’s ability to offer piece-rate pay tied to hourly output. These
practices are interfering. Most existing frameworks do not capture
interdependencies or process interference (Davenport and Short; Harrison and
Loch) while interference matrices makes these interactions explicit.
A grid connects each process in an interference matrix, and at the junction of each
grid plus signs (+) designate complementary and minus signs (-) competing
processes. Thus since “designated equipment” complements “narrow job
functions” the intersection of their grid is assigned a plus. The presence of a plus
sign does not indicate that an interaction is “good,” only that it is reinforcing. In
the absence of evidence to support either reinforcement or interference, the space
at the junction is left blank. The horizontal triangular matrix for a subset of
MacroMed’s existing practices appears on the left half of Figure 2.4
4 Only pairwise interactions are identified. In principle, more complex interactions may be
important; for instance, two practices may be complements only in the presence of a third practice.
Typically, framing the question in terms of a reference set of practices will resolve such potential
ambiguities without resorting to a matrix with more dimensions.
Matrix of Change 11
Horizontal Triangular Matrix
Vertical Triangular Matrix
Designated Equipment
Narrow Job Functions
Large WIP and FG Inventories
Piece Rate (Output) Pay
Several Mgmt Layers (6)
Existing Practices
+
+
++++
++ +
-
Energized
Organization Zero Non-
Conform. Elimination of Non-
Value-Adding Costs
'+' Reinforcing practices
' ' Weak / No Interaction
'- ' Interfering Practice
Matrix Interaction
Figure 2 – Horizontal and vertical matrices capture the existing and
target practices respectively.
An analogous process develops a vertical triangular matrix for target practices. In
the horizontal matrix, there are no competing practices; this system coheres as a
stable unit. In contrast, the vertical triangular matrix has two competing practices.
“Line rationalization,” which reduces product variety, works in opposition to
flexible equipment, which encourages greater variety.
The plus or minus values for each cell can be derived in a number of ways. Often,
once the practices are classified, the values become self-evident. In other cases,
formal models and theory provide guidance. Theories of ownership, for example,
suggest that decentralizing data management can boost quality levels in systems
users control themselves (Alstyne, Brynjolfsson and Madnick) and operations
management models suggest task processing in parallel adds more value when
inputs have higher variance (Harrison & Loch, 1995). In some cases, empirical
data will suggest the existence of complementarities or substitution effects, and
formal statistical analysis can identify them5. Surveying key personnel is also an
effective way to gain insight into both perceived and real interactions. MacroMed
used each of these approaches.
5 Specification of such models must be done with some care since the clustering of variables will
depend on the source of heterogeneity in the environment that gives rise to sample variation
(Holmstrom and Milgrom).
Matrix of Change 12
Step 3 – Identify Transition Interactions
Next, the team constructs the Transition Matrix – a square matrix combining the
horizontal and vertical matrices which helps determine the degree of difficulty in
shifting from existing to target practices. The advantage of the transition matrix is
that it shows the interactions involved in moving from existing practices to a
clean slate. Simply starting with a clean slate tells a team nothing about the
difficulty of a transition (Harrison and Loch) while using a “blank sheet of paper”
for design can require a “blank check” for implementation (Davenport and
Stoddard).
A subset of the transition matrix used at MacroMed (Figure 3) illustrates important
interactions between existing and target practices, a large majority of which are
opposing. Narrow job functions interfere with equipment flexibility and multiple
layers of management interfere with greater responsibility.
'+' Reinforcing practices
' ' Weak / No Interaction
'- ' Interfering Practice
Matrix Interaction
Designated Equipment
Narrow Job Functions
Large WIP and FG Inventories
Piece Rate (Output) Pay
Several Mgmt Layers (6)
Existing Practices
Energized
Organization Zero Non-
Conform. Elimination of Non-
Value-Adding Costs
-
-
-
-
-
-
----
-
+
+
Transition Matrix
Figure 3 – The transition matrix shows considerable interference
among old and new practices.
Certain practices complement one another. Line rationalization complements the
use of designated equipment by reducing uncertainty around scheduling.
Similarly, line rationalization complements narrow job functions.
Matrix of Change 13
Step 4 – Survey Stakeholders
Next, the team needs to determine where various stakeholders stand with respect
to retaining current practices and implementing target practices. Just as listening
to the “Voice of the Customer” is essential to building a better product, listening to
the “Voice of the Stakeholder” is essential to building a better process. At
MacroMed, several different groups were given the opportunity to indicate how
important each process was to their job performance. Each surveyed employee
used a simple five point Likert scale anchored at zero. A value of “+2” means that
a practice is extremely important and a value of “+1” that a practice is important
but not essential, while a value of “-2” indicates a strong desire to change or reject
business as usual. A value of “0,” which can be omitted, represents indifference.
Figure 4 shows a brief completed example.
