The Congruence Model A Roadmap for …

1 The Congruence Model A Roadmap for UnderstandingOrganizational PerformanceThe critical first step in designing and leadingsuccessful large-scale change is to fully understand the dynamics and performance of the enterprise. It s simply impossible to prescribe the appropriate remedy without firstdiagnosing the nature and intensity of an organization s , all too often, senior leaders particularlythose who have just recently assumed theirpositions or joined a new organization reactprecipitously to a presenting set of quickly spot apparent similaritiesbetween the new situations they face andproblems they ve solved in the past, and leapto the assumption that what worked beforewill work imperative to act is understandable butoften misguided. Leaders would be welladvised to heed the advice of Henry Schacht,who successfully led large-scale change as CEO of both Cummins Engine and LucentTechnologies: Stop, take a deep breath, giveyourself some time, and get the lay of theland before leaping to assumptions aboutwhat should be changed, and s easier said than done.

2 Without a comprehensive Roadmap a Model for understanding the myriad performance issues at work in today s complex enterprises,leaders are likely to propose changes thataddress symptoms, rather than causes. Thereal issues that underlie an organization s performance can easily go undetected by managers who view each new, unique set ofproblems through the well-worn filter of theirpast experiences and personal , the mental Model any leaderuses to analyze organizational problems willinevitably influence the design of a solutionand, by extension, its ultimate there are countless organizationalmodels, our purpose here is to describe oneparticular approach the Congruence Model of organizational behavior. We ve found thecongruence Model to be particularly useful in helping leaders to understand and analyzetheir organizations performance. Thisapproach has been developed and refined over nearly three decades of academic researchand practical application in scores of majorcompanies.

3 It doesn t provide any pat answersor pre-packaged solutions to the perplexingissues of large-scale change. Instead, it is auseful tool that helps leaders understand theinterplay of forces that shape the performanceof each organization, and starts them down the path of working with their own people todesign and implement solutions to their organization s unique this paper, we ll describe the congruencemodel and suggest how it can provide a starting point for large-scale change. It hasproven to be useful in so many widely varyingsituations because it meets the test of any successful Model : It simplifies what is inher-ently complicated, reduces the complexity of organizational dynamics to manageable proportions, and helps leaders not only tounderstand, but also to actually predict, themost important patterns of organizationalbehavior and the Model DevelopedThe organizational Model most of us carry inour head is the age-old pyramid-shaped tableof organization that typified institutions as oldas the Roman Legions.

4 That Model was fineTHE Congruence MODEL1 2003 Mercer Delta Consulting, LLC. All rights reserved. These materials or parts thereof shall not be reproduced in anyform without written consent of Mercer Delta Consulting, when the pace of institutional changewas measured in decades, even through the first half of the 20th century,organizations changed so slowly that theiressence could be captured in neat patterns of lines and in recent decades, the rapidly acceleratingpace of change has made that static modelobsolete. The old Model merely documentedhierarchical arrangements; the new modelshave to capture the dynamics of fluid relation-ships. The old Model provided a reasonablyclear snapshot of a moment in time; today,we need real-time, streaming new approach to understanding organ-izations really started in the 1960s, whenresearchers at the Harvard Business Schooland the University of Michigan began exploringthe similarities between naturally occurringsystems and human organizations.

5 They discovered some striking parallels. In verybasic terms, both take input from their surrounding environment, subject it to aninternal transformation process, and producesome form of output (see Figure 1). In addition,both have the capacity to create and use feedback; in other words, they can use theiroutput to alter their input and refine theirinternal , it wasn t until the mid-1970s thatsystems theory found wide acceptance amongstudents of organizations. Building upon theimportant work of earlier theorists (Daniel Katzand Robert Kahn, Jay Lorsch and Alan Sheldon,and John Seiler), David Nadler and MichaelTushman at Columbia University developed asimple, pragmatic approach to organizationdynamics based on systems theory. At roughlythe same time, Harold Leavitt at StanfordUniversity and Jay Galbraith at MIT weresimultaneously grappling with the sameissues. Nadler and Tushman s efforts led to thedevelopment and refinement of the approachnow known as the Congruence Congruence Model suggests that in order tofully understand an organization s performance,you must first understand the organization as a system that consists of some basic elements:THE Congruence MODEL2 Figure 1: The Basic Systems ModelInputTransformationProcessFeedbackO utput The input it draws from both internal andexternal sources The strategy it employs to translate its visioninto a set of decisions about where and howto compete, or, in the case of a governmentagency, the public policy results it wants to achieve Its output the products and services it createsin order to fulfill its strategic objectives The critical transformation process throughwhich people, working within the context of both formal and informal arrangements,convert input into outputThe real issue is how the interaction of thesecomponents results, for good or ill, in some level of performance.

