CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS: THE ROLE OF INTERNAL AND EXTERNAL CHANGE ADVOCATES

Journal of Management Studies 28:2 March 19910022-2380 $3.50

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS:THE ROLE OF INTERNAL AND

EXTERNAL CHANGE ADVOCATES*

ARI GINSBERG

Stern School of Business, New York University

ERIC ABRAHAMSON

Graduate School of Business, Columbia University

ABSTRACT

Change advocates who participate in the process of strategy-making can playan important role in enabling organizational adaptation. To examine the natureof this role, this article investigates the influence on strategic shifts of two suchparticipants - new members of the top management team and management con-sultants. Empirical findings suggest that managers see these two types of changeagents as having two different kinds of influence on strategic shifts. Specifically,the change agent role of management consultants is viewed as one that createspressure for change by helping to shape new managerial perspectives of theenvironment. In contrast, the change agent role of new members of the topmanagement team is viewed as one that counteracts inertial forces that mayblock the implementation of change. These results suggest that managementconsultants may be much more useful in stimulating changes in the waysexecutives think about their environment than they are in implementing radicalstrategic changes. To overcome institutional resistance to extreme strategic shifts,organizations may need to resort to stronger political and symbolic actions, suchas promoting or hiring new top executives in key leadership roles.

INTRODUCTION

Change in strategic orientation is a pivotal component of organizational adap-tation (Chaki-avarthy, 1982; Galbraith and Kazanjian, 1986). Two dominantschools of thought have emerged to understand the occurrence of such changes(Johnson, 1987). The rational school of thought about strategy formulation andimplementation asserts that when environmental changes are perceived to haveoccurred, strategists recognize available strategic options, evaluate them, andmake the apropriate decisions. Studies rooted in this perspective have examinedthe influence of two factors: (1) the feedback effects of prior performance

Address for reprints: Ari Ginsberg, New York University, Stern School of Business, GraduateDivision, 90, Trinity Place, New York, NY 10006, USA.

174 ARI GINSBERG AND ERIC ABRAHAMSON

(Fombrun and Ginsberg, 1989; Grinyer^^a/., 1988;Oster, 1982); and (2) environ-mental conditions (Miller and Friesen, 1983; Smith and Grimm, 1987; Tushmanand Anderson, 1986). In contrast, the interpretive, or cultural, school of thoughtasserts that strategic changes occur as the result of changes in the strategic 'recipes'or 'formulae' that managers use to construe their environment (Grinyer andSpender, 1979; Hinings and Greenwood, 1989). Studies rooted in this perspectivehave examined the role of new chief executives or management consultants inloosening the mechanisms that act to preserve or institutionalize such recipes,or orientations {e.g. Grinyer et al., 1988; Johnson, 1987).

According to the cultural school of thought, pressure for strategic reorienta-tion occurs when new frames of reference emerge among managers that makethem see aspects of the environment that necessitate realignment (Hedberg, 1981).However, inertial forces can create resistance to realignment by blocking theimplementation of strategic changes (Greenwood and Hinings, 1988). Accordingto Lewin (1952), these two types of forces create a social system that is instationary equilibrium until change agents act to transform the system in threesteps: unfreezing, moving, and refreezing.

Consistent with this perspective, participants in the strategy-making processmay facilitate extreme strategic shifts in two important ways: (1) by introducingnew perspectives that create pressure for orgainizational change; and (2) by takingpolitical and symbolic actions that counteract institutional inertia and culturalresistance to change. The influence of such change advocates may explain whysimilar organizations react differently to the same environmental stimuli orperformance outcomes even when similar levels of resources for change areavailable to both (Gooper and Schendel, 1976).

In contrast to the strategic management literature which focuses on the role ofthe top management team in facilitating organization-environment alignment (see,e.g., Ginsberg, 1990; Hambrick, 1989), the organizational development (OD)literature has focused largely on the efforts of change agents who are external tothe client system (see, e.g., Ottaway, 1983). Although such efforts have traditionallyfocused on lower level management processes (Tichy, 1980), more recently theyhave begun to emphasize top management decision-making processes. Forexample, Buller (1988) identified a number of important ways in which ODconcepts and practices may be used to enhance the formulation and implementationof strategic decisions. Despite increased recognition of the opportunities that ODor management consultants have for influencing strategy-making processes, fewempirical studies have examined the role of management consultants in facilitatingstrategic change. Nor have they compared the change agent roles of managementconsultants to those of new members of the top management team.