Energized
Organization Zero Non-
Conform. Elimination of Non-
Value-Adding Costs
+1Importance +2+2+2+1
Designated Equipment
Narrow Job Functions
Large WIP and FG Inventories
Piece Rate (Output) Pay
Several Mgmt Layers (6)
Existing Practices
-2
+1
-1
+2 Very Important
+1 Somewhat Important
0 Irrelevant
- 1 Somewhat Interfering
- 2 Significantly Interfering
Importance to Job
Figure 4 – Satisfaction ratings capture the importance of existing
practices to stakeholders.
The respondent in this case feels strongly that, among existing practices, narrow
job functions should be discontinued (-2), inventory levels should not be as large (-
1), and piece-rate pay is somewhat important (+1). Blanks indicate zero values or
no strong preference with respect to maintaining or eliminating these practices.6
Regarding target practices, the respondent feels positively about most practices and
indifferent about one.
6 “Importance” can be usefully interpreted as “Benefit - Cost” of the practice in isolation. This
interpretation is revisited in the section on determining net value added.
Matrix of Change 14
Although these examples use a relative Likert scale, several variations are
possible. As shown, they measure internal business value from the perspective of
a single stakeholder. A “Balanced Scorecard” might also consider other
stakeholders and perspectives, including financial indicators, customer
preferences, and innovation requirements (Kaplan and Norton). Thus the axis for
flexible equipment might be evaluated from the additional perspectives of
improving customer product offerings and of reducing financial costs. If multiple
indicators are required, multiple columns can be added. Ideally, a given metric
will have quantifiable units such as accounting profits or the number of product
configurations offered to the customer. If multiple measures are used,
comparisons across practices must use the same units such as dollars or soft dollar
estimates.
Combining Figures 2 through 4 creates the Matrix of Change (see Figure 5).
Matrix of Change 15
'+' Reinforcing Practice
' ' Weak / No Interaction
'- ' Interfering Practice
Matrix Interaction ++ +
Designated Equipment
Narrow Job Functions
Large WIP and FG Inventories
Piece Rate (Output) Pay
Several Mgmt Layers (6)
Existing Practices
Energized
Organization Zero Non-
Conform. Elimination of Non-
Value-Adding Costs
-
-
-
-
-
-
----
-
+
+
+
+
++++
-2
+1
-1
Importance +2
+2+1+1
+2 Very Important
+1 Somewhat Important
0 Irrelevant
- 1 Somewhat Interfering
- 2 Significantly Interfering
Importance to Job
-
+2
Figure 5 – The three matrices linked together.7
A count of cross-connections is one measure of coupling strength or
interdependence within blocks. Within the existing practices, “designated
equipment,” “narrow job functions,” and “piece-rate pay” each have three
connections with other practices. “Large WIP” has two and “several management
layers” only one. In this sense, management layers are the least tightly coupled
practices within this block. In contrast, the target state for this example has only
small blocks which are independent and easily separable.8 The large block of
existing practices that involve “designated equipment” in Figure 5 will illustrate
several principles discussed next.
7 See Apppendix A for a larger and more complete matrix, illustrating the transition from a
hierarchical to a network organization.
8 For a large system of interconnections, a graph spanning algorithm can identify independent blocks
of practices as well as connection counts within blocks.
Matrix of Change 16
Interpreting and Using the Matrix: Implications for Change
Management
The Matrix of Change is a useful tool for addressing the following types questions:
Feasibility: Do the set of practices representing the goal state
constitute a coherent and stable system? Is our current set of
practices coherent and stable? Is the transition likely to be difficult?
Sequence of Execution: Where should change begin? How does the
sequence of change affect success? Are there reasonable stopping
points?
Location: Are we better off instituting the new system in a
greenfield site or can we reorganize the existing location at a
reasonable cost?
Pace and Nature of Change: Should the change be slow or fast,
incremental or radical? Which groups of practices, if any, must be
changed at the same time?
Stakeholder Evaluations: Have we considered the insights from all
stakeholders? Have we overlooked any important practices or
interactions? What are the greatest sources of value?
Each major area in the Matrix of Change serves various roles and addresses
different aspects of these five issues. Taken together, they offer useful guidelines
on where, when, and how fast to implement change. Figure 6 points out the
general purpose of the various features.
Matrix of Change 17
Transition Difficulty
Stability
Main Goal Processes
Sub-Goal Processes
Main Existing
Processes
Existing
SubProcesses
Incentive
Compatibility
+
+
+
Separable
Clusters
Figure 6 – Matrix graphics have different and sometimes multiple
functions.
Interpreting the information captured in the Matrix of Change motivates the
principles which follow.
Feasibility: Coherence and Stability
The sign, strength, and density of interactions are important for determining
process coherence and stability. A system of processes with numerous reinforcing
relationships is coherent and therefore inherently stable, whereas one with
numerous competing relationships is inherently unstable. The current system is
quite stable at MacroMed; it has no competing relationships. This is hardly
surprising since the current system has been in place for decades, and practices
have co-evolved. Fine-tuning a traditional approach over a period of years tends
to eliminate conflicting practices.
