Management: Theory and Practice

Paul’s Ark
An infinite number of stories affirm our relationship with the universe

Skip to content
 From Paul
 Story Theory
 Individual Stories
 Organizational Stories
 Nature & Stories
 Annotated Resources
The Apex Story
Posted on November 7, 2010 by pnelson
The Apex Story
A Case Study of Management Issues
By

Paul T. Nelson, PhD

November 2009

Table of Contents
Part I. Introduction………………………………………………………………………1
Part II. History, People, and Financial Problems …….………………………………..4
Early times…….…………………………………………………………..………4
Modern Times …………………………………………………………………….5
Personnel and Financial Issues……………………………………………………6
Part III. Apex Grows a Human Resource Manager…….……………………………13
An Organizational Partner……………………………………………………….13
Social Responsibility……………………………………………………………..16
Working Together……………………………………………………………….17
The Haunted Leader…………………………………………………………….19
Part IV. Issues of Change at Apex ……….………….……………………………….21
Design Issues……………………………………………………………………21
Global Uncertainty….…………………………………………………………..23
The Change Process ……………………………………………………………26
Part V. CEOs & Apex Organizational Eras………………………………………….28
Era I…………………………………………………………………………..…29

Era II…………………………………………………………………………….31

Era III……………………………………………………………………………34
Part V. Closing Thoughts….…………………………………………………………..37
Nature and Organizations……………………………………………………….37
Epilogue…………………………………………………………………………40
References………………………………………………………………………………42

Part I. Introduction
Our story begins in December 2002. Imagine all those towns and farms dotting the coastline of the great Northwest, some nested in valleys, others up high with an ocean view. In those towns and on those farms are thousands of families. The families have all made many choices regarding how they are going to live their lives or how they are going to organize to accomplish their choices. In part, these choices are made in response to environmental conditions.
Then along comes an El Nino that unexpectedly changes that environment. At regular intervals throughout December storms pounded the coast from Northern California to Washington. How long would this last? Was it time to move to higher ground? Should everyone sit tight? No one, including the meteorologists, really knew.
In the 1800s a Peruvian fisherman noticed the regular arrival of a warm coastal ocean current in late December. He named that current El Nino after the birth of Christ. The large weather event is actually called ENSO, the El Nino Southern Oscillation. The oscillation occurs in air pressure measured between two locations; Darwin, Australia, and Tahiti.
In normal times the trade winds maintain the pressure difference in one direction. When the trade winds weaken, for unknown reasons, the pressure difference reverses. This atmospheric oscillation triggers changes in the ocean that in turn affect the atmosphere, particularly the location of the jet streams. The changes in the atmosphere are fast, easier to measure, and get our attention; the changes in the ocean are slow, difficult to measure, and long lasting. Although the origin of the oscillation is a mystery, once it evolves, changes can be plotted and forecasts can be made. Unfortunately specific weather at a specific place is still very much a guess, as many other and less understood cycles and phenomenon interact with ENSO.
For those Northwest families, the effect of ENSO alters many of their life choices: for example, the clothes they wear, their planting and harvesting activities, the flood control strategies, the availability of potable water. The effects of ENSO are not limited to the Northwest. Droughts occur in Australia, the winter weather in Europe is unusually harsh, and Antarctica receives more snow. Nor are the effects limited to land based creatures. Migratory patterns of sea mammals, fish, and fowl are disrupted, as well as the location of their food source. ENSO has a tremendous impact on agriculture and may last more than a year. ENSO occurs at 2 to 7 year irregular intervals; there have been 10 since 1950. It seems there are a lot of “sometimes” and “maybes,” and very few “definites.” In response, some people make short-term changes, some long-term; in either case there is not sufficient information to make a comfortable choice.
The National Oceanographic & Atmospheric Administration (NOAA) attempts to forecast the occurrence of ENSO. Seventy buoyed sensing devices spread across the Pacific report air and water temperature, pressure, direction and strength of currents, and salinity, to help NOAA search for patterns of change. As the ENSO event develops, predictions become more and more accurate. The subtle change in conditions that initiate the change will eventually evolve yielding a discernable pattern. But in that period of time prior to the emergence of a discernable and measurable pattern, there is a knowledge gap. The situation is between two recognizable conditions and despite not knowing which conditions will prevail, a decision must be made.
Organizations are often faced with mysterious sources of change in external or internal conditions or both. If there were no mystery, all organizations would be successful all the time. Management’s sensing devices search for a discernable pattern in the change, but the situation requires that decisions be made in the face of uncertain information. Once a pattern emerges, thoughtful adjustments and modifications can be planned. But in that period of time prior to the arrival of a discernable pattern, the organization is in a knowledge gap.
Being in the gap leads us to multiple answers to the same question. We apply judgment to the situation, judgment based on our own fundamental assumptions about the world and human beings. Few things, if any, can be more important than discovering our own fundamental assumptions. The discovery process requires hard work. Many of our assumptions are unknown to us, so they operate unconsciously. A major purpose for reading and thinking about the Apex Story is to discover some of those assumptions.
Most often the assumptions are found in the organizational stories we tell. Story is the primary way in which organizational life is given meaning, and embedded in this meaning, are the fundamental assumptions.
I have entitled this case study The Apex Story. In doing so, I am ascribing a story to a non-living entity, as if Apex were a person making decisions. In fact The Apex Story is a collection of stories experienced by employees, customers, and suppliers created within a context of time and place. Imaginally, The Apex Story is an umbrella embracing this collection of stories as seen through the single lens of the author. The perspective for this story is a 2010 perspective and the events and issues described occurred many years ago. The fact that these events and issues are historical does not necessarily make them irrelevant as significant organizational issues have been with us for hundreds of years.
The Apex Story has been developed as a supplement to the study of individual and organizational effectiveness. The story is divided into sections and in each section are questions for the reader to respond to. The story leads to the possibility of many different answers to the questions raised, questions that must be answered by in the context of fundamental assumptions. The fundamental assumptions may have their origin in the reader’s worldview or in the culture of a particular organization. At times it is a combination of both sets of assumptions.
Although the form of this presentation appears to be a case study, it is much more a story. This is because the events and issues originate in my work experience, occurred over a period of years, and woven into a fictionalized account of Apex. Given my interest, the human side of the enterprise is emphasized more than the objective and analytical side that commonly appears in a case study. Douglas McGregor has had considerable influence on the content.
It is also written to help the reader experience how the significant problems of organizations are a tangle of disciplines and that more often than not problems require answers before all the necessary information is known. Additionally, I hope the story approach is more engaging and helps the reader integrate the content of different disciplines.
Part II. History, People, and Financial Problems

Early Times
The village of Glenrock is located in semi-rural southwest Ohio where the tree lined streets overwhelm the view. The green leaves flare forth in abundance in the spring, provide needed shade during the summer and ease on into a myriad of earth tones in the fall. One can’t help but feel the pull of the simple life, a life in close relationship to dogs, children and farm fresh food. A small liberal arts college has been the heart of Glenrock since the 1800’s. The non-traditional college encouraged its students to pursue their dreams through independent and work study programs in addition to more traditional core courses. Most students took five years to finish the four-year degree. It is in this setting that Apex was incorporated in 1957. Apex actually began in the early 50s when it was founded by three students and housed in a space provided by the college.
In those early days the interest of the students moved in many directions driven by their need to make money and their personal interest in science. For these young men the need to make money was an ugly thought. It represented the dark side of a business reality that enabled them to pursue their interest in science. When their beloved Great Dane developed serious respiratory problems they responded by designing and building the first iron lung to ease his breathing. They built five more but then abandoned the project for other interests. Through their interest and love of science the three students discovered innovative ways to convert scientific principles into products. This was a process that provided enormous satisfaction in return for their effort. For these three individuals the production of those first products was similar to giving birth. They willingly sacrificed time and compensation to produce a high quality product.
Working in borrowed space, they pieced together a manufacturing process that formed the basis of a company. As they added employees they tried to add employees who shared their love and excitement about scientific discovery and turning those discoveries into useful products. Employees might make mistakes and the founders would patiently teach the employee how to avoid and correct the mistake. However, the expectation of alignment between the individual and the organizational intention of producing a quality product would not be compromised. If the employee had the right intention, he or she would be taken care of.
With continued market interest they began to grow the business and the business no longer fit in the borrowed space. They rented a new space in an old factory building. The building was typical of those built in the 30s and 40s, lots of small rooms with doors, back hallways, cigarette smoke and bad lighting. The building was satisfactory to the founders as they cared little for the esthetics of physical surroundings. They viewed the move as confirmation of their business success.
Apex developed a reputation for fair treatment of employees, so it was considered to be a good place to work. Perhaps this was the reason why it was never unionized despite a couple of attempts. With a conservative financial approach, it started small and grew slowly. Over the years there have been some hard times, but by and large there were many more successful years than bad ones.

Modern Times
By the 90s Apex was in the business of designing and manufacturing equipment that measures temperature, water quality, and different chemicals within the human body. Apex bought the rented factory building and remodeled and added space on three occasions. However, the upgrades did not change the character of its management style.
Apex now has a Board of Directors which is composed of nine members. One of the members is a current employee, nominated and elected by employees (Employee participation on the Board began when Apex became an Employee Owned Company in 1993). Other Board members are a lawyer, two CEOs from other companies, two individuals with strong technology backgrounds, a former Apex VP of Marketing & Sales, a prestigious member of the local community, and the Apex CEO who chairs the Board. In general, they work well together, although they are somewhat hesitant to challenge the CEO.
In 1993 Apex became an Employed Owned Company via ESOP (Employee Stock Ownership Plan). Apex joined the National ESOP Association and has had frequent interaction with the association and advice from its president for many years. The defined benefit pension plan was phased out, replaced by the ESOP and a 401K plan. Employer contributions to both plans are dependent on the yearly financial performance and are based on an individual’s base compensation. The 2002 plan calls for a 6% contribution split evenly between the ESOP and the 401K. This approach seems to have worked well and benefited both employees and the company. Apex maintains a small foundation which averages 200K in grants and gifts per year to fund various projects in the community. The Board of Directors is proud of this heritage and sees wisdom in a conservative financial approach coupled with humanistic employee policies and procedures.
Beginning in 2001 the growth rate of the business slowed. Initially, adjustments were made to the plan and a slight profitability was maintained. But with the national economic downturn during the first half of 2002 caused by the trauma of 9/11, Apex posted a loss in both Q1 and Q2. The hope was that the losses during the first half of the year would be made up in the second half. Now, in June, it seems clear that this isn’t going to happen.
With a Board Meeting coming up in 3 weeks, Douglas Warren, the CEO, needs a plan to address this situation. He knows the rationale for the decrease in revenue, but that’s only interesting. What’s important is what is to be done about it. Doug thought how often this happens in organizations; a plan is developed and then something unanticipated occurs, such as 9/11 or the corporate scandals, and the environment moves in unexpected ways. Excuses are interesting, but paying the bills is what counts. And perhaps more important for employees, Doug took the poor performance personally; it affected his mood and demeanor. Success to Doug meant more than a job well done. Success captured Doug’s essence. Doug was driven by the need to be more successful than his father and there was never enough success to satisfy this need.
Key Personnel and Financial Issues
The following paragraphs are brief bios of the key managers at Apex. The paragraphs also contain additional information regarding the financial problem in 2002, personal issues, and clues to the fundamental assumptions of the culture.