This article begins to address this gap by linking conceptualizations of therole of change agents to the literature on strategic change. Such an integrativefocus allows for the development and testing of specific propositions regardingthe influence of two types of change advocates on shifts in strategic orientation:(1) internal, specifically, new members of the top management team, and(2) external, specifically, management consultants. We begin by discussing theliterature which underscores the role of cognitive and socio-political rigiditiesin preventing strategic shifts in response to a changing environment. We thendelineate the roles of management consultants and new members of the top

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 175

management team in creating pressure for, and in countering resistance to, changesin strategic orientation. To explore the relation between the theoretical concep-tions expressed in this literature and the conceptions held by executives, we nextpose specific research questions that emerge from this discussion. Finally, wepresent the results of an empirical study that investigated top executives perspectiveson the role of these change advocates in facilitating shifts in strategic orientation.

RIGIDITIES PREVENTING STRATEGIC REALIGNMENT

The literature that examines rigidities preventing adaptation to changingenvironment details two broad approaches - one that emphasizes resistance tonew environmental perspectives that create pressure for strategic reorientation,and another that emphasizes inertial forces that block the implementation ofchange (Ginsberg, 1988).

Depending on their orientation, researchers examining the cognitive biasesthat impede the formation of new perspectives in strategic decision-making focusat either the individual or the group level. An example of individual-levelresistance is the tendency among managers to seek out information that confirmstheir preconcpetions (Zaskind and Costello, 1962) and to discount data thatdiscredits them (Nisbett and Ross, 1980). An example of group-level resistanceis Janis' (1972) description of group-think in which he initially drew attentionto self-validating processes that narrow the perspectives that guide and rationalizegroup responses to various issues. Goncern with the effect of cognitive biaseson the strategic decision-making process is widespread in the managementliterature (Jackson and Dutton, 1988; Schwenk, 1984; Walsh, 1988).

Inertial forces can block the implementation of a strategic reorientation evenwhen a new perspective calling for the need to change has emerged in the schema,or information domain, of strategic decision-makers. Inertial forces can be bothinternal and external to organizations (Hannan and Freeman, 1977). Externjilly,organizations must conform to strategies and policies that stakeholders have cometo expect, or else lose legitimacy and stakeholder support (DiMaggio and Powell,1983); Meyer and Rowan, 1977; Rhenman, 1973). Resistance to change maythus reflect an organization's ongoing effort to appear legitimate to itsstakeholders.

As summarized by Miller and Friesen (1980), internally based inertia andresistance to change emerge for the following reasons: (1) organizational mythsand ideologies are enduring factors which tend to inculcate narrow views amongemployees that reinforce past behaviour and cause its future amplification;(2) procedures and strategies are extrapolated past their point of usefulnessbecause they have enjoyed success in the past; (3) continuity in the directionof the developmental wishes of key members of the organization is more likelyto be in line with the elaborate set of programmes, goals, and expectations thathave grown up around the organization and have come to reflect these wishes;and (4) strategic rebrientations may entail admissions of failure and a concomi-tant erosion of the political base and self-esteem, not only of managers but alsoof employees who had a vested interest in these norms.

In sum, two types of forces impede extreme shifts in strategic orientation. In

176 ARI GINSBERG AND ERIC ABRAHAMSON

the first, forces block the emergence of new perspectives on the environmentthat can reveal the need for realignment. In the second, new perspectives mayemerge, but inertial constraints, both external and internal to the organization,create resistance to organizational changes. The occurrence of strategic reorien-tation may thus require the presence of decision-making participants that actin two capacities as change agents. These participants overcome forces blockingthe emergence of new insights and understandings that create pressure for realign-ment, and help counter inertial forces that create resistance to the implementationof extreme shifts in strategy orientation.

The literature discusses two important participants in the strategy-makingprocess that can counteract these rigidities by acting as change advocates - thosewho act from the 'inside', i.e. managers with new executive positions and thosewho act from the 'outside', i.e. management consultants. The next sectionexamines their role in overcoming rigidities impeding organizational change.

THE ROLE OF CHANGE ADVOCATES

Creating Pressure for RealignmentNew members of the top management team''' have the potential to facilitatestrategic change. They do so by fostering the emergence of new frames ofreference among strategic managers that make them see aspects of the environ-ment that necessitate a shift in strategy (Hedberg, 1981). Organizations inenvironments undergoing turbulent change and increasing environmentalcomplexity need to be able to adapt to such change by transforming their modesof strategy making, or orientation towards managing their environment (Millerand Friesen, 1983; Smart and Vertinsky, 1984).

New members of the TMT. Executive succession is an important mechanism forcreating pressures for strategic realignment because of the frame-breakingperspectives new members of the top management team may bring with them(Pfeffer and Salancik, 1978). New members of the TMT who have come fromother hierarchical levels, organizations, or industries can import into top manage-ment groups new perspectives that reveal the perceived need for change andits direction (Graham and Richards, 1979; Virany and Tushman, 1986).

