Chapter 14

High-Performing Systems
and the Learning
Organization

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 Cisco Tames Its Cowboy CultureLike many companies, the
tech wreck of the early 2000s caught including Cisco Systems Inc.
and its CEO, John Chambers, off guard.In 2001, Chambers
initiated a massive change. Revolutionary change was the
company’s only chance.Several years later Cisco was back in
fighting trim—stronger than ever, with record profitsCisco could
be a case study of how a discredited industry leader can use a
slump to clean house and build a better foundation. Chambers
took the opportunity to rethink every part of the company,
including operations, priorities, and culture.Cisco’s culture before
the changes could best be described as a wild west cowboy
culture.Executives were encouraged to compete with one
another.Ideas were pursued with little discipline or
accountability.In the 2000s, the market changed dramatically in
what customers expected. It was not based on how fast a
company could get a product to the customer.Chamber says, “…
we needed to have engineering and manufacturing and
professional services and [sales] and customer support working
together in a way that wasn’t required before.”“The rule I followed
was to make the changes one time, make them deeper than you
think, articulate the changes in a way that explains your longer-
term vision, explain why the changes have to be made, and
outline what employees need to stay focused on.”

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 System-wide interventions.
• Managers today are facing constant
innovation and they must be able to
transform and renew the organization
to meet these changing forces.
• Certain OD interventions are aimed at
the successful implementation of
change within the total system.
• OD is a systems approach to group,
functional, and interpersonal relations.
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 • A system-level intervention is a structural
design framework for viewing the
organization that examines:
 Organization design.
 Organization flow patterns.
 Interactions of individuals and groups.
• The system may be an organization or a
reasonably well isolated unit such as a large
segment or subsystem within the total
organization.
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 Survey research and feedback.
• The key to a successful survey is for
management to clearly define the
purpose of the survey and explain
what will be done with the results.
• Employee attitude surveys serve two
important functions:
 An improvement tool.
 A communication tool.
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• Steps in survey feedback
 Step 1 - Top management plans survey
questionnaire.
 Step 2 - Outside staff administers
questionnaire to all organization
members.
 Step 3 - Outside staff summarizes data
and gives feedback to organization.
 Step 4 - Each work group diagnoses
problems and develops action programs
based on survey feedback to understand
problems, to improve working
relationships, and to identify opportunities
for change and research areas.

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• Results of Survey Research and
Feedback indicate positive changes in
employee attitudes and perceptions.
 The greater the involvement of all
members of the organization, the greater
the change.
 When feedback is combined with other
interventions, the effects are usually more
substantial and long range.

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 The learning organization.
• The learning organization is a system-wide
change program that emphasizes the
reduction of organizational layers and the
involvement of all employees in continuous
self-directed learning that will lead toward
positive change and growth in the individual,
team, and organization.
• A learning organization is an organization
that has developed a continuing capacity to
adapt and change.
• An approach frequently used is to bring
together key members in a collaborative
process to discover the problems and then to
develop a model of the system.

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 • Learning in organizations means the
continuous testing of experience and
the transformation of that experience
into knowledge accessible to the whole
organization.
• Members become conscious of how
they think and interact, and begin
developing capacities to think and
interact differently.
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 OUR CHANGING WORLDCEMENT IS NOT LOW-TECH AT LAFARGE?
Lafarge is the world’s biggest cement producer, with over $15 billion in
revenues from 133 cement plants in 46 countries.It has a culture that is
traced to its origins in 1833 when it was founded by the Lafarge
family.The founders were committed to a form of Christian humanism
that still prevails in the company today.The Lafarge way is a philosophy
of participative management that includes:A key responsibility for
managers is to develop their people.We expect our people to share their
experiences and to seek those of others. Best practices derive from our
ability to recognize and share our local successes.Dealing with conflict is
an integral and productive part of teamwork. Teamwork is each
individual contributing, accepting, and seeking differences of opinion as
a source of progress.Effective teamwork creates an environment of trust
and confidence.The learning organization. An important element at
Lafarge is training.Managers are required to monitor the development of
employees.The company practices intensive communication to make
sure that its worldwide businesses understand its operations.“Our aim is
to become a learning organization,” says the training manager of the
cement division.Questions:Can you explain how a culture can persist in
an organization for over 170 years across different owners?Visit the
Lafarge Web site (www.lafarge.com) to read and critique the “Lafarge
way” and other company practices and philosophies. Based on your
research, is Lafarge a learning organization? Support your position.