The desired state in Figure 5 is also stable but has a single competing relationship.9
This implies that it may require more effort to keep the parts working together.
The business may also need to evolve new, non-competing processes or to propose
9 An early analysis of the complete set of fifteen new practices discovered several other competing
relationships. Most were associated with the practice of “line rationalization” which seemed
appealing when proposed in isolation (who could be opposed to “rationalization?”), but which
conflicted with the principles of worker empowerment and flexibility embodied in many of the other
practices.
Matrix of Change 18
alternatives that are at least neutral. If a proposed state has too many negative
relationships, the project will be unstable and must be reevaluated. If a target state
has few relationships, whether reinforcing or interfering, it will be neither likely
to collapse nor tightly bound together. Thus, the tighter coupling of the existing
system indicates that it is more inherently stable than the target system. Tight or
loose coupling also predicts the level of coordination necessary to effect change.
Loosely coupled practices require less coordination.
Critically, the transitional state for MacroMed is dominated by interfering
relationships indicating a high degree of instability. This offers a fundamental
explanation for the difficulty found in business process reengineering: when faced
with new practices that conflict with current operations, well-intentioned local
managers seeking to optimize their piece of the system will consciously or
unconsciously undermine change by pushing the system back toward its initially
stable state. From a local perspective, each manager’s resistance appears sensible
and even efficient, but from a global perspective structural change becomes almost
impossible.
Sequence of Execution: Where to Start and When to Stop
The most easily eliminated practices are those that oppose other existing practices.
While it can be tempting to do this, it can also be dangerous in that it may render
the remaining system even more entrenched and difficult to change. Since stable
systems generally have few opposing practices, another alternative is to start
removing practices that have no inherent effect on other practices. On the goal
side, the easiest new practices to implement are those that complement existing
ways of doing business. This can be used to build a bridge from one system to the
next, particularly where a practice has numerous complements in the new state. It
should be avoided, however, if new practices strengthen old habits in ways that
make dismantling the old regime even harder.
Practices that support a large number of other practices must be handled with great
care. Such “linchpin” practices can be inserted to help lock several new practices
in place or they can be removed to unlock several old practices. At MacroMed, the
use of designated equipment acts as a linchpin practice; it has multiple dense
complements, as Figure 5 illustrates.
Matrix of Change 19
Designated equipment – inflexible, high volume machinery – is one linchpin
practice that facilitates narrow job functions and pay schedules that are tied to the
amounts produced. Removing inflexible equipment helps with the simultaneous
removal of the entire block. In the ideal case, completely independent blocks may
be identified but in this case, the block’s components have less impact on the
number of management layers which might be changed separately.
Therefore, as long as the old designated equipment remains in place, it will be
more difficult to expand job responsibilities, lower inventory levels, and remove
piece-rate pay. For similar reasons, introducing new technology is often used
intentionally as a catalyst to facilitate change management. Installing new
equipment can signal an irreversible commitment to a new way of doing business,
and can initiate a cascade of complementary changes in work practices as workers
are forced to adapt. At MacroMed, one manager described the dramatic unveiling
of the new technology:
“In phase 2, we took down the walls that had surrounded the
new equipment, and assembled the new machines right on the
manufacturing floor in their final location. The workers saw the
new technology growing right around them. Because of this,
people knew it was real and didn't want to be left out of it.”
Although the new technology helped achieve buy-in from the workforce, it was
not enough to overcome the ingrained routines of the factory without a lot of
additional change management. Ironically, the very flexibility of the new
technologies made it too easy to continue with the comfortable old routines.
When flexible technology meets an inflexible workforce, often the machines, not
the people, are forced to adapt.10
The larger the blocks of reinforcing processes, the more difficult they are to change.
The hardest changes involve the installation of new practices that oppose the
greatest number of existing practices. In fact, large new blocks may be impossible to
install before the opposing practices are removed. One strategy is to dismantle
these competing practices beforehand. Another alternative is to lay a foundation
10 Firms adopting the popular SAP software package report that it is inflexible in how it handles
many basic business functions. Typically, this forces them to change their business practices to
conform to the software's requirements. Some customers view this as a feature, not a bug, because it
compels recalcitrant managers to discard their old practices.
Matrix of Change 20
of complementary new practices before making the attempted change. Having
support in place helps keep employees from reverting to old habits.
The presence of large blocks also suggests that change should stop only after a block
has been completely removed. Reducing the pressure to change when an
interlocking block is only partially dislodged can allow old practices to roll back
into place, thus undoing work and wasting resources.
Location: Greenfield and Brownfield Sites
Since the density of interfering relationships in the transition matrix indicates
how disruptive proposed changes will be, increasing interference indicates a
greater need for isolation. Sometimes a fledgling change project needs to be
shielded from bad habits. Natural tendencies toward local optimization will push
the system towards an initially stable state as long as opposing practices remain.