Management consultants. The organizational development literature leads inconceptualizing the role of consultants in organizations. These early effortsrecognized the catalytic role consultants play in the unfreezing stage of Lewin's(1952) unfreezing, moving, refreezing sequence (Bennis, 1969; French and Bell,1978, p. 16; Huse, 1975). Organizational change is the raison d'etre of bothorganizational development and management consulting (Ottaway, 1983).However, the former has tended to have a narrow focus on altering individualand group level within the context of strategic decisions that have already beenmade, whereas the latter has tended to have a broader focus that includes guidingtop managers in designing new strategies and structures for their organizations.

More recently, scholars have begun to examine how management consultantscontribute to the creation and evolution of new perspectives or schema among

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 177

strategic decision-makers. Management consultants challenge the existingcognitive order - they 'state the obvious, ask foolish questions, and doubt - £illof which helps organizational members get outside of themselves' (Smircich andStubbart, 1985, p. 731). They 'offer the potential advantage of being experiencedobservers and analysts without the related disadvantage of being locked intodefending previously established positions or ways of thinking' (Gattiker andLarwood, 1985, p. 120). By ushering in new conceptualizations and jargon,consultants act like fashion setters who create new frames of reference that forcetop managers to recognize the antiquated nature of previous strategic orienta-tion and the 'fashionability' of the new (Abrahamson, 1986).

As the environment becomes increasingly turbulent and complex, innova-tion becomes increasingly important to avoid obsolete products and practices(Miller and Friesen, 1983) and firms should tend to increase experimentalbehaviour {e.g. new product development) to find novel answers where old onesno longer work (Dutton and Freedman, 1985). Gonsequently, as the environ-ment becomes more complex, firms seeking to gain competitive advantage overother firms in their environment should attempt to become more innovativeand proactive (Brittain and Freeman, 1980). Nevertheless, empirical evidencedoes not consistently support the claim that firms shift their strategic orienta-tion in tune with shifts in environmental complexity (Miller and Friesen, 1983).

The influence of change agents, such as new members of the TMT andmanagement consultants, may explain why some firms make such shifts inadapting to increasing environmental complexity while others do not. Accordingto the theories espoused in the literature discussed above, new members of theTMT and management consultants hired can have a significant impact on theway in which a firm adapts to an increasingly complex environment becausethey help reshape existing perspectives and schema. An important researchquestion, then, is whether or not new members of the TMT and managementconsultants play an important role in facilitating extreme changes in perceivedenvironmental complexity. More specifically:

Ql\ Are perceived changes in environmental complexity more likely to beextreme when strategic shifts are strongly influenced by new membersof the top management team?

Q2: Are perceived changes in environmental complexity more likely to beextreme when strategic shifts are strongly influenced by managementconsultants?

Counteracting Resistance to the Implementation of ChangeExtreme organizational changes threaten to usher in entirely new beliefs andto alter radically the patterns of resource allocation, dependency, and powerunderlying the interaction of organizational constituents (Greenwood andHinings, 1988). Those who have studied organizational cultures argue per-suasively that firms must often change these cultures in order to implementstrategic changes (Deal and Kennedy, 1982; Sathe, 1985; Schwartz and Davis,(1981). Additionally, strategy implementation requires political restructuringsin which opponents of strategic changes are either enticed to support them orblocked from obstructing them (Gray and Ariss, 1985). The resistance to cultural

178 ARI GINSBERG AND ERIC ABRAHAMSON

and political inertia will be particularly strong when proposed organizationalchanges are far-reaching in nature. However, new members of the top manage-ment team and management consultants can act to ease the implementationof strategies.

New members of the TMT. Quinn's (1980) seminal work suggests that well managedstrategic change requires signals to the organization that change is coming andthat new courses of action are legitimate. Changes in top-management teamsprovide such signalling and legitimating functions. Repeated findings thatmanagement changes in athletic organizations have no discernible impact uponperformance support the notion that executive succession plays a legitimatingrole by reflecting a form of scapegoating to assure fans, players or otherstakeholders that a team does not tolerate poor performance (Brown, 1982; Eitzenand Yetman, 1972; Gamson and Scotch, 1964). A ceremony of status degradationof the old leader followed by an elaborate ceremony of replacement aimed atbuilding up the organization's collective image often constitutes an importantelement of this symbolic process (Gephart, 1978).

Succession, then, helps communicate that a highly competent top executiveor management team directs the strategic reorientation that will lead the organiza-tion to success. Adroit executives can reinforce the symbolic impact of successionwith actions specifically designed to remove cultural obstacles to implementa-tion (Argyris, 1985). Tunstall (1986), for instance, changed recruiting, trainingand promotion, built new headquarters and developed a new mission statementin order to integrate AT&T into its newly deregulated environment.