Douglas Warren, Chief Executive Officer
The Board of Directors hired Douglas Warren ten years ago. During the search process the Board focused their attention on “outside” candidates, driven by the thought that Apex was in need of some fresh thinking. They weren’t particularly dissatisfied with the past, but as they thought about the future, they felt it would be important to hire someone with a different outlook. In addition, the business had stalled and maybe some fresh thinking would help that situation. Doug seemed to fit the bill. He had had a wide variety of experiences in a large organization, his values were aligned with Apex, and he appeared committed and passionate about the future success of Apex.
It was Doug who pushed for and drove the strategy that made Apex an employee-owned company, which in turn led to the buy-out of the founders. He focused on the big picture, always shaping and modifying a vision for Apex. He scanned the environment for potential acquisitions and unique partnerships. He networked widely, read materials from all points of view, and was determined that he and Apex would be on the forefront of the latest and greatest. Along with this focused energy came a rather large-sized ego; it was clear from the start that this was a person you didn’t want to cross.
From time to time Doug stomped on some toes, but as far as the COO, Steve McCray, was concerned this behavior was necessary. In Steve’s judgment it took a large-size ego to make the necessary decisions in a timely manner, and with the increase in the pace of competition in the market place, Apex did not have time to sit around and wait for a committee decision. In fact, Steve found the fast pace somewhat intoxicating, lots of action and learning. Steve was Doug’s primary confidant, a kind of alter ego, which placed Steve on the inside of most decisions.
In 2002, four individuals reported to Doug: Steve McCray (COO), Jackie Pittman (Vice President of Marketing & Sales), Vadim Pacheco (Vice President of Advanced Technology) and Ed Turnbull (Chief Financial Officer).
1. What fundamental assumptions underpin Doug’s behavior?

Steve McCray, Chief Operating Officer
Steve has been with Apex for 15 years. Initially hired as a Purchasing Manager, he successfully moved through a variety of positions until three years ago he was promoted to COO. Steve is quite intelligent; he quickly gained an understanding of the different disciplines and functions at Apex. He understood their interrelationship and how the whole was greater than the sum of the individual parts. Steve was a good fit for the position of COO. Before joining Apex, Steve was a Branch Manager for a well-known national bank and most recently a Sales Manager for a health-care provider. Steve, and his wife Cynthia, are involved and respected members of the Glenrock community. Their two children, Rebecca and Nathan, attend the Glenrock Christian Elementary School.
As COO, Steve has a Operations Team reporting to him. The team is composed of a HR (Human Resources) Director, a Director of IT (Information Technology), a Quality Assurance Manager, a Manufacturing Manager, and a Purchasing Manager. The Operations Team meets weekly with Steve and once a month the meeting is held with the CEO.
At team meetings issues are aired, discussed, and resolved. Team members generally present their issues from the point of view of their particular function or department. From time to time there is friction among team members, particularly when business is poor. Steve believes this is team-member competitiveness and if he confronts the conflict the team will self-destruct. By avoiding the conflict some meetings end in pointless argument. Doug considers the conflict healthy competition. However, it is up to Steve to resolve the differences. In contrast to Doug, Steve is quiet and thoughtful interpersonally; yet tenacious when it comes to accomplishing tasks.
An ongoing team issue for Steve is the inappropriate emphasis the team places on results. In Steve’s view a large part of good results that are sustained come from attention directed at continuous process improvement. However, at Apex results get the bonus; results get recognition, while improving process is viewed as grunt work. Steve thinks the Apex reward system and culture should change and give greater emphasis to process improvement. Thus far he has been unsuccessful in his effort to change the focus on results at Apex.
2. What should Steve do to change the results orientation to one of continuous process improvement?
Gloria Harshell, Human Resources Director
A long-term employee, Gloria has been the Director of HR for the past five years. She was promoted slowly through the ranks. In addition to managing the traditional HR functions (benefits, pay, recruiting, termination, etc), she believes a significant part of her job is to advocate for the rank and file employees. Although Gloria sees her role on the Operations Team as an opportunity to be the voice for the employees, in fact she spends most of that time trying to come up with solutions to team conflicts. Most of her suggested solutions are compromises. This approach is fine with Steve, as he often needs an ally to move the team forward. In part, Gloria learned the art of negotiation and compromise by surviving stormy, and at times, destructive family relationships. In a way it seems that Gloria has replaced her personal family relationships with her work relationships. As a divorced person Gloria lives alone in a small but attractive condo in Glenrock.
HR is significantly involved in supporting the ongoing education of Apex employees. Education, the ESOP, profit sharing, and a low turnover have become the major recruiting tools for the HR Department. There are 280 employees at the Glenrock headquarters, 95 at the Maquiladora manufacturing facility in Mexico, and 25 at the European Sales & Distribution Center in Milan, Italy. Pay and benefit practices are competitive in the areas where these facilities are located. The average wage in Glenrock and Milan is 60K: the average in the Maquiladora facility is 20K. Employee benefits average an additional 40% of base pay. 65% of all employees are involved in manufacturing. Overall, the yearly turnover rate is 7%, a rate that Gloria is very proud of.
Gloria also manages the bonus plan for thirty key employees. The plan has variable rates depending on the employee position, but does not exceed 15% of base pay. Doug makes the decisions and Gloria implements them. The average base pay for these employees is 95K. There is also a profit sharing plan for all employees, with distribution in December of each year. Gloria is concerned that the poor financial performance for 2002 will result in a zero pay-out. Employees have come to count on the distribution to pay for their holiday expenses. She believes that a zero payment this year will seriously affect company morale. She would like to find a way to prevent this from happening.
Ed Turnbull, Chief Financial Officer
Ed has been with Apex for 20 years. He inherited a mess from his predecessor, who had little financial experience. The predecessor’s systems and processes were informal; he resolved most issues via the “old boy” network. Ed, a CPA, came to Apex with five years of experience with the accounting firm, Deloitte Touche, and worked diligently to clean up the mess at Apex. After two or three years, financial reporting improved significantly. The Board of Directors complimented Ed on his work; they felt a great sense of relief to have accurate numbers to plan and evaluate the business activity of Apex. Ed is at his best working alone and seems to have trouble clearly articulating his expectations to others. Ed is addicted to golf; he loves the challenge of different terrains, shot angles and club selection. If given the opportunity he will discuss this subject endlessly.
As Ed reviews the Apex numbers, he sees the rise in inventories of both raw materials and finished goods, as well as a rise in manufacturing costs, which when taken together, result in an increase in the cost of products. A no-nonsense kind of guy, Ed would like to focus on cost containment. He believes it’s time for Apex to seriously consider a layoff.
3. How do Gloria’s fundamental assumptions about employees and the business differ from those of Ed Turnbull? What is the likelihood that Gloria or Ed will change their fundamental assumptions?
The revenue plan for 2002 was 80 million dollars and that would yield a net profit of 4 million dollars or 5%. Based on the performance for the first half of the year Ed revised the revenue plan down to 77 million. This revision also included an across the board reduction of 3.75% in line-item expenses. These actions were effective at the start of Q3. The Board of Directors was not pleased with this revision but saw no alternative and accepted it. Now it looks as if revenue will be down an additional 3 million by the end of the year.
4. What is the financial problem caused by the increase in inventory of both raw materials and finished goods?
Jackie Pittman, Vice President of Marketing & Sales
Jackie was key to moving the business focus from designing and manufacturing high-quality instruments to focusing on providing customers with the high-quality information they need to perform their jobs. In the old days, Apex put a healthy mark-up on the price of an instrument and with the Apex reputation for high-quality, customers paid the piper. It was a cost-plus pricing philosophy. Enter stiff price competition from globalization, and this way of doing business was no longer viable. Jackie transformed that problem into opportunity.
Jackie drastically reduced the price of the equipment. She poured resources into customer visits and service, into application notes and customer education. Jackie and her team developed strong relationships with Apex customers, always focusing on the long term. Meanwhile she allowed the price of consumables (calibration solutions, membranes, etc.) to creep up. Jackie was heard to say “Give the products away; we’ll make our money on the consumables.” Jackie was also quick to make use of the web site. She saw investment in technology as a way for customers to order online, thus driving down the cost of sales. Jackie also initiated the selling of data to customers who did not want to buy an instrument. In sum, Jackie used price and the internet to gain market share.
Most of Apex’s products (65%) are sold to the health care industry. It’s a good news/bad news situation. The good news is that humans will always need health care and therefore health care products. The bad news is that between federal regulations and managed care, one is never sure which health tests will be reimbursed and at what price. The regulatory environment rather than the customer affect the buying decisions of the health care providers. To balance this uncertainty, Jackie expanded both the international sales effort and the exploration of industrial applications for the same or similar Apex medical technology. Adding this diversity of products increased manufacturing complexity and, therefore, increased some operational costs. However, in general, the strategy was successful.
Jackie is optimistic about the future but greatly resents the reduction in her budget caused by the revised plan. In her view, this is the time to invest, a time to visit and explore customer needs and wants, a time to expand advertising expenditures, and to invest in the internet. Jackie works hard. She is quick and decisive, and doesn’t have much tolerance for those who aren’t.
Jackie came to Apex after working ten years in Public Relations for a non-profit organization. She left that job in frustration with their inability to change. Jackie runs an efficient household where every family member knows their role. Jackie comes from a wealthy successful family and she continues to uphold that standard. She has been with Apex six years.
5. The macro-economic function of price is to allocate resources. What is its current micro-economic role at Apex?
Ian Carter, Director of Information Technology
Ian has been with Apex a little less than one year. Prior to his arrival, IT was buried in the Finance Department. Doug was dissatisfied with the limited view Apex had of IT. Finance used it as a basic financial tracking tool and an aid to communication via e-mail. Doug felt it had much broader business application and hired a Director over the objections of Ed Turnbull. Doug met Ian on one of his trips to Milan. He was impressed with Ian’s IT knowledge and hired him on the spot.
Ian spent much of the year gaining an understanding of the nature of the business and the existing equipment and software. Recently he made several proposals to upgrade the hardware and the software, for example, the purchase of video conferencing equipment to facilitate communication with sales personnel in Milan. The initial capital outlay was expensive, but over time (5 years) the investment should pay off. Ian is full of enthusiasm and excited by the many possibilities. Being the youngest member of the Management Team, he is intimidated when conflict arises. He is not sure how to overcome the decrease in revenue. His basic thought is not to under-invest in IT.
Ian lives alone and spends most of his spare time playing video games.
6. What should Ian do to improve his effectiveness?
Vadim Pacheco, Vice President Advanced Technology & Product Development
Vadim was hired four years ago after the retirement of Tom Woodman. He takes his science seriously. He believes, along with a couple of Board Members, that the science behind product development is the key Apex competency, and it is this competency that has provided Apex with longevity. After a few strong drinks, Vadim is known for expounding relentlessly on this belief.
Recently this thinking has come under fire from both Marketing and Finance. Marketing feels that it takes Apex too long to do the science and that Apex would be better off with a series of partnerships with university research facilities. They would do the research and Apex would do the product development. The argument from Finance is simple: research is too expensive. Vadim considers these arguments frivolous as science is the superior discipline and should be treated as such.
Vadim responds that Apex can’t provide customers with high-quality products and understand customer applications if it doesn’t understand the science. On the question of cost, he simply says you get what you pay for.
The Advanced Technology budget has been held flat the last two years, and now with additional decreases in the offing Vadim is becoming very frustrated. Vadim is an extremely bright individual who would be difficult to replace and an employee Apex would not like to lose. As a result, on several occasions Doug has had private conversations with Vadim reassuring him of the commitment Apex has to both science and Vadim.
7. How should a small organization, such as Apex, handle the issue of basic scientific research? Why do you think so?
8. How does your organization discover the latest and greatest information that is critical to the business?
Lisa Martinez, Quality Assurance Manager
Lisa has been at Apex eight years. She has an engineering degree from General Motors Institute (GMI) where she learned a great deal about process engineering. Lisa is excellent at designing and improving the manufacturing process. These talents made her an excellent fit for the position of Quality Assurance Manager since the heart of quality strategy is continuous improvement. Lisa is a steady, people-oriented person, very creative and open to new ideas. Lisa believes that if Apex took a systems-thinking approach to Quality in all business areas, Apex could take a large amount of cost out of the operation.
9. A reduction in cost resulting from continuous improvement would occur over the long term but not fix the immediate problem. How could Lisa convince Apex of the value of her long term strategy?
Nick Danielian, Manufacturing Manager
Nick came to Apex five years ago from the printer division of Hewlett Packard. Nick is an excellent systems thinker and applies this talent to solving manufacturing problems. He is intent on getting the job done, although he is often impatient with employees who don’t move or think as fast as he does. Nick, a handsome young man, gets away with a lot stuff others wouldn’t dare to try. He is trying to find a way to address the financial problem at Apex without disturbing the manufacturing operation. Nick believes he can do this by improving the efficiencies in the manufacturing schedule.
10. How might a focus on schedule result in an increase in business?
Kevin Jackson, Purchasing Manager

