Page 287 - Managing Change in Organizations

CarnCh14v3.qxd 3/30/07 4:32 PM Page 270

Chapter 14 ■ Change architecture
Local management
The position vis-à-vis local management may be summarized as follows.

Advantages
■ Users more fully involved.
■ Development of centres of excellence at local level.
■ ‘Ownership’ and ‘buy-in’.
■ Market-focused.

Disadvantages
■ Higher costs due to duplication.
■ Lack of integration and consistency.
■ Variable standards and competence.
Overall change architecture seeks to create a framework within which the central
and local approaches can be more effectively balanced.

CASE
STUDY Lufthansa

In the eight years to 1999 Lufthansa proceeded from the verge of bankruptcy to record
results and being a founder member of the Star Alliance – a global network of airline
companies and others. Following the initial restructuring to avoid financial collapse, the
executive board and the supervisory board decided on a process of strategic renewal,
fundamental to which was a process of ‘mental change’.
In early 1992 Lufthansa found itself with only 14 days of operating cash available,
with little prospect of support from the banking system. Having engineered a short-term
solution, it embarked on a four-week change management programme for executives
out of which emerged a grouping committed to radical change. This became known as

the ‘Samurai of Change’. In mid-1992, 20 senior managers participated in a meeting ini-
tially known as ‘Mental Change’ but which became known as the ‘crisis management
meeting’. This created Program 93, comprising 131 projects or actions leading to 8000
job cuts, fleet downsizing, revenue enhancement efforts and so on.
The executive board appointed task forces to implement these projects, mostly headed
by members of the ‘Samurai of Change’. To communicate this, Lufthansa adopted
General Electric’s ‘town meetings’. By mid-1999 the CEO had participated in over 200
such meetings.
Progress of the 131 projects was monitored under the direction of the corporate
financial controller using explicit measures of revenue growth, cost reduction, etc.
By 1995 the results were apparent throughout the group, setting the scene for more
fundamental restructuring from a functional structure to a federal structure com-
prising decentralized business units. Subsequently Program 15 was implemented
(from 1996) focusing on strategic cost management aimed at cutting costs by 20
per cent in five years. The Program 15 task force emphasized the vital need for

270