Executive succession, however, probably accomplishes more than a symbolicfunction in implementing strategic change. Quinn (1980, p. 26) noted that well-managed implementation of strategic changes called for decisive political actsby top managers - 'they try to get people behind their concepts whenever possible,to co-opt or neutralize serious opposition if necessary, or to find the "zone ofindifference" where the proposition will not be disastrously opposed'. In two areaswhere successful top managers have intervened politically, first, they acted todefeat efforts of the 'old guard' to maintain the status quo, then they counteractedthe efforts of other coalitions to control a disproportionate share of changeresources (Tichy and Ulrich, 1984). Furthermore, in an effort to secure thesupport of key stakeholders and to attain legitimacy for their change efforts,executives and dominant coalitions may exaggerate and even construct crises(Neilson and Rao, 1987). These arguments are consistent with empirical findingsthat administrators may create the illusion of a fiscal crisis so as to increase theircontrol over scarce financial resources and thereby to increase their power(Bradshaw-Camball, 1989).

Management consultants. Tbe mere presence of expert consultants in tbe strategyformulation process may serve to signal to organizational constituents that expertknowledge bas been applied to the problematic situation, and that,the strategicreorientation is justified and legitimate. As Pfeffer observed 'consultants arepresumably objective, experts, and expensive. The two former beliefs ensurethey will be legitimate and the latter tends to foster commitment to theirrecommendations' (Pfeffer, 1981, p. 143). Thus, by soliciting the advice of

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 179

management consultants, top managers advocating strategic changes may tipthe balance of pov^er in their direction (Kanter, 1984; Pfeffer, 1981). In recog-nizing the ability of management consultants to enhance the credibility of thosewho hire them, scholars have argued that the consulting process of bringingabout change is inherently political (see e.g. Cobb and Margulies, 1981).

According to the theories espoused in the literature discussed above, theparticipation of management consultants and new members of the top manage-ment team can help implement extreme shifts in strategic orientation bycounteracting cultural and political obstacles. An important research questionthen, is whether or not this role is important in facilitating extreme changesin perceived strategic orientation. More specifically:

Q3: Are perceived changes in strategic orientation more likely to be extremewhen strategic shifts are strongly influenced by new members of the topmanagement team?

Q4: Are perceived changes in strategic orientation more likely to be extremewhen strategic shifts are strongly influenced by management consultants?

METHOD

Time Frame and Sample, .The enactment in 1980 of the Depository Institutions Deregulation and MonetaryAct (DIDMC) represents a significant change in the retail banking environ-ment. The DIDMC act, called the most monumental banking legislation to bepassed in nearly half a century (McLean, 1980), marks the beginning of a newera of competition among commercial banks and savings institutions in the UnitedStates., The six-year period beginning with the passage of this legislation thusprovided a meaningful time horizon for this study, since it was not only adjacentto a critical regulatory event that would likely lead to increased environmentalcomplexity, but also sufficiently long for firms to have made discernible strategicchanges (Ginsberg, 1986). To maximize access to top managers and to controlfor differences in state regulations, the data collection centred on one state inthe northeastern region of the United States.

Data Collection ProceduresData were collected via questionnaires and interviews. Questionnaires were sentto all banking institutions listed in the American Bank directories for this state.Interviews regarding the role of management consultants and executive successionwere conducted with top managers of 29 firms from this sample.

Questionnaire data. To ensure that the analysed sample consisted of senior executiverespondents who had adequate familiarity with the firm's strategic decision-making environment, we excluded all questionnaires that were not filled outby executives who had been in this position for at least eight years. Onlyrespondents who were managing officers (president or CEO) were included inthe analysed sample. These managing officers were asked to comment on the

180 ARI GINSBERG AND ERIC ABRAHAMSON

replacement of subordinates at the executive or senior vice president level aswell as the use of management consultants.

Using a test of proportions, we next compared distributions of size and typeof institution categories distributions of this sample and the state population fromwhich it was drawn and found no significant statistical differences. Althoughthese analyses indicated that the sample of firms examined was representativeof the state population from which they were drawn, we cannot, strictly speaking,generalize from the results of this study to firms in other types of industries.

Interview data. To conduct interviews, we selected 16 organizations in whichquestionnaire respondents had indicated that new members of the top manage-ment team had exerted a strong influence on strategic shifts and 13 organizationsin which questionnaire respondents had indicated that management consultantshad exerted a strong influence on strategic shifts.

