McKinsey, The Psychology of Change Management
McKinsey, once again, have published an article that provides real value and discussion to the work we are doing here at People, Ideas & Objects. Change is a difficult process to manage. This article discusses the psychology around change management within organizations, and therefore is relevant, but I want to mention a few aspects of People, Ideas & Objects unique perspective before we review this paper.
There are two types of changes that affect organizations. The first type of change is to steer the ship in a new direction, one that is believed to be the better choice for all concerned. The second type of change is the type that is forced upon an organization by events that are beyond the control of anyone. People, Ideas & Objects is oriented to the second type of change. One that addresses the scope of the forces of change that are being exercised on the oil and producer.
The forces of change that are currently being asserted on the oil and gas producers are significant. The change in oil and gas prices affects all aspects of a producer firm. At the same time the volume of engineering and earth science effort per barrel of oil continues on a steep upward trajectory. A third major change that is occurring is what I would call the maturation of the Information Technologies (IT), bringing new and innovative ways of doing business. These are of the type of changes that are seen once a century. Fundamental changes that have the power to re-configure the makeup of an industry.
To accommodate the changes that are acting against the producer firm, People, Ideas & Objects prescription is to align the producers internal processes. By simply moving the compliance and governance frameworks to be in alignment with the Joint Operating Committee’s legal, financial, operational decision making, cultural and communications frameworks. Our research has shown that this alignment increases innovativeness and accountability, to name just two of the key benefits.
Alternatively, left unaddressed, these changes will soon cause producers to outspend their revenue streams. These losses will also exercise the type of change that is needed within the producer firm and the oil and gas industry. Producers therefore need to choose to ride these forces or continue to resist them. Either way that these changes are made, People, Ideas & Objects will provide the systems and applications that provide the innovative oil and gas producer with the most profitable means of oil and gas operations.
Our claim to be the most profitable means of oil and gas operations is a bold statement. And we assert that this is provided through our value proposition and the enhanced division of labor the software will identify and support. By allocating the one time development costs across the producer base, the costs of software development will fall to a small percentage of what firms have traditionally paid for ERP systems.
With respect to the second component of our claim to being the most profitable means of oil and gas operations. For any industry to increase its economic output demands that an enhanced division of labor be used. This economic theory has been proven time and again over the last few hundred years. We now live in times where to expand on the current division of labor and specialization requires that advanced Information Technologies be employed to identify and support them. People, Ideas & Objects is configured to develop the software that will provide these to the producer firm. This is our fundamental competitive advantage.
McKinsey’s discussion on change is of the first type, or deliberate change an organization undertakes. Nonetheless it provides us with some valuable information regarding change in general.
Over the past 15 or so years, programs to improve corporate organizational performance have become increasingly common. Yet they are notoriously difficult to carry out. Success depends on persuading hundreds or thousands of groups and individuals to change the way they work, a transformation people will accept only if they can be persuaded to think differently about their jobs. In effect, CEOs must alter the mind-sets of their employees—no easy task.People, Ideas & Objects have presented a workable vision of how the innovative oil and gas producer would operate. This vision is represented in the Draft Specification. People can then see the effect of working in that environment and adjust their actions to fulfill that vision and enable the innovative oil and gas producer.
But what if the only way a business can reach its higher performance goals is to change the way its people behave across the board? Suppose that it can become more competitive only by changing its culture fundamentally—from being reactive to proactive, hierarchical to collegial, or introspective to externally focused, for instance. Since the collective culture of an organization, strictly speaking, is an aggregate of what is common to all of its group and individual mind-sets, such a transformation entails changing the minds of hundreds or thousands of people. This is the third and deepest level: cultural change.With the benefits of people having this vision in mind. And using the Joint Operating Committee as the key organizational construct of the innovative producer, people will be able to think differently about their work.
Employees will alter their mind-sets only if they see the point of the change and agree with it—at least enough to give it a try. The surrounding structures (reward and recognition systems, for example) must be in tune with the new behavior. Employees must have the skills to do what it requires. Finally, they must see people they respect modeling it actively. Each of these conditions is realized independently; together they add up to a way of changing the behavior of people in organizations by changing attitudes about what can and should happen at work.In this next quote McKinsey note that cognitive dissonance will affect the people who believe in our purpose. I can only suggest that those people begin the process of joining People, Ideas & Objects or the Community of Independent Service Providers.
The implication of this finding for an organization is that if its people believe in its overall purpose, they will be happy to change their individual behavior to serve that purpose—indeed, they will suffer from cognitive dissonance if they don’t. But to feel comfortable about change and to carry it out with enthusiasm, people must understand the role of their actions in the unfolding drama of the company’s fortunes and believe that it is worthwhile for them to play a part. It isn’t enough to tell employees that they will have to do things differently. Anyone leading a major change program must take the time to think through its "story"—what makes it worth undertaking—and to explain that story to all of the people involved in making change happen, so that their contributions make sense to them as individuals.For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
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