GOING TO THE NEXT LEVEL OF GROWTH: EMPLOYING SYSTEMS THINKING TO MAKE EFFECTIVE INTERVENTIONS

To read this systems diagram, start with the Change in Defense-Related Contracts. There is a gap between the reliance on defense-related work to needing to make the transition to competitive market forces. The introduction to competitive market forces influences a need for new ways of being and new ways of doing work. There is a sub-loop here to indicate that there is a corporate objective of needing to specifically focus on attaining world-class productivity as the way of refocusing work and tasks. To continue with the main loop, the new ways of doing things spawns a need for new skills and knowledge, especially in marketing. The emphasis on new skills and knowledge points to a larger issue of changing the culture and inculcating a new set of values. This change in culture and values points to the need for leadership that can manage this whole process. This loop continues ad infinitum, seeking equilibrium; hence, the "balancing" loop.

Research Question

How do we increase the performance of this organization and our employees to the next level of sharpness and discipline? This was the question that the CEO posed at the end of the authors’ first investigation in 1995, and the one focused on going into an expanded case study in the summer of 1996.

Methodology

The undertaking and reporting of this research is going to be viewed as being slightly different from the norm of categorizing something as quantitative or qualitative. In the spirit of the philosophy of organizational learning, the authors will present a story, a story of how a company’s life and changes unfold. In this way, a synthesis of what happens, of what transpires, is provided. The traditional way of thinking is to analyze and to break things apart. By synthesizing, by seeing the whole of something, one may begin to understand the underlying dynamics of a situation in order to make the most effective intervention for the highest leverage in instituting change (Senge, 1990).

The researchers interviewed the President and CEO of Galileo Electro-Optics Corporation in Sturbridge, Massachusetts, and his key top managers in the four business segments comprising Galileo’s core technologies and markets in 1995 and again in 1996 using structured interview questions. Evaluating the documentation of this company, collected from company records and from business literature, provided additional insight and information. The chronicles of this firm will be used to present the findings.

This research explored the underlying dynamics in growing an organization and its people. It provides a glimpse into how a leader thinks and the impact of beliefs on an organization, the cultural changes that needed to take place, and the underlying philosophy of the organization that embraces learning at all levels.

The Story of Galileo: The Real Work Involved

The shift from relying on defense dollars to market-based forces has created an emphasis on the underlying dynamic that can make this fundamental change possible. That dynamic is the skills, abilities, and thinking processes of the workers. As the President and CEO of Galileo Electro-Optics Corporation, Mr. Hanley, put it, "People didn’t know how to think [when immersed in the government contract system]." This part of the evolving story will focus on people–from the vision of the CEO to the front-line worker and what is needed to make that transition. As Hanley observed, "They don’t relate to it...they don’t know what it means at first." Notice Hanley’s operative word here–"first." Here is an open door, a window into a new possibility. The beginning point is realizing that "we’re looking at re-culturalizing here...changing something to that extent...there is absolutely no substitute for time." Hanley postulates that implementing this kind of change requires about five to ten years. Such change is an educational process, a step-by-step evolution that people have to go through that is very, very difficult.

To share with you the process as experienced and lived by Hanley is the best way to present this. As he shared with us:

When you set out to change a culture, you have to give people something to focus on. We started with laying out for people a value set, a set of values that would define what our culture would be at the end of the trail, if you will. That set of values is defined as the Galileo philosophy; it’s in every annual report; it’s out in the front lobby; it’s in every manager’s office. You start with ‘This is the way I want to behave when I grow up.’ That’s the culture I want in my company at the end of the day. Then comes the creation of the business strategy, all the numbers and details, and everything that would have to go around that. Then the constant leadership change education of the organization, leading by example, instilling new ways of approaching things and new thought processes in people. Next you get to the point of formalizing that process, bringing in outside consultants, starting the re-engineering process, and starting personal development programs.

