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WORKING PAPER 6

A Study on

Organisational

Development

ii

A Study on Organisational Development

By Jessica Mackenzie and Rebecca Gordon

The authors’ views expressed in this publication do not reflect the views of the Government of Australia, Government of Indonesia, or the Knowledge Sector Initiative. All entities will not accept any liability arising as a result of this publication. The perspectives offered in this paper are those of the authors and do not necessarily reflect the views of Overseas Development Institute or Research and Policy in Development programme. The authors wish to thank Mirisa Hasfaria, Gatot Widayanto, Louise Ball, Julie Hind, John Young, Louise Shaxson and Ajoy Datta.

A Study on Organisational Development iii

Abstract

People often do not know what is meant by ‘organisational development’ and yet, if they work in international development, it is very likely that they will have been involved in it. Essentially, it is a planned, organisation-wide effort to achieve strategic goals more effectively and efficiently. This report draws on current literature, good practice examples, interviews and case studies on organisational development, to distil useful frameworks and recommendations for future work. It is structured to address the different stages and components of the organisational change process.

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Table of Contents

Abstract ............................................................................................................................................. iii

Key Messages ...................................................................................................................................iv

Table of Contents ...............................................................................................................................v

Abbreviation and Acronyms .............................................................................................................. vii

Chapter 1: Introduction .................................................................................................................. 1

1.1 What is Organisational Development? ............................................................................... 1 1.2 Current Organisational Development Approaches in Indonesia ......................................... 1.3 This Paper ..........................................................................................................................

Chapter 2: Mapping the Organisational Context ...........................................................................

2.1 Know Which School of OD You Subscribe to ..................................................................... 6 2.2 Do Not Forget the Invisible Factors .................................................................................... 6 2.3 Know Who You Place at the Centre of Your Strategy ......................................................... 6 2.4 Understand Cultural Discrepancies You Are Working With ................................................ 6 2.5 Be Prepared to Adjust as You Go to Changes from Complex Environments ..................... 2.6 Failures Happen so Expect Them More Often Than Not.................................................... 9 2.7 Determine Organisational Readiness ................................................................................. 9 2.8 Be Prepared for OD Changes to Occur in Fits and Bursts. If Your Plans are Linear, They May Not Fit the Reality ............................................................................................ 2.9 Acknowledge That OD is Political and Understanding The Context is Critical .................

Chapter 3: Undertaking Organisational Development Interventions ........................................

3.1 What are the Different Types of OD Activities?................................................................. 3.2 Should You Apply One Type of OD Activity or Several? ................................................... 3.3 How Should Core Funding be Delivered? ........................................................................ 3.4 How Many Staff Should be Involved in OD Efforts?. ........................................................ 3.5 How Can You Integrate a Group of Organisations Undertaking Similar OD Activities? .... 3.6 How Do You Ensure OD Activities Diffuse Effectively Across the Organisation? .............

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3.7 How Do You Select the Best Organisations to Work With? .............................................. Chapter 4: Managing the Change Process .................................................................................. 4.1 What Models Do the Private Sector Use? ........................................................................ 4.2 How Can You Create A Comprehensive Approach? ......................................................... 4.3 What Models Have Been Created For and Used in International Development Activities? ......................................................................................................................... 4.4 What Specific ‘Knowledge-to-Policy’ Considerations are There in the Literature for How to Manage a Change Process? ...........................................................................

Chapter 5: Measuring and Evaluating Organisational Development ........................................ 5.1 How to Measure Behavioural Change in Three Easy Stages (Outcome Mapping) .......... 5.2 How to Collect Stories of Significance to Demonstrate What You Have Achieved (Most Significant Change Technique) ............................................................................... 5.3 How to Enable Organisations to Learn from Their Experiences and Adjust (Active Learning Cycles) ................................................................................................... 5.4 Consolidated Guidance and Checklists ............................................................................

Chapter 6: Conclusion ...................................................................................................................

