Leadership and the Psychology of Turnarounds

By    Sep 2, 2011

Smart financial and strategic choices are clearly necessary in revitalizing a declining organization. In this article, Rosabeth Moss Kanter points out that reversing the organizational culture is just as important in harnessing the energy needed for change. Moss calls this a psychological turnaround. Executives at companies such as Gillette and the BBC have successfully orchestrated turnarounds by restoring employees’ confidence in themselves and in one another, thus strengthening external stakeholder confidence.

Kanter offers a long list of cultural phenomena in declining organizations: secrecy and denial, blame and scorn, avoidance and turf protection, all of which eventually lead to passivity and helplessness. Though these issues may be more prevalent in the large corporations she cites in the article, smaller and nonprofit organizations are in no way immune to these kinds of problems. Kanter speaks to the merits of building trust and transparency in troubled organizations—a valuable lesson for healthy organizations as well. Perhaps unsurprisingly, the most effective leaders reversed the cycle not by replacing large numbers of staff, but by restoring confidence through empowerment.

This short article is a must read because it provides managers with a quick look at methods that can be used both restoratively and preventatively to create an open, respectful and productive organizational culture. Find it for a small fee on the Harvard Business Review website.

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