"No one is born a capable CEO."
In his 40 years as an organisational consultant, Gerhard Fatzer has experienced many a hype and debunked many a misconception. An insightful conversation with one of the great pioneers of organisational development – about the role of artificial intelligence, the myth of the all-powerful leader and why 70 percent of all mergers fail.
Eliane Eisenring spoke with Gerhard Fatzer
Mr. Fatzer, you have been dealing with changes within organisations for 40 years. How has the field of organisational development changed during this time?
Interestingly, the important questions have overall remained the same. Organisational development was first described in the USA and England in 1956. In the late sixties, early seventies, the idea came to Europe. At first, only leaders were coached, but soon it became clear that this was not enough. Nowadays, the field of organisational development is characterised by ever new concepts or currents of thought that all keep trying to answer the same question: What is the best way to organise a company?
What concepts are we talking about here?
Currently, for example, the "decentralised" and "self-organised" approach is in vogue. Gender issues are also increasingly being discussed. Another hype is the so-called "fear-free organisation", a principle that shows the connection between psychological security and high performance.
Organisational development: What is that?
According to the Gabler Wirtschaftslexikon, organisational development is the "strategy of planned and systematic change brought about by influencing organisational structure, corporate culture and individual behaviour". This change is intended to improve the organisational performance of the company as well as the working conditions and opportunities for the individual employees. To achieve this, the strategy takes into account "interactions between individuals, groups, organisations, technology, environment and time" as well as "the communication patterns, value structures, power constellations etc." of the respective organisation.
According to the HR company Personio, development is important because "rigid structures and entrenched processes slow down companies". With the help of the concepts of organisational development, "companies can renew themselves from within, initiate learning processes and thus remain competitive".
With the Trias Institute, which you founded 30 years ago, you advise and support companies that want to change or develop. To what extent do you respond to these hypes?
We take them into account by looking at what trends have already been discussed within the company we are advising and what ideas and mindsets the employees themselves bring with them.
Speaking of trends, what role does artificial intelligence actually play in organisational develop-ment? Is there a connection or are there tools that are being used?
Yes, there are, for example the so-called "system archetypes". They were developed by Jay Forrest-er, the founder of core memory and system dynamics and professor at M.I.T. (Massachusetts Institute of Technology, Cambridge), where a lot of research is being done on artificial intelligence. The "system archetypes" are simulations that show us how organisations or teams function. In organisational development we use them to illustrate what is going on in an organisation. They describe very precisely the behavioural patterns of leaders, teams or departments and help us to recognise and avoid possible "pitfalls". Artificial intelligence also helps to organise large amounts of data in a sensible way – a key issue for effective companies. So, as you can see, there is a direct practical benefit. Good leaders use "systems thinking" to become even better.
In the last interview, we discussed Edgar H. Schein's term "humble leadership", which also plays a major role in your new book " Kunst der Veränderung: Vorurteilslose Führung und Organisation-sentwicklung". To what extent does such a leadership style facilitate change processes?
It is actually a prerequisite: you can only successfully implement change in an organisation if there is an understanding of the need for change and a willingness to implement it right up to the top, up to CEO level. Otherwise, there will be too much resistance. Humility, as Schein defines it, requires that one is curious and does not already know the solution or the procedure from the beginning, that one asks open questions and also communicates openly. In fact, leaders are downright dependent on humble and open communication.
The ability to change in a targeted way is increasingly a necessity for companies in the age of globalisation and digital competition. But how does one find out in which direction a development makes sense and how does one ensure that it will be a success?
The Trias Institute has been advising and supporting clients – from start-ups to established organisations – on this path for 30 years. The role that curiosity, open communication and awareness of one's own corporate culture plays in this process are explained in the texts compiled by Gerhard Fatzer and Daniel C. Schmid in their new book „Kunst der Veränderung: Vorurteilslose Führung und Organisationsentwicklung“.
In most cases, CEOs are highly isolated and have only selective information; there is extreme filtering from the bottom up. Therefore, CEOs usually have to make decisions on the basis of incomplete information. The consequences of this were evident, for example, in the floods last year in the Ahr region in Germany: The relevant authorities were either mis- or totally uninformed. It is quite natural that the highest authorities do not have all the information. That is precisely why they have to maintain an open culture of communication.
Let's take the term "culture" as our cue: you say it is the most important element in a change process.
Corporate culture encompasses shared values, norms and attitudes that shape the decisions, actions and behaviour of company members. It ensures that changes are sustainable. Or to put it the other way round: if the culture remains the same, nothing changes. However, once you have identified the cultural assumptions that make up a company, you can address what drives all behaviour.
Is the role of corporate culture in change processes underestimated? If so, why?
The difficult thing about culture is that people are usually not aware of these shared values, norms and attitudes. As consultants from outside, we try to get to know the culture of a company by asking employees about their practices and views. This is also the initital way to make them aware of their own culture. However, this cultural exposure is exhausting and many people simply don't want to expose themselves to it.
Corporate culture ensures that changes are sustainable.
This means that as a consultant you first have to understand the culture of a company in order to find the right approach for the change process?
Exactly. On the one hand, understanding the culture of a company makes it easier to work together. A good example was a project in China: advising a group of 30 people, I first conducted an interview: What do I need to know about you as a trainer, what is important in your group, what works well, what is critical, what is taboo? This way, we quickly got closer and were able to build trust. At the same time, the answers provided us with important insights into what could help this group move forward.
You also describe dialogue as central to change processes in organisations. Why is dialogue in this context more helpful than discussion or debate?
In a debate, there is a winner and a loser – someone is right. Dialogue, according to the philosopher of knowledge and atomic physicist David Bohm, is the "art of thinking together". You talk about a topic without the aim of coming to an immediate decision. What is interesting then is how this dialogue is conducted. This depends very much on the respective culture – a technician communicates differently than someone from the administration or a teacher, for example.