Using open-ended questions, we asked executives interviewed to describe thefollowing: (1) the nature of the shift in strategic orientation that their firm hadundergone since the year prior to the passage of the DIDMC Act and (2) thenature of the roles new members of the TMT euid management consultants playedin facilitating strategic shifts.

Qualitative AnalysisBased on verbal descriptions, we classified changes in strategic orientation aseither incremental or radical. In accordance with a classification scheme ofchanges in strategy proposed by Ginsberg (1988), the former were defined aschanges in degree or magnitude and the latter as changes in state or pattern.For example, efforts by a bank emphasizing specialized service to selectivelyacquire competitors to deepen expertise were classified as incremental. In contrast,efforts by a financial boutique to broaden expertise, i.e. to offer a full line ofproducts and services and to realize economies of scale were classified as radical.

Based on this classification, almost 40 per cent of the executives in the firstgroup (those that had indicated that new members of the top management teamhad exerted a strong influence on strategic shifts) described the change in strategicorientation which the firm had undergone as radical; In contrast, only 17 percent of the executives in the second group (those that had indicated that manage-ment consultants had exerted a strong influence on strategic shifts) describedthe change in strategic orientation which their firm had undergone as radical.

We also used classified verbal descriptions of the role of new members of thetop management team and management consultants as either providing a freshlook at the organization's problems and opportunities and rendering expert advice,or as overcoming political and cultural barriers to change. Based on this classificartion, about 56 per cenit of the first group (those that had indicated that newmembers of the top management team had exerted a strong influence on strategicshifts) indicated that the primary change role of new members of the top manage-ment team was to help overcome political and cultural barriers to change. Ofthose who were classified as describing their firms as having undergone an extremeshift, about 67 per cent indicated that the primary change role of new membersof the top management team was to help overcome political and cultural barriersto change.

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 181

About 87 per cent of the executives in the second group (those that hadindicated that management consultants had exerted a strong influence on strategicshifts) indicated that the primary role management consultants played in thestrategy-making process was to help take a fresh look at the organization'sopportunities and problems, and to render advice about how to become morecompetitive. About 81 per cent of the executives in this group indicated thatconsultants worked for one of the big eight consulting firms. The others werehired from small firms.

In sum, the executives interviewed tended to view the change advocate rolesof management consultants and new members of the top management team asfundamentally different. Management consultants were viewed as quite usefulin helping to reframe managerial perspectives regarding the external environ-ment. However, they were seen as considerably less useful than new membersof the top management team in helping to overcome political and cultural barriersto the implementation of extreme strategic shifts.

QUANTITATIVE ASSESSMENT OF VARIABLES

To conduct statistical analysis of the relationships between level of influenceand nature of change, we asked executives to use seven-point scales to indicatethe direction and magnitude of change in environmental complexity and strategicorientation which occurred since the year prior to the passage of the DIDMC Act.

Change in environmental complexity was assessed as top managers' perceptions ofvariations among the firm's markets that require diversity in servicing andmarketing orientations (Chandler, 1962; Khandwalla, 1977). Five items wereused to measure this dimension. Adopted from a scale used by Miller and Friesen(1983) to measure change in environmental heterogeneity or complexity, theseare: (1) change in rate of innovation of new products and services amongcompetitors in the firm's markets; (2) change in rate of innovation of product/service technology among competitors in the firm's markets; (3) change in diver-sity of products/services offered with regard to customers in the firm's markets;(4) change in diversity of products/services offered with regard to the natureof competition; and (5) change in diversity of markets in which firms operate.These scales were rated from 1 (greatly decreased) to 4 (no change) to 7 (greatlyincreased).

Change in strategic orientation was operationalized as top managers' perceptionsof changes that reflect shifts in a firm's approach to managing its product/marketenvironments (Khandwalla, 1977; Smart and Vertinsky, 1984). Five items wereused to measure modes of strategy-making, these are: (1) change in aggressivenessin dealing with competitors; (2) change in seeking unusual and/or novel solutionsto problems by senior executives; (3) change in the rate of new product/serviceintroduction; (4) change in the methods of providing products and services; and(5) change in top management operating philosophy regarding emphasis on R&Dcosts, technological leadership, and product innovation. These scales were ratedfrom 1 (greatly decreased) to 4 (no change) to 7 (greatly increased).

Perceived influence of new members of the TMT and management consultantson shifts in strategic orientations was measured by using a five-point scale that

182 ARI GINSBERG AND ERIC ABRAHAMSON

ranged from 'not at all' (1) to 'a great extent' (5) for each of these two factors.Executives were also asked to indicate whether or not changes in top managementhad occurred during the relevant time frame, and whether or not managementconsultants had participated in the strategy-making process.

