Leadership

Executives today face many difficult, potentially explosive situations in which they must make decisions that can help or harm their firms, themselves, and others. How can they improve the ethical quality of their decisions? How can they ensure that their decisions will not backfire? The authors discuss three types of theories -- theories about the world, theories about other people, and theories about ourselves -- that will help executives understand how they make the judgments on which they base their decisions. By understanding those theories, they can learn how to make better, more ethical decisions.

In their Fall 1995 article, the authors discussed the four elements necessary to establish a behavioral context that rejuvenates a company's employees -- discipline, support, trust, and stretch. In this sequel, they trace the common threads in successful companies' transformation processes -- simplification, integration, and regeneration. In an extensive study, they discovered that carefully phased or sequenced processes were more effective than sudden frenzied commitment to the latest management fad. Along with a phased approach, the successful companies recognized that the real challenge in transformation was to change people's attitudes, assumptions, and behaviors. Only when managers committed to the long-term effort required to establish the four characteristics necessary for a new behavioral environment were they able to create companies that could renew themselves.

Why are some companies able to remain vital, even after extensive reengineering, while others flounder and fail? The answer, according to these authors, lies in a company's ability to rejuvenate its employees by establishing a behavioral context with four characteristics -- discipline, support, trust, and stretch. The authors trace postwar corporate history to identify the pernicious qualities that have ossified many companies, using the example of Westinghouse to illustrate an oppressive context based on the elements of compliance, control, constraint, and contract. They also show how companies like Intel and 3M have been able to renew themselves by creating an environment in which people are the most important resource.

Companies are examining their use of space more carefully to reduce occupancy costs. Misconceptions about the role of accommodation in organizations have led to costly inefficiencies in space planning and building use. Reducing square footage provides a company with a two-stage opportunity for improvement. First, space "right sizing" and redesign can lead to a better "fit" between work-space design and users' tasks; employees' work space can more effectively support work performance and improve productivity. Second, the process of making space cuts and changes is an opportunity for initiating broader-based corporate change in companies seeking to reduce overhead, empower employees, and reengineer work processes. The author offers examples that show how some companies have used work-space changes to transform their business and how CEOs can take full advantage of this opportunity.

For managers, the challenge of understanding nonmarket forces — government, interest groups, activists, and the public — is frequently more difficult than understanding the market environment. The author develops a strategy system of principles, frameworks, and action plans to deal with the issues, in-stitutions, interests, and information that characterize the nonmarket environment. He uses the concept of a rent chain, analogous to the value chain, to show how com-panies can participate in policy-setting processes and generate leverage to their own benefit.

When employers focus only on the direct, out-of-pocket costs of health care, they fail to consider the indirect costs of illness in the workplace form workers' impaired functioning on the job and absenteeism. The authors present a case study of the effects of clinical depression on direct and indirect health-related costs and provide a model that employers can apply to a wide range of illnesses to analyze their investments in health care. The authors apply the framework to several workplace situations -- employees' depression, cigarette smoking breaks, and arthritis -- to estimate the costs of lost productivity. They also show how to do a break-even analysis to determine when employers' investments in health interventions are likely justified.

The production-line approach to service is being challenged by an employee empowerment approach. Despite its growing popularity, many managers are till uncertain about empowerment’s impact. The authors describe the returns a company can expect from empowering service employees, which include a number of favorable business results, but new management changes as well.

In this case study, the authors describe Toshio Okuno's five techniques for managing major changes in his company.

In their decision-making activities, managers need to tread a fine line between ill-conceived, arbitrary decisions ("extinction by instinct") and an unhealthy obsession with number, analyses, and reports ("paralysis by analysis"). The author examines the over- and underuse of formal analysis and describes its underlying motives. She identifies three types of situations that lead to excessive analysis and three that lead to insufficient analysis. She concludes that, since the causes are frequently structural, simply exhorting managers to be more or less analytical is unlikely to solve the problem. Attention must be given to deeper structural and cultural issues. Moreover, because the obvious solution to one problem may drive the organization to the opposite one, rational yet efficient decision making is a complex balancing act that requires frequent diagnosis and realignment.