More disruptive changes make existing or brownfield sites less attractive. In fact,
greenfield sites are much more popular for introducing new systems, even (or
perhaps especially) when they require abandoning years of organizational
learning.
Greenfield issues relate not just to location but also to attitudes. Radical change is
“frame-breaking” in the sense that it requires changes in mental and mechanical
(Tushman, Newman and Romanelli). Mental models involve (1) goals and
values, (2) system boundaries, (3) causal structure, and (4) relevant time horizons
(Sterman). A transition matrix with more densely interfering relationships can
therefore indicate a greater need for changing mental models. For particularly
radical or frame-breaking change, an outside change agent may be essential to
helping people see processes differently. Managers may also need to be replaced
because they are too closely tied to former ways of doing business. Also, if a group
is left particularly worse off by change – in influence, responsibilities, etc. – it is
often best to address this issue early because members will tend to reassert their
former roles (Milgrom and Roberts; Rousseau).11
11 In principle, if the new system really does create more value, then it should be possible to
compensate the losers so that everyone is better off. In practice, it may be hard to determine which
grievances are legitimate, so some claims will need to go uncompensated. Nonetheless, if a majority
of stakeholders appear to be worse off under a new system, this is a warning sign that the change is
merely re-allocating benefits and not creating much new value.
Matrix of Change 21
Pace and Nature of Change: Fast or Slow, Incremental or Radical
For purposes of implementation planning, it is worth distinguishing between the
pace (gradual or rapid) and the nature (incremental or radical) of the change to be
made (Gallivan, Hofman and Orlikowski). Occasionally, radical change may best
be spread over several episodic steps (Gallivan, Hofman and Orlikowski) especially
if resources are locked in place and initial conditions resist change (Barua, Lee and
Whinston). A single step discontinuity may prove too disruptive, too expensive,
or too confusing. And yet, as the European proverb suggests, there are other
occasions when change is an all-or-nothing proposition. A halfway solution may
lead to wasted resources, organizational exposure, or even failure.
Three factors help to determine an appropriate pace: task interdependence,
organizational receptiveness to change, and external pressure. The first, task
interdependence, concerns how modular and how serial the essential steps are
(Leonard-Barton), that is the divisibility of organizational processes. Segmenting
tasks into blocks reduces the scope of change and the coordination problem that
must be managed at any given instant. The pace of change within blocks must be
rapid; the pace of change between blocks may be slow. Thus the speed of removing
parallel components of an interdependent block may be more important than the
serial speed of the whole change process. At MacroMed, the existing block of
practices associated with designated equipment in Figure 5 are interdependent
whereas the target block associated with low JIT inventory is independent. The
transition matrix, by showing interference, also suggests how radical a change
must be.
The culture of an organization helps to indicate the second factor, its receptiveness
to change. In a large chemical products company, the IS group was used to
experimentation and risk taking, a situation that greatly facilitated an episodic
approach (Gallivan et al., 1994). A big advantage of a supportive culture and
episodic change is that it permits phased adaptation to unfamiliar practices.
Particularly if change needs to migrate through several parts of an organization,
episodic change can promote experimentation and learning so late adopters can
access the know-how and know-why of the early adopters (Leonard-Barton)
without repeating their mistakes. Experimentation, however, is unlikely if the
culture punishes failed experiments. At MacroMed, the culture was not receptive
initially to the kind of change that managers sought to undertake, but this cloud of
resistance had a silver lining:
Matrix of Change 22
The fact that the first effort took place in one of [MacroMed]'s
oldest unionized plants made the challenges surrounding the
change-effort all the more great; however, that also made the
success all the more marketable in [MacroMed]'s other locations.
External pressure is the third factor. Low pressure provides slack time for
adaptation, but as an arbiter of pace, the environment may preclude the option of
episodic change, for example, if the organization faces a crisis. With extreme
external pressure, concern for survival and the absence of slack resources may
force the pace to be rapid. This, in turn, interacts with the culture of an
organization. If there is a history of opposition to change or a pattern of
unsustained or regressive change, then transition times should be minimized. As
Gallivan, Hofman & Orlikowski (1994, p.336) note “Under these conditions,
managers’ intentions for rapid implementation would seem appropriate given
that the opportunity to change anything later may be lost as enthusiasm wanes,
skepticism grows, resistance accumulates, resources are reallocated, and
champions are reassigned.”
Stakeholder Evaluations: Strategic Coherence and Value Added
Stakeholder evaluations make preferences and expectations explicit. Evaluations
help anticipate responses to change by providing data on sources of support for,
indifference to, or hostility toward proposed changes. If employees give an
existing practice low marks, they are likely to support a change. Conversely, if they
do not support a change they will likely give an existing practice high marks. They
may require new incentives to support new proposals.