Exceeding the First Objective

Laying this foundation has started to pay off handsomely. One very specific objective that was set was to get the world-class level of productivity needed to compete in commercial markets (Mittelstaedt, 1992). According to Hanley, "We can’t compete in commercial markets with military productivity; we just can’t do it." We can see a snapshot of some of Galileo's financial results from defense conversion in their sales per employee in 1995: $195K as a market-driven organization; $40K as a military contractor (Galileo Annual Report, 1995). Galileo had to create new technologies from scratch. Their military technologies did not work in commercial markets. However, it is starting to pay off again as measured by another business indicator, the drop in revenue from military sales. Annualized military sales in 1987: $25 million; in 1995: $1.7 million. Sales of $34,043,000 were up 13 percent from the previous fiscal year and earnings per share of $0.17 reversed their year earlier loss of $0.17 per share. Over $30 million of this revenue base is generated from brand new "start-from-scratch" products; the balance being generated from the original military technology.

Galileo’s strategy involves a creative fusion of the firm’s core skills and technologies. As stated by Pages (1993a, p. 35; Pages, 1993b; Pages, 1992). Galileo would try to develop commercial applications for the valuable technologies it possessed, such as its successful move toward creating remote sensors for use in manufacturing. In addition, in areas where Galileo lacked valuable technologies, it would exploit core skills. Determined to serve new customers with those skills rather than new technologies, Galileo deliberately moved into the office products and medical markets. All of Galileo’s key profit generators are made of one common material: glass. Everything they make is of glass. As Hanley explained, "It is used in totally different ways, in totally different markets, using totally different processes for the most part.... but we’ve tried to take what I call a universal skill set..."

With this emphasis on core competency and core businesses comes the next generation of technology in anticipation of market needs. Another key to Galileo’s thinking and strategy is to look for the best way to solve the customer’s problem rather than selling them something they make.

Fuzzy Concepts That Have Worked

When you are transforming an organization a lot is involved and a lot is at stake. Transformation does not happen by itself. Changes and transformation can and should be encouraged by leaders. That "push," or foresight should come from the leader. Hanley believes that you really have to be an extraordinary leader and manager to survive. There is a complimentary, yet creative, tension between the two concepts of leader and manager. According to Hanley: "The way you measure successful managers and leaders is that they’re not overwhelmed at this hectic pace; that things really do run well in their organization with or without them; and they’re highly visible as leaders and almost invisible as managers…"

Moreover, just how does one make that transformation? What key business and economic indicators does one reference? Well, picture being back in 1984 and nobody is getting out of the military business. You are Hanley and he is telling the Board of Directors of Galileo that they should get out of the military business. What? But, wait ... it gets more intriguing. Hanley proposes that in order to get out of the military business, you have to get into it first in order to get back out. He proposed that they needed to immerse themselves in the military business to make as much as they could, gain a strong financial base, while simultaneously building their commercial business. That strategy definitely paid off. Even though one of the Directors said that they had a forecast from the government saying that the military business is going to do "this," Hanley said, "Well, we think it is going to do "this." The board then asked, "What makes you think that this is what’s going to happen to the military business?" Hanley’s reply, "My gut, that’s all. I have no numbers; I have no explanation. I’m just telling you it’s my gut." As he continued, "I try and coach people - trust yourself, trust your gut."

In Retrospect

Galileo’s heavy dependence on defense contracts, in the face of talk of defense spending cut backs, lead to attempts to diversify in the late 1960s and once more in the mid-1970s. Both attempts have to be labeled as failures. It was the mid-1980s when Hanley, recently on board as president, initiated the third, and final, successful move away from defense contracts and toward competitive markets.

In 1995 as Hanley looked back on the conversion process, on changing a culture, on having gone through the process, he shared some key insights as to what was paramount. "Education, education, education, education–as soon as possible in the process is critical." A major portion of that education is just how you look at things, how you solve problems, and what’s fundamental about the technology. As Hanley continued, "It’s this examination and self-assessment, whether you call it a skills inventory [or whatever]; it’s being very introspective."