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 • Characteristics of learning
organizations.
 Constant readiness.
 Continuous planning.
 Improvised implementation.
 Action learning.
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 Reengineering: a radical redesign.
• Reengineering is the fundamental rethinking
and radical redesigning of business processes
to achieve drastic improvements in
performance.
• The redesign seeks to make all processes
more efficient by combining, eliminating, or
restructuring tasks to gain a large or
quantum leap in performance.
• Reengineering emphasizes products,
customer satisfaction, improvement in
processes, and creation of value.
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• Core values of learning organizations.
 Value different kinds of knowledge and learning
styles.
 Encourage communication between people who
have different perspectives.
 Develop creative thinking.
 Remain nonjudgmental of other and their ideas.
 Break down traditional barriers within the
organization.
 Develop leadership throughout the organization.
Everyone is a leader.
 Reduce distinctions between organization
members (management vs. nonmanagement and
line vs. staff.)
 Believe that every member of the organization has
untapped human potential.

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 • Steps in the reengineering process:
 Identify the key business process.
 Identify performance measures in terms of
customer satisfaction.
 Reengineer the process, organizing work around
the process, not functions or departments.
 Implement the redesigned process and a
continuing reevaluation.
• The process is criticized by some as a top-
down, or numbers approach, but in its use
of employee involvement, empowerment,
and teams, reengineering is similar to the
sociotechnical approach to change.
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 System 4 management.
• Rensis Likert developed the System 4
management model based on his
research of organizations.
• Systems 4 management describes
organizations on a continuum with
traditional bureaucratic organizations
(ineffective) at one end and
participative (effective) organizations
at the other.

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• The four systems are:
 System 1 - Exploitive/Authoritative
(autocratic, top-down).
 System 2 - Exploitive/Authoritative (top-
down/less coercive-autocratic).
 System 3 – Consultative.
 System 4 – Participative.
• Likert found that system 1
organizations tend to be the least
effective, whereas system 4
organizations tend to be very
effective. (See Figure 14.1)
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Figure 14.1 Profile of Organization Characteristics

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 • To improve organizations, the OD
practitioner tries to move the pattern of
functioning from System 1 organizations
toward System 4 organizations.
• System 4 organizations have several
common elements.
 Action rather than further analysis.
 Decisions involving subordinates rather than by
superiors.
 Individual accountability rather than rigid policies.
 Specific recognition of team and individual
accomplishments rather than blanket expressions
of thanks.
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 High-performing systems
(HPS).
• HPS calls for the removal of excessive
layers of structure within the
organization and the creation of a
climate that encourages participation
and communication across functional
barriers.
• HPS is a term originated by Peter Vaill.
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 • Eight criteria used to examine systems are:
 Perform excellently against a known external
standard.
 Perform excellently against their potential
performance.
 Perform excellently in relation to where they were
at some earlier point in time.
 Judged by observers to be doing substantially
better than other systems.
 Perform with significantly fewer resources than is
assumed are needed.
 Perceived as a source of ideas and inspiration for
others.
 Perceived to fulfill at a high level the ideals for the
culture within which they exist.
 They are the only organizations that have been
able to do what they do.
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 • HPS is identified by eight characteristics.
 An HPS is clear on its broad purposes and on
nearer-term objectives for fulfilling these
purposes. It knows why it exists.
 Commitment to these purposes is always high.
 Teamwork is focused on the task.
 Leadership is strong and clear.
 An HPS is a fertile source of inventions and new
methods.
 There is a strong consciousness that “we are
different.”
 Other subsystems of the environment often see
HPS as a problem because HPS avoids external
control and produces its own standards.
 HPS is a cohesive unit.
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 The Grid OD program.
• Designed by Robert R. Blake and Jane S.
Mouton, grid organization development is a
systematic approach aimed at achieving
corporate excellence by changing the basic
culture of the system.
• Grid OD starts with a focus on individual
behavior, specifically on the managerial
styles of executives.
• The program then moves through a series of
sequential phases involving the work team,
the relationships between groups, and finally
the overall culture of the organization.
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 • There are six Grid phases:
 Phase 1:
• Grid seminars someone in a management
position attends a public seminar.
• The seminar is highly structured and focuses on
managerial style, organization culture, and
increasing the effectiveness of the whole
organization.
 Phase 2:
• Teamwork development begins with the top
manager and continues through the entire
organization.
• The team sets group and individual goals.
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  Phase 3:
• Intergroup development sessions that work
with people along the horizontal dimension of
the organization.
• Sessions are attended by key members of two
segments or divisions where barriers exist.
• Participants leave the meetings with goals and
objectives plus an increased understanding of
communication with one another.
 Phase 4:
• Development of an ideal strategic model that
provides the organization with the knowledge
and skills to move from a reactionary approach
to one of systematic development.
• The concern is with the overall norms, policies,
and structure of the organization.
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 • Phase 5:
 Implement the ideal strategic model.
 The organization is divided into planning
teams with coordinators and the model is
implemented.
 Phase 6:
• There occurs a systematic examination of
progress toward change goals through survey
use.
• Grid OD may be implemented over a period of
5 to 10 years.
• Results of Grid OD programs are documented in
anecdotal evidence that suggests an increase in
productivity, improvement in managerial style and
ability to manage, and increased efficiency.