Kevin bounced around from company to company prior to his arrival at Apex two years ago. Apex hopes he has finally found a home. Kevin is quite active in the local Purchasing Association, and has brought several good ideas back to the Purchasing Department. However, he has little understanding of business functions other than Purchasing. Now that Kevin has begun to settle in at Apex he does not want to lose his job.
11. What could Kevin do to ensure his ongoing employment? How do you discover the latest career information critical to your career?

Conclusion
The preceding information gives some understanding of the key players at Apex. It has also provided some clues as to the company culture and described the current financial problem. We also observe the diversity of perspectives different managers have concerning the resolution of the financial problem.
12. Prepare a set of recommendations for Doug that are consistent with the Apex culture and resolve the financial problem. List the assumptions about Apex that support your set of recommendations.

Part III. Apex Grows a Human Resource Manager
An Organizational Partner

One of the attributes that Gloria Harshell possessed (in fact, it was the major reason that Doug Warren promoted her to HR Director) was her deep understanding of the Apex employees. Gloria had a knack for listening in such a way that employees disclosed many issues that they didn’t share with others. From Doug’s point of view, this understanding was essential to staffing decisions. It provided answers to some of the key questions. Who was really committed? Who had potential? What are the underlying career interests? Who were the informal leaders? Who did other employees respect? Doug was always focused around goals and objectives, so others responded to him in those terms. He was smart enough to know that the soft side of human relations, or the affective side, was where motivation lies, and motivation was at least as important as objective knowledge when it came to performance. He was also smart enough to know that employees weren’t sharing that information with him. How could he access it? Gloria was the channel for this information.
Doug was determined to get the right person into the right position. Given the transformational changes occurring at Apex, and with more change on the way, some employees left for other employment. Some employees could not perform satisfactorily in this change environment and were separated from their employment at Apex. Both of these situations led to vacancies which created opportunities to assign the right person to the right position.
Gloria collected employee stories for different reasons. She found them very useful for planning educational programs or designing individual development plans. When an employee shared a story with her, Gloria did not see this sharing as inappropriate for the workplace; rather she wanted to understand the “whole person.” After all, it was the “whole person” who came to work and where he or she spent a significant portion of their life. Therefore it was important that employees be involved in meaningful work. Having a deep understanding of an employee increased the odds of placing that person in the appropriate work assignment. From time to time it troubled Gloria to share this information with Doug as she was never absolutely sure what he would do with it.
13. Is it appropriate for Gloria to share this information with Doug? Why or why not?
It was at Doug’s insistence that Gloria became more involved in staffing decisions in all Apex functions. With this change in responsibility Gloria was promoted to Vice President reporting directly to Doug. At first she felt overwhelmed, trying to learn the language and the major processes of all these different business disciplines. However, the more she got involved the more she found similarities. When it came to personnel decisions, naturally Finance required accounting education and experience and Research wanted engineers and scientists, but the process through which fit was determined was much the same. She understood the necessity of matching the individual with the particular work environment. Over time Apex Management came to rely more and more on her input when making hiring and promotion decisions as well as decisions of termination. Gloria was pleased with this outcome.
As Gloria worked with the different Apex functions she noticed how different individuals held different images of what an organization is. In some functions the entire staff held a similar image. For example, some understood the organization as a form of politics-they were always bargaining and negotiating and forming coalitions. While others saw the organization mechanistically, they were busy fine-tuning parts or trying to find the right part to improve the machine’s efficiency. The particular image affected how an individual or function wanted to organize their work.
This added complexity to the task of designing work when new employees were hired. Was this a work task for an individual, a team, or a hierarchy? How should reporting relationships be structured? At times some departments wanted to add people for the sake of adding people (more people, more power), while others were bound and determined to keep on doing work the same way they had always done it. Everyone knew that Doug, who had final position approval, was not buying any of these rationales, so some managers became quite clever in the way in which they disguised their motivation.
In this setting Gloria tried to separate the wheat from the chaff by remaining focused on the design objectives. She tried to balance the cost of additional employees with the improved customer service, bearing in mind the effect the additional cost would have on profit margins, and eventually the bottom line. Gloria often wondered in “close call” situations, where one had to conclude by intuition rather than objectivity, who or what she was primarily responsible for. Did her responsibility lie with shareholder value, since most of the stock was owned by employees? Was she responsible to the hiring manager? Or to a particular function? Or was she responsible to Doug? She liked to think she was responsible to herself, but in hindsight she understood her responsibility was linked to all of the above. Gloria often felt as if she were on a journey. That sentiment was captured in her favorite poem, “The Journey,” by Mary Oliver (1992). Gloria recalled the opening lines:
One day you finally knew
what you had to do
and began, though the voices around you
kept shouting
their bad advice–
though the whole house
began to tremble
and you felt the old tug
at your ankles.
“Mend my life!”
each voice cried.
There were times when Gloria wished for the old days in HR, or rather the Personnel Department, when she administered policies like seniority or bereavement leave, worked 9 to 5, and was paid very little. At the same time, she had to admit she found this new “HR” approach interesting. It was hard work, but she had learned a lot, felt more a part of the business, had a significant sense of contribution, and was paid more. HR had become a full partner in the strategic decisions of Apex. By becoming a partner HR had a share in the responsibility for the outcome of the strategic plans of Apex. Being a partner was a heavy responsibility.
14. In your organization is HR a full partner with top management? Why or why not?
Enough of these ruminations; a more immediate problem was on her voice mail. Doug had left a message, “What are we going to do with Austin Lewis? Let me know when you’ve come up with something.”
Austin had come to Apex twenty years ago. He had a background in chemistry and, although he had a limited amount of supervisory experience, he was hired as a supervisor in the department that manufactured chemical reagents. He did an excellent job in this role and after a few years was promoted to foreperson, responsible for the manufacture of temperature sensors as well as chemical reagents. In this role he reported to Steve McCray and carried out his responsibilities effectively.
When the Team strategy was put in place, Austin’s position as foreperson disappeared, and he was moved to the Quality Assurance function. He was good at paying attention to detail, and this assignment seemed like a good fit. His attention to detail resulted in his writing many policies and procedures. However, some problems began to occur when QA expanded to an organization-based strategy rather than a function of a particular department. Austin had a tendency to micro-manage, which bothered many employees, and it was impossible to manage every employee in the company.
When Steve discussed this behavior with him and tried to get him to relax, Austin always had a good rationale for the double checks and the need for his approval before making any change. In Austin’s mind, quality was at stake and quality was the key to Apex brand recognition. It was hard to find fault with this sentiment, but it was often directly at odds with the Team strategy that was moving all employees towards greater participation and responsibility for decision making.
To further complicate matters, Austin was going through some problems at home. Austin was a very conservative religious man. Both Austin and his wife Lillian volunteered regularly in church sponsored activities. They both dutifully raised their son and daughter according to these values. Then, as they came of age, both children became rebellious free spirits. Austin’s son, Mark, was caught smoking pot. This hit Austin hard, everything seemed out of control. He blamed himself for his son’s behavior, and he began to seriously doubt himself.
This personal situation caused Austin to strive for greater control at work and he increased his micro-management style. Several employees who report to Austin began to complain to each other and, in fact, to anyone who would listen. Doug picked up on the noise and dropped the problem on Gloria, who was already aware of Austin’s personal situation and the employee complaints.
15. Given the culture at Apex how should Gloria deal with the issue of Austin? Identify the assumptions that support your answer.