Annex A: Bibliography .................................................................................................................... Annex B: Guidance Notes from WBI Guide to Evaluating Capacity Development Results ........... Annex C: WBI Diagram – Tracing Multiple Change Processes ...................................................... Annex D: Checklists for McKinsey’s 7-S Framework...................................................................... Annex E: Checklist for Organisational Readiness from the Learning Network on Capacity Development ................................................................................................................... Annex F: Expert Interviews ...........................................................................................................

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A Study on Organisational Development^1

1.1 What is Organisational Development?

Organisational development (OD) is defined by practitioners and theorists in different ways, due in part to its complexity. Essentially, it is a deliberately planned, organisation-wide effort to increase an organisation’s effectiveness and/or to enable an organisation to achieve its strategic goals. The concept formally emerged in the 1950s (though some theories date back to 1920) and is generally credited to psychologist Kurt Lewin.^1 It encompasses both the theory and practice of planned, systemic change in the attitudes, beliefs and behaviour of employees through long-term training programmes. 2 It is often described as action-oriented. Typically, it starts with careful organisation-wide diagnosis of the status quo and needs. It is inherently interdisciplinary, drawing upon techniques from the behavioural sciences, predominantly sociology and psychology (including theories of learning, motivation and personality). Emerging related fields include capacity development, systems thinking, complexity thinking, clinical epidemiology and organisational learning. There is increasing recognition that it is in fact the network of relationships, and the collaboration between organisations and individuals operating in their social, political, cultural and economic contexts, often referred to as ‘institutions’, that generate real change. This means recognising that OD needs to include work at both the higher ‘institutional’ and lower ‘personal’ level to be effective. 3 A useful table which provides an overview of the progression of different approaches to OD activities since the 1950s is included below (Table 1).

1 Child, J. (2005), Organisation Contemporary Principles and Practice , Blackwell Publishing, p.292. 2 Cacioppe, R. and Edwards, M. (2005), Seeking the Holy Grail of organisational development , Leadership & organisation Development Journal 2005 26:2, 89-91. 3 Horton, D. (2002), Planning, Implementing and Evaluating Capacity Development, ISNAR Briefing Paper 50.

Chapter 1

Introduction

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1998, today the SMERU Institute ranks among Indonesia’s top centres for independent policy research and analysis. An assessment by its first director identified factors accounting for its success, including its commitment to a clear vision statement that could be made operational and measured, and special attention to ensure consistent policies on recruitment, compensation and training. 5 However, without the sustained core funding it has received over the last decade, SMERU would struggle to retain its independence as a sustainable research institute. Even with financial assistance, SMERU will be unable to afford salaries if too many of their staff become qualified with PhDs. It is also unclear what relationship this core funding has had with other OD efforts internally. Although funding to date has undoubtedly assisted with financial stability, it has not necessarily afforded the level of intellectual independence that might be expected. Few donors provide support that nurtures OD activities. The majority of ‘research support’ is in the form of commissioning short-term research projects or twinning arrangements with other universities. In commissioning these short- term projects, donors inevitably have their own priorities, which may not align with long-term tailored OD plans, or those of the broader policy- makers and national development goals. As a result, the best researchers are often over committed on projects and do not have the time or availability to mentor other staff or engage in meaningful organisational reforms for their institutes. To date, OD efforts have met with these realities, and in their fragmented and project-based approach have not resulted in building strong knowledge sector institutions. Significant and flexible donor support (including core funding) coupled with the provision of technical assistance is widely viewed as fundamental to OD efforts. Yet economic, legal, political and institutional constraints on research organisations and universities in Indonesia have meant that these inputs have not led to better knowledge sector

5 Sumarto, S. (2011).

outcomes.^6 Donors and practitioners increasingly recognise these barriers and would benefit from additional support in: (i) diagnosing which organisations to work with; (ii) enabling organisations to better self-diagnose; and (iii) navigating which interventions are most likely to achieve improved results. OD efforts that have occurred have been disjointed, project-based and unsustainable. There have been some demonstrated measures of success, 7 but these have not been able to address the broader context of the enabling environment or the demand for research by policy-makers. 8 Ultimately, the provision of training and the acquisition of project-based skills do not equate to the ‘development of organisational procedures and systems that channel human abilities’ that OD involves.^9