Whereas the transition matrix indicates the degree of process interference and the
need to break mental models, the evaluations measure the alignment of
incentives. Negative values in the target ratings section indicate a need to either
cooperate and better align incentives, to increase pace and avoid drawing out
resistance, or to isolate factions whose interests oppose the change initiative.
High variance among stakeholder evaluations indicate different priorities and a
fragmented strategic vision. If evaluations were uniform across employee
populations, then stakeholders within the company would jointly focus on
tackling the most important issues first. With different priorities, however,
stakeholders will tend to work at cross-purposes during implementation. When
Matrix of Change 23
these differences occur, organizations may wish to establish a more uniform
strategic vision early in the change process.
Stakeholder evaluations open a window onto organizational receptiveness to
change. In their case study of a large chemical company, Gallivan, Hofman and
Orlikowski found that a tradition of open experimentation, a willingness to
invest in technology without immediate payoff, and a philosophy of
empowerment and learning all created norms that facilitated change. These
factors influence the willingness of stakeholders to cope with, to participate in, and
to accept responsibility for change.
The very act of asking workers for their values – and taking them seriously – can
have a positive effect on the change process by giving employees a sense of
ownership and responsibility. At MacroMed, the workers attitudes changed
noticeably:
They played the role of 'final customer.' They decided where
engineering and operations resources should be focused. They
also made supplier decisions and traveled together to supplier
sites. ...There is true measurable value in soliciting and
developing ownership at the worker level, at the early stages of
change.
Determining the Net Value Added
Once key differences in stakeholder evaluations have been addressed, a simple
mechanism gives an indication of which changes will ultimately add the most
value. The formula Target Value - Existing Value gives an approximation of the
net value to be gained by changing practices. This assumes that all units are the
same and that practices with no counterpart are paired with a value of zero. Thus
“line rationalization,” a target practice with no existing counterpart, has a net
value of 1 - 0 = 1. A means of visualizing the net value added is to sort practices in
a “Tornado Plot.” This diagram, illustrated in Figure 7, connects importance
ratings across categories so that the spread is monotonically decreasing. Net values
can also be negative, as in the case of a stakeholder who feels he or she can earn
more through piece-rates than through flat pay.
Matrix of Change 24
-3
-3
-2
-2
-1
-1
0
0
1
1
2
2
3
3
Flat Pay
Flat Mgmt.
Line Rat.
Flex. Eqpmt.
JIT Inventory
Grtr Resp.
Piece Rates
Layered Mgmt.
N/A
Designated Eqpmt.
Buffer Inventory
Narrow Resp.
Figure 7 – A “Tornado Plot” indicates which factors create the most
value for stakeholders by sorting on the basis of net values.
Net value added provides a useful complement to the Matrix of Change, but it can
be misleading if used in isolation. Principles of net value suggest which changes
are important, but principles of coherence suggest which sequence to adopt. Many
consulting companies try to get the big payoff items first (Sterman, Repenning and
Kofman), but this can be counterproductive, and the Matrix shows why. A
“greedy” algorithm, which sorts changes based solely on the best value, will miss
the possible cost reductions brought about by setting up complements (Croson).
The net values in Figure 7, for example, appear to suggest first giving workers
more responsibility then reducing inventories and so on, proceeding through the
list in a sequence that gains the next best value at each step. This process might
stop before implementing the last step which appears to add negative value. The
matrices in Figure 5, however, show that some practices are reinforcing. For
instance, at MacroMed, narrowly defined job responsibilities complement the use
of designated equipment, so the least cost path involves changing them together
rather than two steps apart. Although net value methods suggest changing to just-
in-time inventories before moving to flexible equipment, this could even be
counterproductive. It could lead to stockouts or increased worker frustration and
resistance.
Although cutting layers of management may not create as much value as
improving the product offering through flexible equipment, Figure 5 shows how
multiple layers of management complement narrow job descriptions. It may not
be possible to have workers assume greater responsibility when they face oversight
Matrix of Change 25
at multiple levels. In this case, moving to flatter management constitutes a
“stepping stone” – a practice that smooths the adoption of other practices (Nolan
and Croson).
The sequence of changing practices affects not only how soon any given payoff
may be realized but also the cost and feasibility of changing other practices. Thus
there are “alpha” and “beta” benefits to the order of adoption (Croson; Nolan and
Croson; Rosenberg). Alpha benefits represent immediate returns while beta
benefits represent subsequent gains achieved through “setting up
complementarities in the adoption of future [practices]” (Croson, p. 32) Beta
benefits also accrue from “learning by doing other things.” In the process of
learning to operate with fewer layers of management, an organization may also
learn the process of distributing responsibility.
The greatest benefit from the Matrix of Change may be that it forces management
to make explicit the practices and interactions that are implicit in the old, new, and
transition systems. Recognizing and defining the nature of the problem can be
80% of the battle, but without a tool for clearly sorting out interactions among
principles, much of change management is relegated to intuition and politics.