Social Responsibility
The question before us is “what must an organization do to be considered socially responsible?” Historically, Apex considered itself responsible primarily for the way in which it took care of its employees. There was strong loyalty between the employer and the employee and vice versa. What made this possible was a stable business environment. But times change and the stable business environment is no longer stable. New products and services arrive on the market at faster and faster rates. In addition, international competition increases, overseas markets suddenly develop, and regulations change, all of which cause the business to change at faster and faster rates. Skills and talents quickly become obsolete, and employees without the needed skill are let go and new employees are hired. Younger employees expect rapid promotion and if that doesn’t occur they leave. Employee turnover rates increase.
At the quarterly management team meetings strategic topics are discussed and on more than one occasion social responsibility was the topic. When addressing social responsibility there is a fine line between a belief that if we manage everything correctly, everything will be in control and a belief that managing everything correctly is beyond human capability. Neither position is absolutely right or wrong. Without movement to a third integrative position the discussion is endless.
One aspect of the discussion at Apex dealt with employee health and rising health care costs. What strategy could Apex adopt that would improve both situations? Some years ago the issue of smoking had been addressed and Apex was one of the first organizations to become a non-smoking facility. Initially employees were offered a wide variety of assistance to quit. After some months of effort employees who continued to smoke, outside of the facility, were charged an additional amount on their insurance premium. This process worked and management considered the policy an act of social responsibility. Now some managers argued that a similar policy should be extended to other areas of an unhealthy life style. Excessive body weight became the issue that focused management’s attention. Others argued that Apex was intruding too far into the personal lives of its employees and invading their privacy. This type of policy would cause valued employees to leave. Others countered that there was no difference between the policy and smoking and the proposed policy on excessive weight. It was important to be consistent.
16. What do you see to be the best resolution of this issue? What assumptions form the basis of your answer?
There were other areas where Apex continued to act in a socially responsible manner. The Apex Foundation had been in existence for many years providing community grants for a variety of social purposes. By establishing an Employee Stock Ownership Plan (ESOP) profits from the business were shared through an increase in ownership as well as an increase in value when the stock price increased. All employees participated in this plan and all shareholders elected members of the Board of Directors including an employee member. Some thought of this plan, coupled with a decrease in hierarchy, as a form of industrial democracy. From another perspective, everyone knew that Doug ran the show and it would not be in one’s interest to oppose him too aggressively.
Apex sold some of its products into the environmental market; so many years ago Apex began to take actions to decrease its environmental footprint and enhance its reputation in that environmental market. Some examples were the actions taken to reduce the use of energy from the manufacturing process, to replace standard light bulbs with CFLs, to the leasing of hybrid cars for sales personnel. The large lawn in front of the building that was once neatly manicured was drastically reduced in size. Recyclable materials replaced hazardous materials in the manufacturing of products. Toxic materials were disposed of by waste management professionals. A continuous improvement committee was formed to constantly pursue actions that had the least negative effect on the environment.
17. In the context of social responsibility contrast the effort your organization is making with that of Apex.
Working Together

Working together is a circumstance we simply cannot avoid. At times we work together in a false collaboration. In his poem “A Ritual To Read To Each Other” (Bly, Hillman and Meade 1992) William Stafford warns us of the consequence of such collaboration.
Gloria was particularly fond of the final stanza which reads:
And so I appeal to a voice, to something shadowy,
a remote important region in all who talk;
though we could fool each other, we should consider—
lest the parade of our mutual life get lost in the dark.
For it is important that awake people be awake,
or a breaking line may discourage them back to sleep;
the signals we give—yes or no, or maybe—
should be clear: the darkness around us is deep.
Gloria Harshell was aware that at times teams operated with this false sense of collaboration. She was also aware that at other times a synergy developed that led to high performance. The initial environmental conditions seemed identical in both cases. How could two different outcomes occur? Before pursuing this further, a review of how teams got started at Apex is presented below.
18. Describe a meaningful team experience you have had in a work situation.
If there was one talent that Gloria had it was her ability to “go with the flow.” Hired as a receptionist in 1980, she managed to get along with a supervisor who had driven at least three other employees out of the company. However, Gloria hung in and slowly she was promoted. Probably that experience instilled in her empathy for others in the same predicament. That empathy fit in well with Gloria’s other personality traits, which together made her an extremely effective listener and communicator.
“Going with the flow” also meant Gloria continually upgraded her skills and her understanding of herself and organizations. Sometimes this was done through formal education, sometimes via her network, and sometimes through unique experiences she attended during her vacations or weekends. Quietly she had developed a presence and was respected throughout the Apex organization.
When Doug became CEO in 1992 he sensed this presence. Therefore when the incumbent HR manager “retired” (some say she could not deal with Doug and opted out), Doug quickly promoted Gloria to HR Director. They developed a bond early in their relationship from which they both benefited. Doug often needed a place to vent or someone to talk to, and Gloria was a great listener. At the same time, Gloria was learning a great deal about the issues and the situations a CEO had to face.
Together they designed a Team strategy, which was implemented in 1993. The Team strategy basically included two days of team education for everyone, a restructuring of the organization, formation of teams, establishment of team goals and accountability, and the establishment of a team task force that was responsible for gathering feedback and making ongoing changes. As with most transformational strategies, implementation took longer than planned, had many surprises, and had its share of pain and suffering. In the early to mid 90s, the focus was on lowering costs and improving both response time and quality. Teams effectively addressed these issues, and employees participated in the benefit through the profit sharing plan. After a couple of years, everyone felt good about the change from a traditional hierarchy to a flattened team-based organization.
19. In a team-based organization decisions are pushed down to the lowest level. Should this be the case for all decisions? If so, why, and if not where do you draw the line?
When the business declined in 2002, many organizational problems began to surface, just as a lower water level in a stream reveals the rocks. Teams were one of the larger rocks. Where had the synergy gone?
Teams always have to deal with conflict. After all, teams are composed of unique individuals with different wants and needs. But now it seemed as if the conflicts were getting out of hand. Teams and team members were looking for someone to blame. There were pointless discussions about layoffs and many organizational questions. For example, why weren’t Marketing and Sales personnel doing their jobs and moving the product? Why don’t the engineers develop better products? The griping then moved to which teams were having the most problems, who wasn’t doing his or her fair share on our team, and why is so and so always bossing us around. Meanwhile quality was slipping, schedules weren’t met, and costs began to rise.
The noise level reached a pitch that Doug could not tolerate. He resisted his initial impulse to fire a couple of problem employees and make an example out of them. Instead he blew into Gloria’s office and vented. After the storm had passed, Doug and Gloria began to discuss what had changed and what needed to be done. They both agreed that the team issues were not simply a response to the business downturn. The good financial performance of the past had covered up the underlying issues.
Doug left the problem with Gloria, indicating he would be back in a few days for more conversation about what Apex should do to address the problem. Gloria realized that this was an opportunity to influence how Apex responded to this problem. She began to puzzle over what the key issues were and how Apex should respond to them. Gloria knew that Doug would listen to her, although he might not agree with her.
20. What recommendations should Gloria make to Doug?
The Haunted Leader

As CEO, Doug Warren believed he was responsible for multiple bottom lines. However, in his view, economics was the most important bottom line. He knew a terrible thing happened when a business lost money; it went out of business and everyone went home without a job. The financial situation needed to be under control before other bottom lines could be secured. A second bottom line was what Doug called the community. For Doug, community was composed of all employees, their interaction, the terms and conditions of employment, meaningful work, distribution of wealth, company values, and the company culture. Employee know-how and technology were a third bottom line. An organization’s core competencies were housed within the collective knowledge. Core competencies were what made a business distinct; they provided the basis for market strategy and customer loyalty. And finally Doug believed that a fourth bottom line was social responsibility, particularly to the community in which the business was located. Social responsibility also meant operating within the legal and ethical code.
Doug was a great believer in communication. He created all sorts of venues to communicate: in addition to the normal set of Board meetings and meetings for direct reports and functional reports, he welcomed company-wide meetings, monthly leadership council meetings, employee-ownership meetings, even birthday meetings, as well as walk-around management, e-mail, newsletters, and white-paper reviews. He insisted that all functions have regularly scheduled meetings to air issues, report progress, and suggest changes. When it came to dealing with people, Doug believed there was good and bad in every person. It was naive to believe that some were good all the time and some bad all the time. Therefore he rarely, if ever, fully trusted the intentions of others. Yet he generally supported strategies that rewarded rather than punished participants. All in all, Doug seemed to lean in the direction of more good in the world than evil.
Although he considered himself a man of patience, in practice he was disappointed with the pace of change. Often he had sessions with his staff, or with whomever he thought needed them, where he would hold their “feet to the fire.” He was not reluctant to confront individuals when he sensed they had drifted away from agreed upon objectives or not moved quickly enough. Doug constantly read and networked, grabbing ideas from all sorts of sources. He shared articles and books with employees, invited business writers to speak, and encouraged employee education. Few knew that he had never completed his bachelor’s degree, and no one would have guessed it from his behavior or his intellect. Doug expended a lot of energy creating and testing a vision for the company with its stakeholders. Then eighteen months would go by, and he would be right back at it, creating and testing.
As Doug looked back over the ten years that he had been at Apex, he realized many things had changed. On the whole, the changes were more positive than negative. The company consistently grew and reported decent financial results while carrying very little debt. He had reduced costs to improve profit margins. He had shifted the culture to what he called industrial democracy. He had changed the composition of the Board; it was stronger and more diverse. He had recruited some “high-flyers” into the organization, attracted by his charisma. He had improved wages across the board. He had entered into new partnerships and acquisitions that should be profitable in the future. He had bought out the owner-founders through an ESOP that made all employees owners. Even with all this and more, something haunted him, bothered him, kept him awake nights.
This feeling went beyond his disappointment with the current business conditions. Some of it was no doubt tied to the problems he was having in his marriage; it looked as though he was headed to divorce court. He knew everything was connected and the divorce might play a role, but that answer did not explain the behavior of others. That behavior was what troubled him.
Doug listened to his intuition. It told him that something was out of sync, didn’t fit, was unaligned. When he questioned his many sources, he didn’t get anywhere. Everyone basically responded with “things are going as well as can be expected.” He discussed it privately with a Board member, visited other organizations looking for some contrast, went to lunch with influential people in his network, but still he came up dry. He was about to conclude that maybe it was just a false impression when it hit him. Employees were dead serious, fun had disappeared, no one laughed anymore, and the parking lot was empty at 5 PM. It wasn’t that way in the past. What had changed and what was it that needed to be changed?
21. Assume you are a management consultant and Doug has written a letter to you asking for assistance with this issue. How would you respond?