1.3 This Paper

This paper synthesises global literature on OD, draws upon good practice examples from select practitioners and applies it to the work of KSI. It aims to distil from the vast amount of literature (that is often very conceptual) what is most useful to partners of KSI in the sector, and to package it in an accessible way. The report is structured to address the different stages and components of the organisational change process. Chapter one assesses current literature and good practice examples on mapping the organisational context in which capacity development takes place. Taking into account that organisation-wide capacity changes are often unpredictable, rarely occurring in linear progression, this chapter also includes an assessment of theories on the emergence of organisational change. Chapter two looks at undertaking OD interventions. It considers different types of interventions used to facilitate change. This

6 McCarthy and Ibrahim, (2010). 7 Such as SMERU and the Centre for Strategic and International Studies (CSIS). 8 McCarthy and Ibrahim, (2005), p.21. 9 Horton et al. (2004), p.44.

includes theory and good practice examples on core funding approaches, technical assistance, communities of practice and networks. Chapter three looks at managing the change process. Drawing on Kotter’s eight principles and Rhodes’ cross-cultural approaches to building organisational capacity, it covers several overarching theories and frameworks. It also includes an overview of literature on embedding experimental governance structures and building collaboration between government and academia. Chapter four considers measuring OD. In particular, this chapter considers good practice models for outcome mapping, action learning cycles and significant change techniques. Chapter five concludes the report with key

findings and a summary of how programmes might apply this report to ongoing activities and OD. The review focused primarily on English- language publications, with an emphasis on recent material. Sources of literature included articles, books, working papers, reviews, reports, strategic plans, documented speeches, blogs and some relevant project documentation. This was complemented by a series of interviews with KSI staff. Interviews sought to understand KSI’s current exposure to OD literature and what activities this study would inform. OD specialist Rahmi Yunita, in cooperation with the authors, conducted the case studies. Several interviews were conducted with practitioners in the field. Details are in Annex F.

2.1 Know Which School of OD You

Subscribe to

Richter describes two main schools of thought on OD from as early as 1920. In her analysis, these schools are divided between ‘clocklike’ and ‘cloudlike’ thinking. Clocklike thinking is based on the assumption that organisational change can be planned and implemented through controlled interventions leading to clear pre-set results that are achieved. Cloudlike thinking sees organisations as complex systems with many inter-connecting links between elements within the organisation and the wider society. As a consequence, change is a chaotic process that does not follow a clear strategic path. 10 Appreciating this can help you recognise when others think differently, and navigate their assumptions. OD practitioners should be aware of which school of thought they subscribe to before engaging in activities, and be aware that not everyone will have the same assumptions.

2.2 Do Not Forget the Invisible Factors

Kaplan provides a comprehensive overview of the OD context as six interrelated elements: vision, strategy, culture, structure, skills and material resources.^11 His work emphasises that the challenge for practitioners is to recognise intangible as well as tangible elements. Many OD projects focus on providing the more visible material resources: building skills, improving organisational structures and systems. Kaplan highlights that the invisible elements can be left off the donor priority list, due to their unobservable nature. The equally important OD elements of vision, strategy and cultural values are often overlooked, as well as being harder to measure. Kaplan also highlights the importance of the complexity of inter-connecting links between these elements and inter-connecting links with contextual influences. He makes the distinction between two schools of OD: the Northern and Southern. The Northern donor or NGO

10 Ingrid Richter (2010), in: Ubels, J., Acquaye-Baddoo, N.A. and Fowler, A. (2010), pp.101-115. 11 Kaplan, A. (1999), pp.10-12.

perspective is where capacity is seen as the ability to absorb donor funding, be accountable for how it is spent and manage any donor- funded projects. The Southern perspective is differentiated as southern organisations ‘view[ing] themselves as important and viable “organs of civil society”, players whose role is to work towards social transformation, redress, a better deal for the marginalised, poverty alleviation and towards parity with respect to the dynamics of power’.