Once the elements of the Matrix of Change have been identified, the most effective
strategy may become self-evident.
The Problem of Prediction in Complex Systems
Of course, despite data provided by the Matrix, companies consist of myriad
unarticulated rules, procedures, technologies, and cultural mores that can never be
completely catalogued, or even recognized. The most detailed list will inevitably
overlook certain unstated assumptions inherent in any system of work. The
result of any elicitation or mapping process is “a set of causal attributions, initial
hypotheses about the structure of the system which must then be tested” (Sterman,
p. 321). The Matrix of Change helps managers identify important assumptions
implicit in their work organization, but they must keep in mind that key
components of any system may remain unmodeled, allowing unexpected barriers
to surface in the midst of the change process.
The Matrix of Change can offer two forms of assistance, if not complete assurance,
in dealing with complex systems. The first is that the Matrix design process can be
Matrix of Change 26
revisited as often as necessary. Each design phase can represent a temporal time
slice, or window onto current and possible outcomes as Figure 8 suggests.
ABBCCD
Figure 8 – Linked matrices can show intermediate transitions.
Matrix chaining can highlight important stepping stones or phases that can be
skipped entirely. A transition from craft production, to mass production, to
modern manufacturing, for example, might omit the intermediate step or use it as
a bridge, depending on the ease of the associated transitions. Refining the Matrix
across several levels of detail or across time slices can lead to the development of
organizational meta-principles, such as the observation that a pair of process
dependencies frequently recur. This pair might then be integrated or replaced
wholesale. Having identified certain dependencies and interactions, systematic
process behaviors might be amenable to software simulation to aid in prediction.
Reflecting actual events, a feedback model of total quality management practices at
Analog Devices found significant quality and productivity improvements did not
translate into higher financial performance (Sterman, Repenning and Kofman).
The software offered controlled and repeatable simulations that helped identify a
confluence of interacting business practices and environmental factors causing the
trouble. The matrix can provide important inputs to such a system.
A second form of assistance is help in reshaping mental models. At MacroMed,
workers held the unarticulated goal of running the machines at all times to
increase productivity. This led them to resist product line changes and
inadvertently to defeat the value of flexible equipment. As this belief surfaced,
MacroMed managers devised compatible incentives and achieved a more coherent
work system. To the extent that the Matrix can help shift mental models even part
way from implicit to explicit parameters, it can improve chances for success. It
may never be possible to “manage the magic” of a perfectly functioning system, but
managers need simple ways to initiate debate on critical changes. The Matrix helps
Matrix of Change 27
initiate that inquiry, it helps identify multiple interactions, and it uncovers at least
some of the hidden assumptions.
Lessons Learned at MacroMed
At MacroMed, we administered a set of questionnaires based on the Matrix of
Change to multiple groups within the company. This included managers,
engineers, and hourly employees in both the company at large and in a special
pilot project designed to test the proposed changes.
Having MacroMed employees fill in the Matrix proved to be highly informative.
For instance, management within the pilot group saw positive reinforcement
between flexible machinery and line rationalization, an interaction that is
inconsistent with the literature. Line rationalization, a top-down optimization
process, tends to reduce the scope for on-the-spot decision-making and
reconfiguration of flexible machinery.
Worker matrix data also showed a certain degree of ambivalence regarding
management. Rather than viewing it as a partnership, workers considered that
having supervisors work the line would discourage workers from contributing
new ideas or expanding their roles. At the same time, a surprisingly large subset
of workers expressed no desire to become “empowered” with responsibility for
programming the equipment. They preferred their traditional roles, which
required little on-the-job thinking, allowing them to daydream and chat with co-
workers while doing the parts of the job requiring physical work.
Several assumptions about the transition surfaced during data gathering, but other
assumptions did not surface until the new system was implemented. For instance,
although piece-rate pay was eliminated and an explicit goal of reducing WIP
inventory was established, most workers continued to behave as if the paramount
performance indicator was eliminating machine downtime. As a result, they
avoided changeovers and kept the flexible machines running on the same product
line almost as much as they had with designated equipment. Although this no
longer increased the profitability of the factory or their individual pay, this and
many other heuristics were too ingrained to be easily overturned.
Overall, the high density of interfering relationships in the transition matrix
highlighted the need for a greenfield approach. Since a completely new site was
too expensive, MacroMed chose a modified greenfield implementation. One
Matrix of Change 28
portion of the factory was physically isolated with a temporary new wall, then
workers and managers were carefully selected for the SWAT team.