6 So it s important to beclear about the nature of each component andits role in the organizational Organizational ComponentsInputAn organization s input includes the elementsthat, at any point in time, constitute the set of givens with which it has to work. There arethree main categories of input, each of whichaffects the organization in different ways (see Figure 2).1. The environment: Every organization existswithin and is influenced by a larger envi-ronment, which includes people, otherorganizations, social and economic forces,and legal constraints. More specifically, theenvironment includes markets (clients orcustomers); suppliers; governmental andregulatory bodies; technological, economic,and social conditions; labor unions; competi-tors; financial institutions, and special-interest groups. The environment affectsorganizations in three ways:THE Congruence MODEL3 All factors, includinginstitutions, groups,individuals, events, etc., outside of theboundaries of theorganization beinganalyzed, but having a potential impact onthat demands does the environment make on theorganization?

7 To what extent does the environmentput constraintson organizational action?Various assets the organization has access to, including humanresources, technology, capital, information,etc., as well as less tangible resources(recognition in the market, etc.).What is the relative quality of thedifferent resourcesthat the organization has access to?To what extent are resources fixed, as opposed to flexiblein their configuration?The patterns of past behavior, activity,and effectiveness ofthe organization thatmay have an effecton current organiza- tional have been the major stages or phasesof development ofthe organization?What is the current impact of historicalfactors such as:Strategic decisions?Acts of key leaders?Crises? Core value and norms?DefinitionCriticalFeaturesof the Input forAnalysisFigure 2: Key Organizational InputINPUT ENVIRONMENT RESOURCES HISTORY- It imposes demands. For instance,customer requirements and preferencesdetermine the quantity, price, and qualityof the offerings the organization can successfully It imposes constraints ranging from capitallimitations or insufficient technology to legal prohibitions rooted in governmentregulation, court action, or collective-bargaining It provides opportunities, such as new marketpossibilities resulting from technologicalinnovation, government deregulation, or theremoval of trade organization is directly influenced byits external environment; to put it evenmore emphatically, nearly all large-scalechange originates in the external environ-ment.

8 The privatization of state-ownedindustries in Europe and the United Kingdom,for example, significantly altered the waythey operate. To move from monopolies to a competitive landscape, utility companieswere forced to change the ways they dealwith customers and the United States, the market s saturationwith expensive servers and mainframes onthe high end, and intense competition fromlow-cost producers of desktop computers onthe other, drove IBM s dramatic makeover into an integrated service provider. And majorchanges in the laws governing interstatebanking led to widespread acquisitions oflocal financial institutions by major bankswhose operations had previously been limitedto their home state or region, promptingmajor strategy changes across the Resources:The second source of input is the organization s resources, including thefull range of accessible assets employees,technology, capital, and may also include less tangibleassets, such as the organization s reputationamong key outside groups customers,investors, regulators, competitors, etc.

9 Or its internal organizational History:There is considerable evidence thatthe way an organization functions today isgreatly influenced by landmark events thatoccurred in its past. In order to reasonablypredict an organization s capacity to act nowor in the future, you must understand thecrucial developments that shaped it overtime the strategic decisions, behavior of key leaders, responses to crises, and the evolution of values and history of Xerox is a case in point. In the 1950s, Xerox approached industrygiants IBM, GE, RCA looking for a partner to help it produce, sell, and distribute its revolutionary new copier. No one was inter-ested, so Xerox was forced to work on itsown. Ironically, the result was one of themost successful product launches in lesson from the company s seminal victory, which influenced its business strategyfor decades, was that partnering was for other companies, not for historical lesson at Corning Inc. was just the opposite. Since its earliest days,when Corning Glass Works teamed up with Thomas Edison to produce the firstcommercially viable light bulbs, the companyhas fueled its growth through a variety ofcreative collaborations with other companiesaround the globe.

10 Those mergers, partner-ships, and joint ventures provided Corningwith new technologies in evolving growthbusinesses as well as access to new marketsfor its existing products. Clearly, two verydifferent histories led directly to two verydifferent strategic Congruence MODEL4 StrategyEvery company faces two levels of strategicissues. The first is corporate strategy, involvingportfolio decisions about which businesses thecompany ought to be in. For government andnot-for-profit organizations, corporate strategy often reflects a combination of the legislativemandate, which defines the public-policyobjectives the organization has been created to address, and organization-specific second level involves business strategy,a set of decisions about how to configure theorganization s resources in response to thedemands, threats, opportunities, and constraintsof the environment within the context of theorganization s history. Together, these choicesconstitute what our colleagues at MercerManagement Consulting describe as a businessdesign, which includes five strategic elements: Customer selection:Who are my customers,and why do I choose to serve them ratherthan any others?