2.3 Know Who You Place at the Centre of

Your Strategy

Connected to this, Rhodes and Antoine identify an increasing shift in the focus of OD literature onto the holders of the capacity, rather than those who contribute the capacity. It has historically been easier to analyse what exercises or activities an OD advisor should deliver when working generically with different organisations wanting to improve their effectiveness. It becomes more complicated when the focus is inverted and the question shifts to understanding how to better diagnose the needs of an organisation, and how it grows as a group of individuals in its capabilities. These elements are less observable than a list of training activities to be delivered. They are more time consuming to undertake and tailored to each individual context. 12

2.4 Understand Cultural Discrepancies

You are Working With

Cultural values have an impact on several elements of OD interventions, including: the way change occurs, perceptions about whether change is needed, perceptions about leadership and ownership, perceptions about risk and uncertainty, perceptions about relationships and partnerships, and perceptions of what success looks like. Rhodes and Antoine identify eight key dimensions that should be be mapped out before an OD activity is undertaken:

1. Power distance
2. Uncertainty avoidance

12 Rhodes and Antoine (2013), p.4.

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3. Humane orientation
4. Individualism collectivism
5. Assertiveness
6. Gender egalitarianism
7. Future orientation
8. Performance orientation

This list provides a starting point for discussions between people from different cultural contexts working on OD activities, to help determine what is important to that activity and how different their approaches are. Rhodes and Antoine recommend mapping the discrepancies across the dimensions on a spectrum (visually ‘plotting’ them) to help clarify different OD expectations.

2.5 Be Prepared to Adjust as You Go to

Changes from Complex Environments

Systems and complexity theories are two valuable perspectives that can equip organisational leaders with the requisite

© Leadership Strategies Practitioners’ Handbook for Capacity Development: A Cross- cultural Approach

Low power distance

Low powerdistance

Low humaneorientation

Low uncertainlyavoidance

assertivenessHigh

High futureorientation

High performanceorientation

High gender egalitarianism

High power distance

High powerdistance

High humaneorientation

High uncertainlyavoidance

Lowassertiveness

Low futureorientation

Low performanceorientation

Low gender egalitarianism

knowledge and understanding of how to respond and adapt to the uncertainties and demands of a changing knowledge sector in Indonesia. This builds on the idea that the ability of organisations to manage and survive change is becoming increasingly important in an environment where competition and globalisation of markets are ever-intensifying. 13 A systems theory is a concept that originated from biology, economics and engineering. It explores principles and laws that can be generalised across various systems. A closed systems approach considers the external environment (and an organisation’s interaction with it) to be inconsequential. An open systems approach views an organisation’s interaction

with the external environment as vital for organisational survival and success. 14 Systems

13 Cao, G. and McHugh, M. (2005) , p.475. 14 Amagoh, F. (2008).

Figure 1: Plotting Cultural Differences

Source: Rhodes and Antoine (2013), p.45.

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Source: Adapted from Baser and Morgan (2008) 17

2.6 Failures Happen so Expect Them

More Often Than Not

Reports into change management efforts in 2007 indicated that as few as 10-30% of formally researched interventions were successful. 18 This is a very low rate, however authors qualify that the managers in charge of these OD interventions began with high expectations. Woods et al. (2010) explain that often a ‘performance gap’ is identified by stakeholders at the beginning of an OD intervention. This is where staff and managers map a desire to move from one less desired state to another. Often these performance gaps are unrealistically large. This can partially account for the low success rates.

2.7 Determine Organisational Readiness

Organisational readiness is a relatively new area of OD literature that has emerged in the last decade.^19 As its title suggests, it helps determine how ready the organisation you are

17 Baser, H. and Morgan, P. (2008). 18 Figures range from 10% of OD undertakings being successful, quoted by Oakland, J. S. & Tanner, S. (2007), Successful change management , Total Quality Management, 18 (1-2), pp.1-19, or up to 30% being successful, according to Kotter International http://www. kotterinternational.com/the-8-step-process-for-leading- change/. 19 Cumming T. and Worley, C. (2009).

planning to work with is to implement a programme of OD. Rather than a binary question of whether an organisation is ready or not, it is about ‘how ready’ it is along a spectrum. 20 It allows you to systematically determine to what extent the organisation has the right conditions and resources in place to support the envisaged change process. Drawing upon a variety of theories and literature from psychology, sociology, anthropology, marketing and epidemiology, the key authors have developed a checklist. 21 This is especially relevant, not just to protect investments in research organisations that will otherwise be less effective, but also to protect politically sensitive relationships. Working with government departments to help determine their policy-making needs and areas for development is sensitive and highly political. The openness to working with a donor to determine these potentially very private and powerful needs can vary. This can mean it is even more difficult to ascertain organisational readiness, yet perhaps more important to do so.