However, as the account of Galileo unfolds as an odyssey of dynamic organizational change, the use of the term "education" takes on both an interesting and puzzling meaning. A look at the dynamics of the process a year later gives the statement "... education–as soon as possible" a different contour. A year later Hanley seemed to be at the realization that education and training were successful interventions only at the right point in the dynamics of a changing organizational culture.

At that point, Galileo has attained accomplishment and success in their quest for market driven development and growth. According to the President, they had reached their "next level of sharpness and discipline." Now the question became, How does one define that level of sharpness and discipline and nurture it?

The Next Level of Sharpness, Discipline and Growth

Galileo’s odyssey has taken it from the brink of extinction to resilience. When asked what change the new organizational culture had brought about the Director of Manufacturing answered quickly. "We have brought in a future when we didn’t have one. That is a real achievement."

When we look at Galileo with the guidance of its president and the top management team, we see a changed organizational culture and philosophy that was started, as Hanley points out, at the shop floor and then extended to management. It was an evolution that was often painful and one that many managers could not make. At Galileo and other firms in transition, organizational change was often more easily made in the shop than in the executive suites, but in the end it worked.

The biggest change seen at Galileo was seen in the response to production challenges. In the past, the issue often was an explanation of why an order could not be completed on time. In the new environment the spirit is, "if we can get the order, they will be able to do the work and do it on time. It will be done to the best quality." From the shop floor to the boardroom, everyone knows the financial numbers and the metrics--that information is always available. Everyone knows they have a stake in how well Galileo does, and that they will be recognized and rewarded for their contribution. That has created the new "can do" perspective of work. Out of the process of change has come a new sharp team-based management structure that works through a well-disciplined, yet dynamic process. The goals of the company’s efforts are always stressed, yet a lot of freedom is allowed. There is an insistence on accountability, combined with a liberal recognition and reward system based on people’s resourcefulness. The bottom line is of final importance, but at all times a sense of humor is expected.

The practice is rooted in the leadership style of top management. The Vice President and General Manager of Remote Sensor Products, made this clear: "None of us are micro-managers. An important part of the Galileo environment is the acceptance of a variance of views and ideas. There is a lot of freedom allowed in getting things done. We make a point of recognizing and rewarding resourcefulness, even when people go off on a different track."

The following story illustrates his point. In the past, Galileo had never been able to successfully produce a 60-degree scope, but two people on their own time went off in their own direction and solved the problem of making one. This was way out of line with their current assignment and more related to the company’s history than its future. However, at the new Galileo, they were not scolded for working outside their bounds; they were praised at a meeting and rewarded for their creativity.

Here we have a case of an old agenda meeting the new level of sharpness and discipline. Having reached the new level meant that the previously unattainable now was in reach. In this new environment, the people on teams are not working to carry out the tasks on the manager’s lists, they are doing what is important to them--what they want to see accomplished. At this point it was important to the two workers to use their new level of sharpness to find a solution that was beyond their reach in the past. With the right intervention at the right point, good leadership can foster a synergism between what is important to creative employees and the vision of the organization.

At the next level of organizational dynamics, teams have brought new meaning to quality manufacturing. In the past, the debate was often about what percentage of production would be returned because of defects. Five Percent, ten percent, were seen as standard and accepted. Now defects and returns are just not accepted as normal. Under the teams, the expectation is that there will be no returns for quality reasons. The teams feel they have a stake in it. Today only high quality and on-time delivery are accepted as the norm. This is part of the new environment, which extends from the top, down to the shop floor. Everyone who has stayed with the company has accepted the team spirit. They believe in the mission statement.

Yet, sharpness is not always easy. As Hanley sees it "Pain is inevitable in life; suffering is optional. Suffering is what we create in our minds." Sometimes people are confused about the team environment. It is not all friendly, buddy like. The team can be very competitive, very driven, and intense. People are working together for a goal and their success goes right to the bottom line. They know their reward is going to depend on what the team adds to the bottom line. There was a fear in the beginning that now that you are asking people to take responsibility, they will be punished for their errors. First, you tell them to make the decisions, then you punish them for those decisions.