Part IV. Issues of Change at Apex
Design Issues
As indicated previously, Apex grew slowly after it began in 1957. As the business grew, additional employees were added where they were needed. Also, once a function expanded, it was natural to promote the most senior employee to lead that function. And so the structure grew.
By the time Apex reached 100 employees, it became obvious that the existing informal systems and processes, which greatly depended on an employee’s memory, would no longer work. Formal systems had to be put in place.
To accomplish this, Apex acquired help from consultants. Soon there were some new positions; for example a Process Change Manager. Functions formalized, systems and processes increased, and a traditional hierarchy developed, which worked well for many years. Bureaucracy and specialization had arrived.
However, when Doug Warren was hired as CEO in 1992, it did not take him long to pick up on the inefficiencies of the bureaucracy. Employees at the bottom of the food chain did little thinking for themselves, and the company’s cost structure was burdened with too many assistant supervisors, supervisors, forepersons, and managers. Many of the supervisors and managers had little, if any, management education. As the work force grew a variety of problems began to surface in several different areas. Doug was determined to flatten the structure and put resources into the training and development of leaders and managers.
In 1993 a team strategy was put in place. Teams would now make decisions; supervisors were moved to other positions or left the company in frustration. Management education began. Quality circles were formed. HR was a very active place during this time, and Gloria demonstrated she could handle the workload. There was a lot of change to adjust to at Apex, and the preoccupation with the change led to a poor financial performance in ‘93. But Doug held fast to the strategy despite the Board’s reservations and the poor bottom-line performance. He was right; performance began to improve in ‘94 and ’95, and ‘96 was a record year.
As a result of this strategy, most of the former hierarchies were gone. Doug divided the business into a large Domestic Medical Product Focus Group, a smaller Domestic Industrial Product Focus Group, and an International Medical & Industrial Product Focus Group that basically contained the employees in Milan plus a liaison person in Glenrock. These Product Focus Groups, or PFGs, contained the marketing, sales, and product development functions. HR, Operations, IT, and Finance remained centralized. The idea was that the centralized functions would provide services to the PFGs, their customers.
In this reorganization reporting relationships were changed. Jackie Pitman became leader of both the Domestic Medical PFG and the International PFG. Vadim Pacheco was assigned the responsibility for the Domestic Industrial PFG. Doug reasoned that this PFG needed heavy product development, and as the Product Development VP, Vadim was the right person to lead this effort. Doug also decided that the PFG leaders would continue to report directly to him along with Steve McCray. Both Jackie and Vadim viewed this change as a promotion while the remaining members of the Management Team were disappointed as they continued to report to Steve and not to Doug.
Ed Trumbull’s feathers were particularly ruffled by this change. For some time the relationship between Ed and Jackie had been testy. Ed felt Jackie had no respect for the fact that he had been at Apex three times as long as she and therefore understood the business better than she. Now Jackie was promoted; an unfair and bad decision that escalated Ed’s feelings of frustration with his relationship with Jackie. On the other hand, Jackie saw Ed as a controlling “bean counter” that would never support a risk. Rather than take a risk, he would prefer to watch the business slowly decay.
The change was fine with Steve; he no longer had to deal directly with the “Jackie and Ed show.” Doug was not bothered by the competitive interplay between Ed and Jackie; in his mind, competition was healthy, and besides, these reporting relationships would last only as long as they worked. Doug was quite pleased that both Jackie and Vadim were “pumped up” by this change; it would be good for the business.

With the downturn in business in 2002, one of the options Doug is considering is to once again transform the organization and its culture. He views this option as much larger than a response to the business downturn. However, the business downturn might well provide an acceptable rationale for a much larger change. Doug has come to Gloria Harshell for her recommendations regarding a redesign of the Apex organization. Coming to her means he burst into her office unannounced, sat down, then stood up and started pacing.

“Gloria what are you up to?”
“I’m filling out last year’s EEO1 report” she said, nervously taking out a clean pad to take notes on whatever was coming.
“Gloria, can you work on a special project for me?”
“Be glad to, Doug,” she answered.
Doug continued, “I have been thinking about putting in place a major reorganization, and I want you to give it some thought and develop a preliminary plan. At the moment there are no constraints. And let me just say that I am not interested in rearranging the deck chairs on this ship. There are times when you need to shake the leaves off the tree. I am thinking about that kind of change.” With that comment, he certainly had Gloria’s full attention.
“I want to share with you some of my thinking. There are three major points.
One, as an organization, too many of us are too far removed from our customers, and therefore our response time is inappropriate and our products and services don’t quite hit the mark. Although I must say that I am impressed with the work Jackie has done with her PFGs. Perhaps there is some way we can build on what she is doing.”
“Two, we need to improve our efficiency; our manufacturing costs and our administrative costs are too high. We probably need to downsize, and I would like to accomplish the downsizing through attrition.”
“And three, I don’t have the impression that we have leveraged the ESOP to its full advantage. We need to do something to renew the ‘ownership’ spirit. And the word ‘spirit’ reminds me that it also seems that employee morale isn’t what it could be.”
“As you think about this, start from a blank slate. I have no commitment to any existing structure. Also, think about the cultural implications of significant change. You recall some of the pain and suffering we went through when we put the team strategy in place. I’d like to mitigate that as much as possible.”
He started walking towards the door, turned, and said, “I guess that’s enough to get you started. Do some thinking, and then let’s get together a week from now and discuss what you’ve come up with. Call me when you’re ready.”
Gloria just sat in her chair, took a deep breath, and thought that this all sounded very exciting and yet scary, big opportunity but big risk, and then the ugly “downsizing” word. That he asked her for her ideas was a compliment, but this had the potential to upset a lot of people, many of whom were her friends. She remembered all too well the last time people were let go. Then she soothed herself with the thought that such was life in organizations these days. At least she would have a chance to influence the outcome and share in the responsibility for its success or failure. But, where to begin?
22. Where do you think Gloria should begin? In what ways do you think the organizational structure should change? Explain the reasons for your suggested changes.
Global Uncertainty

Globalization is causing a rapid redistribution of the world’s wealth. New markets, customers with money, are appearing in many different parts of the world. Diversifying the customer base is a good way to grow the business and stabilize revenue. When one region is slowing down economically, another region is growing. At the same time competition is appearing from many different regions of the world. Apex had to move away from its domestic focus.
For the past ten years Apex has been working its globalization strategy. The strategy is based on four points. The first point is to enter into an arrangement with an individual or organization that has an existing or potential competency that compliments the technology or knowledge of existing employees, product lines, or manufacturing capability. The second point is to enter into marketing arrangements with organizations that provide access to new markets and customers. The third point is to enter into manufacturing arrangements where a cost or efficiency advantage exists. And finally, to partner with these individuals or organizations in such a way that Apex would hold a majority ownership position. Over a period of ten years a dozen relationships were established with other organizations following this strategy.
To Doug Warren and the Board, this strategy was the best way to respond to the phenomenon of globalization. With these arrangements in place, Apex would be able to maintain a competitive position and grow the business. For example, manufacturing partners were established in Mexico and China; in both cases labor costs were low. The specific tactic was to transfer stable and established manufacturing processes, which did not contain any proprietary information. In addition the transfer involved only those manufacturing processes where the process was in firm control. This would allow for frequent measurement to ensure quality control. Sales and marketing partnerships were established in Italy to access the European Market, and in Hong Kong to access the Far East. After making the determination that the Japanese market was more or less closed to outsiders, a partnership was established with an organization that both manufactured and marketed health care products in that country.
Doug reasoned that Apex was too small an organization to transfer managers to lead these foreign entities, so the existing management structure of the host country remained in place, a decentralized business model. This meant that on a regular basis Doug traveled to these various sites in an attempt to keep the various efforts integrated and focused, a daunting travel schedule. Michael Porter has written extensively about how strategies work best when different efforts fit together or when tasks come together in a competitive bundle. (Porter 1996). For Apex, crossing all these international boundaries with different ways of managing, different ways of accounting for expense and revenue, and different ways of establishing relationships with customers; meant that managing and evaluating the effectiveness of the competitive bundle was extremely difficult. It always seemed to end up with a comparison of apples to oranges; therefore, many decisions were based on hunch. This was acceptable to Doug but not to Steve McCray.
Doug retired in December 2002 and Steve McCray was selected as the new CEO. A full account of the transition is discussed in the section “CEOs and Organizational Eras.”
Steve’s mode of operation was much more planned and structured than Doug’s. As Steve took over in 2003, he wanted to evaluate more objectively the effectiveness of these entities and improve the fit of these entities into the Apex business model. Those organizations that did not meet a basic level of effectiveness would be closed and preferably sold. How to improve the fit of the more effective organizations into the business model was a complex question. Steve’s inclination was to take a more centralized approach, but he was open to other options. Also, before responding to this question the overall purpose of the globalization strategy needed to be revisited. Does Apex have a global strategy because it’s a fad? Or does a global strategy really have a positive impact on the growth and development of the business?
As Steve thought about how to improve the fit he recognized that one approach was increasing the visits of foreign managers to Glenrock while at the same time increasing the visits and involvement of Glenrock managers in these foreign organizations. Technology could be used to enhance these relationships, but it would only be useful if it were built upon strong relationships established in a face to face context. This approach seemed costly. Did Apex have the resources to support this approach?
A second approach was to further centralize these operations with the home office. This would involve more travel by Apex managers as they pushed for the assimilation of these organizations into Apex. The advantage would be that if all Apex managers were using the same methods, Apex would be able to make objective evaluations of the different organizations. At the same time there was significant opportunity cost involved with this approach. If a manager was in China, he or she was not paying attention to the operation in Glenrock. Also, after all the emphasis on efficiency and cost cutting, Apex did not have an excess of managers.
A third approach was to hire an additional senior executive whose specific task would be to manage and integrate these entities into Apex. This would be a difficult job to fill, and a high risk approach because so much would depend on one individual.
Steve knew that it was not uncommon for an organization to move back and forth between strategies of decentralization and centralization. Apex had done this in the past. Both strategies had their costs and benefits. Furthermore, once one strategy was chosen, the benefits of the other strategy came into view and the pendulum began to swing. The strategy of the opposing direction attracted forces that fueled the need to constantly change and improve. This could be change for change’s sake, but at the same time if change was handled well it positively stimulated an organization and its employees.
These were some of the issues and ideas that Steve wrestled with as he thought about the globalization strategy at Apex. Politically he knew he had to take into consideration the thoughts and feelings of the Board Members and Doug. They had initiated the existing strategy and might not take kindly to an aggressive move in the opposite direction.
23. What actions do you think Steve should take regarding the global strategy at Apex? The actions must fit the business model and culture at Apex and at the same time affordable.