Statistical Data AnalysisConstruct validity (Nunnally, 1978) of measures of perceived change inenvironmental complexity and of perceived change in strategic orientation wasdetermined through the use oi confirmatory maximum likelihood factor analysis. Thisform of classical factor analysis extracts factors with predefined characteristicsand then tests to determine if the residual matrix still contains significant variance(Gorsuch, 1974). As can be seen in table I, the x̂ indicates that the residualmatrix contains no significant variance and thereby confirms the existence ofthe two hypothesized factors explained by these items - change in environmentalcomplexity and change in strategic orientation.

The sample was then split in hcdf randomly in order to subject the two indicesthat emerged from the factor analysis to a reliability test. Cronbach's a, whichis preferred as an estimate of index reliability (Mclver and Carmines, 1980),was calculated and found to be 0.748 for change in environmental complexityand 0.755 for strategic reorientation. These are both greater than Nunnally's(1978) suggested threshold of acceptable a coefficients.

Table I. Confirmatory factor analysis of the items measuring changes in environmental complexityand strategic orientation"

Factors

Items'' Factor 1 Factor 2

1. Change in rate of innovation of new products andservices among competitors 0.548 0.097

2. Change in rate of innovation of product/servicetechnology among competitors 0.582 0.194

3. Change in diversity of products/services offered withregard to customers' buying habits 0.692 0.165

4. Change in diversity of products/services offered withregard to nature of competition 0.790 0.216

5. Change in diversity of markets in which firmsoperate

6. Change in aggressiveness towards competitors

7. Change in frequency of seeking unusual/novel solutionsto problems

8. Change in rate of new product/service introduction

9. Change in rate of new distribution methods introduction

10. Change in emphasis on product/service innovation

Eigenvalues

" Maximum likelihood model was used'' Loadings are derived through varimax rotation' Kaiser-Meyer-Olkin measure of sampling adequacy = 0.81'' The two factor structure has a x̂ value of 34.83 which is significant at /!<0.115

0.4510.208

0.230

0.077

0.173

0.162

3.11

0.2460.468

0.574

0.799

0.661

0.466

1.02

1.

2.

3.

TOPMAN''

CONSULT''

Environmentalcomplexity"^

1.

1.

0.

41

49

44

0.49

0.50

0.49

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 183

Variables were coded in accordance with this study's focus on the relationshipbetween high and low change agent influence and extreme and moderate changesin environmental complexity and strategic orientation. We first coded theindependent variables 'influence of new members of the top management team' and'influence of management consultants' as low influence [1] and high influence [2].We next coded the dependent variables 'change in environmental complexity'and 'change in strategic orientation' as 'moderate' [0] and 'extreme' [1].

Table II presents univariate descriptive statistics and a correlation matrix ofthe variables.

Table II. Descriptive statistics and correlation coefficients"

Variables • Means S.D. 1 2 3 4

0.24

0.11 0.28

4. Strategic orientation' 0.52 0.50 0.25 0.22 0.50

" N = 71. Coefficients greater than 0.19 are significant at the /)<0.05 level'' Coded as a dichotomous variable where 1 = weak influence and 2 = strong influence' Coded as a dichotomous variable where 0 = moderate change and 1 = extreme change

To examine the research questions through statistical analysis, we needed touse a technique that reflected the simultaneous and potentially interactive effectsof the perceived influence of management consultants and new members of thetop management team. To accomplish this more complex kind of analysis,methodologists recommend the use of loglinear model approaches that analysethe effects of criterion variables on a binary dependent variable through amaximum likelihood estimation routine (Agresti, 1984; Aldrich and Nelson,1984). We conducted a logistic regression analysis to determine which of thechange agent influences and their interactions provided the best model forpredicting extreme changes in environmental complexity and extreme changesin strategic orientation. This process allowed us to examine the following models:

(1) £ = /3Q + |8 ,Z,+/32Z2 +13,2^,2

(2) ^=/3o + /3,Z, +/32Z2 + |8,2^,2

Where:E = the loglinear probability that perceived change in environmental complexity

is extreme;S + the loglinear probability that a perceived change in strategic orientation

is extreme;X^ = the perceived influence of new members of the top management team

(TOPMAN);X2 = the perceived influence of management consultants (CONSULT);

A',2 = the interaction between TOPMAN and CONSULT.

184 ARI GINSBERG AND ERIC ABRAHAMSON

RESULTS OF STATISTIGAL ANALYSIS

The results of the logistic regression analyses shown in table III indicate thatperceived shifts in environmental complexity (ENVIRON) are more likely tobe extreme when management consultants (CONSULT) are seen as having hada strong influence on strategic changes. Although the influence of new membersof the top management team (TOPMAN) is not a significant predictor of shifts inenvironmental complexity, the interaction between TOPMAN and CONSULTis significant. This indicates that the influence of new members of the TMTincreases the likelihood that extreme shifts in perceived environmental complexitywill occur when the influence of management consultants is strong.