However, that is not the way it is. Errors are accepted as inevitable in this dynamic environment. There is a high tolerance for risk taking at Galileo. One general manager came from a company where he said, "It was the safest to do nothing. In a big company like that you can be fired for doing something, but never for doing nothing. Here doing something and taking risks is the norm."

Successes are rewarded. Giving people responsibility is a whole system: they make decisions in a supportive environment, are rewarded accordingly. Team members can ask questions, take lead roles, and get the training they need to do what is expected of them.

Fast-paced timing is a very important change and people understand that. With the Galileo reward system, team members understand the importance of time. If a team can get a new product line that is going to yield $50,000 profit a month on-line two months early, the team members will share in that profit. Everyone has the incentive to see that it happens.

There is a lot of peer pressure to be motivated, to do the best possible. Motivation by the teams is very profit orientated. People know their performance and reward are tied to the bottom line. Bottom line improvements are shared but everyone knows "there is no free lunch."

Although there is team pressure, there is another aspect. At Galileo, it is all seen as a kind of fun. The teams are inventive. The leadership wants workers who want to be in the action of the team environment that is motivating to them. Feedback on how your team is doing is seen as very important in this environment and there is a lot of it. Everything and everyone is very open.

Although metric growth is approached with caution at Galileo, the bottom line is seen as much more important than sales, new levels of growth are important to the teams. There is structure, boundaries, and goals, new ideas quickly move forward. The rewarding of good work cannot be overstated as an important element here. Risk taking is accepted and expected. Making errors while trying is accepted. When you do well and contribute to the company’s success, you know you will be rewarded. Rewarding is part of leadership.

Leadership as the Effective Point of Intervention

"Leadership is creating a new environment." That is what leadership has meant at Galileo. Hanley’s leadership style has never been static, as he is the catalyst for a new and evolutionary organizational environment. Hanley’s philosophy is that "the leader can change dramatically the entire way something performs…he or she generally does not do it with a lot of fanfare…you don’t find huge change taking place and groups of people running around in a frenzy. There is just this deliberate march towards better that starts to happen." The fundamental key to igniting this change begins with implanting a value system that people can identify with. To quote Hanley, "It’s the culture that really provides the guidance to get you through what’s going to happen and it’s the beliefs that get you through that." Hanley is very quick to point out, however, that creating the culture is the beginning point. One also needs managers and leaders who are synergistic with that new culture. Having very good leadership at all levels of the organization is also critical.

The top management team gives its president high credit for the cultural change at Galileo. "Hanley really did things right in creating a new environment." The struggle, and it was a real struggle at first, was started when the company was on the brink of extinction, so it was taken seriously. Outside experts were brought in who knew what they were doing. This made it clear this was not the fad of the week; the new environment was going to be there for a long while. "Once it was in place, we have stuck with the new Galileo environment. This has meant that its acceptance has been complete. You can really see a growth in the role of the employees coming from the leadership and the empowered team environment."

However, the convergence of the concepts of leadership and an effective point of intervention necessitates changes in leadership style as a dynamic organization evolves. At the core of the new Galileo work environment, the team’s effort is crucial. Freedom, flexibility, responsibility, a high degree of diversity, an acceptance of and the importance of individual’s ideas, all must be there. On the other hand, especially in the start up of a new project, the culture says that there is no room or time for consensus building and that leadership and team empowerment often must involve benevolent dictatorship. As one manager put it: "You must make the decision as to what goals must be done and the team is empowered to do it. You may not wait to develop a consensus, but you explain why you are doing something. In an empowered environment, the team accepts and understands the goals and their importance. There are different aspects to leadership, depending on the need and the circumstance."

Learning and Education Throughout the Organization

In manufacturing and all other departments of Galileo the greatest change has be in the competency of the people. With that competency has come the confidence. Top management puts learning in this perspective: "We are spending two times as much on education and training as we did in the past. We give them the chance to learn what they have to know to do better and they take advantage of it. We have created an environment that insists on success and progress. That’s what we all expect and what the people who come to work for us want. We have developed an environment where people are paying attention to advancing their careers. We give them a great many opportunities to learn, and train, and advance themselves. They take advantage of this."