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 The third wave organization.
• The third-wave organization is a term
originated by business futurist Alvin Toffler.
• The third wave organization describes
companies that are evolving in the
information age to meet changing times.
• Third-wave organizations have the following
characteristics:
 Flexibility - structure has no permanence.
 Creativity - people are motivated by the
commitment to a vision or cause.
 Innovation - support for risk taking and
innovation.
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 OD IN PRACTICETHE SPOOKS, THE CIA, AND CHANGEGeorge Tenet (now retired) took
over as director of the CIA in 1996.Tenet was the seventh director in five years.During the first
five years of his tenure, CIA budgets were slashed.Some government decision-makers believed
the CIA to be irrelevant.Prior to Tenet taking over, the CIA’s morale had plummeted.There was
little or no articulated mission for the CIA in this new world of peace.In 1995 the CIA trained
only 25 operations officers and shut down 30 percent of the overseas offices. Many people
quit.Tenet’s first priority was to rebuild the spy shop.He hired new recruits and improved
training.Tenet brought in as executive director A. B. Krongard from Wall Street’s consulting firm
Alex. Brown.Krongard’s was tasked with the job of overhauling everything from the CIA’s
structure and technology to its compensation systems.In June 2001, the CIA began one of the
most significant reorganizations in its history until that time.The transformation included setting
up new departments, including information technology, human resources, and finance. The new
department heads sat in on the executive board meetings along with the chiefs of three core
directorates.To have the head of human resources working on the same level as the head of
operations was a radical change.Computerized information systems were installed that allowed
people to communicate via the Internet.Communication flows were radically
changed.Stovepiping described the communication flow.Communications was to go up or down
but not horizontally.Communications was on a “need to know” basis to maintain secrecy.Data
tended to remain segmented with the big picture remaining obscure. In the summer of 2001
Tenet and Krongard were beginning to bring change to the CIA. For organizations, both
government and business, a crisis can often be the only way that significant change can be
bought about.In testimony to the 9/11 Commission on April 14, 2004, Tenet testified that it
would take another five years of work to produce the kind of clandestine service that the United
States needs.In June 2004 Tenet announced his retirement.Questions:Are the changes at the
CIA of a type that makes the CIA a high-performing system or a third-wave organization?Why
do some organizations have to experience a crisis in order to bring about meaningful change?
Conduct research on other changes that the CIA may have made and what the 9/11 commission
had to say about the CIA’s need for change. Research the changes that have been mandated by
Presidential order and Congressional legislation.

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