The Change Process
We can think of the phenomenon of change on a broad continuum with minor changes at one end and profound change at the other end and many points of intersection along the way (diagram follows).
Continuum of Change
Minor Change Profound Change
________.__________.______._______._______._______._________.______.________
The purpose of these comments is to describe profound change in generic terms. The result of this type of change is a fundamental shift in the understanding of the world. It is not a description of a planned change where goals and objectives are extrapolated from an existing world view but rather a change that requires the letting go of the known in search of the unknown underlying profound change. It is not an adjustment or an adaptation to a specific circumstance but a different understanding of where and how the human situates his or her being in the world.
The process involves 4 elements that are discussed and distinguished separately, but are far from being separate. They interact with each other in a manner so that they are often experienced as a single phenomenon. The change process may begin with any element. Although these elements create the potential for change there is no guarantee that change will take place.
One element is intention. Without an intention to change, nothing will happen, change will not take place. However, intention must be held lightly, it must be coupled with openness. If the intention carries with it the ego’s agenda then the intention is caught in the existing world view. In a sense the best intention is directionless. It is an intention with and without direction.
A second element is letting go of the existing world view. A most challenging task as we are heavily invested in thinking about the world in a particular way as our deeply held values are part of this investment. Kurt Lewin and Edgar Schein referred to letting go as an unfreezing. In their language unfreezing required sufficient feelings of guilt and anxiety to let go of former assumptions. The guilt and anxiety caused a disequilibrium that challenged the existing culture. In my language, most people overcome the difficulty of letting go through a wounding. A wounding may be psychological or physical but either type of wound results in a giving up or a letting go of the existing thought structure.
Within these two elements (intention and letting go) one can observe the paradox of holding the element of intention which narrows the field of knowing and the element of letting go which opens the field of knowing.
The third element is an opening to a different way of knowing. It occurs at the threshold of conscious rational thought and an experience of the imaginal. By quieting rational thinking an invitation is extended to the imagination. This may occur in that moment when we have given up or let go.
The imaginal experience is then connected to the conscious world manifesting as a different way of knowing. This is the 4th element or integration. Often the 4 elements occur in a flash and the totality is referred to as a quintessential experience. In The Dance of Change, Peter Senge quotes W. Edwards Deming: “Nothing changes without personal transformation” (15). And personal transformation requires the persistence and patience to engage the elements of profound change.
The majority of the work of the consultant involves existing organizations. Very few of these organizations are interested in profound change as the risk to the individual and the organization is determined to be too great. Generally the work of change is incremental. A current example involves the changes that are occurring in the human relationship with nature, more commonly referred to as environmental policy. Most policies demonstrate our desire is to change without fundamentally changing our relationship with nature.
Although the process of organizational change occurs under many different labels, Senge observes commonality in their aspirations:
They are trying to respond quickly to external changes and think more imaginatively about the future. They want better relationships, with less games-playing and more trust and openness. They want to unleash employees’ natural talents and enthusiasm. They hope to move genuinely closer to their customers. Through all of this, they are striving to shape their destiny, and thereby achieve long-term financial success. (5)
To accomplish this set of aspirations one must profoundly change. Understanding the process of change is essential to finding appropriate interventions that produce an environment conducive to organizational change.
24. Describe a personal experience of profound change.

Part V. CEOs & Apex Organizational Eras

So much has been written about Organizational Change, authors advancing one theory or another, that the basic organizing question often gets lost in the abstract analysis. The question for all organizations is how best to organize. In response to this question, many organizations operate within a narrow band on the continuum of how to organize. Most have accepted the globalization rules in what Thomas Freidman refers to as the “Golden Straightjacket” in his book The Lexus and The Olive Tree (1999). And like baseball, once we accept the rules of the game, teams play within the narrow range of the game’s possibilities.
In 1984, Edgar Schein cast his response to this organizing question in cultural terms, stating that two key functions of an organization’s culture were to adapt to external conditions in order to survive, and to integrate common ways of thinking and working together to address these conditions (Boone and Bowen 1987). These two forces push and pull on an organization, never quite in balance, and in part result in a design that defines the organization’s way of being in the world. In a similar way when leaders work with people they often attempt initiatives that attract or pull employees to another level, or failing that, adopt tactics that push employees to that higher level.
For most organizations the basic organizing theme is a mechanistic one. Based on cause and effect analytical thinking we view the organization as an integration of parts that compose a machine. Organizational issues dissolve into a question of which dials to loosen or tighten to increase effectiveness. To avoid getting stuck in a particular organizing theme it is essential to understand the organization as a dynamic system that is open to change.
In addition to these forces, and particularly in small-to-midsize organizations, both the CEO’s personality and understanding of reality have a significant impact on how an organization organizes. Depending on the CEO the significant impact can be positive or negative. This is particularly true for smaller organizations, which are more flexible and can quickly adapt. More importantly the small size allows the personality of the CEO to reach most if not all employees, giving his or her personal stamp to the understanding and meaning of reality, and his or her method of dealing with that reality. These perceptions greatly affect the strategic choices the organization makes. Even so, when change is large or transformational, it is complicated and requires considerable ongoing effort. CEOs that remain in their positions for at least five years live through the initial transformation and create a unique organizational era.
Apex did not change CEOs frequently, so the tenure of the CEO frames the boundaries of an organizational era. Analyzing the Apex story should highlight some of the core issues of transformation. The challenge is, first, to think through how values and fundamental assumptions manifest themselves in this or any organization and, second, to appreciate the complexity of change when it comes to letting go of these assumptions and adopting a different organizational framework.

Era I. (1957 –1992)
From its inception, Apex was known for its humanistic employee policies. Some of the major influences on the founders were the thinking of Kurt Lewin (Gold 1999), Abraham Maslow (1965), Douglas McGregor (1960), and Chris Arygris (1994). These individuals, and others, were on the forefront of organizational change after World War II. The national culture was also changing and those fundamental changes influenced the answer to how best to organize. We can see the external adaptation and internal integration forces that Schein described impacting Apex right from the beginning.
The founders were highly motivated by their interest in science and engineering. It is through these disciplines that they saw a way to secure a career for them in a business they loved. With some luck and encouragement from others, the business began and slowly grew. Certainly it is no small feat to start and maintain a business. A challenge for the three founders was to find compatible ways to implement the grand abstractions developed by those who observe and write about the larger picture. How should these social and technological abstractions manifest themselves in Apex? Certainly they would have to fit the personalities of the founders.
At first employees were treated as part of the family. With few employees, human issues could be handled informally and humanely. In some ways, it was like a herd of elephants or a troop of baboons; everyone knew their role and who the leader was. (By this time one of the three founders had become “the” leader.) However, unlike other species, humans have the arrogance to believe that their organizations can grow to any size and that they have the ability to manage it. Once Apex reached approximately a hundred employees, it was beyond the capability of the family model and a more formal process had to be put in place.
It was the founders’ fundamental assumptions about human beings and the world that guided the development of Apex during this initial era. They would meet, discuss and determine how to address external adaptation and internal integration. For example, how to put the desire for self actualization as described by Maslow or Lewin’s principles of group dynamics or utilize the communication and learning techniques of Argyris or the participation and egalitarian models of McGregor into Apex and still make a profit. At the same time and unconsciously, the individual personalities of the founders had their own idiosyncrasies. However, the personalities were not recognized as part of the decision making process. This was a time when “real men” did not consider such “psychological stuff.” In the minds of the founders, their process was completely objective and analytical, therefore unassailable.
In the external environment, democracy and capitalism had won the war. Many technologies were discovered during the war, and now those technologies could be used for other applications. This was of great interest to the founders. After the wave of patriotism settled down, it seemed that socialism and communism were viable alternative economic models. The broader culture was opening up. Many people who had not participated before or who had not been allowed to participate were now going to be part of the system. What would the future be like at Apex? Would world economics follow one model, many models, or some hybrid model?
Hundreds of policies and procedures make up the various ways an organization works. What follows are some examples of the strategic choices Apex made during this initial era. These examples should be viewed as indicators of the fundamental assumptions that governed the behavior of the founders.
1. Loyalty was a core value. Apex would rarely fire an employee for any reason; employees would rarely leave. Less effective employees were carried by the more effective employees. In an oblique way, this was an acknowledgement of the self-actualization process. Who knew what route this process might take? Turnover rates were barely measurable. It was employment for life.
2. The business operated with an engineering bias. Whether Accounting or Personnel Policy & Procedure, the analytical problem-solving framework provided the direction and the fix.
3. Systems and processes were informal. Many decisions were based on what a manager thought the founders desired. Private conversations with the CEO were prized; they allowed managers to preface their decision with the comment “the CEO said.”
4. There was little difference in compensation between the lowest paid and the highest paid. The practice seemed a mix of paying according to need and recognizing hierarchy. Cost of living raises were awarded quarterly and used significant amounts of the compensation resource. The flat pay structure was an acknowledgement of egalitarianism, while at the same time, those at the top of the hierarchy received stock options.
5. Engineers were the heroes and heroes went to extremes to develop and assure a quality product was produced. Engineering innovation made the business work and drove the marketing function with a “cost plus” price philosophy.
6. The Board of Directors was dominated by the founders and key managers. Meetings were perfunctory and usually confirmed decisions already made by the founders.
7. During a business downturn, rather than respond by laying off a particular group of employees, the company, working with the State Unemployment Agency (which had never heard of such a thing) laid off in rotation one-fourth of the entire workforce for one week per month. The rotating lay-off lasted three months.
8. A committee of key managers led by the CEO determined the best benefit package to offer all employees.
9. Women and minorities were hired at entry-level positions with the thought that they would work themselves up in the company hierarchy, a process that never quite happened.
These then are examples of how the Apex founders put their personal stamp on the organization. In the late 80’s, as retirement for the founders approached, the business stalled. It seemed the business was also headed for retirement. The participation process no longer operated in areas relevant to employees. The founders concluded it was time to change, to let go of their child, and to bring in a fresh perspective to lead Apex. Obviously, it is one thing to intellectually make the decision and quite another to carry it out, especially since the founders had a great deal of personal value tied up in their work at Apex.