Implementation proceeded in two phases. During the first phase, the SWAT team
debugged the most difficult technologies and procedures. They reorganized the
line and reduced obsolete finished goods inventories to zero. Once the process was
established, the SWAT team helped disseminate flexible manufacturing practices
throughout the remainder of the factory and to other plants. They served as
trainers and troubleshooters for the second phase of implementation. As one
MacroMed manager put it:
“All members of the SWAT team, both union and salaried,
shared equally in the responsibility... Because they were given as
much responsibility as the salaried employees, the union workers
on the team cared greatly about the outcome of the project and
they were a positive influence on bringing the other union
workers in the plant over to the new way of doing things.”
Paralleling the episodic introduction of radical change (Gallivan, Hofman and
Orlikowski), this modified greenfield approach greatly simplified MacroMed’s
transition. Workers reported that job security was critical, indicating that a sudden
transition from a piece-rate incentive scheme to different incentives based on
meeting new goals – such as new ideas contributed, lower inventory, and
accepting greater responsibility – could be too disruptive.
MacroMed chose to offer flat-rate compensation initially while workers adjusted to
their new roles and began to more fully understand the risks while management
gained a better understanding of behaviors they wished to promote. Wage
guarantees thus lowered worker resistance to the new changes. As the head
manager of the SWAT team observed, “Equipment issues are easy; the people
issues are the tough part.” Other factors that eased the transition included the use
of contract employees and hand-selected union workers who were receptive to
change.
Applying the Matrix of Change, MacroMed also discovered conflicts in different
employees’ set-up procedures. This revealed a way to reorganize process
changeovers and resulted in a 67% reduction in setup times as well as a dramatic
reduction in variability. Other successes included a fourfold increase in
throughput and waste costs cut by 65%. Purely through attrition and early
retirement, the number of line employees was reduced by 33% while staff
Matrix of Change 29
employees were reduced by almost 40%. MacroMed stopped its decline in market
share. Moreover, flexibility and response time improved to the point where
products could move from concept to store shelf in just 99 days, an impossible
time frame under the previous practices. The success was such that management
ordered the windows painted black in the portion of the factory devoted to the
new approach to prevent visitors and competitors from observing their
organizational and technical innovations.
Conclusions and Next Steps
The findings from our study of MacroMed and similar companies underscore that
successful change depends on leveraging complementary practices and on
redesigning contingent business processes. Managing and coordinating
increasingly complex systems, however, requires increasingly sophisticated tools.
Flexibility in manufacturing relies not only on powerful new information
technologies, as is commonly emphasized, but also on a mutually reinforcing set
of practices in the areas of cross-training, incentives, inventory policy, decision-
making structure, and open door communications among others, which function
as a coherent and stable system. Not only is it difficult to isolate a single practice
and graft it onto another work organization to achieve the same effect, but also
many subtle interactions often go unnoticed until it is too late. Juxtaposed against
this argument, the high failure rate of business process reengineering seems less
mysterious: without proper tools, most business process reengineering efforts are
unlikely to have accounted for the complexities, the finely balanced complements,
and the time delays of a stable and coherent system.
By systematizing change management, the Matrix of Change can help. It selects
those practices most likely to contribute to business goals. It detects
complementary and interfering practices, and presents an overview of an
interlocking organizational system. It helps capture the alignment of incentives,
showing which practices are the greatest sources of value to stakeholders. Then
after identifying interactions, it suggests guidelines for judging a proposed system’s
feasibility and coherence, its sequence of execution, and its relative pace of change.
By focusing on the difficulty of a transition, the Matrix of Change also suggests
how disruptive or radical the change is likely to be and thus provides an index of
the need for a greenfield location. From this overview, management can learn
Matrix of Change 30
where it has the greatest leverage in implementing change and which changes are
most important.
Each element of the Matrix of Change proceeds from fairly intuitive concepts of
reinforcement and interference. MacroMed used these steps to develop a deeper
understanding both of how its existing practices cooperated with one another and
of how practices they wished to introduce meshed with what they had done in the
past. Since the list of practices can be disaggregated to an arbitrary level, the Matrix
can be applied to the whole organizational structure, the department, and the shop
floor.
It is also possible to proceed in the other direction and consider aggregation
through the entire value chain, including suppliers, in-bound logistics, out-bound
logistics, buyers, and even competitors (Porter and Millar; Venkatraman). From
this perspective, the Matrix can also be used as a measure of environmental fit,
answering questions about how well current or proposed practices work with or
against the environment. If environmental factors oppose one another in a
triangular matrix, they indicate instabilities that might uncover new
opportunities. Unstable environments require more flexible – possibly networked
organizations – with a premium on innovation. Emerging markets often fit this
profile. If environmental factors reinforce one another, they indicate stable
systems that are unlikely to change or that might change all at once, a change in
regulation, for example, can create a shock to the system. A more stable
environment requires a more structured organization with a premium on
efficiency. Commodity markets, for example, tend toward stable, cost-based
competition (Alstyne; Snow, Miles and Coleman).
