Rethinking Change Management Preface
Walter Chrysler formed the Chrysler Corporation in 1925. He led the company to become one of Detroit’s Big Three automakers. For that reason, he is considered to be one of the founding fathers of the early automobile.
Gottlieb Daimler was one of the first pioneers of the internal combustible engine. He took that idea to market and began a car company in the 1890s. In 1926, the Daimler company merged with Benz. As a result, Daimler-Benz became the main German automaker and noted luxury car throughout the twentieth century.
In May of 1998, Chrysler and Daimler-Benz merged to become DaimlerChrysler AG. The merger was intended to create a new giant automaker that could stretch across Europe and the Americas. With projected annual sales of over $150 billion, the company was poised to be a dominant automaker. This combination would address the full consumer auto market while capitalizing on economies of scale by maximizing German efficiency and American innovation.
The merger had a tough beginning fraught with significant cultural differences. Chrysler had a reputation as an agile, action-oriented company with a flat management hierarchy. Daimler, however, renowned for being methodical and analytical, and utilizing a vertically organized management structure. Compounding these differences was the fact that the merger was soon revealed to be a takeover. Chrysler did not have a board seat at the new corporation and had reduced influence over how the two companies would become one. The push was to adopt Daimler’s management, standard operations, and culture instead of creating a new work model.
Over the following years, organizational disaster ensued, accompanied by management misalignment. Leadership infighting became the norm. The bickering led to multiple reorganizations and layoffs, which, in turn, led to industry-declared poor vehicle designs and lagging manufacturing practices. Eventually, the board decided to run the companies as separate entities so as to not degrade the brands.
By 2007, the gas crisis had swung into full effect, and Chrysler could not survive. Given a prime excuse, Daimler sold Chrysler to Cerberus Capital Management to bring it back to life. This allowed Daimler to wash its hands of one of the greatest change management failures.
On a massive scale, this takeover demonstrates the same behaviors of many change management failures: ignoring environmental differences, not engaging with stakeholders who will be impacted, and forcing behavioral changes upon an embedded organizational culture. While this was a takeover, the execution of Daimler’s change management was an abject disaster for both parties.
The roots of change management stretch back to World War II and the mass mobilization of soldiers. This led to the study of management and, later, the effects of change. In 1948, Lester Coach and John French studied the motivational issues centered around change initiatives, identifying behavioral resistance. Their work defined the three types of change: planned, continuous, and transitional.
In the 1950s, Kurt Lewin developed one of the first change models. The model consisted of three stages: unfreeze, change, and refreeze. In 1969, Elizabeth Kubler-Ross published her five stages of grief and pointed to the correlation that change mirrored by individuals experiencing the death of a loved one and the employees during the change management process.
With the 1990s came the advancement of globalization. General Electric was able to leverage successful change approaches taking advantage of a slower transitioning market. Its approach was so successful that it was able to turn it into a new consulting business.
With eighty years of practice, organizations continue to struggle with implementing change. Change theorist John Kotter projects that 70% of all change efforts fail because they created environments of decreased morale, missed opportunities, and wasted resources. In retrospect, studies found that the model of reengineering the organization boom of the 1980s ignored people. The model actually made things worse. As practice and models have adjusted, leaders now know the change tools and theory but are failing to apply these tools or involve employees in the change process. This practice has led to poor communication channels, not rewarding quick wins or change successes, making it harder to change ingrained behaviors.
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