25. In general, what are the strengths and weaknesses of the Apex organization during the Era I?

Era II. (1992 –2002)
The process of hiring the new President was secretive and confined to conversations among Board members. Obviously the CEO was driving the process. He had vacated the title of President, creating space for the new hire and a way to hold on to power during a time of transition. Meanwhile, the rumors flew around Apex. Was it going to be someone from the inside? Several insiders had thrown their hat in the ring. Everything had always been done from the inside, so the smart money was on an inside hire.
The business continued to stall as everyone discussed the rumors and the possible impact the change would have on their careers. After six or seven months the decision was made, a surprise to the rank and file, an outsider, Doug Warren, was hired. A brief bio was quickly circulated and Doug soon arrived on the scene. All that was really known was that he had big business experience and served on some of the same Boards as the CEO.
Employee reaction was mixed, but most guessed that a major change coming. About a third of the employees responded by saying that it was time for them to leave, that Apex would never be the same. Another third adopted a wait and see attitude, to give it some time and then make a decision to stay or leave. The remaining third concluded this was their job, their company, and they would try to make a go of it.
Doug was ready for change. However, there were times when he was in shock at the lack of systems and process. At other times, he was in shock at the lack of the overt use, or the inappropriate use, of power. Doug was not shy when it came to accumulating and using power: he seemed to believe that power came in a fixed amount and was the property of an individual, rather than understanding power as abundant and fluid, contingent on a situation or a relationship. For Doug, it was important for a leader to want and accumulate power. When this belief coupled with his lack of trust in the intentions of others, Doug could become aggressive or magnanimous. His behavior was difficult to predict.
As Doug went about Apex, it seemed to him that no one knew what to do, that most folks were standing around waiting. He went up and down and sideways through the organization, asking questions. What’s your job, why do you do the things you do, etc.? Several people attempted to corner Doug in the hope of establishing a personal relationship with power, anticipating this would make them safe from change. Most times Doug left them in mid-conversation. With the business stalled, Doug created a sense of urgency, in part to prepare people for change but also to surface unwritten processes. Underneath the sense of urgency he had created, there was fear, and Doug knew fear had a way getting people’s attention.
Doug was excellent at reading people. In those early months, he was evaluating employees with an eye towards a future management team. There was no room in his mind for those who continued to run around him trying to get the blessing of the CEO. He concluded that most senior managers were so tied to the former CEO that they would not make the cut. Some employees could not let go of the CEO; they had grown up at Apex and simply could not switch allegiance. At the same time, Doug provided opportunities to employees who had never had any. While all this maneuvering was going on, Doug was learning the business, both its strengths and weaknesses. It was plain to Doug that Apex wasn’t big enough for both the CEO and himself. He sensed the divided loyalty; divided leadership wasn’t going to work.
Doug focused on a strategy to help the CEO retire. He created awards and ceremonies to celebrate and mark the end of the CEO’s era. Doug created an Employee Stock Ownership Plan (ESOP) in part to buy out the CEO’s stock. After a year of stress and anxiety, the CEO finally left. It was now clear who the leader was; Doug was both President and CEO.
Initially Doug decentralized the business and the power structure and then while the business remained decentralized power was centralized. At times, this concentrated power produced competition and dependence in others and that worked against the strategy of collaboration.
While Apex was struggling with these issues of internal integration, external forces began to manifest themselves under the umbrella of globalization. Most striking was the competitive position Japan had established for itself. How was it able to build automobiles and electronic devices with such excellent quality at a reasonable cost? What was it in the Japanese culture that allowed this tremendous collaborative energy to be released and focused on organizational goals? Doug wondered how Apex could capture that energy. It seemed to him that Apex had to capture that energy if Apex was going to stay competitive.
Doug was always looking for the next “big thing,” be it a book or an acquisition or customer feedback. In his drive to be on the forefront he latched on to new information and frequently changed Apex priorities. On the one hand this was exciting, while on the other, employees grew weary of not being able to bring tasks to completion.
Following are some examples of the strategic choices that Doug made during the second era at Apex.
1. Reduce cost. Reduce the number of positions of hierarchy in the organizational structure. Reduce headcount through attrition. Ineffective employees should leave; the organization comes first. Redesign products to reduce cost.
2. Terminate the cost of living raises and use that savings to compensate outstanding performance. Widen the band from the lowest to the highest paid. Emphasize merit, not longevity, in pay practice. Arrive early and leave late.
3. Create an Employee Stock Ownership Plan (ESOP) as a means to buy out the founders and to motivate employees. The ESOP becomes a step towards industrial democracy.
4. Become a team-based organization and eliminate most supervisory jobs. Force decision making to lowest levels and increase the level of responsibility and accountability of every employee. The physical walls come down and Apex opens up.
5. Form alliances to help reduce cost and develop new products and services.
6. Invest in education. Become a learning organization; create a leadership council of managers and potential leaders. Establish a Performance Appraisal & Individual Development Plan process.
7. Invest in a new facility. Renovate or demolish parts of the existing structure. Physical surroundings do matter.
8. Drive the business from a marketing point of view. Establish market niches for products. Focus on the customer. Price products to gain market share. Cost-plus pricing is over. Create Product Focus Groups to keep marketing and product development close to the customer. Involve suppliers and manufacturing employees in the product development process.
9. Emphasize the environment; “Ecological Sustainability” becomes both a vision and a way for Apex to distinguish itself in the marketplace.
10. Establish a company-wide quality system. No more Inspection or Quality Assurance Departments; quality is everybody’s business.
11. Network and partner with research institutions.
These then are examples or indicators of the fundamental assumptions that guided the strategic choices of Doug during Era II. Many of these strategies worked; the business tripled in size during this era. As the millennium arrived, it was time for Doug to retire.
After a search of outside candidates did not produce a satisfactory candidate, the search committee shifted its attention to inside candidates. There were three; Jackie Pittman, Ed Turnbull and Steve McCray. Doug led the decision making process and selected Steve.
Once again making the intellectual decision to retire and to transition to a new CEO was one thing and doing it was quite another. The process was more difficult for Steve then it had been for Doug. Coming from the outside, Doug had a certain freedom that was not granted to Steve, who had a history of reporting to Doug. The process was more arduous and required a great deal of patience from Steve.
During the transition, Steve embarked on a development plan, including Executive Education, coaching, etc. and by the end of 2002 he was promoted to CEO.
In a newspaper interview, Doug reflected upon his tenure. “I’d like to think Apex is making a difference in the lives of its workers, its customers, and in the community. It’s always been about people.”
26. A. Write a brief critique of Doug’s newspaper interview. B. Is the Era II Apex a company you would like to work for? Why or why not?
Era III. 2003 –

Era III has just begun. It is difficult to know the strategic choices Steve will make that will leave his personal stamp on Apex. Below are some of the ideas that come from the Apex Strategic Plan (2002 – 2005) that Steve and his Management Team developed. In addition other ideas come from comments that Steve has made.
1. Apex will be the employer of choice. The organization will not always be considered first when resolving employee issues and concerns.
2. Apex will drop the next “big thing” syndrome. It will proceed in a more orderly fashion with few changes to the company’s game plan.
3. Apex will distinguish itself by being “Socially Responsible” rather than “Ecologically Sustainable.” Ecological Sustainability is too narrow a focus and leaves out some parts of the business, while Socially Responsible is a large enough umbrella to include an environmental focus. Steve has already replaced all leased SUV’s with hybrid vehicles, a socially responsible decision that also sustains the environment.
4. Power will become decentralized. For example, pricing will be driven by competitive knowledge, the sales people and the Business Unit Manager will make the specific price decision, not the CEO.
5.The composition of the Board of Directors will change. Currently the Board Chair is also the CEO & President; in the future the Board Chair will be a separate position. In addition, the current Board is dominated by white businessmen; in the future, Steve will encourage the Board to move the membership towards more ethnic and experiential diversity.
6. The company will be more inclusive. Although Apex sees itself as a global company, employees outside of the United States are not part of the ESOP plan. The plan needs modification so this can happen. In addition, many of its key activities, for example leadership development efforts, are Glenrock based. The monthly meeting of the Leadership Council is attended by Glenrock employees only. Steve is looking for ways to change this.
7. The business units will develop products and services to help Apex customers move from a need to generate compliance data to a generation of information that allows monitoring and control of an environment.
In addition, Steve noted that the workforce is changing: fewer manufacturing jobs and more knowledge workers. Many of these knowledge workers are young and have a different point of view from the older employees. Steve is currently analyzing an employee survey that identifies these differences. He recognizes that the structures or vehicles that an organization designs to motivate and improve performance must change as the internal and external culture changes. In Steve’s view, many of the existing Apex structures are worn out and need to be replaced.
He also noted that the younger employees do not have a strong interest in the long term. Although they like the idea of building their ownership stake in Apex, there is not much interest in 401K plans. They want the money now. In addition they want an environment in which feedback on their learning and performance helps them build a career and increase their marketability.
The survey also indicated that employees want an environment in which they can take more risks. They want to open up the conversation within Apex, to say what they need to say without feeling pressure to think one way or another or, in the worst case, become a victim of retaliation.
The areas that are especially troublesome, questions without ready answers, are related to globalization, politics, and technology. Was globalization too expensive a strategy for Apex? Steve believes the United States will move towards isolationism, which will mean lower sales of U.S. made products in foreign countries. Therefore, he sees a necessity to establish foreign manufacturing which, however, is expensive at low volumes. Of a more local political concern is the shrinking state tax base. With less revenue available, states are less apt to buy environmental monitoring equipment. And, finally, would a new competitive technology drive Apex out of business?
As time passed a strange thing happened, Steve began to operate differently. He was frustrated with the emphasis on teams which in his view dodged responsibility. Steve wanted a leader to hold responsible. Steve sensed the culture in general and specifically Apex employees were increasingly motivated by money not collaboration. He responded by becoming focused on cost and profitability. The expansion of selling into global markets and technological alliances became the priority. Gone were the days of working team issues. Steve appointed leaders and expected performance. His vision trickled down and profits improved. The Board of Directors was pleased as their number one concern was increasing share holder value. Many employees were also pleased as they saw their ESOP accounts rise in value. However, some employees, like Gloria, were concerned about the long term implications of this change.
27. What fundamental assumptions do you see changing across these different eras?