In contrast to the results for model 1, the results for model 2 do not supporta significant association between the influence of management consultants andextreme shifts in perceived strategic orientation. However, the results do indicatethat shifts in perceived strategic orientation are more likely to be extreme whenthe perceived influence of new members of the TMT is strong. Moreover, theinteraction between these two types of change agents is also not a significantpredictor of extreme change in strategic orientation.

Although the nature of the analysis precludes our ability to infer causality,the patterning of these results still points to the contention that senior executivesassociate these two change agents with different roles or functions. For exampleif we interpret the results as indicating that top managers' perceptions of changesprompted their choice of whether to add a new team member or to hire an outsideconsultant, we still need to explain why changes in environmental complexityprompted only the hiring of outside consultants, but not the addition of a newteam member, or why changes in strategic orientation prompted the additionof new team members, but not the hiring of outside consultants.

The combined results of the analyses shown in table III reinforce the resultsof the qualitative analysis discussed earlier regarding the different roles of thesetwo types of change advocates. Although Model 2 (p = 0.987) is significantlystronger than Model 1 (/? = 0.721), both models provide highly significant fitsto the data.

Table III. Logistic regression analysis: maximum likelihood parameters

Explanatory variables

Intercept

TOPMAN

CONSULT

TOPMAN 'CONSULT

Maximum

Model 1:Change in environmental

complexity''

Coeff. Std. error p-value

-0.730

0.104

0.549

0.523

0.287 0.007

0.290 0.721

0.264 0.033

0.290 0.060

likelihood estimates"

Model 2:Change in strategic

orientation'^

Coeff. Std. error p-value

0.024

0.656

0.004

0.279

0.271

0.260

0.246

0.268

0.661

0.012

0.812

0.255

Sample size = 71Model likelihood ratio chi-square = 0.128, D.F. = 1,/> = 0.721Model likelihood ratio chi-square = 0.000, D.F. = 1, /) = 0.987

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 185

Although management consultants are viewed as playing an important rolein facilitating changes in the ways executives look at the environment, they arenot viewed as playing an important role in overcoming the political and culturalbarriers that prevent the implementation of changes in strategic orientation. Theseresults are consistent with Gattiker and Larwood's (1985) findings that a politicalrationale for hiring management consultants received weak support among topexecutives that were polled. They found that, instead, consulting clients felt thatthey were likely to hire consultants: (1) on the basis of their ability to providestimulation for others in the organization; (2) to bring their expertise to bearon solving problems; (3) to take an objective stance toward them; and (4) fortheir ability to apply consulting processes in the organization.

In contrast to the change agent role of management consultants, new membersof the top management team may facilitate extreme strategic shifts in twoimportant ways. First, because they are likely to be more open to new ideas andto change, they may make it easier for management consultants to change theway other key executives think about the environment. Secondly, new membersof the top management team may themselves be promoted or hired to helpovercome political and cultural barriers to the implementation of radicaJ changes.

DISCUSSION

Results of both qualitative and statistical analysis suggest that managementconsultants and new members of the top management team play different rolesin facilitating extreme shifts in strategic orientation. The results of the ansdysesreported above indicate that executives perceive management consultants to bequite useful in creating pressure for strategic realignment by helping to reframemanagerial perspectives of the environment. However, they consider them lessuseful than new members of the top management team in helping to implementextreme changes in strategic orientation. Although Ginsberg (1986) found asignificantly positive association between the influence of management consultantsand radical strategic changes, his study did not control for the influence of newmembers of the top management team or for differential types of influenceprocesses as the present study does.

The findings of the present study suggest that management consultants areseen as more useful than new members of the top management team in changingideas and perceptions of key executives. However, the likelihood of successfulintervention is enhanced when the composition of the top management teamhas been recently changed. Moreover, new members of the top managementteam are considered to be more useful than management consultants in counter-acting inertial forces by helping to implement extreme strategic shifts.

These results dovetail nicely with those of other studies that underscore theimportant roles played by new members of the top management team inimplementing strategic changes. As mentioned earlier, these studies indicatedthat the symbolic impacts of succession itself (Brown, 1982; Gephart, 1978) andthe deliberate political and symbolic actions of top managers (Quinn, 1980) servedto overcome cultural and political inertial forces forestalling strategic changes.

