The article emphasizes upon the carefully phase-wise approach and behaviour of individuals within the organization for the successful corporate transformation. Here corporate transformation means turning several businesses of the corporate into ‘strategic business units’ with autonomous control and integrating all these ‘business units’ to create synergy for corporate growth.
For corporate turnaround, the authors have developed a model and have shown that this model is successful in the turnaround of ‘General Electric’ and ‘AT&T’. The distinct sequential phases of this transformation are rationalization, revitalization and regeneration. Rationalization deals with strengthening the performance of each of the company’s businesses, attempting to make a prominent player in that business. This means the corporate has to cut down the business where it is not doing well or in which the turnaround would be taking lot of time and resources and acquiring the businesses that would create synergies with the existing business. This change at the business unit has greater correlation with changes in individual values and activities. The tall building that would last long would not be built on the weak foundations. Hence rationalization largely deals with proving competency at the business unit levels. Here the autonomy and resources have to be passed to the plant level from the corporate level. The next stage i.e. revitalization largely deals with integrating the competent autonomous business units. The overall integrated business entity thus formed would have shared vision and shared set of values that could tie the whole organization together. Behavioral context that can boost revitalization process needs change in the organizational structure. The revitalization phase also needs a behavioral context of stretch i.e. enhancing people’s expectations of themselves and the company and trust to motivate in cross-unit integration e.g. the corporate head office can invite the heads of autonomous business units to serve on the internal of other units or even on worldwide business boards. The third stage i.e. regeneration deals with adaptation with ongoing transformation process on continuous basis. For continuous evolution, the soft levers play an important role. It has lot to do with how managers think and act. ABB calls it as human engineering. Being an electrical engineering company, it endeavors towards forming engineers into capable managers and capable mangers into effective leaders. In order to sustain regeneration, the organization has to look organization function as an educational institution in which everyone accepted dual roles as teacher and student. A good example is Kao, the Tokyo-based consumer package goods company.
The continuous sense of dynamic imbalance that cyclically emphasizes on rationalization and revitalization is essential for ongoing business regeneration. This model was shown during the transformation of Kao from 1971 to 1990 under Dr. Yashio Maruta. Transforming a hierarchical bureaucracy into a flexible, self-regenerating company can be painful and requires guts from those who must lead the process of change.