At Galileo they are not concerned about people taking the training, developing new skills and then taking them to a new job. If that happens, that is okay. The strategy is to give them the skill and competencies, but also give them an environment where they want to stay. That keeps them at Galileo, even as their ability improves. Education and training are seen as parts of a total package. The feeling is that the best people will look at the whole thing and take advantage of it all--which seems to be getting the results the company needs. Employees see themselves as working hard, but they feel comfortable going to work, taking responsibility, and using their competencies. Learning and using new knowledge has become part of the company. It was only within the last year that an intensive drive for company-wide education was started. Over the years of transition, a learning culture developed until a point was reached where education could be emphasized. In Hanley’s words, "You can’t teach brain surgery to sixth graders. You have to prepare people to get to the point where they recognize education as important to them." Today, every employee must have at least a GED and each one must complete at least one training program a year. When the new education program was announced, people lined up at the door of Human Resources. Hanley feels that if those rules were announced five years ago, "A lot of people would have been looking for jobs, because they just knew they were going to be fired."

Results and Conclusions

Managing a dynamic environment will require leadership that understands the changes needed at critical points of development of the organization. Developing this competency in leaders is critical for organizations going to the next level of growth (Stalk, 1992).

The crucial goal of the new learning programs at this organization will be the fostering of the mindset, internal drive, and self-direction needed to complement and promote corporate cultural change.

How This Research Contributes To New Knowledge in HRD

The business story presented here delineates a company "breaking down the walls," of functionality by assiduously building cross-functional teams that are successful, productive, and creative. It also illustrates how the cornerstone discipline of organizational learning, systems thinking, can be utilized and applied in organizations. The research in HRD delineates the need to continue to link HRD to business results. The time is right for HRD professionals to continue the process of improving human performance within organizations by employing a systems thinking perspective (Brinkerhoff, 1994). By doing so, an understanding of the whole system in question is looked at from the perspective of elevating the performance of that system to the next level of potential. Where our field of HRD is about tapping into everyone’s potential for the benefit of all, this business story is a contribution to that purpose.

The theoretical implication from this research is two-fold. One, employing systems thinking can be applied to any field of research. It elevates our thinking from the events level to seeing the underlying structures inherent in any given situation. It is a process-oriented shift that does require time to develop. Herein lies the challenge to researchers and practitioners and it also represents the second theoretical implication: fast-paced organizations must be able to develop a change in thinking patterns that will facilitate a shift to a more effective, long-term, and systemic perspective.

References

Brinkerhoff, R. & Gill, S. (1994). The Learning Alliance: Systems Thinking in Human Resource Development. San Francisco: Jossey-Bass.

Duck, Jeanie Daniel. (1993). "Managing Change: The Art of Balancing." Harvard Business Review. November-December, pp. 109-118.

Galileo Corporation Financial Data and Description of Business, On-Line Annual Report, for latest quarterly financial date: December 31, 1995.

Mittelstaedt, Robert Ed. (1992). "Benchmarking: How to Learn from Best-In-Class Practices." National Productivity Review. Summer, pp. 301-315.

Pages, Erik R. (1992). "Weathering the Defense Transition: A Business-Based Approach to Conversion." Business Executives for National Security. Washington, D.C., November, pp. 1-16.

Pages, Erik R. (1993). "How Defense Contractors Can Survive in a Peaceful World." Business and Society Review. Summer, pp. 32-37.

Pages, Erik R. (1993). Next Steps in Business Conversion: Supporting Innovation and Entrepreneurship. Washington, D.C.: Business Executives for National Security.

Senge, Peter. (1990). The Fifth Discipline. New York: Doubleday.

Stalk, George; Evans, Philip; and Shulman, Lawrence E. (1992). "Competing on Capabilities: The New Rules of Corporate Strategy." Harvard Business Review. March-April, pp. 57- 69.

Acknowledgment: The researchers would like to acknowledge assistance received under the auspices of the Department of Defense, Defense Nuclear Agency Grant 05-0258810 covering 100% of the cost of this research.