9-11-08 Crash: I-O Psychology Can Help
George B. Graen
University of Illinois Urbana-Champaign (Retired)
The global financial crash of 9-11-08 has ushered in the knowledge era of discontinuous context changes that are shaking our sense of corporate stability. At the multinational level, new opponents emerge in established markets, as Lego, Mattel, and Hasbro are now faced with competition such as Sony, Nintendo, and Electronic Arts, and Merck, Norvartis, and Pfizer are now competing with biotechnology companies (Birkinshaw, Bessant, & Delbridge, 2007). Moreover, the financial crisis promises to shake out many inflexible corporations and establish a new more adaptable model needed for survival. Sensing these opportunities and threats, Procter and Gamble committed to changing radically its large design and development engineering function from the inside out in order to find 50% of its new products from outside of the corporation (Huston & Sakkab, 2006). Clearly, new knowledge and innovation has become the new driver of corporate adaptation. Corporations that were “stars” yesterday may be “cash cows” today and bankrupt tomorrow, and new stars will emerge. Threats to corporate survival seem to suddenly appear from many unexpected directions. Questions now asked of I-O psychology by top management teams are how to adapt their corporations quickly to discontinuous changes and how to integrate rapidly needed new talent. They need more open designs to anticipate these needed changes and more flexible organizational designs to help capitalize on the many new opportunities and avoid the new threats of creative destruction. Without a doubt, top management teams need our outside assistance to remain competitive throughout this shakeout era. Being in the eye of the storm, corporations need to establish chief innovation officers (Hazy, 2007).
What Would P & G Do?
Hannah, Eggers and Jennings (2008) offer a model of the workings of a knowledge-driven corporation that deserves our careful study. The authors challenge us to open our thinking to exciting new individual, group, and organizational constructs and processes. Let’s take a deeper look at this model by applying it to Procter and Gamble’s new “Connect and Develop” organization (Huston & Sakkab, 2006). Following the Hannah et al. model, the macro level is subject to tensions from the top management team to design and develop efficient and effective organizational processes and practices that discover, connect, and develop new business opportunities from new Gillette-like partners to new discontinuous products and processes. According to the model, nonmanagers get their delegation from top down and their interpreted reality of these delegations from the bottom up. Manager and nonmanager realities may not be isomorphic and this may create tensions. The magnitude and persistence of such tension are related to the organizational network complexity. It is assumed the greater the complexity, the greater the need for internal design teams (Graen, 2008). When conditions are appropriate change teams are assigned to deal with tensions.
Complementing the organizational network reactions (Cross & Parker, 2004) is the leader’s cognitive, connotative, and conative complexity reactions. Again, the assumption is that the greater the complexity the greater the need for a knowledge-driven corporation. Complexity of the leader contributes to cognitive–connotative thinking by the design team that contributes to the change group’s collective behavior. Finally, these dynamics produce change and hopefully adaptive organizational changes (Orton, 2000).
I-O Psychology Contribution
The connect and develop model prescribes that the new mission for P&G’s massive product engineering organization is to send the call for new knowledge through all relevant networks with as much openness and earnestness as possible. The intent is to supply the same information to all participants from bottom to top and even to retained retirees. This is where I-O psychology can help with the implementation of change. As we understand how the particulars of the mission must be communicated to everyone possibly involved, how managers must be trained to mentor change groups in the technology of networking, self organization, emergent collective behavior, and high-quality network dynamics, how change group leaders must be identified based on adequate complexity (cognitive, connotative, and conative), networking skills, and promotion orientation, and how managers must be trained to think, feel, and act with greater complexity about themselves, and their social and nonsocial environments. These we should offer to top management and CEOs.
In this manner, organizational networks will tie together to cast wide nets for new business from outside (Brass, Gelaskiewicz, Greve, & Tsau, 2004). As the adaptation blossoms into a million flowers, the open architecture must be continuously tested and improved. In this way, the corporation may be opened to overcome the “not invented here” thinking that may reject, out of hand, great new discontinuous business opportunities. The future will demand some form of knowledge-driven corporation. To assume that it must have more people who are complex in thinking, feeling, and doing is reasonable. Those who pioneered the machine-driven corporation may not understand why simply working harder to improve the efficiency of the old production system may lead to unforeseen and rapid obsolesce in a knowledge era of discontinuous changes in markets. We must help them understand the new world.
I think that we can help organizations to prepare for the many current challenges required to sustain the company through the 9-11-08 crash and the descending perfect storms of the knowledge era. A recommended path to follow toward enhanced prediction and understanding of significant change in organizations consists of discovering alternative unused but valid predictors of effective systems changes (Mahoney, 2001). This path follows the procedure of Platt’s “Strong Inference” for doing science (1964), employing “insider-research” data collection procedures (Graen 2007). Applied psychology is required to do the impossible.
Conclusion
Miriam Grace, a systems design manager at Boeing Aircraft, brings these game changing innovations up to date by suggesting that in response to the financial crash and the perfect storm of discontinuous innovations, other corporations follow the aerospace corporations in the process of creating change teams to create new, more appropriate systems using proven design principles. This trend is reinforced by the younger employee’s demands for change teams to break down old silo barriers to innovation and promote true “peer to peer mentoring” beyond the often superficial top-down mentoring or consultant coaching (in press). As A. G. Lafley, CEO of P&G, initiated the movement to accelerate vastly the rate of corporate discontinuous change (Lafley & Caran, 2008), significant changes in the design of economic corporations are required from a stable set of processes designed for stable environments to a complex set of adaptations designed for new financial systems and accompanying discontinuous problems. Adaptation by top management teams and cohesive design teams are needed using established organizational design principles and technology. Welcome to the knowledge-driven corporation (Graen & Graen, 2008).
References
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