Since the change process is likely to unfold over a period of time, the Matrix can be
revisited as necessary to gauge progress. New relationships can be captured as
managers develop a deeper understanding of their situation. Managing change
without regard to context or interconnections misses what is most important. The
true value of the Matrix is to optimize steps not just in isolation but as parts of an
integrated system with a more cohesive fit.
In adopting change, businesses typically look for cost savings, a first order effect.
Savings then free up resources that can be substituted into other areas – a second
order effect that also needs to influence business decisions. Third order effects,
however, are those which are most often missed. These represent whole new
Matrix of Change 31
structures or systems for organizing work (Malone, Yates and Benjamin). Flexible
machinery adds little value in environments accustomed to rigidly hierarchical
procedures, large inventories, and little autonomy. But in conjunction with
shorter production runs and just-in-time deliveries, its effects upon competitors
can be devastating. Financial analysis alone frequently does not uncover third
order effects because it can overlook complements in strategies and structures, as
well as unanticipated interference from incompatible practices. The Matrix of
Change can identify complementary structures and give change agents with an
intuitively appealing tool for managing them.
Matrix of Change 32
Appendix
Reinforcement and interference themes recur frequently. One important business
process reengineering version is the transition from a hierarchical to a network
organization. Hierarchies tend to be vertically integrated, mass-production
organizations that seek scale economies through long production runs of
commodity products and that reduce risk by owning assets they use (Malone, Yates
and Benjamin; Williamson). Network organizations, on the other hand, tend to
be partnerships which exploit strategic opportunities by rapidly and flexibly
adjusting their outputs to niche markets, seeking scope economies through
complementary, possibly intangible, assets, and that reduce risk through equity
arrangements, repeated cooperation, and trust (Alstyne; Powell). Members
exercise joint control over assets rather than taking direction from an executive
body. Hierarchical and network practices may be internally consistent but
juxtaposed against one another typically they compete. Milgrom and Roberts
discuss the differences between “lean manufacturing” and “mass production.” In a
survey of attributes, Alstyne also provides a direct comparison of hierarchies and
networks. Table 1 lists elements from these two systems and illustrates the strong
differences between their methods for organizing work.
Hierarchical Organization Network Organization
Mass market Customized production
Fewer models / longer lives Broader offering / shorter lives
High vertical integration Low vertical integration
Specialized high volume machinery Flexible machinery
Large WIP and FG inventories Low JIT inventories
Vertical communication Direct communication
Competing arms-length suppliers Fewer more trusted suppliers
Function-based work groups Cross functional teams
Multi-tiered management Flatter management
Narrow job descriptions Local autonomy / decentralized decisions
Fixed wages for output Residual claim incentives
Rank-based authority Expertise-based authority
Table 1 – Different work organizations have competing practices.
Internally, these systems appear to be coherent. Long mass production runs
accompany large inventories just as highly customized products accompany
flexible machinery. It is unlikely, however, that mixing elements of these
independently coherent systems will result in another coherent system (Milgrom
Matrix of Change 33
and Roberts). In fact, placing several of the organizational attributes from Table 1
into the matrix framework (Figure 9) illustrates the difficulty of a potential
business process reengineering effort. In aggregate terms, the endpoints are stable
and cohesive but the transition from a hierarchical to a network organization
appears to be unstable. Given the number of competing practices in the transition
region, it is not surprising that, for this type of change, reengineering projects that
implement only a handful of features have difficulty reaching their goals.
Although advanced information technology is typically associated with modern
manufacturing more than traditional mass production, it is interesting to note
how adding it can complement practices in both systems. If IT is used for
coordination and decision support, it can complement cross-functional teams and
flatter management, as in the vertical interference matrix. By providing everyone
with the same data, it can also undermine expertise-based authority. On the other
hand, if IT is used for monitoring and automation, it can complement narrow job
descriptions and rank-based authority, as in the transition matrix. The dual
character of IT has been observed in literature (Attewell and Rule). If an
organizational feature has multiple attributes, a helpful rule is to split it into
discrete practices, such as disaggregating IT into monitoring, decision support, and
automation.
Matrix of Change 34
Mass Market
Multi-Tiered Management
Competing Arms-Length Suppliers
Large WIP and FG Inventories
High Vertical Integration
Narrow Job Descriptions
...
+
+
-
-
Strong Complement
Weak Complement
Weak Interference
Strong Interference
Rank Based Authority
Mktng Production
& Design Human
Resources
Organization
Hierarchical Organization
-
-
-
--
-
--
--
-
-
--
- -
-
- - - -
--
-
-
--
+
++
++
+++
+
+
+
+
+
+
++
+
+
+
+
Importance
...
Function Based Work Groups -
- - -
+
++
+
+
...
+
...
++
+
++-
+
-
+
Matrix Interaction
Figure 9 – Although organizational archetypes appear stable, the
transition appears to be unstable.
Matrix of Change 35
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The authors thank James Champy, Kevin Crowston, Michael Gallivan, Deborah
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