The conclusions derived from this study are consistent with anecdotal evidence

186 ARI GINSBERG AND ERIC ABRAHAMSON

regarding the change agent role of management consultants versus members ofthe top management team. For example, in reporting results of the McKinseystudy to GE's management in May, 1970, Fred Borch noted: 'We decided thattheir recommendations on both the operating front and the staff front concep-tually were very sound. They hit right at the nut of the problem, but theimplementation that they recommended just wouldn't fly as far as General Electricwas concerned. We accepted about 100% of their conceptual contribution andvirtually none of their implementation recommendations'.'^' To develop anapproach for implementing the McKinsey recommendations in a way suitablefor GE, Borch decided to set up a task force headed by Group Vice PresidentW. D. Dance.'3'

To stimulate significant changes in the ways top managers think, executivesmay do well to hire management consultants who bring good problem-solvingand coaching skills along with a more 'objective' view of the organization-environment interface. However, in general; management consultants may beinadequate for counteracting the intertial processes through which organizationalsymbols, meanings, and values are created and institutionalized (Allaire andFirsirotu, 1985). To legitimize and facilitate extreme changes in strategic orien-tation, or 'recipes', organizations may need to resort to strong political andsymbolic actions, such as hiring new top executives in key leadership roles.

Limitations and Future DirectionsBy its very nature, strategic change is both a process and an outcome. This dualnature presents a methodological dilemma: researchers can carry out in-depthlongitudinal case studies of a single strategic change episode {e.g., Greiner andBhambri, 1989). Such studies capture with great accuracy the process of strategicchange and its outcomes. They can be used to untangle the causal direction-ality linking the multiple variables that affect the dynamic evolution of strategicchange. Researchers using the case study approach, however, rapidly discoverone horn of the research dilemma (McGrath, 1981): their studies, like any casestudy, provide little generalizable knowledge concerning strategic change inmultiple organizations. Researchers can adopt an alternative methodology: theycan use questionnaire studies to elicit information concerning strategic changesin multiple organizations. This approach generates findings with greatergeneralizability, but also uncovers the other horn of the dilemma: questionnaire-based research suffers from well-known biases of perceptual and cross-sectionaldata; the directionality of causality between variables as well as the accuracyof retrospective data is disputable.

Ideally, researchers would carry out multiple case studies of strategic changesoccurring in different organizations. Alternatively, they would distribute question-naires at different stages of strategic change across multiple organizations andsupplement their findings with longitudinal archival data. Both these approaches,however, have been shown to be highly impractical and provide rather unrealisticsolutions to the methodological dilemma presented above (Miles, 1979).

We suggest that for research on strategic change to progress, three types ofstudies are necessary: (1) single-organization, longitudinal case studies; (2) multi-variate questionnaire studies of numerous organizations; and (3) studies thatcombine both qualitative and quantitative measures of strategic change. This

CHAMPIONS OF CHANGE AND STRATEGIC SHIFTS 187

Study provides an example, though not an exemplar, of this third approach.Qualitative research provided a way of accessing the validity of perceptualmeasures and the directionality of causation. Quantitative research provideda way of checking the generalizability of these observations. In line with thisapproach, future research should strive for greater methodological rigour, bothqualitatively and quantitatively.

Future studies on the role of change agents in organizational transformationsshould address a number of important questions: (1) Do organizations withdifferent types of structures, systems and cultures require different types of changeagents to facilitate strategic change? (2) Are different types of change agentsrequired for peripheral changes than for changes in an organization's core?(3) How does the timing and sequencing of strategic change influence the effec-tiveness of different types of change agents? (4) What performance measuresare appropriate for evaluating the effectiveness of these different types of changeagents? (5) How does the type of consultant used or the level of top managerreplaced affect the implementation of strategic changes; (6) How do the percep-tions of executives regarding the influence of change agents emerge, e.g., howare perceptions affected by performance outcomes?

Although the findings of this study are very preliminary, they have importantimplications. Not only do they provide insights into managerial theories oforganizational change, but they also challenge researchers to begin more rigorousresearch on the roles of change advocates in facilitating strategic shifts. In thisway, the results of this study begin to suggest how practitioners interested inmodifying or redirecting organizational strategy can select and utilize changeadvocates more effectively.

NOTES

* Support from the Center for Entrepreneurial Studies at New York University isgratefully acknowledged. We thank Jane Dutton, Charles Fombrun, N. Venkatraman,and the reviewers for their helpful comments on earlier versions of this article.

[1] In this article, 'members of the top management team' refers to managers that areno lower than two levels below the President or CEO in the organizational hierarchy.

[2] Source: 'General Electric: Strategic Position - 1981'. HBS Case Services, HarvardBusiness School, Boston, Mass., 1981.

[3] Ibid.

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