Part VI. Closing Thoughts

Nature and Organizations
Humans have often used a superficial understanding of nature to develop ideas on how to structure and design an organization. By examining the structure of a tree or the anatomy of an animal one can see the efficiency of separating the whole into parts. The idea of specialization, and its accompanying efficiency, is readily accessible. Most organizations adopt the model of a branching tree or circulatory system to establish specialization and hierarchy. However, on close examination nature is far more complex in the design of relationships that govern the activity of a living system. By using the metaphor of an ecological system I believe there is much more we can learn from nature.
Are all ecological systems the same? If so, one way of organizing would suffice. If not, there is a need for a diversity of thought and action in determining how to organize. In an ecological system can we identify a boss or leader? In an ecological system when change occurs in the environment or in the components of the system, networks of relationships make adaptive changes. Depending on the specific nature of the change the closest network will respond first and this response will reverberate throughout the system. At times, a feedback loop will amplify the response creating vast disequilibrium in the system, and at other times feedback loops will nullify the change. The cognitive process of the network system influences the selection of the response from a series of alternatives.
By conceiving of an organization as similar to an ecological system we deepen our understanding of how humans come together to achieve a purpose or mission. They come together at various points along a broad continuum of possible organizational designs. By using the example of an ecological system, a natural theory of organizing emerges which broadens our understanding of choice and the consequences of the decisions we make. Fritjof Capra, in The Web of Life, identifies three interrelated phenomenon that compose an ecological system: they are pattern or form, structure, and cognition or process (157- 76).
An ecological system has a particular pattern or form whereby it constantly recreates itself (autopoiesis or self making). In autopoiesis each component participates in the production and/or transformation of other components. The components of an ecological system exist in a context which is both open and closed. It is closed in the sense of maintaining itself; renewing and repairing the individual parts that make up the system and maintain a recognizable pattern. The system is open to flows of energy (in its broadest sense) that constantly change the nature of the part as well as increasing or decreasing its significance to the system. The changes in energy flows require a network response.
In an organization we design networks of relationships that are specific to the purpose of the organization. One category of network, specifically within the organization is closed. These networks are based in the organization’s culture and maintain the organization’s identity. For example, the manner in which compensation is determined or the range of benefits offered to employees. A second category of network searches the external environment, or the without, for those relationships that open the organization to life giving flows of energy. For example, the organizational style of suppliers may influence job design in the purchasing department. The result of the combination of networks, within and without, is a recognizable pattern which is unique to an individual organization.
A pattern of organization can be found in both not-for-profit and for-profit organizations. As an overview, there is an intake function whether we are a health-care organization, an educational institution, or a shelter. There is a service function intervening in the life of a living being. There is a release function where the client is discharged from the organization, and finally, a follow-up function allowing the organization to evaluate its effort. This is an example of a pattern of activities that form a non-profit organization. With slightly different language we can see this same pattern in a for-profit organization. There is an acquisition of raw material (intake) to which methods of manufacturing are applied (service) which result in a product (release) and customers determine through their purchases the success of the product (follow-up).
Structure involves the physical description of the components. This is true in both an ecological system as well as an organization. For example, in an organization the description includes the hierarchy, job descriptions, and the terms and conditions of employment. It also includes location and the facility in which the components are housed. There are a myriad of factors affecting structure. For example, we traditionally consider proximity to customers and resources as significant to location. Equally important to this proximity is the likelihood of establishing advantageous relationships with markets and technological resources. Resources deal with measurable quantities while relationships deal with difficult to measure qualities.
Structure and pattern are highly interrelated and raise the question as to whether form follows function or function follows form. The answer is yes, structure and pattern are so closely related that they are inseparable. They both lead and follow each other.
The interrelatedness brings the third concept into play, that of cognition or process. Cognition is embedded in both pattern and structure and is the method through which they relate to each other. The essence of relationship is the process of knowing, which includes language, perception, and action. Capra writes: “Human decisions are never completely rational but are always colored by emotions, and human thought is always embedded in the bodily sensations and processes that contribute to the full spectrum of cognition” (275). Cognition is imaginative and to remain vital and meet the challenge of change there must be constant learning.
As an example of these three concepts consider an individual person. The specific form of a person is recognizable throughout his or her life. Although changes occur, the person is easily identified. The structure is the description of the various body parts that compose the individual. Cognition involves all the decisions and activities that keep the individual’s system in harmony. Harmony refers to the dynamic configuration of the elements of a system that work together to optimize the individual’s function. Many of these decisions and activities are accomplished through a network of relationships, in addition to the activity of the brain. Organizations are challenged to find the harmonious (not a balanced) relationship between its many goals. The result is a complexity that is beyond the comprehension of an individual. The resolution of the complexity is found in a network approach to the organization’s design.
In addition to the complexity of pursuing multiple goals, organizations are constantly involved in responding to change. Change generally occurs when a system is in a state of disequilibrium, for example, when sales decline. The response to disequilibrium can move in many different directions with unpredictable consequences. It is a situation that, once again, is beyond any single entity to understand or respond to. Nature evolved networks to cope with, and take advantage of, the changes confronting an eco-system.
In nature, evolution is often thought of solely as a competitive process where someone wins and someone else loses. However, Capra refers to recent research by Lynn Margulis which suggests that evolution has often been jump started by a cooperative process of sharing genetic material (known as symbiogenesis). The idea of networking and cooperation is as old as evolution itself. Through cooperation nature leverages the response to disequilibrium (227-49). When the environment changes for a particular molecule in an eco-system it has no choice but to respond to that change. Human organizations have much to learn from the natural process of seeking and finding harmony with the forces of within and without.
Generally human organizations do their best to avoid profound change. Organizations are often mired in the complexity of short term issues and with a focus on predictability and control, change is something to be avoided. In addition, there is a great deal of pressure placed on current performance which leaves little time for planning change. It is difficult, but absolutely necessary, to step back from this pressure and reflect on the fundamental assumptions that provide the basis for understanding the organization’s purpose and developmental path and their relationship to on-going change.
The fundamental assumptions are dynamic as information about your world view and the individual’s place in it constantly changes. In Douglas McGregor, Revisited, Warren Bennis writes about the problem of static assumptions which he refers to as a mindset:
The biggest problem with a mindset is that once we’ve developed one, we tend not to challenge it, particularly when it seems effective. Why should we? If it worked yesterday and works today, it should work tomorrow, right? Not necessarily. Not even probably. In fact, in a rapidly changing environment such as the one we compete in today, leaping to this conclusion is dangerous business. Instead, to ensure that our thinking does not become outdated, we must continuously put our old ideas to the test, to question the efficacy of yesterday’s truths and do so before they fail. (48)
Beyond the individual world view there are at least two additional areas that impact the story that is told. Over time organizations develop a system of values and attitudes that governs the behavior of its members and is unique to that organization. The cultural view of a particular organization contributes to what is considered acceptable behavior and thought. There is a powerful interplay between the culture and the business context. Business context refers to a wide range of internal and external issues. Examples of internal issues are profitability, growth, and sustainability, while external issues refer to the national and international economic conditions. Dramatic swings in internal or external conditions can have enormous impact on culture and individual perspective. Given the number of variables it s a risky and complex task to address the many issues that relate to and impact organizational performance.
The basis of all organizational effort is to increase the effectiveness in achieving the goals and purpose of the organization. Therefore any change must tie back to the organization’s purpose. You may be working to improve morale but the outcome must achieve the organization’s purpose more effectively. Just as it is true for nature, there is no recipe or set of rules that apply to all eco-systems or all organizations. However, by reflecting on the natural world of which we are a part, we can see alternatives for how we design and manage an organization.

From these comments we can begin to see one way of understanding how organizations are designed and how they manage themselves influenced by different models of natural phenomena. The natural theory also demonstrates how an understanding of management is influenced by one’s world view. The phrase organizational development implies a movement or change in a particular direction. What is that direction? Part of the answer is determined by the assumptions we hold about the world as in the above discussion. Therefore it is necessary to reflect and then write and make explicit, the assumptions about your own world view and understanding of organizations.
28. Write a five page explanation of the fundamental assumptions that support your world view and address the following questions. Where did your fundamental assumptions come from? Are you satisfied with them? How do your fundamental assumptions affect your understanding of effective organizations?
Epilogue

The Apex Story began with the thought that like ENSO (El Nino), organizations do not always behave according to rational thought and process; that mysterious forces seem to affect their way of being in the world. The ENSO metaphor was then extended to individuals who often make decisions based on intuition or unconscious assumptions (mysterious forces) that determine their own way of being in the world.
The ongoing transmission of data from the Wilkinson Microwave Anisotropy Probe satellite launched in June 1991 has been partially analyzed and presents some fascinating ideas (Overbye 2003). It has been determined that the universe is continuing to expand at an ever increasing rate; it is not slowing down in preparation for a grand contraction. The universe is being pushed apart by a mysterious dark energy that increases in negative pressure as cosmic bodies separate. At the moment, scientists don’t have language to describe this force. It’s something like anti-gravity but not quite; in the interim it is called “dark energy.” Astronomers also report that the universe is composed of 73% dark energy, 23% dark matter or what are called black holes, and 4% atoms or those bodies that we humans can see. It is indeed remarkable that we don’t understand, can’t see, and don’t have the language to describe the majority of the forces affecting the universe.
From one point of view, the presence of “dark energy” in the universe and the unconscious assumptions present in individuals, provide a gloomy perspective on the goal or managing and developing organizations. There are forces from the “other world” influencing and/or controlling behavior. In an organization, this is not a topic that gets discussed. Without discussion or exploration individuals may continue to think privately about the dark mysterious forces, an idea that conjures up visions of evil and nasty forces attempting to drive out the good and rational intentions of decent, hard-working people.
Or is there another way to understand this irrational organizational and individual behavior? Is it possible to admit that our understanding of ourselves is limited, and therefore, our understanding of others and an organization is extremely limited? Is it possible to appreciate the insight that diverse people and disciplines bring to our understanding of reality? Is it possible to think and act differently based on this new understanding of reality? It would seem that the door to a new way of thinking is open. Now we need the courage to leave what is comfortable and walk through to the other side. The other side recognizes the human as part of the natural world.
I end this story with a fundamental belief that came to us from the mythologies of Native Americans and early Greek civilization. In Native American legend a long held belief is to think of the earth as something that humans belong to rather than something that belongs to humans. This same belief appears in the first Homeric Hymn as translated by Charles Boer. The Homeric Hymns were written Homer during the 8th Century BCE and based on the oral tradition emerging from the Trojan Wars (1220 BCE). In part “The Hymn To The Earth” reads:
it is she
who nourishes you
she,
out of her treasures
Beautiful children
beautiful harvests
are achieved from you
The giving of life itself,
the taking of it back
to or from
any man
are yours
References
Anderson, D. & Anderson, L. Ackerman, 2001. Beyond change management. San
Francisco: Jossey-Bass/Pfeiffer Publishing.
Argyris, C. 1994. Good Communication that Blocks Learning. Boston: Harvard
Business School Publishing.
Bennis, W., G. Heil, and D. Stephens. 2000. Douglas McGregor, Revisited. New York:
John Wiley and Sons.
Bennis, W. 1989. On becoming a leader. Cambridge: Perseus Books.
Bly, R., J. Hillman, and M. Meade. 1992. Rag and bone shop of the heart. New York:
HarperCollins.
Boone, L.E. and D.D. Bowen. 1987. Great writings in management and organizational
behavior (2nd ed.). New York: McGraw-Hill.
Capra, F. The web of life. 1996. New York: Doubleday.
Case, J., executive editor. 1999. The art of managing effective teams. Boston: Harvard
Business School Publishing.
Friedman, T. 1999. The lexus and the olive tree. New York: Farrar, Straus & Giroux.
Gold, M. 1999. The complete social scientist. Washington, D.C.: American
Psychological Association.
Homer. The Homeric Hymns translated by Charles Boer. 1970. Putnam, Connecticut: Spring Publications, Inc.
Johnson, D. and Frank J. 2000. Joining together. Needham Heights: A Pearson
Education Company.
Maslow, A. 1965. Eupsychian management. Homewood: Dorsey Press.
Morgan, G. 1998. Images of organization, the executive edition. San Francisco: SAGE
Publications, Inc.
McGregor, D. 1960. The human side of enterprise. New York: McGraw-Hill Book
Company Inc.
Oliver, M. 1992. New and selected poems. Boston: Beacon Press.
Overbye, D. 2003. ‘Cosmos sits for early portrait, gives up secrets.’ Available from
http://www.nytimes.com; Internet; accessed 12 February 2003.
Porter, M. 1996. ‘What Is Strategy?’ Harvard Business Review (November/December).
Schein, E. 1992. Organizational culture and leadership. San Francisco: Jossey-Bass.
Senge, P. et al,. 1994. The fifth discipline fieldbook. New York: Doubleday.
Senge, P. et al., 1999. The dance of change. New York: Doubleday.
Ulrich, D. 1997. ‘A New Mandate for Human Resources.’ Harvard Business Review.