Such different cultures often come together during changes. This is also the case with mergers.
That’s true. There are different types of mergers – in a merger in the narrow sense, two companies of equal standing form a new company; in an acquisition, a smaller company is taken over by a larg-er one; and in a joint venture, two companies merge but keep their separate identities.
Failure is usually caused by what we call the "synergy illusion": the misconception that two parties are a good fit and therefore can be easily merged.
You write in your book that up to 70 per cent of all mergers end in failure. Why is that?
The reason for a merger is usually that one company has a product or service that the other company wants to take over. Failure is usually caused by what we call the "synergy illusion": the misconception that two parties are a good fit and therefore can be easily merged. However, especially in the case of acquisitions, it often happens that the smaller company is simply swallowed up.
Do you have an example of this?
One example is the acquisition of Nixdorf Computer AG by Siemens in 1990. Nixdorf had the most advanced HR culture in the IT sector and Siemens wanted to adopt it. At first the best Nixdorf employees went to Siemens, but then they realised that Siemens was a typical administration culture. That didn't fit with the expectations and basic cultural assumptions that prevailed at Nixdorf. So the Nixdorf employees looked for another job.
Amazon's acquisition of Wholefoods in 2017 I evaluate similarly: At Wholefoods, the largest supplier of natural products in the USA, you can buy high-end food around the corner. This is based on a completely different philosophy than Amazon has. How much will be left of the Wholefoods concept in the end is doubtful, but I assume it won't be much. Such an eradication of a concept, as I said, often leads to leaders leaving and starting something new. This is not necessarily negative, but it does not lead to the result that was originally intended.
The intention being to continue the successful concept of the merged company.
Exactly, and creating a synergy by two strong parties coming together and accomplishing something even better than they have on their own.
What is your advice to a company in the merger process?
To make a merger successful, you first have to look at the two different corporate cultures. Second, you have to provide the opportunity to talk about the merger. Weaknesses that one has as a company should also be addressed – this again goes in the direction of open communication. And you should create a common framework, that is, create collective projects and experiences and form teams that combine the know-how of both sides.
It is crucial to record what you have learned, to create a "learning story" that makes you aware of the change you have gone through.
Coming back to organisational development in general: What types of companies generally struggle the most with change?
In my experience, change is most difficult in companies that have distinct routine processes, e.g. in administrations, but also in government and development organisations. It is easier with companies that are intrinsically agile and creative, such as start-ups or NGOs. The good thing is that such companies inspire the more routine ones. Especially in administrations, there has been a lot of movement in recent years; they are increasingly being trimmed in the direction of corporate development.
In your experience, how do companies in the IT sector do in this respect?
As businesses, IT companies are quite open. The challenge lies more in the professional culture: IT people have a very different one compared to managers. Many IT professionals are highly specialised experts in their field. The question is whether they are open to change. Generally, IT is a very exciting industry, because in this very technically oriented culture one often has to find new ways of communicating.
When it comes to change, it is also important to document the process.
Yes, it is crucial to record what you have learned, to create a "learning story" that makes you aware of the change you have gone through. This does not happen automatically. Such a learning story does not necessarily have to be written, it can also be a ritual, e.g. that a team has a common experience as a conclusion of the change process, which deepens and applies what they have learnt together.
In your words, a learning story helps to establish "effective practices" instead of "best practices". What is the difference?
Two or three years ago, people used to do benchmarking. At that time, it was assumed that there was one company that did something best. Then everyone went there, e.g. to Silicon Valley, to learn something from these companies or to copy their "best practice". This way, however, they also adopted their problems. The opposite principle is to find tailor-made solutions for an individual organisation, because each functions differently and has different needs.
With defensive routines an organisation paralyses its own development possibilities.
In your book you also speak of "defensive routines". These are a hindrance to the change process. What exactly is meant by this term?
Defensive routines are principles that determine communication in organisations. Instead of addressing things that are not ideal, they are tabooed and therefore not improved. This way, an organisation paralyses its own development possibilities. Such routines are usually practised unconsciously, but you notice them when you join a team, for example as a new team member or as a coach.
How do such routines develop?
Organisational developer and business professor Chris Argyris has shown that leaders have a tendency to try not to lose face and show weakness. They also try not to lose control. This leads to negative things not being addressed, the higher up the less. For change, however, as I said, there must be room for honesty and personal relationships. This contradicts the myth of the leader who has everything under control.
One of the many myths when it comes to organisational leadership and development. In your experience, what are the other most widespread misconceptions in management?
On the one hand, that digital transformation – i.e. organisational development in the digital domain – can be brought about purely through technical measures. Contrary to this myth, the development of culture is central here as well. Another misconception is that leadership and control primarily happen from above. What’s essential is the role of the "followers", the employees who support. Likewise, it is not true that capable CEOs are born: leadership can be learned and depends only to a small degree on charisma. Last but not least, it is a myth that "political communication"– not saying what you think or what you see – is expedient. Honesty, openness and humility lead to the goal and make up "good communication".
About Gerhard Fatzer
Gerhard Fatzer (* 1951) is a Swiss psychologist and pioneer in organisational development in German-speaking countries. He has been head of the Trias Institute for Coaching, Supervision and Organisational Development in Grüningen, Switzerland, since 1991. Fatzer has advised CEOs and management boards of globally active companies, including Henning Kagermann, the former CEO of SAP in conjunction with Dietmar Hoppe. He has also advised the CTO at Dornier Flugzeugwerke, senior teams at SWR 3 and Daimler, and the top management teams in technical collaboration projects across the world (GTZ). He publishes series of books, journals and successful titles, and is a key-note speaker at conferences and in the media.