20 Cawsey, T., Deszca, G. and Ingols, C. (2012). 21 WBI (2012), Guide to Evaluating Capacity Development Results.

Leadership Strategy formulator and heroic leader

Facilitative and catalytic

Nature of direction Control and direction from the top Self-organisation emerging from the bottom Control Designed up front and then imposed from the centre

Gained through adaptation and self- organisation History Can be engineered in the present Path dependent External interventions Direct Indirect and helps create the conditions for emergence Vision and planning Detailed design and prediction. Need to be explicit, clear and measurable

A few simple explicit rules and some minimum specifications, however, leading to a strategy that is complex but implicit Point of intervention Designed for large, integrated interventions

Where opportunities for change present themselves Reaction to uncertainty

Try to control Work with uncertainty

Effectiveness Defines success as closing the gap with a preferred future

Defines success as fitting with the environment

2.7.1 The Basics of Organisational

Readiness

How ready is the organisation (whether a supply-side, intermediary or demand-side organisation) to undertake OD efforts? Does it understand why change is necessary? Readiness can be defined as ‘having the right conditions and resources in place to support the change process; having a clear vision and objectives for the intended change; having the motivation and attitudes to engage with the change and make it work’. 22 In any context, OD activities are about changing the way things are currently done. A helpful way of considering readiness is as one of three sides of a triangle. One side is your context and readiness assessment, the second side contains the activities you are going to undertake (the OD intervention) and the third is how you are going to manage the change process. All of these are reinforcing and interlinked; 23 where one changes, you readjust the others. It is important that practitioners and donors approaching this work understand whether the whole system, and any or all of the elements within it, are ready. A change readiness assessment analyses the preparedness of attitudes, conditions and resources at all levels in a system. 24

2.7.2 Attitudes

An assessment of the political economy for change can be very helpful before any OD project, including the vision of a different future and the commitment to achieving it. 25 This requires mapping whether there is a vision of change, political will, understanding who are the blockers and enablers, and whether senior management has committed to sponsoring change. It is not always obvious to members of an organisation that change is necessary (and not everyone may agree). At the organisational level, it requires understanding the political economy for change, including the culture and

22 LenCD, (2012). 23 Dichter, S., Gagnon, C. and Alexander A. (1993). 24 LenCD, (2012). 25 Bossuyt, J., Shaxon, L. and Datta, A. (2014).

motivation of the organisations in the sector and associated networks. At the individual level, it assesses the attitude of key stakeholders.

2.7.3 Conditions

An assessment of the laws, structures and systems necessary to mandate, support and manage change can be undertaken. This requires mapping the alignment of stakeholder goals to the development goal, the scope of change, and the supporting legislation/politics/ strategies. At the institutional level, it requires assessing what laws, policies, structures and systems are already in place; what mandates, governance, structures and systems of individual organisations exist. At the individual level, it involves an understanding of job descriptions and conditions of service.

2.7.4 Resources

An assessment can be done of the human, physical and financial resources needed to support or facilitate change. This requires mapping what organisational tools are already in place to help plan, execute and monitor change, whether staff are appropriately skilled and whether resources will be available for the change itself.

More advanced considerations If a programme wants to apply this beyond the three areas of attitudes, conditions and resources, there is more advanced information available. More detailed conditions for assessing organisational readiness have been detailed by Greenhalgh et al. (2004), and their framework is provided below (Figure 2). Greenhalgh et al. have looked into the conditions that impact upon an organisation’s readiness to cooperate and have listed several findings. These are factors that a programme could adopt, almost as a checklist across the organisations that they plan to work with, and to assess the likely uptake of interventions being planned through its funding. The findings of Greenhalgh et al. on how OD efforts (or ‘innovations’ in government departments) are best taken up, include: