10 |
Strategic Change and Organisation Development at the Centre of Power, 1973–83 |
The three years from January 1980 until January 1983 saw more changes in organisation and manpower in ICI than had occurred in the previous twenty. This was the revolution after years of inertia.
Having come into the Chairman's seat in April 1978 and dampened any enthusiasm for organisation change by saying “let me hear no more talk and work on organisation, let's get on with the business and make some money”, Sir Maurice Hodgson when faced with business pressures promptly pursued organisation change with vigour. The fact that he was succeeded in April 1982 by John Harvey-Jones, was a clear signal both to Harvey-Jones and the rest of ICI that more change was the order of the day.
The reader may recall from Chapter 7, Harvey-Jones’s interest in organisation change, and belief in using OD ideas and techniques when he was chairman of Petrochemicals Division in the early 1970s. Harvey-Jones’s arrival at Millbank as a main board director in April 1973 brought a man with a different perspective, personal style, and values into the main board; someone capable of asking questions about the role and methods of operation of the main board, the overall structure of the company, and the efficacy of the ICI and Millbank culture to meet the fresh challenges of business, economic, and political change during the 1970s. The fact that Harvey-Jones was able to play this challenging role, and at the same time survive and prosper in the ICI power system, says something both about his own skill as a change agent and a businessman, but also the extent of the business difficulties ICI were in by the time of the 1980 recession. Without those business difficulties it is doubtful whether 1980–83 would have witnessed the degree of organisation change it did, or whether Harvey-Jones would have been elected Chairman of ICI in November 1981.
But what were the changes in organisation and manpower announced and implemented in the first three years of the 1980s, and what were the business pressures which created the climate for that degree of change?
After the expected cyclical high point of 1979, when with the additional help of the favourable European operating conditions caused by the consequences of the Iranian Revolution of 1979, ICI achieved their best trading margins since 1976, in 1980 ICI promptly experienced a sharp decline in profitability. In 1980 trading profits of the ICI group fell by 48% to £332m. The third quarter of 1980 produced the first loss in ICI's history, and by the end of that year four of ICI's business areas, fibres, petrochemicals, organic chemicals, and plastics, were between them showing worldwide losses of £200m. The ratio of trading profit to total sales fell from 11.8 in 1979 to 5.8 in 1980, and worse was to come in 1982. A combination of fundamental problems of overcapacity in the European petrochemicals industry, the impact of a severe UK recession, and currency factors arising from the strength of sterling had removed the mask obscuring ICFs inactivity in the 1970s. ICI began to realise at the heartfelt level what they knew at the intellectual level – they had substantially overinvested for their markets.
Faced with this problem Sir Maurice Hodgson set in motion a rationalisation programme to remove some of the excess production capacity, and stimulated a series of organisation changes to reduce fixed costs. Announcements were made in 1980 to close a polyester fibre plant at Kilroot in Northern Ireland, and a nylon salt plant at Ardeer in Scodand; and Fibres Division again reduced its head office staff and its work force at Pontypool, Doncaster, and Gloucester. Sodium and titanium plants were closed at Wilton in 1981, and then the No. 5 Olefin cracker at Wilton was put into mothballs.
In April 1981 the loss-making Petrochemicals and Plastics divisions were merged under a single board, and their service functions were combined with significant loss of employment amongst management and professional staff. Mond division continued the process it had been pursuing since the late 1970s to simplify its structure, reduce the numbers of levels of management, and reduce numbers.
In 1982 the numbers reductions continued in Fibres, Petrochemicals and Plastics, and Mond Divisions. A deal with BP was announced in June 1982 whereby ICI would increase its stake in the jointly owned Olefine 6 cracker at Wilton, withdraw from LDPE production in the UK, and acquire some of BP's PVC production capacity.
While all this was going on ICI collapsed its divisional engineering organisation into a regional system and severely reduced its cadre of investment engineers, thought about making an equivalent structural change in its research and technical operations, but made do with trimming numbers and refocussing research effort, and made good use of the window for change provided by the recession and high levels of unemployment to generally reduce numbers and improve working practices in its manufacturing and maintenance operations.
The effect of these manpower changes, most of which were achieved through the company's voluntary severance arrangements, was to reduce ICI's UK employees from 89,400 in 1979 to 61,800 in 1983, a reduction of 31.0% over five years. Over the same five-year period the number of ICI employees outside the UK declined from 58,800 to 56,100, a reduction of only 4.6%. By the end of 1984, for the first time ever, there will be more people working for ICI outside the UK than inside the UK.
Most of the changes reported above were either announced or implemented in the final two years of Sir Maurice Hodgson's Chairmanship. When John Harvey-Jones took over formally as Chairman in April 1982 he at last was able to introduce changes in the role of executive directors and method of operation of the main board which had been discussed prior to Harvey-Jones’s arrival on the main board in 1973. Throughout much of the 1970s Harvey-Jones and a small number of his peers on the main board had unsuccessfully attempted to reduce the size of the main board, and refocus the attention of executive directors away from their allegiances to individual functions, ICI products, or ICI territories and the short-term management of the UK assets, and to get the executive directors to concentrate on the strategic planning and direction of the worldwide ICI group. The beginnings of this change in role and style for the executive directors was made in October 1982. While this announcement was made of the executive directors’ intentions to distance themselves from the operating units and to think through the strategic direction of the ICI group as a team, the newly designated chief executive officers of the operating units were offered increased delegation of authority, but also a new budgeting and control system from the centre.
Harvey-Jones, however, was still not able to persuade a large enough group of his colleagues that the time was yet ripe to merge Mond Division with Petrochemicals and Plastics Division and create a massive heavy chemicals division which could take operational charge of the great bulk of the UK assets. He was able to announce, however, a change to reduce the company's ‘over-managed and overmanned centre’. If the company could operate with a smaller more strategic board then it required a smaller support staff, if it had a smaller support staff then the prestige headquarters at Millbank was too big. ICI thus began to look for a new headquarters building in London, and to persuade those not required in this building to leave the company, or join the declining support groups for the UK operations. The intended move out of Millbank was a signal that the changes in ICI were for real, if they could be carried through and implemented. What was hoped for was not just a change in manpower and structure, but a necessary change in company culture to meet the much harsher business conditions of the 1980s. As one main board director put it:
I see the Millbank change as being the outward and visible sign of the inward and spiritual grace. That signals to the outside world and the units that we are going to do something very different. It's not quite piddling on the altar, but it's certainly saying there must be a more functional headquarters for the church than Canterbury Cathedral.
The 1980s revolution, if it could be implemented, involved changing people, structures, operating systems, roles, relationships and company culture. Why did all this change have to happen at once? Would this degree of change so destablise ICI as a group that it would imperil its business survival? Would the necessary changes in attitude and behaviour, and people with the necessary capabilities and capacities emerge from the old ICI to make these new roles, structures, and systems work? Or would the old ICI culture smother the fledgling organisation before it got on its feet and achieved a life and momentum of its own? These are crucial questions which the time frame and data base for this book cannot comprehensively answer. Neither is there space in this book to chronicle all the lessons from the implementation of those strategic changes so far.
The role of this chapter is to continue to explore the theme of the contribution of OD resources in creating and implementing change in ICI. The reader may recall that Chapter 4 described and analysed the role that OD resources played in implementing a strategic change those resources had no part in fashioning. Here the focal point for analysis is the attempt made by a relatively small number of OD consultants to try and create the conditions for, and reality of, some of the changes that were implemented in the early 1980s. The difference therefore between this chapter and the other chapters of this book lies in the fact that here we are discussing the role played by specialist resources in creating strategic change alongside the main board and chief executive officers of ICI. The point of intervention is the top power system of the company and the focus of the intervention was often the governance, structure, and operating style of the company.
It will, of course, be impossible to analyse the contribution made by internal and external OD resources at the centre of power without also detailing the more significant impact made by various chairmen and executive directors of ICI in inhibiting and pushing for organisational change. If as Harvey-Jones maintains the story of ICI in the 1970s was “a very fast-changing external scene to which we have reacted too slowly”, then the contribution of those executive directors seeking to create change, and the role that OD resources at times played as helpers to that process, will have to be set in the context that created a climate for inertia.
This chapter begins by examining some of the forces for stability and continuity in ICI. While those pressures for continuity were the seeds of much of the company's strength, they were also the seeds for a great deal of the unresponsiveness to change now seen to be characteristic of the 1970s. These crucial parts of the context which often became the objects of change efforts were the size, organisation, and working culture of the main board and the Millbank culture, and the systems and relationships which linked the main board and Millbank to the operating units.
Having established aspects of the context for change, and the way that context was seen by some to be inhibiting the running of the business, the second part of the chapter moves on to analyse the conditions of central OD after the WSA/SDP implementation, and chronicle the use made of OD resources in trying to open up ICI for strategic change in the period 1974–77. Here the focus for change was the role and method of operation of the main board, and the linkages between the main board and the chairmen of the UK divisions and overseas operating units. As I have already implied, this work was only partially successful in producing the desired change.
The next part of the chapter explores OD at the centre in the period 1977–82. Now the initial attempt to create change came through the use of an educational strategy. The OD resources created a series of Management of Change Workshops which had the effect of providing a common language to think about change management, and helped to prepare the top several hundred senior managers in ICI with some of the skills and knowledge they would require when the 1980 stepwise changes came. The late 1970s also provided an opening for one of the change-minded executive directors to dissolve much of the Europa Division and create structures and processes to encourage all of the UK divisions to directly make their headway into European markets. This became known as the Pan European change. Related to this was a need for reasons of business strategy, market planning, and operating efficiency to begin to prepare the ground for a Heavy Chemicals Group in ICI. The late 1970s also saw the creation of a set of mechanisms variously called the Inter Divisional Policy Group, and the Heavy Chemicals Policy Group which eventually led to the partial creation of a Heavy Chemicals Group when Petrochemicals and Plastics Divisions were merged in 1981.
A contribution was made to all of the above changes by the central OD resources. Often this contribution was limited in time and scope, usually it was low–key, often helping with the design of a crucial meeting and strategising with executive directors about when and how they should make a move to carry forward what became a slow, halting, and frustrating attempt to create change. The remarkable thing about the story is not the dramatic impact made by specialist OD help, for except for one occasion in 1974 no such dramatic impact was possible, but rather the fact that in a company of ICI's size and prestige OD consultants ever got near enough the power system to begin to see the possibility of helping powerful people to create organisational change. The other remarkable feature of the process was that the two internal consultants Stewart Dudley and Tom James, and even more interestingly the American external consultant Ron Mercer, survived in and around changes in the ICI power system to be drawn in and out of the process of organisational change.
The final section of the chapter examines in particular the reasons for the survival and impact of Stewart Dudley and Ron Mercer, and in so doing opens up the broader question of the what and the how of using OD to help stimulate strategic change. An important pattern in the way that OD has been used at the centre of power in ICI is the fact that only two of the executive directors have been associated with its use. A further pattern has been the linkages between those two executive directors and a very small number of internal and external consultants. As one of the key internal consultants put it:
If I look back on major changes in ICI where there has been some assistance from some kind of change (OD) resource, I might be cynical enough to say major change has been the result of manipulative collusion between an external consultant, an internal consultant, and a power figure.
In what follows, the meaning of manipulative collusion and evidence for any justification in using such a phrase to characterise how OD and executive resources have been connected to change problems, will be discussed. But throughout the narrative, often in the foreground, and nearly always in the background, was the prompting, pushing, and pressure for change from Harvey-Jones. To create change Harvey-Jones needed the support of his board peers and superiors; he also needed the massive enabling opportunity afforded by a worsening business scene. Against the critical nature of those factors in stimulating change, the role of internal and external OD resources could only be described relatively speaking as modest. On the other hand if Harvey-Jones had not in turn been promoted as an executive director, a deputy chairman, and then Chairman of ICI, it is doubtful if OD resources would have played any part at all in helping to create change in ICI. As Tom James has said – admittedly of his patron:
Harvey-Jones is the most important OD intervention in the company. He provides a real political umbrella, a proactive base from which to work. He's probably the biggest single intervention in this company in the OD field.
But before discussing in detail the role that OD resources played in trying to create change over the period 1973–83, it is important to examine those parts of the top governance, structure and systems, and management culture of ICI which were felt by those pushing for change to be impeding ICI's overall capacity to manage its quickly changing business, economic, political, and social environment.
THE STRUCTURE, SYSTEMS, AND TOP MANAGEMENT CULTURE OF ICI IN
THE 1970s
The top structure of ICI
Encouraged by Harvey-Jones in July 1974 Stewart Dudley, the senior internal OD consultant in ICI, wrote a critical paper reflecting on ICI's top organisation and culture. This paper, “A Look at ICI in 1974”, was inadvertently sent to all executive directors in August 1974. The furore caused by Dudley's critical paper seriously endangered Harvey-Jones’s credibility on the main board, and nearly caused Dudley to be fired. It also helped to open up discussions about changing the top governance of ICI.
The main board in 1974 comprised 18 people, a chairman, 11 executive directors, 3 of whom had deputy chairman status, and 6 non-executive directors. The main board was serviced by 3 principal officers, a secretary, a treasurer, and a solicitor, each of whom had status equivalent to the general managers of head office departments. Three logics of organisation are explicit in Figure 12: a focus around product, a focus around function, and a focus on geographical area or territory. These foci were the principle determinants for dividing the activities of the main board and executive directors into committees, and for allocating the individual responsibilities of executive directors. The principal committees at that time were:
Appointments Committee
Capital Programme Committee
Personnel Committee
FIGURE 12 ICI Board of Directors: April 1974
Staff Salaries Committee
Product Policy Groups
Territorial Policy Groups
Apart from being a product director and chairman of a product policy group such as Agricultural, an executive director could also be a policy group member of another policy group such as Plastics, chaired by a colleague executive director; and a functional director, and a territorial director. Each director accordingly held a number of portfolios, the intention being that this would give him a breadth of experience and responsibility which would better equip him to participate in the wide range of topics discussed at board meetings.
The ICI Chairman was not chief executive of the Group, and more significantly he did not in the 1970s behave as such. The Chairman was elected by his fellow board members after a traditional sounding-out process conducted by a senior non-executive director, and possibly also involving the outgoing Chairman. The new Chairman invariably came from the ranks of one of the Deputy Chairmen, and as a contrast to Sir Paul Chambers's eight years in office, the three Chairmen who followed him had either three or four years in office each.
The Chairmen of the late 1960s and 1970s were regarded as, and behaved as, first amongst equals. The Chairman had no singular authority on substantial matters of money or appointments. The Chairman chaired the board, helped substantially to determine its agenda, and allocated portfolios to executive directors. Election to the main board was a board decision, although it varied from chairman to chairman the extent to which the process of appointment was one of the Chairmen sounding out his colleagues and then announcing a name at the board, or whether the process was one of individual soundings leading to a board discussion.
The powers of individual executive directors were also fairly circumscribed. They could sanction capital expenditure in their areas of product or territorial responsibility at a level above the limit set for division chairmen, and of course within the constraints of custom and practice could decide when to take a decision to the board in their area of functional responsibility, but essentially they had to operate within the framework of policy set by the board.
Deputy chairman was a distinct level in the structure. Before 1974 all the policy groups had been chaired by deputy chairmen. By 1974 it was now common practice for the product policy groups to be chaired by executive directors, but all the territorial policy groups bar Southern Africa were still chaired by one of the three deputy chairmen. The deputies were there then not just to deputise for the Chairman, but to act individually almost as managing directors, and collectively as a sounding board, “inner cabinet”, or “top box” with the Chairman. The separate managerial level explicit in the deputy chairman role, together with the power and status that went with it, was undoubtedly resented by some of the executive directors in the 1970s.
The executive directors met every Monday morning at the Chairman's weekly meeting. This was a discussion forum rather than a decision-making forum. Decisions were taken by board committees or individual directors, having regard to the Chairman's weekly meeting discussion.
Every two weeks there was a Chairman's conference. This was a body where all executive and non-executive directors would discuss any matter where their collective input would be valuable, prior to its being formally approved as part of ICI policy.
Once a month all executive and non-executive directors would meet as the ICI main board. This was the only body in the governance system which could give top-level decisions and top-level approval to matters within the ICI Group. The main board's principal reserve powers were in the financial and personnel areas.
Of the eight board committees listed on page 381, and discounting the important but specialist role of the appointments and personnel committees, the most pervasively significant committees in the ICI system were the Product and Territorial Policy Groups, and the Planning Committee.
The Planning Committee was chaired by a deputy chairman and had as its secretary the General Manager of Planning. The members of the Planning Committee were otherwise all executive directors, and included, of course, the Planning Director. The Planning Committee met quarterly, did some longer-term thinking for the ICI Group and some investigative studies on the growth, ranking, and development of the ICI businesses, but as we shall see, one of the problems of the ICI top management systems at that time was that macro-planning on the shape, size and growth of the ICI group was not explicitly tackled by the main board or their committees. Instead the ICI planning systems were directed to the shorter-term horizons of producing a group capital programme and the financial plan associated with it. In this regard the planners linked with the finance experts in the Treasurers Department at Millbank to essentially become the slave of the Product and Territorial Policy Groups.
The Policy Group's major responsibilities were to set profit and other targets, and approve the plans of UK divisions and the overseas subsidiary and associated companies. The Policy Groups also approved major items of capital expenditure and investment, including diversification and divestment, and generally acted to provide resources, judge, and control the performance of operating units. In strict organisational terms, of course, the ICI main board approved and decided the plans, capital requirements, and divestment behaviour of operating units, but the behaviour within this system was that once a piece of capital expenditure had been through an operating unit's investigative process, had been scrutinised by representatives of Planning and Treasurers Department and most crucially by the relevant policy group and the Capital Programme Committee and then championed on the main board by the appropriate Policy Group Director, it would not normally be thrown out at the main board level.
Moving away specifically from the board and its committees, there is also the important organisational question of the link between the main board and the chairmen and boards of the operating units. Here, apart from individual contact between a policy group chairman and the operating unit, the major link operating units had with selected executive directors was through the monitoring, controlling, and capital sanctioning process associated with the Spring and Autumn policy group meetings.
FIGURE 13 ICI Head Office organisation: July 1974
Before 1977 there were two other meetings in the ICI system which “happened” but were not officially part of the scheme of organisation. Twice-yearly there was a “secret” meeting of executive directors and UK division chairmen for the latter “to be informed” of the financial performance of the group. These meetings were held at Warren House, the ICI's senior management training centre.
The other meeting was an informal gathering of the UK Division chairmen. This group began to come together in the early 1970s initially as a defensive strategy to cope with the central control and direction of UK personnel policy, but by the mid-1970s their interest turned to legitimating their role in the ICI governance system, and clarifying and improving their relations with the main board.
The final part of the top structure is the organisation of the head office departments. Figure 13 summarises the functional character of Millbank.
Most of the functional directors had reporting to them a general manager who was roughly equivalent in status to a division chairman. Each of the general managers ran sizeable departments, which were often further subdivided. The General Manager/Commercial – for example – had responding to him, amongst others, the Central Purchasing, Central Distribution, and Commercial Co-ordination Departments, and the General Manager Planning had reporting to him the Planning Department, the Policy Group Department, and a Business Environment Department.
The Millbank departments could crudely be divided into those functions which provided support services to the main board, for example, secretarys, treasurers, solicitors, and the Planning Department, and those departments such as Commercial, Research and Development and Personnel which, while having links to the main board, were more strictly trying to provide a central focus and service, mostly to the UK operating units. The powerhouse departments in Millbank were undoubtedly Planning, Finance, and Personnel.
The ICI culture, the main board culture, and Millbank culture in the mid-1970s
Because one can talk about specific structures, rules, systems, and consistent patterns of attitude and behaviour across numbers of defined individuals and groups it is somewhat easier to pinpoint the main board and Millbank cultures than it is to describe an ICI culture. Certainly, the variations in managerial culture at divisional level already evident from the preceding chapters is a further note of caution against any simple argument about cultural consistency across ICI. Nevertheless it is possible to present a characterisation of the ICI culture as it is seen both by very senior people in ICI, and a number of people outside the company who have contact with those senior people.
In thinking about ICI in these broad terms in the 1970s it is obviously relevant to note that ICI was very much a British-based and managed multinational company. There was a reduction from 52% to 43% in the percentage of total Group sales attributed to UK customers between 1963 and 1973, but between 1973 and 1981 that percentage fell only another 4% to 39%. In 1973 66% of ICI's worldwide employees were working in the UK divisions and notwithstanding interests in North America and Western Europe, the main board and Millbank were heavily preoccupied with the UK divisions. ICI was often referred to in the press as Britain's largest manufacturing company, and its prestige offices in London SW1 were within ten minutes’ walk of Parliament Whitehall and the main government departments, and the headquarters of the two major political parties. When and if ICI executive directors left the company they often became chairmen of large but lesser UK companies, or played prominent roles in employers organisations such as the Confederation of British Industry. The financial fortunes of ICI were regarded as a barometer for more general upward and downward movements in the stock market, and certainly outside the company there was the view that ICI was a British institution, and had to behave, and be seen to behave, in an appropriately ethical, regulated, and stable fashion. Anthony Sampson's view of ICI in the 1960s as “The Slumbering Giant” was still largely apposite for much of the 1970s.
The tradition in ICI had, of course, been to recruit first–class scientists and engineers and turn them into managers. The requirement from the company's beginning to develop new products and processes and to turn product out in volume into well-regulated markets, meant that technologists and people with production experience were pre-eminent. As one person put it, “things were produced and chaps were told to sell them. You didn't really closely follow the market.” The combination of engineering and production bias, and the location in the British national culture were two key determinants of inertia in ICI.
The line of succession [to top positions] has been 90% technologists of one sort or another, all coming out of the same kinds of schools, playing rugby together at the same kinds of places, and having the same kinds of orientations to life . . . the marketing free-swinging business man or the very innovative science type, as distinct from the good scientific analyst – the free-swingers and entrepreneurs have been in a minority in this company in strategic positions. Put that in the British culture and you get a reinforcement for the inertia, because the British culture is not an entrepreneurial culture, it is an inventing culture.
Many of the people interviewed talked of ICI as a traditional, a conservative organisation, images of the “great ship ploughing through waters and not needing to change”; of well-tried and stable systems, layers of management hierarchy, bureaucratic stops derived from compartmentalisation, and at the centre a heavily functional or disciplinary organisation. ICI was also described as an intellectual culture and while this had its pluses “one of the minuses was people tend to over-intellectualise. We have wonderful seminars about almost everything”. A further consistent theme was the difficulty of innovating.
There’s a sense of continuity in this place which is old, traditional. It's a hard place to innovate. Change has to be evolutionary rather than revolutionary. The revolutionary is tolerated but seen as a bad boy.
A main board director's summary view of the ICI culture picked up many of the above points:
If you have an organisation which has been by and large successful, it's 50 years old, it's hierarchical, it's almost totally inbred, it advances layer by layer, rank by rank, it has to be very, very conservative. And unless it falls off a cliff as it did in 1980, then people feel just as they would in a plant control room on a Friday afternoon, “keep your hands in your pockets, don't touch anything, it's Friday, the plant's running well isn't it?”
If conservatism was a theme often mentioned to describe the ICI culture, then consensus decision-making was the key theme in discussions of the main board culture of the 1970s. ICI twice had dynamic, autocratic Chairmen, once before, during, and after the Second World War in the persona of Lord McGowan, and then again between 1960 and 1968 with Sir Paul Chambers. Reader (1975) describes how the ICI main board effectively curbed McGowan's executive powers as Managing Director in the late 1930s, but allowed him to continue as Chairman with his autocratic inclinations trimmed by a series of committees. Sir Paul Chambers grew in power while he was Chairman to the point where he was effectively able to make appointments to the board, and so his personal strategy for ICI became the strategy ICI behaved. Chambers's maxim of growth, caught in the catch–phrase he is supposed to have recited to division chairmen, “Give me a good profitable project, and I will get you the money” eventually led to ICI's cash crisis of 1966, the rise of planning as an activity in the company, and Chambers’ exit from ICI 2 years earlier than planned in 1968. The tenure of the next four Chairmen did not in any case exceed 4 years, and all behaved as first amongst equals, thus reaffirming a consensual style of board decision-making.
Without doubt the 1970s pattern of giving each Chairman a 3–4 year term acted as a break on change. One executive director remarked:
If you have a Chairman who has a 3-year stint in office, the first year he's not going to lash about him too much because he wants to establish himself. The second year is a year when he can lash about, but the third year he's already saying. “I don't want to prejudice the position of my successor”, and guys on the board are not wanting to take big risks because there's always one or two competing to be the next Chairman. So if you analyse the thing you find that you only have one year in three – rather like elephants – when you can mate and make it happen.
Division chairman who became executive directors in the 1970s talked of entry onto the main board as “a numbing experience after being a chief executive”; another said “it was the nearest thing to Devil's Island I'd known, boredom not brutality . . . Ritual dancing time and time again, failure to take the decision, walking away from decisions. Continual frustration through the consensus board where 1 or 2 strong and opinionated voices could stop the whole thing stone dead.” Overlaid on top of this was the two-tier system of having a Chairman and three or four deputy chairmen acting as an inner cabinet in relation to the remaining executive directors.
We had a two-tier system of a Chairman and three deputy chairmen, which wasn't clear, and I felt that well you can't be let out on your own yet, and your instinct was to go on and continue doing a division chairman's job, but this just drives the layer below you potty.
This tendency for executive directors to continue to try and act as super operators alongside the operating units caused frustration and defensiveness with the chief executives of those units. But more importantly the policy groups system and ICI's top-level obsession with capital expenditure and cash management meant that the board became more and more involved with monitoring the operating units and capital expenditure decision-making, and less and less with the strategic direction of the ICI Group. One executive director summed up the problem in these terms:
There were two obsessions, one the obsession with fixed capital, and the other – and by obsession I mean the thing the mind is always on, the other was a fear of running into another cash crisis like the one in 1966. There was an enormous cultural force pressing people's minds onto fixed capital and cash management. Anything very quickly boiled back again to the capital programme and what are we going to do in 6 months hence. And when you'd had that capital expenditure, the 6 months after that. The key constraint was how much money would it be prudent to spend in the ensuing 12 months. This was something the Treasurers Department and Planning Department worked on quite closely, with the Finance Director putting in rules of prudence and the Treasurers and Planning Departments using that to make recommendations on the total size of the fixed capital programme.
In this atmosphere the planning department worked on the annual cycles of finance and capital and helped create mechanisms such as the business ranking system and strategic business sectors to allow the board to distinguish between the operating units more or less deserving of additional capital. Capital in a world full of technologists and powerful production people became “a virility symbol” and division chairmen and policy group directors measured one another in their success in acquiring fixed assets. Enormous “sectoral pressure” was put on the board by policy group directors pressing for their territorial or product area. Given the consensus style of the board this led to a lot of “I’ll support you in this proposal if you support me in that one”. An executive director explained how the drive for board consensus managed to ally itself with the sectoral pressure coming onto the board from the policy group system and the policy group directors:
Those that got to the top in the divisions and came onto the main board were very clear that fracturing in a division was highly undesirable. They were equally strong-minded people who were not going to be done down. So you had to have a situation where strong–minded people wouldn't be done down and be no fracturing, and this produces a tremendously strong force for consensus. Not because people tremendously want consensus but because anything else is unthinkable.
This “smoothing rather than problem-solving culture” eventually led to some inadequate selection of capital and left around an undue capital burden in some very embarrassing places. More significantly perhaps, the obsessions of capital and cash meant that “the concept of explicit longer-term strategies in which individual capital expenditures were steps, really was absent”.
The Millbank culture was of course dominated by two features. The Chairmen and executive directors on the 6th floor and the general managers or their equivalents – the 9 barons – with their functional or disciplinary departments. One executive director thought “the whole Millbank thing to be wrong”:
It gives a feeling of comfort, of immutability, permanence, lack of change, hierarchical organisation . . . If I appear in the cafeteria for a pie and a pint it's almost as if space man has appeared . . . On the 6th floor every door is shut. There's the affectation that no-one had their name on the door, you could find people wandering around this bloody floor for hours trying to find somebody!
Another executive director was less concerned with the atmosphere of hierarchy and status in Millbank as with the feelings of lack of identity and purpose in the head office compared with a division:
There’s no identity in this building in the way there is identity in a division from its production operations and its desire to make money out of its products. There is a highly functional organisation in this building, with not much interpenetration between those functions. There isn't the policy, the objectives, the singleness of purpose you have in a division.
Given the functional organisation at Millbank it was natural that people should acquire much of their consistent identity from the floor they were on and the pattern of work that came from their expertise in their function. Millbank with all its highly intelligent functional experts epitomised the intellectual side of ICI's culture. A departmental head in Millbank described what the norms were in the 1970s in these terms:
Be a good chap – say some interesting things in an intellectual way which are stimulating and challenging, but don't expect anything will happen as a result of them. You will get a name for being a bright boy with all sorts of good ideas. But don't push things too far.
The final part of that quote indicates what the central taboo was:
Don’t rock the boat, don't dig too deep, we're pretty well all right thank you, we know most of it. You can dig too deep, too fast. This boat has stood the test of time.
An executive director summarised how the intellectual atmosphere in Millbank, the concern for stability, and the smoothing risk-aversive culture at board level, and amongst the general managers, all contributed to influence the pattern of decision-making at the centre:
The whole physical environment was structured to dealing in a very hygienic way a splendid paper, a limited discussion, perhaps not an entirely open discussion, leading to a decision. There are many topics where perhaps one wants to talk to people for longer, and in more depth.
These then were some of the critical features of the structure and operation of the ICI top governance system in the 1970s. The short tenure, non chief executive chairmen, the two-tier main board, and executive directors with portfolios allocated by product, territory, and function. The consensus style of decision-making on the main board. The cultural obsession with cash management and capital expenditure. The games-playing between the operating units and the main board, and between the policy group directors over the annual capital expenditure allocation process. The power of the policy groups and the influence of the planning and treasurers departments, and the limited time the main board spent formulating macro-plans and strategies on the shape, size, and growth of the group. The compartmentalised and intellectual culture of Millbank. An expectation that with continuing financial success, but not necessarily brilliant financial results, the great ship would continue to plough its way through the waters. The question was could this smoothing rather than problem-solving culture be convinced that issues of organisation and culture could influence business effectiveness, and if that could be accepted at an intellectual level, was it possible for the ICI collegial board system to radically change itself?
THE CONDITION AND USE OF ORGANISATION DEVELOPMENT, 1973–77
The two lowest points in the fortunes of OD at the centre during the 1970s were 1972–74, and 1978 to late 1979. If there was a high point that was from 1975 to 1977. These three time periods correspond with parts of the tenure in office of three different Chairmen of ICI. Sir Jack Callard was Chairman from April 1971 until March 1975, Sir Rowland Wright from April 1975 until March 1978, and Sir Maurice Hodgson from April 1978 until March 1982. Each of the Chairmen took a different view of the necessity of change in the structure and top governance of ICI during their respective periods, and as we shall see each thereby behaved differently toward OD.
In November 1972 Sir Jack Callard had the Board Organisation Committee reconstituted. The last occasion this committee had met was ten years before when the McKinsey study of ICI's structure was in progress. The terms of reference of the 1972 organisation committee were:
To examine the organisation of the board and their method of working and the top management structure of the Group to consider the organisation that would be appropriate having regard to the changes that are expected to take place in the Group's business over the next decade; and to make recommendations.
The committee of a deputy chairman and three executive directors, took evidence from executive and non-executive directors, division chairmen, the heads of some overseas companies, and general managers. Their initial report which contained much criticism of ICI's top structure and the culture surrounding its operation was itself critically received when presented to a meeting of executive directors in July 1973. The revised report dated November 1973 was still revolutionary in character, recommending as it did a more international organisation, greater time to be spent by the executive directors on strategic thinking and worldwide issues, a smaller board, the end of deputy chairmen as a distinct level on the structure, and wider involvement of division chairmen in matters that affected them. At the November meeting the Organisation Committee's report “sank at the first shot”, or as another executive director put it the Organisation Committee “presented the parcel to the board, the latter then unwrapped it, and threw the parcel out of the window”. Both executive directors blamed the failure of this change attempt on individual directors’ fears of this degree of radical change, and the inadequate process adopted by the Committee:
It had done just about everything you could have done to get it wrong. It had taken massive amounts of evidence and so aroused massive expectations. It had barely reported back to its colleagues, and it had not really carried its Chairman with it . . . also it doesn't take a genius to see that a hell of a lot of executive directors would have been out of a job if this change had gone through. So again the working through had not been done.
There was little lobbying, persuasion, or involvement of other people by the Organisation Committee.
Someone close to events at that time also pointed out the poor process plan of the Committee, and the fact that with the financial results as good as they were in 1973, there was no desire to rock the boat that fundamentally.
In that sense the process was wrong – it was a misdiagnosis of the power structure in the board and the readiness for fundamental change. They [the Organisation Committee] were really talking about a culture change. People could give lip service to bits of it, but when it was put back in terms of prove this is better than what we have, why upset the company? There was no external crisis, no business problems, so it was theory against theory.
The above events revealed that Sir Jack Callard and some of his board were not prepared in 1973 to contemplate radical organisational change. With the board split on the issue of change, a compromise emerged which left the top governance of ICI even more complex than it had been before 1972. Now the executive directors “in addition to all the other bloody jobs we already had, we would each take a worldwide product responsibility, and the product area would be enhanced above the territorial areas . . . end of message”. Worse still “we had released expectations around the patch of the most lavish scale . . . So when this mouse was produced the main board lost credibility massively.” It was in the context of the immediate history of the Board Organisation Committee's failure, that in 1974 John Harvey-Jones and Stewart Dudley began to think through an alternative process for influencing change amongst the top structure of ICI.
The precarious state of OD after WSA and SDP
Reference was made at the end of Chapter 4 to the precarious state OD as an activity was in, once by 1972, the major central change programmes of WSA and SDP had been implemented. WSA and SDP had projected a vision of a future dimension to the company which many managers at Millbank and in the divisions did not share. Talk about more open systems, shared responsibility, more participative management styles, job enrichment, and other fashionable phrases of the late 1960s had been difficult for managers to handle. Those managers felt concerned about losing control of matters for which they felt accountable, and were in no way sure that their bosses were sharing responsibility for any experimental changes made. The fact also that WSA and SDP had been pushed so zealously and determinedly from the centre, and MUPS/WSA had created so much local industrial relations strife, meant that there was widespread scepticism of such “threatening irrelevancies”.
OD as the tool used to implement WSA and SDP was guilty by association. By 1972 OD had acquired two negative aspects to its image. The first was it was seen as a manipulative tool for the ICI power system, and particularly for the personnel function. The second was its close association with behaviourism and psychology, and its consequent over-clinical image. Faced with the bad financial results of 1970, 1971, and 1972 there was an emerging “revulsion to behavioural training . . . there was a feeling that that's not what it's all about – what about productivity, and the business, and getting the job done, was the call”.
Stewart Dudley recalled that the behavioural training of the late 1960s and early 1970s “had produced increased awareness and understanding, but not organisational change. We knew that. The harder you pushed on that the harder people saw the psychological couch stuff, and if you went down that route the likelihood of political rejection was high.”
With Tom Evans now working for another company, and the two other members of the central OD group assigned to other duties, by late 1972 Dudley was the sole survivor of the central OD resources. He had no intention of setting himself up for political rejection, although there was every danger that OD as an activity might disappear altogether. Dudley kept his head down for a time, or as he put it “discarded a semi-confronting position opposite management to a smoothing style . . . we were thinking all our work will be wiped out, we'll all go down the hill, it will all be forgotten.” Apart from keeping a low profile, Dudley did a number of other things to stabilise his position. He continued to try and maintain his distance and independence from George Bridge and the Central Personnel Department, carried on working in the divisions on workshop and team-building activities with works managers, and in the light of the harsher business climate “realised we have to pick up problems managers were worried about – make ourselves relevant to managers”.
Dudley was not invited to take any part in the Board Organisation Committee's work of 1972 and 1973. Quite a considerable amount of staff work came out of the Organisation Committee but it was all handled by a senior consultant from the company Management Services Department who specialised in organisational analysis work, but had not been tarred with the OD brush.
Given the inertia in the ICI system, and in the absence at that time of any hunt to reduce numbers, Dudley would probably have carried on as the central focus for company OD for a number of years. He was saved from this fate as a passive central expert by the arrival on the main board in April 1973 of John Harvey-Jones.
Harvey-Jones is a good example of an individual who exemplifies the institutionalisation of OD. He was first introduced to OD while working in a division. George Bridge introduced him to Ron Mercer and helped persuade him to go on an American T-group. Harvey-Jones increasingly adopted behavioural science first in trying to get MUPS/WSA in at the difficult Wilton site and then in redesigning the structure of his division. He set up the Petrochemicals Division OD unit and used Ron Mercer as an external consultant. There is no doubt Harvey-Jones was an OD convert although he was careful to maintain some distance from the more extreme psychological or behavioural aspects of OD which were likely to arouse most emotional opposition. He was careful too that his presentation of self stressed his successful business image.
Harvey-Jones’s arrival on the main board meant that in terms of a sponsor for OD, George Bridge was replaced – and at a higher level – even before Bridge left ICI in 1974. Meanwhile Ron Mercer had slowly been building up his network and credibility throughout the ICI organisation. By 1973 Mercer had worked for varying periods of time with the boards of Agricultural, Petrochemicals, Plant Protection and Organics Divisions. He had also had regular contact with the general managers of Personnel and Research and Development, and had limited contact with Rowland, later Sir Rowland Wright who in the early 1970s was the main board director responsible for personnel matters. A close observer of the OD scene at that time described how Dudley and Mercer worked together to maintain both their positions. Eventually in 1974 the availability of the Dudley–Mercer knowledge and skills, and Harvey-Jones’s sponsorship and desire for change produced an opening:
After Agricultural Division I observed Mercer moving along the system like a puppet with Stewart as the puppeteer. Trying here, trying there, being accepted here. I don't think he was ever rejected, but he was accepted to different degrees. I think I saw him, and indeed Stewart, having at least an implicit aim of getting at the top, not to the top, and I suppose it was 1974–75 when they made a break through at board level.
OPENING UP ICI TO STRATEGIC CHANGE: THE 1974–77 ATTEMPTS
Before Harvey-Jones formally became an executive director in April 1973, he was asked to join the Board Organisation Committee which had been set up in November 1972. The failure of that Committee to influence the board did not deter him from seeking what he felt were appropriate top level organisation changes. Interviewed for the first time in this study in 1976, Harvey-Jones described his change philosophy on entering the board in these terms:
In my view, the ways in which we have tried to change our organisation in the past have been wrong – because the approach has been to wait until some bit is evidently hurting and then to move in on that bit. . . It then takes quite a while for that change to become effective. If as is usually the case, you are trying to change attitudes you are in for a 4 or 5 year haul – you're too bloody late, you are dealing with the symptoms of the last war . . . so I see my role, since I became Organisation Director, as being to stop trying to frig around with bits of the company and really concentrate on getting some major changes in the board . . . I believe we need to:
(a) try and read the environment about 5 years ahead, and
(b) try to aim our objectives 5 years ahead and only then to start intervening organisationally.
In the meantime you have to make some interventions . . . but you have to make sure that these changes will be reinforcing to the big changes you are trying to aim for . . . so the main initiative has been and still is to try and make the board change.
But tactically how was he to achieve that objective? Clearly with the Board Organisation Committee of 1973 now stone dead, he realised he would have to wait until the encumbent Chairman retired, seek in the meantime to plan to influence the incoming Chairman, and to use his board responsibility as Organisation and Services Director “to legitimately roam all over the place . . . in a fairly structured way in order to get some of the real dissatisfactions of ordinary guys with the performance of the board – recognised”. Harvey-Jones was in a dilemma from the beginning whether it would be politic to publicly use OD help, and yet he could see from his experience on the Board Organisation Committee that some “process help” would be necessary to move the board forward. Somehow or other Harvey-Jones had in the context of his board colleagues’ resentment about force feeding of T-groups, and the “long-haired kooks” behavioural image of OD, to “avoid picking up total responsibility for OD – because this would remove my legitimacy as a director”, but at the same time “call on the mud-on-the-boots, operating guy type of OD help that Stewart Dudley and Tom James might offer”. The way Harvey-Jones handled this was to try and use OD help quietly, and selectively, and that meant Dudley, James, or Mercer, and as he put it counter that by “never missing a chance to make the point that I'm basically an operator”.
In fact, during late 1973 and on into 1974 Harvey-Jones encouraged a number of things to happen, some of which were conventional moves to create change, and others were decidedly counter-cultural. He set up a room on the director's floor at Millbank where “anybody could put up a chart to bring the bad news to the attention of the board without having to stand up and say boo! . . . I got a number of studies done of views of where the board was going . . . and I started a real effort to try and get the staff in Millbank to operate better and again put pressure on the board”.
Away from Millbank, Harvey-Jones rescued Tom James from the fast-declining Petrochemicals Division OD unit and placed him into ICI's Central Management Services (CMS) Department in order to develop in CMS “a greater sensitivity to change”. More significantly perhaps in terms of the long-term structural development of ICI, Harvey-Jones was able to use his role as Board Liaison Director for Petrochemicals Division to set up the Petrochemicals Product Directors Advisory Committee. This was the first mechanism to pull together all the chairmen of divisions connected with Petrochemicals, and the first tangible move on the chess board towards creating a heavy chemicals business organisation in the UK.
While all of the above moves were being made, Harvey-Jones and Stewart Dudley began to meet on a three-weekly basis, first of all to share views about the organisational problems ICI had at that time, and then “to prepare a strategy for opening up a discussion with the main board” about those problems. The essence of their strategy was not to try and influence the outgoing chairman Sir Jack Callard, who was due to go in March 1975, but to try and influence the next Chairman, who they expected to be Rowland Wright. Dudley wrote a paper called “A look at ICI in 1974”, and this was to be used as the vehicle to draw the board into a serious discussion about organisation matters. Dudley takes up the story:
We understood Rowland Wright's appointment would be announced round about 26 September 1974. Our plan was to influence a group of directors by going to them individually with the “ICI in 1974” note, rewriting it if they didn't agree with it, but slowly building up a note that was acceptable to a critical mass of directors on an individual level. We then planned to give that note to Rowland Wright immediately after his appointment, but before he formally became Chairman in April 1975. We wanted to try and capture him in the period between knowing he was going to be Chairman, but not actually taking the job, in that pause period. Then we hoped he would pick up and validate the things that were being said to him.
Dudley’s handwritten notes of 1974 outlining the above strategy vouch for the accuracy of the interview account. The detail of those handwritten notes, including which director was to be approached first, and who was to be approached next, and by when, indicates the kind of OD help offered in the highly personal and political environment in and around the main board. What was to happen next threw all their rationally conceived plans to the wind, and as a result opened up the ICI main board a good deal more quickly than Harvey-Jones and Dudley had in mind. The following events nicely characterise the role that chance, opportunism, and environmental preparedness can play in hastening processes of change.
The secretarial error
Part of the above plan had been for Dudley to send copies of “A Look at ICI in 1974” to Harvey-Jones, in order that Harvey-Jones could distribute them to each of his board colleagues as and when he felt appropriate. Dudley takes up the story:
These copies were sent to Harvey-Jones’s secretary on a Friday morning when he was away from the office, and as I was going on a fortnight's leave. So there was no chance for the secretary, who I believed had been briefed by John about what was happening, and actually hadn't been, to check with me about what was going on. It so happened that there was a Monday morning director's meeting with an agenda item “Review Company Progress”. Harvey-Jones’s secretary thought the “ICI in 1974” note was suitable for that item and so she circulated it to every member of the board including the Chairman.
Harvey-Jones’s report of what happened next “was that this produced the most fantastic explosion – absolutely marvellous. The Chairman sent for me white with rage, lost his temper, and commanded that I withdrew it, and demanded I fire Stewart. I said ‘no way, poor devil. I've asked him to do this. If you don't like it fire me.’ That was a real breakthrough in its own way but it hadn't been designed. It meant we were able to get Ron Mercer to the Chairman, it also meant we were able to raise the pain level on the board so that when Rowland Wright became Chairman he did his trips around the Company to talk to people at various levels, and this again increased the pain level and began to open up the possibility of change.”
Evidence that Sir Jack Callard received Dudley's note with shock and bewilderment can be seen from his memorandum of 6 August 1974 to Harvey-Jones. “Much of what is said in it is contrary to the impression I have gained travelling at home and abroad amongst the ICI Organisation . . . Are you, or whoever, trying to tell me that my 39 years has been totally wasted? Are you seeking to destroy my faith? Or are you making a bid for a new era launched by enlightened men?”
Harvey-Jones tried to explain the error to his colleagues and recover as many of the papers as possible. On 6 August he wrote to Dudley, who was by this time holidaying, “you beastly horrible old Dudley! This is the best I can do to recover the dropped clanger. Please think quickly what I do now besides shoot myself.”
When Sir Jack Callard returned from vacation he was still sceptical of the information and views supplied by Harvey-Jones and Dudley but remarked was there not an outsider who occasionally saw individual board members, and would he not be a more reliable source of data about the company? This conjecture opened up the first opportunity for Ron Mercer to talk directly with the Chairman. Mercer was very nervous going into the meeting feeling that “because of the way the meeting, and I had been set up, it was going to have an impact. I felt pleased that an outside resource was being used to get this information to the Chairman. That was an important step for the organisation. I felt unhappy about what it was going to be like, and felt I might be seeing the last of ICI.”
Mercer described the information he gave to Sir Jack as “very painful”, “very hurtful”. But “although it was hurtful his immediate response was to say this needs to be shared with my colleagues, and he asked me to write a note which he distributed to the board”.
Mercer’s note of September 1974 contained many of the same points as the “ICI in 1974” paper but given the immediate history was written a good deal more diplomatically. After noting that his remarks about “issues and improvement opportunities in organisation climate and communications”, should be read in the context of an organisation whose general “health” is perhaps as good as any organisation in the world, Mercer went on to make the following kinds of observations:
1. Communications between main board and divisions
There were difficulties in this linkage pardy because the main board did not make clear priorities, goals, and plans; partly because the board did not think through issues informally and collectively, and therefore tended to communicate different messages from the centre; and partly because division chairmen were not clear where their responsibilities for a business ended and the main board product director began.
2. Company Chairman: Division Chairmen
There was a tendency for division leadership to play down its role as part of company management, and to increase its identification as division leadership. This meant that the spirit of main board intentions was not being communicated below the top division management.
3. The lost battalions
This was a reference to unrest and moves towards collectivism on the part of junior management staff. This was pardy due to compensation problems – an established annual bonus for staff at this level had recendy been consolidated into a salary increment for one year – and partly due to the fact that junior management in other ways felt “unappreciated, undervalued, helpless to influence their fate”.
Mercer used his note to suggest a number of mechanisms to help alleviate some of the above difficulties, and also indicated ICI as a group could benefit from organisational mechanisms and skill development in handling negative information and conflict management generally.
Mercer remarked when he met the board as a group “There were various degrees of belief and disbelief, but this helped to motivate what Rowland Wright was going to do when he took over.” The minutes of the meeting ended, however, on a none too optimistic note:
An improvement in the general area covered by the discussion was most likely to be achieved by a fairly low - profile approach from the top, aiming at gradual rather than sudden or dramatic change.
There had been some movement, at least in legitimising changes in organisation and top management behaviour as a topic for board discussion, even also in opening the way for Mercer to work with the board in the future, but would any action follow this opening up?
The follow - up: some success but continuing inertia
Through the various prepared statements and informal face-to-face contact the message that Harvey-Jones and Dudley had been trying to get through to the board was that there needed to be some reform of the top structure and governance systems of ICI to cope with the increasingly complex business, economic, and political environment the company was facing in the 1970s. ICI had had a tendency to respond slowly to environmental change and when it did the response was to create further internal complexity to try and match the environmental complexity; the result was a further reduction in the organisation's capacity to adapt to change.
The early 1970s had seen a more confident use of grass-roots trade union power. The miners’ strike of February 1974 produced an election also in February 1974, and the fall of the Heath Conservative government. The miners were awarded a 25% wage increase by the incoming Labour government who promptly abandoned the Stage 3 incomes policy, and abolished the Pay Board. Inflation started to take off with a vengeance, fuelled not only by large rises in world commodity prices, and particularly oil, but also by large wage increases. The average percentage increase in retail prices from 1973 to 1974 was 16.6%, and the equivalent figure for 1974 to 1975 was 24.3%. Meanwhile the percentage change in wage rates (manual workers all industries) from 1973 to 1974 was 19.8%, and from 1974 to 1975 it was a staggering 29.5%. In amongst these industrial and economic changes the 1970s also saw the increasing growth of white-collar unionisation, and through the Bullock Committee, the beginnings of an attempt to create a national pattern of industrial democracy.
The above environmental trends placed an added burden on the practice of personnel matters in ICI, and increasingly drew the main board into handling UK personnel matters. One consequence of this was the creation in 1973 of the Board Personnel Committee. The existence of the Board Personnel Committee, and in George Bridge a general manager of personnel who believed in providing strong leadership and influence added to the post/WSA/SDP stereotype of personnel as a powerful centrist function which drove policy on to the company. When in 1973 and 1974 ICI attracted a lot of unfavourable publicity in the UK press over their refusal to grant negotiating rights to white-collar unions, and then they compounded those difficulties amongst the “lost battalions” by consolidating a white-collar bonus scheme into salary arrangements, anxiety increased in the divisions both about the activities of Central Personnel Department and the separation of personnel matters from business priorities and concerns.
Out of these increasing concerns about the formulation and implementation of personnel policy two responses began to emerge in the company. One was a move from the Company Personnel Director to meet regularly with the Divisional Personnel Directors as a group. This in turn encouraged a system of regular meetings between senior personnel staff from Millbank's Central Personnel Department, and the Divisional Personnel Managers.
Rather more worrying, however, in terms of the operation of the top governance system of the company, was the formation of an informal meeting of division chairmen, explicitly in its earliest days as a defensive manoeuvre against centrally created personnel policies and practices. This meeting of division chairmen had no position in the scheme of organisation, and was not recognised by the main board.
During 1974 and 1975 the division chairmen, at that time led by the Chairman of Mond, Tony Woodburn, began to examine their role and effectiveness in parallel and initially separate from the stirrings about role and effectiveness carried on by the main board. The division chairmen also utilised OD help; this time Tom James was called on to play the role of process planner, counsellor, and process helper during a series of meetings where that group examined their purpose and impact.
In diagnosing the quality of their existing meetings, the division chairmen noted they were often short term and reactive in the negative sense. They vented frustrations but no considered action emerged. They wanted to be helpful and influential in the company but were beginning to be seen by Millbank as a threatening combine, “a shop stewards committee”, who would attempt to resist change which came particularly from the functional directors and general managers. They accepted the ultimate authority of the board but wished for “interpenetration” with the board “so that decisions to change and thereby improve the Company had our commitment”.
The above developments amongst the division chairmen no doubt added to the pressure for change amongst the main board stimulated by Harvey-Jones, Mercer, and Dudley, and now given fresh impetus with the impending elevation of Rowland Wright to Chairman. A month before he formally became Chairman Wright agreed to take the board away for two days for an informal meeting to discuss the top structure and operation of the Group. This was a risky venture for any new Chairman, quite counter-cultural at that time, and Wright was understandably anxious that “it would be very easy for the board to split”. Dudley takes up the story:
Rowland was very concerned about the meeting and used Mercer to produce a process plan for the meeting in which they agreed some syndicate work on various items, and an initial process plan.
Dudley also became involved and produced a document called “February 19–20 Meeting: A Guess”, which was “basically aimed at giving the Chairman a feel for what might happen based on some knowledge of group working, leading to what might be the identification of areas of further work, and suggesting how that might be handled”. The outcome of this meeting was the setting up of three sub-groups involving all the executive directors and chaired by a deputy chairman, each to work on a different aspect of organisation change. A process was set in train whereby each group was asked to feed back their thinking into the Chairman's weekly meeting so as to keep their colleagues on board. By mid-1975 in Dudley's words:
We then had a situation where the division chairmen were beginning to stir, and wanting to take the bit between their teeth, and they had Tom James working as a consultant to them. The board was also stirring, Rowland was leading them towards a meeting with the division chairmen which would have led to a top-down initiative. We now had the possibility of a clash between a bottom-up, and a top-down initiative. The need was to bring them together.
In this period Rowland Wright created what became known as the Board Resource Group, an informal grouping of Harvey-Jones and another executive director, plus Mercer and Dudley. The function this group performed was to test out and plan in detail meetings of the main board and meetings of the main board and the division chairmen, and “to provide personal support to the Chairman when he is faced with the personal risk of validating new behaviour and actions”. After much careful planning, space was eventually created at one of the quarterly meetings when the executive directors reported on the state of the business to the division chairmen, for both parties to have an extended and informal discussion about the relationship between them. In Wright's summing up of the meeting he began by saying “meeting in this way was of itself significant . . . it should be seen as a start to the process of reviewing, clarifying and, where appropriate, modifying the ways in which directors and division chairmen interact on each other”. Wright noted that the directors would continue to spend time reviewing their own methods of working . . . but no organisational change would, however, be introduced without full consultation with division chairmen. He further noted that the division chairmen's meeting had an important consultative/advisory role, particularly in regard to UK corporate matters, and that there was a greater need for directors to clarify and better communicate corporate objectives. Interestingly he ended by indicating that the success of division chairmen and executive directors in working together depended not only on organisation but also on attitudes, and he had been encouraged and impressed by the way in which attitudes had developed during the course of the debate and discussion.
Important as the above meeting of executive directors and division chairmen was, it was not for another 16 months, until January 1977, that its successor, the Chairman's Group Conference, became institutionalised into the ICI system of top-level governance. Indeed for the first time ever in January 1977 the executive directors met together with the division chairmen, the chief executives of the major overseas subsidiaries, and the general managers to discuss at length matters of substance about the policy, aims, and organisation of the Group. The creation of the mechanism of the Chairman's Group Conference was one of the key steps forward in the organisation change area over the period 1974–77.
The first Chairman's Group Conference was held early in 1977 because of the output appearing from a series of executive director task groups during 1976. These task groups had agonised throughout 1976 about the by now familiar issues of the board:
– not spending sufficient time discussing key strategic issues such as the long-term business strategy and shape of the group;
– not being able to have deep, objective discussions on key subjects, and then come to crisp decisions;
– not being able to handle conflicts which came out of the product, territory, function matrix;
– spending too much time managing, not enough time directing;
– and spending too much time on UK affairs to the detriment of ICI's interests as an international operation
These issues, although never aired more comprehensively and openly than in 1976, were not resolved. Again they were left on the table. What did come out of this period of work, however, was a clear statement of the ICI Group's objectives. These were tested out at the January 1977 Chairman's Group Conference, and formally adopted by the main board in March 1977. This in itself was a step forward, but would action now follow on productivity improvement in the UK, the implementation of international strategies for major businesses, and lead to the thrust of new investment towards the markets of Western Europe, including the UK, and North America? Would these statements about a greater requirement for strategic thrust and central direction be turned into action? Would the cultural problems be attacked? Those aspects of management style which impaired ICI's performance – resistance to change, excessive consultation, insular modes of thought and behaviour, and over-concern with the immediate problem, at the expense of the longer term, these were all recognised again but would and could they be picked up and dealt with? For all the effort, the right combination of political will and environmental pressures had not yet assembled themselves in 1977, and the changes which had appeared by then could still be described as cosmetic and not yet fundamental.
By 1977 the composition of the main board was beginning to change. As Mercer put it “people were coming onto the board, who were, or came to be known as ‘for change”‘. The “young turks” were by no means uniform in their perspective or priorities for change. One stream of new thinking emphasised the importance of marketing and commercial skills alongside worldwide business strategies, as against the technical skills and preoccupations of older generations of ICI management. Another stream of new thinking personified by Harvey-Jones and Woodburn recognised the importance of international commercial acumen, saw that changes in the commercial sphere would also require a rethinking of the organisation, the systems, and the culture of ICI, and gave some place to OD thinking and methods as the way of pushing those changes forward. But for those wishing for change the pace was still too slow. One of the OD consultants remarked:
Rowland Wright was a very fine help-it-happen person but not a make-it-happen person. Therefore he created an environment in which all sorts of ideas could fly. He also created an environment where communication was open . . . But the board objectives of 1977 again created big expectations of the centre, and board committees fussed about all over the place but there wasn't much change. There was a net plus under Sir Rowland Wright but nothing like a clear progression forward.
A similar message, or progress report on change, up to 1978 was communicated by Harvey-Jones and Woodburn. Tony Woodburn described Sir Rowland Wright's role as “permissive and encouraging, but it was you do it and I'll allow you, it wasn't a leadership role”. Harvey-Jones’s was that Rowland was a believer in evolutionary change, and he found OD methods useful in that respect, so I was allowed to continue to operate . . . I got hugged to death, you know, “what a splendid idea”, but at the end of the day with great skill emasculated the major changes . . . Out of all those board studies at that time something moved a bit but the trouble is you couldn't move the ICI system by moving a bit.
STRATEGIC CHANGE AND THE CONDITION AND USE OF ORGANISATION
DEVELOPMENT, 1978–83
The development of OD by 1978
The above account of the role played by the executive directors Harvey-Jones and Woodburn, and the three OD consultants, Dudley, Mercer and James in trying to create structural and stylistic changes in the upper reaches of ICI, is not, of course, a complete picture of the evolution of central OD in ICI up until 1978. Before moving on to consider what happened to OD in the post-1978 period it is important to reveal something of the wider set of activities carried out by the central OD resources in the period 1974–78, the strategy used to manage and project OD out into the divisions, and the attitudes and quality of sponsorship available to OD by 1978.
In terms of personalities the central OD resources in the mid-1970s were a loosely composed group of three internal consultants, and the external consultant Ron Mercer. The three internals were Stewart Dudley based in the Central Personnel Department in Millbank, Tom James based in ICI's Central Management Services Department in Wilmslow, Cheshire, and Rory McBride who was recruited from Organics Division to work with Dudley in late 1974. In addition in 1973 a head office OD group was created with their patch being largely the Millbank departments.
By the mid-1970s Stewart Dudley had created for himself the role of professional leader for OD people throughout ICI. After WSA and SDP he began to consolidate the survivors from the group of internal consultants who had been trained at the Eastbourne events into an informal company network of OD resources. This network would meet three times a year to share experiences, talk strategy, and present and listen to new ideas. As one person put it, Stewart Dudley was “Dean of Faculty of the ICI OD network, he represented the most experienced and professional guy in the trade”. There is no doubt that Stewart Dudley represented and projected the skills and knowledge of OD throughout most of ICI during the 1970s. He helped to build the OD network, linked on an ad hoc basis with OD resources based in the divisions, worked as a consultant at the works manager and division board level in a number of divisions, ran company-wide workshops on themes relevant to managers and internal consultants, and as we have seen helped to draw external consultants into the company to work where he saw opportunities and openings. He also was part of the set of resources Harvey-Jones drew on to plan and influence changes in the top governance of ICI. As one of the external consultants clearly stated:
The moving force behind the development of OD in ICI is Stewart Dudley . . . The story of the growth of OD in ICI is the story of his personal growth, in large part. . . Stewart’s just a real good guy at seeing opportunities, at putting people in touch with resources, at doing work himself as an external consultant, at knowing when to put on a training programme, at having the right blend between confrontation and not offending people . . . It would be difficult to explain what has happened if he wasn't around.
If Dudley's presence in Millbank was important as a source of continuity for OD, of equal and if not greater importance was Ron Mercer's continuing linkage into the main board. Throughout most of the 1970s and as I write now in 1983, Ron Mercer comes over from the United States five times a year, for 4 days on each visit to link into and influence the concerns and actions of the top people in the company. His activities in the 1970s were various. Sometimes acting as a counsellor to individual directors, working as a process consultant in the design and implementation of directors’ off-site meetings, acting as a communications conduit in the often highly personalised and political world around the main board, and providing ideas and experiences from the academic world and from other firms’ experience, to help solve particular problems. Mercer summed up his role and contribution in these terms:
I visualise myself as a family doctor. It's not something you could bring in a replacement tomorrow. It's a relatively unique role. I'm a living data collection and feedback mechanism, helping to look at symptoms and what to do about them.
John Harvey-Jones took the view that “without Ron Mercer ICI wouldn't have got interested in OD at all. I think he has particular skills which are very precise and which are very attractive to the ICI mentality.” Harvey-Jones went on to emphasise the reinforcing and legitimating effect of Mercer's continuing access to top people in ICI:
Of course the other thing is that he moves easily in the corridors of power, and its been known for a long time that he has moved in the corridors of power. So he's respectable. Any division board is secure in the knowledge that Ron pads along here . . . He’s made the whole thing respectable, his knowledge of the ICI ethos, the ICI background has again been useful because he's been able to place things into an ICI perspective.
Dudley and Mercer were an effective team. Mercer could operate at a level in the ICI power system, and on problems it would have been impossible for an internal consultant to work on. Mercer's presence at the top provided some level of spin-off for the continuing use of OD people in other parts of the company. Dudley carefully managed Mercer's continuing presence in the company. Prior to one of Mercer's visits, Dudley would prepare a list of directors and general managers for Mercer to see. This meant both that Mercer had a set of clients waiting for him when he arrived and that “I’m not all billed to one person, so it's not a big deal financially for any one director or department”. Dudley's colleague Rory McBride argued that Dudley's skill in managing the external consultant Mercer was important:
Something Stewart Dudley has done which I haven't seen done anywhere else – managing an external consultant. My hypothesis would be that Dudley keeps Mercer in the system not any main board figure. It means that Mercer hasn't had to run around and perform all the time in the way that a lot of these external consultants have to perform some act of great genius in order that the Chairman will invite them back again.
In effect Dudley and Mercer helped to set up some of the conditions for their mutual survival. Tom James, perceptive as ever, noted:
They have helped each other. I suddenly realise Stewart probably would not have survived without Mercer, and Mercer would certainly not have survived without Stewart. But had not Mercer been there he would have been invented. Like Stewart would have survived because of somebody else.
Rory McBride, not being part of the Dudley–Mercer duo, did not achieve their level of acceptability in the system. McBride took over from Dudley the stimulation and servicing of the OD network, ran central workshops on the themes of organisation structure, productivity, and conflict management, had a certain number of clients out in the divisions, and wrote many a think-piece paper to try and influence policy. But he had neither Mercer's top connections, nor Dudley's informal leadership position of OD, and Dudley's work management background, and therefore McBride had a more difficult time sustaining his credibility. McBride also ran into a problem finding and keeping a patron on the main board:
If I have a patron, it's Hogarth. The trouble is that means I can't relate too well to some others on the board who are competing with him for the Chairman's job. But then you have to put your money on one horse and hope!
McBride was unlucky his horse lost, and a lot of his political capital went with his patron's defeat. Tom James, however, picked a winner in Harvey-Jones. With the demise of the Petrochemicals Division OD unit on Harvey-Jones’s departure for the main board, James was steered by Harvey-Jones into a managerial role in the Central Management Services Department, and then involved by Harvey-Jones in a whole series of important change processes right up to and including the Petrochemicals and Plastics Division merger in 1981. James had had a work study and management services background, and had grafted onto those structured modes of problem-solving an appreciation and skill in using OD ideas and processes. His rather more planned and orderly approach to work meant that Harvey-Jones was generally predisposed to use James rather than Dudley:
I find Tom a much easier man to work with than Stewart because Tom can work his way through a plan. You can agree an objective with Tom, and Tom will then produce for you an intelligible plan both in process and also in impact terms which you can then see applying to the business. It's very difficult to get that degree of clarity out of Stewart.
If the above account of the evolution of the central OD resources seems like a catalogue of the activities and credibility of a number of personalities, that indeed was what OD amounted to by the mid to late 1970s. There were the few individuals who for highly specific and personal reasons had a personal ticket to practise their trade; the rest had fallen by the wayside. OD both at the centre and in the divisions was probably at its lowest ebb ever in late 1977 and 1978. A close observer of the OD scene interviewed in 1980 had this to say about the state of OD in the late 1970s:
There isn't an OD function, it is an informal association of people interested in creating change. Their main need now [in 1980] is some support, encouragement and stimulation, and a feeling that they are not being plowed into the ground. 18 months ago a lot of OD people around the company were getting disheartened. They could take the view that this was something the Company wasn't interested in at all, it was something of a lost cause.
Of course for much of the 1970s OD didn't have a cause, at least not in the sense of the values of individual worth, participative styles of management, and behavioural skills emphasising team work, openness and trust that had been characteristic of the late 1960s and 1970s. There had been no attempt to resurrect a central initiative to replace WSA/SDP, and the view taken by Dudley and James was that “organisational change should occur as a result of an external trigger being appreciated and something being done rather than as a result of philosophical debate”.
Dudley and James’ statement about the absence of philosophical debate was, of course, not quite accurate. One of the reasons for the limited progress of the Harvey-Jones initiatives to change the top governance of ICI in the period 1974–77 was that in the absence of an external trigger of sufficiently dramatic proportions it became a tussle between a progressive philosophy and an older pattern, and the latter had no difficulty in prevailing. But there was a difference in the mid and late 1970s in the way the central OD resources related to and represented new ideas about organisation and behaviour. Compared with the WSA/SDP period the OD resources were no longer the standard-bearers for the new world. Behaviourism was no longer being propagated through ideas about management style and team-building as an end in itself, but was now clearly being justified as a mechanism to meet business objectives. But even the behavioural concepts were taking a back seat, and Dudley and the others were more likely to describe themselves as “change resources”, or as “resources for strategy and planning at the centre” rather than as OD specialists. When they could Dudley, Mercer, and James were now openly colluding with the power figures in ICI who wanted fundamental structural and cultural change. Dudley summarised his stance in these terms:
We only join the early adopters of ideas we don't try and initiate them from new. We try and link with management, the power system to pick up and build on. We see our role as stimulating thinking without losing the move into action, if we can manage that.
This retreat from proclaiming the values of the “behavioural sixties” and colluding with parts of the power system to create change was in Dudley's eyes also associated with a very low-key approach to selling the activity of OD in the company. Dudley avoided the term or implication that in any sense he was managing a function, which might have required him at various times to publicly defend that function, define for it a set of objectives, and assess the extent to which those objectives had been achieved. Dudley persisted with the model of organisation that implied “holding a network together of people in the divisions and abroad, based on competence”. Dudley's implicit acceptance of the position of Dean of Faculty of the OD network, and his avoidance of the position as manager of the function or activity, together with his idiosyncratic style of behaviour, may have contributed both to his personal survival and therefore the continuing presence of a high-level change resource, at the centre, but caused no small confusion and agonising for those around him. John Harvey-Jones, and another director, David Heaton, to whom Dudley reported, tried for a good deal of the 1970s to encourage Stewart to prioritise his objectives, and in various other ways “to actually organise himself into a specific role”.
It’s neither Stewart's wish nor style to do that. So he acts as a free spirit, a very useful free spirit and ICI can afford him, and thank God we can . . . About 3 years ago [in 1977] David and I tried to get Stewart to produce an OD plan but Stewart is not organised in that sort of way . . . We have failed to get an agreed target with him . . . Stewart symbolises the best and the worst of OD in a way he symbolises all the skills, and yet he symbolises an impatience to me that with all that degree of skill the results are so much less than the need.
Others also described Dudley's mode of working as “planned opportunism”, and argued had they had the kind of personal credibility Dudley had they would have “tried to get the whole service [of OD] used more strategically . . . I was left to develop my own strategy in my own patch – there was a real absence of a company strategy, to create space for OD to operate.” Another OD resource in the Company noted that Stewart “manages well the linking of OD activities he personally observes, but he doesn't have total knowledge of what's going on, and is influenced largely by his own judgment of who is competent and who isn’t”. Dudley was also accused by some of his peers in the Company of not using his access to the power system to help the junior OD man more:
But Stewart has not a bad argument about that which is – the people who need help with their credibility are not the people I want to help. Let them get on with it.
Dudley’s retort to the query why had OD not been functionalised or formalised more was that it had “gone back to my personal beliefs, back tome as a person, it wouldn't have been right for OD, and it would have reduced my space, my freedom of action. I would have been tied into doing things I didn't want to do, like managing, justifying OD in reports, listing clients and activities. This wouldn't have been good for OD.”
Basically, however, as Dudley remarked with no false modesty, “I never, ever as a person admitted that I might not survive in this company, or OD not survive. This was a supreme confidence in my own ability to manage myself, to keep OD going.”
By 1978 a number of trends began to come together to influence the need for management of change skills, the acceptability of OD as an activity, and the personal ticket to practise possessed by Dudley, Mercer, and James. As the business and financial pressures increased on ICI, so the gentle arm-twisting that had come from the centre to improve productivity “6% through volume increase and 4% by employee reductions” was replaced by demands for firm action. Meanwhile “the policy and the posture was for line managers to be the change agents”, and ICI:
Tried hard to have behavioural skills absorbed by line management, and applied by them, as opposed to a need for a clearly identified group of external consultants, be they truly external to the company or external to the unit or division concerned. Obviously that is an incomplete process but you can now identify some managers who have high skills in those areas usually through having worked alongside internal or external consultants through a major change process.
As the Company reward system clearly began to act on evidence of line management success in creating change as a key criterion for promotion, so change management skills and the level of change activity increased. This trend brought out into the open and made explicit feelings latent amongst senior personnel people that “I’ve always had a concept you didn't want your OD resources in specialist people more than you had to. I've always felt OD specialists were valuable, valuable to some people but vulnerable to others. And I've seen too many people come unstuck, have short lives in the Company, because they got too way out . . . now our problem is to build OD knowledge and experience into people doing line jobs.” How this knowledge and skill about the management of change was passed on to managers we will explain in a moment. For the present analysis of the condition of central OD in 1978, the other key factor to note is the appearance in April 1978 of Sir Maurice Hodgson as Chairman of ICI.
Given the worsening business scene in 1978 there was no surprise when that year ICI appointed as its Chairman a man with a reputation as a hard-headed financial businessman. Sir Maurice Hodgson's early interjection, and the exact words he used, vary from source to source, but effectively, “I don't want to hear about organisation, all this Company ever does is talk and work on organisation, let's get on with the business and make some money”, achieved what it was meant to do, dampen philosophical discussions about change in organisation in ICI. In retrospect, of course, there were great changes in manpower and organisation made under Hodgson's leadership. These changes were justified on the pragmatic and business grounds that Hodgson demanded. One of the executive directors characterised Sir Maurice's approach in these words:
The only thing that would convince Maurice about making an organisation change would be – “and we can save 2000 people and £200m, and empty that office block and close that site”. Maurice would go for it then, that's intellectually justified, we'll do it. But if you started talking changing organisation to improve the efficiency of decision making, he'd say we're off with those behavioural chaps – a load of rubbish.
Sir Maurice thereby changed the climate for using OD resources in and around the board, and both Mercer even, and Dudley found themselves relatively speaking out in the cold. Significantly, in April 1978 as Sir Maurice became Chairman, so Harvey-Jones was promoted to be one of ICI's three deputy chairmen. With this appointment there was now the possibility of Harvey-Jones getting the Chairmanship next time around. This fact, together with a move by Sir Maurice to eliminate the organisation portfolio as one of the functional directorships,1 meant that John Harvey-Jones drew back from his previous tendency to sponsor organisation changes through the use of OD consultants, and although “he remained a supporter of OD he was much less proactive as a connection”. One of the senior internal consultants coolly remarked:
When Harvey-Jones became a deputy chairman he dropped out . . . This was a recognition by John that he was an ambitious man and therefore he had to watch his rear, his influence base, his political position in order to work for Chairman. He suddenly realised he had a chance. I regretted him dropping out – you mustn't have any taint of the odd-ball.
Harvey-Jones’s overt withdrawal from public sponsorship of OD resources did not mean, however, that organisation change was no less a possibility. The worsening business results of ICI in the context of a deep economic recession, plus further changes in the composition of the main board in favour of those looking for change, all helped to create the conditions for first the formulation and then the implementation of strategic change. As we shall see, apart from process help in workshops leading to some of the changes in European organisation, and a major role in the educational task of putting together a series of management of change workshops, the company OD resources largely sat on the sidelines watching as the executive directors and Chairman of ICI put together some fundamental changes in manpower, organisation, and then culture. With these changes designed and decided upon, one or two internal and external OD consultants were called in, almost as an afterthought to help with their implementation. Was this to be another rerun of WSA/SDP, with corporate change designed by a small group at the centre – but this time with more far-reaching structural and manpower changes, and then the OD resources that still remained or were deemed to be still credible, being asked to work with divisional management to construct the operational detail of the changes and try to make them happen?
The economic and business environment and strategic change
Basically it took so long [to create the required strategic change] because the company appeared to be doing relatively well, and the company appeared to be doing relatively well because it was relatively efficient in a country the exchange rate of which was being set by the inefficient . . . The people there [in ICI] were not change minded, but basically there wasn't enough dissatisfaction with our performance.
The above quotation by an ICI main board director in 1982 reveals the extent to which he believes environmental pressure was a cause of change in ICI. Certainly one difference between the period between 1972 and 1977 we have just been discussing, and the period between 1978 and 1983 we are just about to discuss, was that pressures in the environment in the earlier period were now to become dramatically worse. As those environmental pressures increased so the internal forces for change in ICI led by Harvey-Jones and others joined with what became a more responsive internal climate, and a whole series of changes followed. Not that those changes in any sense automatically followed the environmental pressure, for, as we shall see, there were still forces of inertia blocking some of the structural and cultural changes being recommended by the change group on the ICI board.
But what were some of the business, economic, and political pressures facing ICI in 1978, and how did those pressures accelerate to produce the bad business results of 1980–82?
ICI was undoubtedly weakened in the 1970s by its dependence on the United Kingdom. Although it had been a strategic objective of ICI from the 1960s to place capital and increase sales in Western Europe, and do likewise in North America in the 1970s, even by 1978 ICI was still very much a UK company. In 1978, for example, over half of group sales and three-quarters of trading profit originated in the UK. The company was headquartered in the UK, it was in 1978 the largest privately owned industrial company in the UK, and it was thus politically important, and in 1978 61% of ICI's total employees were UK-based. The bulk of ICI's assets and employees were therefore based in an economy which was not growing at the rate of, for example, Germany and the United States, but also where by 1980 and 1981 the UK customer base of ICI started to decline dramatically.
In addition the 1970s also saw the beginnings of the end of the major thrust of chemicals substitution for natural products such as wood and paper, and with this the premium of chemical growth over general growth rates was reduced. In the period 1963–72 the ratio of growth in the UK of chemical industry production to general manufacturing production was 2.1 : 1.00; by 1970–75 this had increased to 5.0 : 1.00; and then there was a significant decline in the period 1975–79, to 1.1 : 1.00. Along with many other European chemical companies it took ICI a long time to realise that their industry was fast maturing, and that certainly in the bulk petrochemicals and plastics areas, there was little growth left at all. ICI's capital sanctioning and policy group system turned out some very strange investment decisions in the mid-1970s, so that by 1978 it was clearly evident that ICI's recent investment behaviour and future plans were out of balance with their current and forecast profitability. In 1978 and 1979 ICI had to draw substantially on its liquid resources to meet its planned capital expenditure, and from 1980 onwards capital expenditure was cut dramatically compared with the levels of 1977–79.
With the development of over-capacity in the European fibres, petrochemicals, and plastics industries, and the worsening financial position of those divisions in ICI, it began to become clear in ICI that the “Group had not only to continue to change its territorial shape, and to begin to make greater levels of profitability and market penetration into Europe and North America, but also that it had to change its product profile”. By 1980 a prime objective of ICI was to stop the flow of cash into its heavy chemicals sector at the previous high rates, and first to attempt to increase the profitability of that sector, and then, when that failed, to withdraw under-utilised manufacturing capacity in that sector.
The arrival of the Conservative government on the scene in 1979, pursuing as it did strict monetarist economic policies, meant high interest rates, a recession in industrial production, and mounting unemployment. The further fall in ICI's UK customer base, and worse still the sharply rising value of sterling against the dollar and the Deutschmark, meant cheaper chemical imports from Continental Western Europe and North America, and a trend for UK chemical prices to move out of line with those in Continental Europe.
Another worsening economic indicator for ICI in the 1970s was the high rate of inflation in the UK. In the 1960s the annual rate of inflation in the UK had varied between 1 and 5%, in the 1970s the annual average rate of inflation was 13% – considerably higher than ICI's European and North American competitors. One measure of the effect of ICI's UK base was the impact of high inflation on its annual profits. From the peak of 1974 to the peak of 1979, ICI's historically based pretax profits rose 44% to £560m. However, on a CCA basis adjusted for inflation, ICI's profits have fallen from £415m in 1974 to £366m in 1979 (Kidder, Peabody & Co., 1981). This is the real effect of being based in a country with an inflationary environment.
On top of all the above difficulties there was also the continuing feeling in ICI that “our productivity failed to match that of our major competitors and the extent to which we could now rely on growth to help improve productivity must be in doubt”. One internal estimate of ICI's group overheads in 1978 was that they could be as high as £700m.
Faced with this gathering storm the talk in ICI in 1978 was of the “vital importance of reducing costs”, “of reducing Group overheads”, “of reducing numbers employed beyond the contribution of 2 divisions” (Fibres and Organics). Other measures to improve profitability besides reducing numbers were also discussed. These included performing better in the market place, upgrading the quality of the customer base, and providing better technical service. Other actions considered included reducing the number of layers of management and accepting changes in corporate philosophy which would eliminate or reduce the need for so many checks and counter-checks. Paradoxically, however, all of the above 1978 statements of required change had to be set against Sir Maurice Hodgson's summary of the same 1978 Chairman's Group Conference; where he noted:
Completion of the recent studies on organisation, also initiated by the Chairman [the outgoing Sir Rowland Wright] meant that a period of relative organisational stability now lay ahead.
By 1980, however, the ICI executive directors were acting:
1. To foster reorganisation which will reduce the number of operating units.
2. To work to reduce the number of significant layers in the management hierarchy.
3. To simplify the activities at head office by concentrating on the essential staff support for the board.
4. To encourage operating units to streamline their organisations and simplify their operations, using lower manpower numbers particularly in monthly staff, and weekly staff support services areas.
5. To work to reduce the number of UK sites.
All this was to be done “whilst maintaining the humane values and personnel policies of the company”.
The question and theme was “how can ICI develop a more positive and direct management style and become a slimmer, more effective company?” By 1980 the revolution was about to take place.
The management of change seminars
As we have already discussed, the arrival of Sir Maurice Hodgson as Chairman in April 1978, the promotion of Harvey-Jones to deputy chairman, and the existence of a company personnel director “who doesn't buy OD as a conceptual thing”, significantly changed the climate for using OD resources in and around the main board. Ironically as the need for change increased, and senior executives became more and more involved in creating change, so the central and divisional OD resources found themselves more and more in the background. In this situation, and again using Ron Mercer's conceptual thinking and credibility as an individual with various board members, one or two members of Group Personnel Department2 linked with Mercer to design some management of change seminars. The General Manager of Personnel who claimed responsibility for this initiative (there were two GM's of Personnel at that time), argued that “what I was able to do opposite the board on macro-organisational change was less than we needed to do . . . so I developed the idea of these change seminars as a way of keeping momentum going”.
The General Manager of Personnel saw three objectives for these seminars:
My No. 1 objective was to try and spread around the ownership of OD events at board level now that Harvey-Jones was less proactive as a board connection . . .
The second thing I wanted was to get a much greater understanding of the technology [of change management], and a common language between members of the board, division chairmen, and their boards. It seemed to me if we could get the top 150 people in the UK understanding what technology there was for managing change, and to use a common jargon, we would have a very much better chance of handling some of the things we had to do.
The third objective was that from these there would be action programmes that would give opportunities for OD resources to be supported and helped.
Starting in April 1978 with a mixture of main board directors, and division chairmen and directors, the change workshops eventually involved several hundred of ICI's most senior managers. Ron Mercer ran the early workshops, and then he delegated their development and operation to a team of internal consultants which included Dudley and James. The participants had to come with at least one other colleague from their part of ICI, and most importantly bring a change problem that they both owned, and had a legitimate authority to intervene on. The 2½ days of workshop activity interspersed short inputs of concepts, ideas, and techniques about the management of change with focussed and practical work on the real change problem participants brought with them.
Nobody interviewed in this study substantially doubted the value of these workshops, although “some participants went back with the reservations about head shrinkers, and the usual stuff. An executive director commented that “they have given more skill, they have given more appreciation down the line, and they have given appreciation to some members of the board who never operated in that way before”. Crucially perhaps the workshops helped to signal and clarify what change management was as an activity, to provide a common language for problem-solving about change, and in so doing helped to stimulate a culture for change, at the point in time when environmental pressures demanded real action and outcomes, and the capability to produce those outcomes.
Changing the European business organisation
Like many UK companies, ICI did not become seriously involved in Continental Europe until the early 1960s. Since the 1960s ICI has constructed physical plant in Europe, established selling groups (national selling companies) in each individual market, and encouraged joint ventures with local manufacturers to exploit particular technological or marketing opportunities. Table 30 shows how sales to Continental Western Europe (CWE) have increased steadily as a proportion of total Group sales, although it is noticeable that between 1974 and 1979 the percentage increase was only from 19.1% to 19.6%.
Although sales to Europe have developed both from local production and by exporting from the UK, the profitability of ICI's European production has remained low. For example in 1974, a particularly good year for the European petrochemical industry, ICI earned an operating profit of £51 m in Continental Europe on sales of £450m, but in the subsequent four years operations in the area incurred losses of £15m, £7m, and £2m respectively. The pattern of ICI's development into Europe, majoring as it did in fibres and plastics, the problems of weak prices and over-capacity in the European petrochemicals industry, and sterling fluctuations, all contributed to a business situation of rapid expansion in sales but depression in profits. Although ICI rationalised its fibres operations in Europe in the late 1970s, a decision was taken in 1977 to construct a major chemical complex at Wilhelmshaven in West Germany to manufacture vinyl chloride, and PVC. The collapse of the European petrochemicals and commodity chemicals market in 1980, showed that the Wilhelmshaven project was too large, and certainly too soon.
TABLE 30 Percentage contribution to ICI group sales: by territory
Given the less than auspicious ICI business performance in Continental Western Europe, it was inevitable that the pattern of ICI's organisation in Western Europe would attract the attention of the board organisation study groups of 1976 and 1977. Although in 1977 some improvement had been made in the relationship between the main board as a group and division chairmen as a group by the creation of the first Chairman's Group Conference, the relatively isolated way the board organisation study groups began to work created new strains between the centre and the divisions and operating companies. A report of division chairmen and general managers’ views of the board in 1977 revealed concern that they were being exhorted to behave with responsibility on problems of productivity and capital rationing, “but on a matter of vital impact on the Company, such as its organisation, we are not even wanted”. One of the executive directors of that time voiced this description of board processes of working:
The thing that struck me about the processes they were using was that this was in no way a participative activity. They would occasionally ask some division chairman to do some analysis and report back to them, but they were not saying to the existing organisation, join us in setting a direction for organisation development. There was no question of agreeing objectives and principles for the organisation.
As far as European organisation was concerned what was beginning to emerge in senior reaches of ICI by 1977 was a feeling that the existing scheme of organisation was not sharp enough in accountability terms to meet the business and competitive pressures developing on the continent. Early in the 1970s ICI had tried to spearhead its way into Europe by setting up a Europa Division with its headquarters at Everburg in Belgium. This division was given a mixed role – to manage ICI's interests in its European subsidiary and associated companies, to look after the business interests of ICI's 16 national selling companies, broadly to manage ICI's relations with the EEC and individual national governments, to act as a corporate identity for ICI in Europe, to stimulate further product and investment development into Europe by the UK divisions, and to share in some cases profit accountability in Continental Western Europe with some of the UK divisions’ products.
By 1977 the uneven pattern of development of the UK divisions into Europe, the fact that Europa shared profit accountability into Europe with Plastics, Fibres, and Paints Divisions, but Pharmaceuticals and Plant Protection Divisions had sole profit accountability responsibility, began to make ICI believe that third-order organisations such as Europa Division were leading to over-complexity, lack of business sharpness, and therefore inefficiency. There was no great surprise, therefore, when at the 1978 Chairman's Group Conference the executive directors proposed to the division chairmen and chief executive officers that with effect from 1 April 1978 the sharing of profit accountability with Europa Division would cease. Henceforth the UK divisions were to have sole profit-accountability for the whole of their businesses throughout Western Europe. This was thereafter referred to as Pan-European responsibility. With this arrangement it was also proposed that Europa Division would continue to carry out its “services” activities, such as being responsible for the national selling companies, and maintaining links with the EEC Commission.
The Board were clearly concerned about this move; in particular there was a concern that the Pan-European change might create the impression ICI was pulling out of Europe instead of the reverse. This led to a move to consider placing the headquarters of at least one UK division in Europe. Since Plastics Division had the most assets on the ground in Europe the view was that Plastics should move its headquarters from Welwyn Garden City to Continental Europe. The above proposals were greeted with some dismay by the chairmen of Europa and Plastics Divisions, and with no small disquiet by some of the other division chairmen. It was in this situation that Tony Woodburn the executive director now with the combined role as plastics product director and territorial director for Continental Western Europe was given the opportunity to review the European business organisation situation.
Using Tom Bainton, the external consultant he had known since his Mond days, and Stewart Dudley, the first thing Woodburn did was to get all the division chairmen together and try and achieve some measure of agreement of business aims and business organisation for a Pan-European ICI “so that the aims and solutions have the depth of personal understanding and commitment necessary to make any change happen in fact, not just in words”. As Woodburn later put it, “I said to the chairmen – “Look fellows we [the board] are about to drop a bomb on you – would you like to get involved in designing the bomb?” Both Harvey-Jones and Woodburn were by this time becoming increasingly sceptical of the possibility of creating change in ICI, but as Woodburn remarked “occasionally one would see the opportunity to put the ball into space and run after it”. The Woodburn, Bainton, and Dudley meetings with the division chairmen in 1978 became such an opportunity to put the ball into space, for not only did the above group agree on action on the Pan-European question, they also set in train the further development of strategy and marketing linkages between the heartland divisions (Mond, Petrochemicals, and Plastics), and reviewed the relations between the UK divisions, Europa Division, and the national selling companies.
What happened was that at the first Woodburn, division chairmen's meeting, Woodburn's successor as chairman of Mond Division had said “are you working the right problem first? Before you decide what to do with Plastics in Europe, should we not decide what we are going to do with the whole divisional organisation – clearly the divisional organisation is now obsolete.” Having announced at the 1978 Chairman's Group Conference there would be no changes of divisional boundaries and no divisional mergers to close down speculative thought in those areas, the board now found themselves not for the first time faced with pressures from below for fundamental change. Harvey-Jones and Woodburn took their opportunity.
The Heavy Chemicals Divisions and the Petrochemicals and Plastics Division Merger
Two concrete decisions came out of Woodburn's 1978 work on European organisation. One was the view that ICI could achieve their business objective of a larger share of the European market by requiring all divisions to operate on a Pan-European basis from 1 August 1978. The second decision was the agreement that ICI Europa jointly with Mond, Plastics, and Petrochemicals Divisions would direct the expansion and penetration of their businesses in the Pan-European market by developing integrated marketing and selling plans in that territory. The latter decision to pull together some of the strategic and marketing thinking of ICI's Heavy Chemicals Divisions was a continuation of pressure to link business perspective and action which Harvey-Jones had been pushing since he created a quasi-formal grouping called the Petrochemical Product Directors Advisory Group as far back as July 1973.
By 1978 it was becoming clearer that “the divisional boundaries were primarily bureaucratic in nature, that they inappropriately separated technologies from one another, more importantly they separated marketing activities from one another. Equally inappropriately because they were UK based – as a whole they created a sort of Anglo-centric attitude which was not felt to be particularly helpful to European market penetration in increasingly competitive times.” Tony Woodburn's recollection of events in 1978 was that out of the work on Pan-European organisation “came a realisation that we were over-fragmented, we didn't really use our total competitive strength. It was that thought that led John Harvey-Jones and I to seize our opportunity in the board, and to say there ought to be some way of putting the heavy divisions together.”
Amongst the many problems in the way of pulling Mond, Petrochemicals, and Plastics together two were critical. The first was the fact that the executive directors still had their portfolios divided by product, function, and territory, so that not only were there conflicts and ambiguities in handling that matrix, but also each product director was placed in an advocacy position for the product area or division he was responsible for. Furthermore, the Policy Group System overlaid on top of the Product and Territorial Directorships added to the fragmentation and sub-optimal decision-making, particularly around capital investment decision-making, but also around issues of product and market development. The Policy Group System was not only leading to endless paper-chasing and gamesmanship between individual directors and operating units, it was also leading, as one executive director put it, to:
Horse and cart investment decisions. It was a case of you build a cracker to make ethylene – why are you doing that? Oh! because there's a demand for ethylene. Where's the demand for ethylene. Oh! that's down the road in PVC and polyethylene. Meanwhile if you asked Plastics Division why they were building this new polyethylene plant, one of the answers you'd get was because we want to use up some of the ethylene on Petrochemicals Division's brand new cracker.
Harvey-Jones and Woodburn realised it was too late for financial, market and technological integration to occur at board level, and given the structure and mode of operation of the board, it wouldn't occur there – so it had to occur further back in the operating divisions. Politically speaking there was still no majority on the board in 1978 to contemplate merging divisions, so Harvey-Jones and Woodburn had to go back and invent some intermediary and parallel systems of operation which would tap energy at division chairmen level for more integrated strategic thinking, and in so doing move another piece on the chess board in the direction they wanted, while they waited for the appropriate conditions to push for the bigger change.
As I mentioned a moment ago, Harvey-Jones’s first attempt to bring together the strategic thinking of Petrochemicals, Plastics, Mond, and Europa had been in July 1973 when he used his board position as petrochemicals product director to create the Petrochemicals Product Directors Advisory Group. This was an informal grouping of himself, the four division chairmen, the general manager of planning, and the relevant policy group secretary which had no place in the official scheme of organisation, but which used working parties to examine energy policy, European strategy, and the development of thinking about the Wilhelmshaven project.
The above advisory group carried on until the end of 1976 and was then replaced by a much stronger executive grouping called the Inter-Divisional Policy Group (IDPG). The IDPG was made up of a deputy chairman, the executive directors with product director responsibility for Mond, Petrochemicals, and Plastics, and Harvey-Jones as territorial director for Continental Western Europe. By 1978 Harvey-Jones was a deputy chairman and took over as chairman of the IDPG, and shared this role with chairman of the Continental Western Europe territorial policy group. He had as his product directors on the IDPG, Woodburn as the product director of Plastics, the Mond and Petrochemicals product directors, and Woodburn was also territorial director for Continental Western Europe.
With both Harvey-Jones and Woodburn linked into the IDPG and the Continental Western Europe policy group, the right personalities for change now had the right mixture of board portfolios to begin to link not only the three heavy chemicals divisions together, but to do that linking in the context of business thinking across Continental Western Europe.
Politically Harvey-Jones and Woodburn saw the way to keep any momentum for change going was to use the IDPG mechanism, and to try and connect to that any energy for change coming up from the division chairmen. In August 1978 Harvey-Jones chaired a meeting of the IDPG, plus the chairmen of the three big UK heavy chemicals divisions, the chairman of Europa Division, and the head of policy groups department. The external OD consultant Bainton, and Harvey-Jones’s favoured internal consultant Tom James helped to design the process for the meeting, and were present themselves. The Marlow meeting had two principal agenda items:
1. The role, mission, and method of working which the IDPG intended to pursue.
2. The operational structure for the Pan-European region appropriate for effectively carrying out the policies decided on.
The Marlow meeting achieved a number of important steps forward. Firstly, its purpose and role was clarified, and legitimated with the main board. The purpose of the IDPG was firmly “to ensure that the strategies for the group's heavy chemical and polymer businesses are created and integrated on a worldwide basis”. Within that purpose its role was to “create conditions and structures which will encourage, stimulate, and help the operating units to discharge the above responsibilities”. Harvey-Jones and Woodburn now had a vehicle to legitimately pull together the strategies of three divisions which had previously been the responsibility of three separate product directors, and they had some licence to continue to work on creating new structures in that area.
Further steps were made symbolically to tie together the three UK divisions, when in January 1979 the IDPG's name was changed to the Heavy Chemicals Policy Group (HCPG). Also in January 1979 the financial results for the three heavy chemicals businesses were for the first time presented to the board in total. In February 1979 a Pan-European steering group was created. This was a group of the four division chairmen (Mond, Plastics, Petrochemicals plus Europa) – put together to promote the integration of those businesses in Europe.
The events described above reveal how a combination of executive will, the creation and use of mechanisms such as the IDPG, and the HCPG, plus drawing on the involvement of the division chairmen helped to push events forward in 1978 and early 1979. This slow, additive process of water dripping on a stone might have continued in this way had not the business and political environment changed in 1979, and had it not become clearer that worse was to come in 1980 and beyond.
Harvey-Jones called a follow-up meeting of the HCPG at Streatley in September 1979. The shared view at this meeting was that the business environment had changed dramatically as a result of:
1. the Iranian Revolution which had produced an oil shortage and resultant jump in prices;
2. the strengthening of sterling and associated UK monetary policy;
3. the acceleration of inflation;
4. high and predicted higher unemployment.
The result for ICI was slower growth, increased competition (both in the UK and overseas), a 15% relative increase in UK employment costs, inadequate profitability, and a shortage of cash for capital expenditure. The conclusion of the Streatley meeting was that “in this more hostile environment increased profit could arise only from better decisions in a simplified organisation progressively slimming down towards a much lower cost base”.
In spite of the worsening business scene in 1979 the ICI main board rejected for the first time the Harvey-Jones-Woodburn proposition to merge Mond, Petrochemicals, and Plastics Divisions. Woodburn later acknowledged that the three executive directors openly pushing for a merger may have made a tactical error in 1979 of “pushing too far”, and getting rejected. After the Streatley meeting Harvey-Jones thus found himself with a worsening business scene, more head of steam from the HCPG and the relevant division chairmen, but faced with a clear statement from the board that there should be no attempt to merge the three divisions in one step, and that the unified direction of the three divisions by a single individual at below board level would not be acceptable.
What Harvey-Jones and Woodburn were able to achieve in the immediate aftermath of Streatley was legitimation for the existence of an interactive business area called the heavy chemicals business area, and agreement that the division chairmen would have a maximum of 3 months to prepare proposals for “a wider, potentially all embracing, integration of the functional activities of the three divisions”. Harvey-Jones was by now mightily frustrated at the pace of change and wrote to his executive director colleagues:
While I believe that the above represents about the best we can hope to achieve, acting within the constraints that my colleagues have so far set on our activities, and working in the traditional ICI manner . . . I have to make clear that I do not believe the response is likely to be adequate in terms of the time it is likely to take us to start taking effective action . . . I understand, however, the fears and concerns of my colleagues in this area and am prepared to continue making such progress as we can along the lines outlined above. It may well be that, if time was on our side, this would produce the best long-term solutions. I do not, however, believe we have the time to allow this more protracted approach and would be grateful to hear the views of my colleagues.
ICI were not, of course, just sitting on their hands at this time. Within the constraints set by the divisional boundaries, vigorous attempts were being made to close works, reduce maintenance costs, and slim down managerial levels and numbers. With the clear sign that the recent massive period of capital expenditure was over, ICI had the problem of what they were going to do with the large investment engineering resources they had in each of the large capital spending divisions. Early in 1980 moves were set in train to move from a divisional to a regional engineering organisation and save large amounts in salaried employee costs.
On the question of divisional mergers some progress was made politically by the retiral of executive directors, and the inescapable fact of the collapse of demand, prices, and margins in the European Petrochemicals and Plastics markets. When in April 1980 both the Petrochemicals and Mond product directors retired this allowed Woodburn to take over board responsibility for the Plastics and the Petrochemicals product areas. As Woodburn later put it:
For the first time in ICI's history Petrochemicals and Plastics were the responsibility of one man on the board. I couldn't have arguments with myself about transfer pricing. Within months I was reporting horrendous losses from the whole Petrochemicals–Plastics system.
Implicidy and privately (to the board) at this point in mid-1980 a very much more operational and executive group than the heavy chemicals policy group was created called the heavy chemicals executive. This group, chaired by Harvey-Jones, and with Woodburn and the Mond product director, began the detailed task of preparing the operational plans for how to make any merger happen. When in late 1980, in the midst of ICI's first losses in their history, the board made the decision in favour of a merger the option chosen was the more conservative one of a two rather than a three division merger. One of the three executive directors pushing for a three into one change remarked “it was an absolutely typical compromise trade-off, with the three of us pushing for a three division merger, and being told no you can only have two”.
The reasons why the bulk of the board rejected a three divisional merger in 1979, again in 1980, and again even when Harvey-Jones had become chairman of ICI in 1982, were a mixture of business-related, organisation-related, and political. The view of the detractors was that while Petrochemicals and Plastics were well integrated technology and business-wise, Mond was less so. Also why make yet another organisation change by adding a still profitable Mond to a very unprofitable Petrochemicals and Plastics, when the newly formed division was virtually fighting for its business survival? Crucially perhaps against the three into one merger was the argument that politically “our colleagues couldn't handle it. To them it meant vast numbers of people and assets in one unit. It meant an accretion of power to one or two individuals on the board, and a very powerful division chairman. They couldn't handle anyone in the boardroom with that sort of weight around, and particularly as Harvey-Jones was emerging as a very rank outsider for the Chairmanship.”
However, the Petrochemicals and Plastics Division merger went ahead as from April 1981. The story of the implementation of that merger is an interesting one but beyond the confines of this book. It is relevant to the continuing story of OD in ICI to note that both Bainton and James were drafted by Harvey-Jones and Woodburn to help with the process of managing the Petrochemicals and Plastics merger. The fact that the new chairman of the Petrochemicals and Plastics Division was told to have Bainton and James is indicative of the continuing belief by Harvey-Jones and Woodburn of the value of OD resources, but also indicative of the long years of lack of penetration of the value of OD skills amongst the boards of the old Petrochemicals and Plastics Divisions. Bainton had a considerable impact in influencing the character, structure, and systems of the merged division by working with the new chairman and his board. Evidence of his continuing credibility came when he was invited in 1982 to help with the further changes necessary on the huge manufacturing site at Wilton.
With some level of change now accepted in the structure of the UK divisions, Harvey-Jones and Woodburn, and their supporters, now turned to Harvey-Jones’s long held ambition to try and change the role and mode of operation of the ICI main board. Would they be successful this time?
The role, size, and method of working of the main board
Given the collegial board system in ICI the question is: can a democratic society change itself radically? I'm increasingly uncertain about that . . . If the rate of evolution is not fast enough to cope with the external environment I just don't know where we'll be . . . ICI is not that evidently unsuccessful to make that change evidently necessary.
The above quotation from an interview with John Harvey-Jones in 1977 indicates both Harvey-Jones’s continuing desire for change in the mode of operation of the main board, and his justifiable scepticism that the board studies encouraged in 1976 and 1977 by Sir Rowland Wright would run into the sand as completely as had the 1973 board organisation committee's recommendations. In fact, of course, small changes did accrue from both the 1973 and 1977 attempts to change the role of the board. In 1977, for example, in view of continuing criticisms of the lack of sharpness of decision-making coming out of the board's existing meetings and committees, the decision was taken to add an executive committee to these meetings. The executive committee was a meeting of the executive directors only, and allowed those directors to make decisions on matters of substance without waiting for the once-a-month meeting of the full ICI main board.
As we have already noted the appointment in 1978 of Sir Maurice Hodgson as ICI Chairman, Harvey-Jones’s elevation to deputy chairman, and the end of the board portfolio of organisation director all took the steam out of any attempts to radically change the ICI top governance system. However, by late 1979 and 1980 the fast-declining business fortunes of ICI were creating a better climate for change, and Harvey-Jones used the March 1980 Chairman's Group Conference “to open Pandora's box”. One of the syndicate groups asked to report at the conference repeated the by now familiar diagnosis of the problems at the top. The board were invited by the conference to review their mode of operation in the light of unease about some aspects of ICI's management style, and the capacity of existing ways of operating the top structure to meet the challenges of the 1980s. It was suggested to the board that a smaller, more cohesive board concentrating more on the development and implementation of strategy might be a model to work towards, and that the extant problem of implementing board decisions might be helped by the appointment of a “director of change” on the board.
Although at the time Sir Maurice Hodgson's summary and review of the conference debate “very greatly dampened the head of steam we'd got”, Hodgson followed up the suggestions of the conference that the board should again consider its role, size, and method of working. During the summer of 1980 Sir Maurice interviewed all of the executive directors individually, and met the non-executive directors in small groups to see if there were areas of agreement for change. Hodgson's data revealed that the recent pattern of having 3- or 4-year Chairmanships was not good, and that in future the Chairman should hold office ideally for 5 years. On the size of the board, then 17 including the chairman, the consensus view was that there is no longer any support for the argument that a smaller board is desirable per se on the grounds that an arbitrary reduction in size would force desirable behavioural change and make us more effective. The directors also took a no-change position on another previously controversial point – the existence of deputy chairmen. On the more discursive question of the role of the board, again there was the strongly expressed view that the board spent too much time managing the ongoing business in the UK and Europe and too little identifying major changes they should be driving for in terms of the group's international shape and priorities.
Sir Maurice concluded his review of the views of his colleagues by stating there was little pressure for revolutionary changes in the role, size, or functioning of the board, but that the major problems ICI were facing in 1980 indicated that the board's operation needed to be improved.
At this point in late 1980 with Sir Maurice beginning the soundings to find his successor, and with all three of the deputy chairmen being candidates, the ICI top governance system “went into a state of baulk”. Sir Maurice would presumably not want to make any changes which would constrain the style of the new Chairman, and in an election atmosphere none of the three candidates would surely wish to over-expose themselves by pushing for radical change which affected the position of the electorate. The pattern was broken in November 1981 when with mixed amazement and delight John Harvey-Jones, got the job as Chairman of ICI.
A main board director not normally associated with the “for change caucus” on the board during the 1970s had this to say about why Harvey-Jones got the Chairman's job:
The events of the last 3 years have shown that ICI's old way of doing things, and old approach to a number of questions haven't served it terribly well. Whether it would have been possible to have done things differently, had clearer foresight, and taken better avoiding action I think is exceedingly debatable. But with hindsight the way we had done things hadn't served one terribly well – there could be no argument about that. Therefore there was a realisation that things needed to be different, and the man to my knowledge for the last 8 years in Millbank who has said most persistently and consistently, and without too much regard for how the message was received – there are a lot of things we ought to be doing differently – was John. Change was needed, the obvious change agent was given the job.
Harvey-Jones wasted no time in trying to clarify, share, and reach agreement with his Board colleagues about the principles underlying his vision of the future organisation and style of ICI. In December 1981 he circulated a discussion paper on the shape of ICI and the shape of the ICI board in 1984. Within a week of him formally taking over in April 1982, he set up an informal meeting of his executive team to discuss the mission, role, and method of operation of the board. Ron Mercer had a role in the process planning of this meeting, and in addition was invited to attend the meeting itself. From this meeting and subsequent discussions the following objectives and principles emerged:
1. The Chairman of ICI henceforth should be given a greater degree of personal responsibility for the group. This meant in effect that the Chairman was to be the group's chief executive officer, although the harshness of individuality implied in that title was clothed slightly by describing the Chairman as the company's principal executive officer.
2. The board would comprise a smaller executive team, operating as a team, and supported by a leaner, and more effective head office, concentrating on the strategic direction of the group.
3. There would be an increase in the freedom of chief executives of businesses and territories to run their businesses in accordance with agreed strategies and plans, coupled with greater accountability.
4. There would be greater recognition of the differences between businesses and territories and their problems, opportunities, and aspirations.
5. The style of the group would need to change in order that there was built into the group a self-perpetuating dynamic for change to cope with the uncertainties and opportunities of the future.
Most of the above principles, and certainly those requiring firmer and more strategic leadership from a smaller board operating more as a team, had been part of the changes recommended as far back as the board organisation study of 1973. At last these principles were now part of the official ICI view of the future. But there is a world of a difference between formulating a vision and making it happen, and the task of the top leadership of ICI in 1983 has become how to translate the vision of a more strategic, flexible, tolerant, accountable ICI into a set of structures and systems, together with the appropriate patterns of behaviour, which will make those structures and systems happen in practice. Having at long last got his way as a formulator of strategic change, Harvey-Jones’s major task in the 5 years he has as Chairman will be in implementing strategic change. In this task of implementing change, it is doubtful if the few remaining specialist OD resources in the company will have a role to play any more substantial than the limited one they were able to play in helping to formulate strategic change.
THE CONTRIBUTION OF ORGANISATION DEVELOPMENT RESOURCES AND
METHODS TO STRATEGIC CHANGE IN ICI
As I write in the Summer of 1983 some real progress has been made by ICI in producing strategic changes in organisation and systems, if not yet in culture and behaviour. Effectively ICI now has a Chairman who is a chief executive. The executive team is now composed of a Chairman and seven executive directors, a net loss of three deputy chairmen and one executive director since April 1974. This smaller group intend to work less as a set of individuals divided by functional, territorial, and product loyalties, and more as an executive team providing leadership on the overall strategic direction of the ICI Group. Some of the functional directorships have been discontinued. Although individual executive directors will be designated as business or territorial directors and will be expected to give guidance and in some cases direction to the chief executives of operating units, those executive directors will not act as advocates for the businesses or territories whose direction they guide.
With the end of the time-consuming games-playing of the policy group system, and the elevation of the board to considering the portfolio management of the group, it is hoped chief executives of operating units will have greater freedoms within a more considered strategic framework. The activities and performance of the operating units will now be assessed by means of a new budgeting and control system.
Now that the board3 intends to focus on the strategic direction of an international ICI group, they hope correspondingly to distance themselves from the previous concern with the UK divisions and assets. With the merger of Petrochemicals and Plastics Division, the first stage of creating a Pan-Europeanised Heavy Chemicals Group has been made. If and when Mond Division is added to the new merged division there is the basis of an organisation to represent ICI's interests in the UK and Europe. Service functions such as engineering, puchasing, distribution and personnel could then be rationalised further, and the umbilical cord tying the group personnel department to the ICI board could then be broken. The personnel department of a heavy chemicals business area could then look after the UK personnel scene. The above process of setting up organisations to satisfy business areas rather than historical divisions might be extended to the creation of a “light brigade” to go alongside the “heavy (chemicals) brigade”. The light brigade might comprise the existing Paints, Plant Protection, and Pharmaceuticals Divisions – but action in this area is not contemplated in the short term.
The process of first regionalising, and then centralising, the company's engineering function continues. Manufacturing sites and individual works have been closed, assets have been swopped with competitors, other assets have been divested. Managerial levels and numbers have declined significantly in the period 1979–83, and pressure continues to cut weekly staff numbers – particularly in maintenance areas. ICI's UK employees dropped from 89,400 in 1979 to 61,800 in 1983, a fall of 31%.
In amongst the reshaping explicit in the above structural changes, ICI hope to increase the proportion of their earnings deriving from products with wider margins, and from territories where the customer base is secure and capable of expansion. Both through acquisition and by developing a more flexible, positive, and entrepreneurial management style, ICI hope to regenerate the company during the likely difficult economic, business, and political conditions of the 1980s.
Although not all of the above-mentioned changes have materialised yet, sufficient of them have to characterise the period 1980–83 as an era of strategic change in ICI's history. One might ask if so many of these changes had been contemplated as long ago as 1973, why did they take so long to materialise? Part of the answer to that question lies in the discussion earlier in this chapter of the general ICI culture, and the culture and mode of operation of the main board. The succession of short-tenure Chairmen, the primus inter pares Chairmen, the formal consensual style of decision-making on the board, the hierarchical and layered structure, the risk-aversive institutional character of ICI, and its place in British society. Real change only came when the above culture was threatened by a punishing change in the business and economic environment; only then did ICI become sufficiently dissatisfied with its performance to act. But if the environment was critical as a trigger for change, the narrative in this chapter has also emphasised the role played by a number of key individuals in trying to challenge and break down the old culture, open up and free channels of communication to see uncomfortable sorts of data, and then slowly put in place ideas and mechanisms, together with a sense of direction and a gathering political will which could spell out and accept strategic change. The process of influence used by Harvey-Jones, Woodburn and the other directors interested in change required persistence, patience, the capacity to see where they wanted to be but to make small additive moves in the desired direction, and “to kick the ball into space” as soon as an opening appeared. One of the OD consultants described the process in terms of:
Building up support on a 1 to 1 basis, trying things out, using and making opportunities to test the water, observing how people are shifting, pushing, and then backing off.
Woodburn’s view was that:
You have to wait – it is politics of course. There's no way you can drive the thing like you can in a division when you are a chief executive. You have to learn and develop even more skills of persuasion in designing in quite considerable detail how you are going to influence people, and get the support and power.
Harvey-Jones’s picture of the process implied frustration, and the necessity for persistence:
I conceived of the process as just going on and on and on, continuously trying to make small movement.
Undoubtedly the Petrochemicals Product Directors Advisory Group, the Inter-Divisional Policy Group, and the Heavy Chemicals Policy Group were important step-by-step moves towards the 1981 divisional merger. Those mechanisms legitimated cross-divisional senior contact, and thereby provided commitment-building mechanisms for change which crossed the boundaries between divisions, and between the divisions and the main board. But as Harvey-Jones said:
They were only limited responses to a perceived need, they were a way of putting Petrochemicals, Plastics, and Mond Divisions together without doing so. I actually believe we would have done a bloody sight better if in 1975 we'd put Petrochemicals and Plastics together.
Harvey-Jones and Woodburn constandy had to make compromises, run things in parallel with existing systems when they would have preferred their own and eliminated others. But gradually with a number of additive steps in place, changes in the composition of the main board, “the crumbling lustre of the UK asset base”, and a breakdown in the credibility of the policy group system, the level of dissatisfaction increased at senior levels, and the early 1980 recession provided a window for change in ICI.
Strategic change in ICI occurred when it did in the early 1980s as a result of a mixture of business and economic pressure, and the belated influence of a relatively small number of change-minded directors. There had been a history of dissatisfaction with the top governance, structure, operating systems, and culture of ICI, but for most of the 1970s there was not enough senior level dissatisfaction with the business performance of the company to warrant the massive personal and organisational disruption implied by the necessary changes.
As we have seen, there were individuals in senior positions dissatisfied with the status quo, but their energies were totally absorbed not only in their normal directorial responsibilities of handling the present-day demands of the system, but also in trying to mobilise dissatisfaction with some of the worst consequences of those structures and systems. While those individuals were absorbed raising doubts about current ways of doing things, their imprecise vision of a better kind of ICI often appeared too theoretical, too impractical, to their sceptics. It was an uneven persuasion process of new concepts and new theories of the future against the tried and sure methods of the present. In this struggle of new theory against old theory, the protagonists for change often found it difficult to articulate the first practical steps towards their concept of a better future for ICI. Stacked up against the imprecise vision of a better way of directing ICI, and what appeared to be unjustified and vague first-action steps, were the massive forces of inertia in the ICI structures, systems, and political processes.
In the absence for so long of a clear business rationale for change, and the political will that might have come from that rationale, what was undoubtedly crucial in the long-term process of creating change was the continuity in office and persistence of those executive directors pushing for change. The group for change which eventually emerged, recognised through experience which started for some with the failure of the 1973 board organisation committee, that they were engaged in a political and strategic process, and that consideration of the process of reaching their end point was as crucial if not more crucial than the practical specification of what that end was. It would be inaccurate to suggest that in the long process of trying to generate commitment for change, that those for change had a rationally conceived and articulate process plan to influence the relevant parts of the ICI governance system. In so far as any process plan existed, certainly in the mid-1970s that plan had fairly limited and pragmatic objectives, and the initial steps were not seen as part of a longer-term management process.
Discussing the series of attempts to create change in the 1970s, Ron Mercer acknowledged that one of the pieces of learning for him had been that:
The strategy of building in – of finding the win – wins on the way to the ultimate win was not followed as clearly as it might have been. If one has a total strategic plan to get from here to there the first step was never treated as an end step. When it began to happen, it happened. The Pan-European meetings, the Heavy Chemicals Policy Group, those were some of the steps that began to say hey that moves it, and that moves it. It was only when they dealt with identifiable components of the problem and set up specific commitment getting mechanisms, and management, and transition management mechanisms that they moved. Those build on one another, and then you move to something else.
But if the momentum for change increased as the overall change problem was divided into politically manageable bits, and then progressed by setting up mechanisms such as the Heavy Chemicals Policy Group and the Heavy Chemicals Executive, which performed the duel function of legitimating change and connecting those changes into existing ICI structures and systems, the problem at the early stage of the change process was how to develop a concern or belief in top circles of ICI that something is not as it should be. Without doubt the internal OD resource Dudley, and the external consultant Mercer, had an important part to play in assisting Harvey-Jones to bring the bad news to the senior reaches of ICI and in so doing try and raise the level of dissatisfaction and concern with certain aspects of the status quo. Dudley's early paper “A Look at ICI in 1974”, which was inadvertently sent to the ICI main board before it could be written in a more diplomatic fashion, although rejected as not ringing true with the conventional views of the time, did by chance speed up the process of getting a wider set of data about ICI's functioning to the main board. The process of opening up ICI started by Dudley's paper, and Harvey-Jones’s leadership, propelled Mercer out into the open with a diagnosis of ICI's problems that the Chairman of the day found very painful but insisted on sharing with his colleagues. The next chairman, Sir Rowland Wright encouraged a climate where information about ICI's structure, culture, and systems could more freely pass around the main board, and between the main board and the division chairmen. Encouraged by Harvey-Jones, Mercer, and Dudley he also set up a number of board working parties and the Chairman's Group Conference, both of which had the effect of moving the change process from the stage of development of concern that all was not well, to the beginnings of an acknowledgement and understanding of some of the particular problems of change.
However, the phase of concrete planning and acting to make changes happen, required changes in the personal composition of the main board that came in the late 1970s, the irrefutable pressure of a worsening business scene, and consistent, persistent, and more adroit and selective pressure from the change group on the main board. Given the track record, ability, and highly personalised and political atmosphere that surrounded the upper reaches of a company such as ICI, there is no doubt that personal views and individual position played their part in the change process. For those looking for change, new people were sought for their support, backing off was necessary when opposition from key people was strong. Opportunities created by retirals were seized to combine portfolios and use new linkages between parts of the system previously divided, to kick the ball into space and release options deadlocked by internal political pressures. Risks were taken in challenging existing norms, there was the necessary persistence of water dripping on stone, and then ultimately being prepared to mobilise support for action, and act, when the business crisis came.
Strategic change in ICI has occurred throughout much of its history in an episodic pattern. The periods of high levels of change activity have tended to occur around every decade, and are associated with the second low point of the 4.5-year business cycle. Thus there were concentrations of organisation and manpower changes involving the reshaping and relabelling of divisional boundaries during and immediately after the business downturns of 1961, 1971, and 1981. Metaphorically these were the revolutionary episodes which were followed by considerable periods of incremental adjustment. Given the different stage of development the chemical industry had reached by 1980, and the much more severe business and economic pressure of the early 1980s, ICI pulled five levers of change in 1980–81 compared with the more modest revolution of 1971. It is in the context of this episodic and environmentally driven change response, where in each case the formulation of the strategic changes was in the hands of a small group of very senior executives, that the role of OD resources and methods have to be understood.
The use of OD resources and methods to create strategic change in ICI has always been, and still is, a minority preoccupation on and just below the main board of ICI. It is abundantly clear that without Harvey-Jones and Woodburn's support and protection neither Dudley, Mercer, James, nor Bainton would have survived long enough to have any impact on senior reaches of the company. Those who sponsored OD at the highest levels are prepared to admit that their support was partially a question of individual belief, that OD's use in ICI “has been incredibly patchy, and in particular its use at the main board has been very inadequate”.
I think you've got to recognise that for any businessman to really espouse OD is in the first case an act of faith unless you have actually used it in a number of real life situations and found it helps you to solve problems which you would have been unable to solve by other more direct approaches.
Harvey-Jones acknowledged that he'd always had OD advice on the sort of change programmes he'd been trying to initiate through the board, “but these have always been from a subordinate position.”
The attitude of the Chairman of the time has varied from malevolence to good natured “well if he wants to play around with that sort of thing let him” . . . Believing in it and wanting to use it is an individual thing. OD requires a particular style of boss. If you are unself-confident, a bit uptight, like to keep things to yourself, and you're leading something, you may still be an effective leader, but you'll never use OD.
One of the consequences of this highly personalised, patchy, and necessarily cautious sponsorship of OD methods and people at the top was that the in-house consultants Dudley and James always lacked credibility with the majority of the main board, and Harvey-Jones and Woodburn could only use them as consultants to them “on specific delegated tasks”. There was never any question of either the internal or external consultants working openly or continuously on tasks given priority and substance by a critical mass of the main board. Even Mercer, who had the advantage of the external role and therefore was not part of the internal ICI career and political system, and yet had the credibility that came from a long period of association and testing inside ICI, tended to work on an individual-to-individual basis with members of the main board. Perhaps it would have been impossible to work on a group basis with a set of very senior people on predetermined and prioritised tasks, if they themselves were not yet working on a team basis to produce a clearly articulated framework of purpose and policy.
But if the OD resources were not tied into a set of tasks derived from a pattern of development decided by the main board, why did they survive throughout the 1970s and early 1980s, and what sort of impact on company policy, structure, systems, and behaviour did they have?
Stewart Dudley retired from ICI in November 1982, at for ICI the comparatively advanced age of 57. Tom James did likewise in June 1983. They are quite different personalities and survived in a developmental role in ICI for such a long period for different reasons. One crucial thing about their background which did influence their fate in the ICI system, where they had an advantage over so many of the others who went into an OD role in the company, was that they had both acquired some status in the ICI system prior to taking on developmental work. Dudley had been a works manager in Mond Division, and James had been head of a large management services department in HOC/ Petrochemicals Division. As we have seen, Dudley was able to use his credibility as an ex works manager both to help set up the works management training programmes which helped to rescue MUPS/WSA, and to link with works-based clients in the low point for OD work after the implementation of WSA and SDP. James meanwhile was early on in ICI able to graft OD skills and knowledge onto the more structured problem-solving skills and reputation he had acquired from working in work study and management services. James also had the advantage of a good working relationship with John Harvey-Jones.
Asked how and why Dudley and Mercer had survived Harvey-Jones replied:
Bluntly I suppose they have had protectors . . . I suppose I would be a protector of both of them. But I haven't had to actually intervene and say “keep your filthy mits off . . . But you can't really tell if protection is overtly necessary because in a company like ICI the fact that somebody at the top who is perceived to have some power is known to be in favour with somebody is in fact protection.
As we have seen, Dudley survived the post-WSA/SDP period to become “Dean of Faculty” of the ICI OD network, partly because of his well-recognised knowledge, skill, and experience in using OD concepts and techniques, partly because he distanced himself from George Bridge and the more traditional members of the central personnel department, and ultimately because he was the last and most senior central OD resource. To have removed Dudley would have taken out the focal point for internal OD work in the company. This would publicly have said to the rest of ICI, OD as a body of knowledge and skills is no longer relevant to ICI. Given that Mercer, Dudley, and James were fast trying to move the image of OD away from its more clinical and behavioural extreme to connect more with issues of strategy, business, and organisation, no-one in ICI was able that decisively in the mid-1970s to pull the carpet away from OD.
Dudley’s strategy of organising OD on a company-wide basis as an “informal network based on competence”, avoided any connotation that he was in any sense managing a function which would require publicly stated objectives and accountabilities. Without the need to articulate certain strategies or tasks as priority areas for OD work, Dudley retained control of the development of OD in the company in a way that gave him maximum room for personal freedom to grasp opportunities as and when they presented themselves. Some of his superiors and peers eventually were to criticise Dudley for what they would describe as the “laissez-faire”, “expediency”, and “opportunistic” manner in which he interpreted his central role. When by 1980 the topic of Dudley's successor was being openly discussed in ICI in the context of massive internal change, a widely held view was that:
Dudley’s successor should manage, not co-ordinate, actually manage the creation of appropriate levels of new OD resources in the company, and manage the interface between the needs of board members for OD support on the one hand, and the supply of these services from the inside or the outside of the company on the other.
Someone was actually appointed in 1980 as Dudley's successor but he retired after about a year because of ill-health. When Dudley himself retired at the end of 1982, he was replaced by the former personnel director and director of change of Mond Division, Nicholas Mann – of which more later.
Earlier in this chapter it was argued that while Mercer's professionalism and skill earned him the unique access he had to individuals on the ICI main board covering the period of four Chairmen, a factor in both his and Dudley's survival was their mutual dependence on one another. Dudley needed Mercer to keep OD methods and ideas alive on the main board, and to counsel and support the change group on the board, and Mercer needed Dudley to manage his continuing access into the diaries of the top group of executives in ICI.
In terms of activities Mercer was capable of being an individual counsellor, an information transmitter, a problem diagnostician, an advisor on the process planning of key meetings and change interventions, a process observer of meetings, a provider of expert inputs from the academic world, and anonymously from other large firms, and a high level trainer. He explicitly saw himself as an outside, and clearly trusted doctor, in a doctor–patient relationship where help could be provided under the controlled and safe conditions of a role-to-role, rather than a person-to-person, relationship. His approach was:
A low key kind of consulting, not very flashy, so it's not very painful to the client . . . my style is to honour or support what and where people are, and to watch out for getting sucked into distortions. I'm in the perspective business. If I went in and passed on all the terrible things going on in the universe I would be out of business. I am constantly trying to empower people, use my influence, brains, outsideness to help them to work towards using their own potential, and to unblock where that's not happening.
Another central tenet of Mercer's approach was to keep his level of visibility in the ICI system low:
In this kind of consulting there's an inverse relationship between the effectiveness of an intervention and who knows about it. So if your needs for money, rewards, fame grow out of feedback about your performance, or grow out of visibility, you better get the hell out of this racket.
Mercer’s approach in relating to the top people in ICI was very much on an individual-to-individual basis. He refused to attend board meetings,4 arguing “that the degree to which the consultant provides value-added is overshadowed significantly by the over-potency of the consultant at the meeting”. A close observer of Mercer's consulting style noted that only Mercer and Dudley had a copy of Mercer's programme of contacts on his visits to ICI so that “no-one else could see who Mercer was seeing and get at them beforehand”. Mercer's approach to the executive directors closely mirrored the one-to-one style they preferred for relating to one another. As one of the executive directors put it:
Ron helps by dropping round and cross-pollinating, doing good by stealth.
While individual executive directors remarked “that without Ron Mercer ICI wouldn't have got interested in OD at all”, there was the same sense of questioning about Mercer as about Dudley – with all that skill could their contribution not have been tied down and managed more? Could Mercer not have related to the ICI main board, not through a set of individual relationships, and doing good by stealth, but through a set of agreed business-related tasks?
Now if you're going to employ a resource like Mercer, I would like to have hoped that the Chairman would say to him “look Ron, this is where I am trying to move the board, this is where I see my problems”. Now what do you think you can do to help this? And at a minimum you ought to use him as a sounding board – “Hey, we're a bit worried here” – it's not sort of pulled together. Nobody pulls all that lot together and says “right what comes out of all that?”
Asked what learning about the organisation and use of OD resources Mercer had taken from his ICI experience he commented along lines very similar to the above executive director:
If I was starting over I would build a network of three or four outside consultants, managed from the inside and I would require linkage between inside and outside consultants. I would have periodic, at least twice a year, meetings of the system sharing experiences, developing strategies. I would manage the process quite differently, and have recommended they manage the process quite differently than the laissez-faire motive and the expediency motive . . . It wouldn't therefore just be creating an OD network for technical and clinical stuff, but around OD strategy and its relation to the business.
If the above points about personal background and experience, bases of credibility, personal working style, and strategy and organisation for doing OD work, indicate some of the reasons why Dudley, James, and Mercer were able to survive and continue to work at senior levels in ICI when as far as the main board was concerned between them they never had more than two or three active political sponsors; what can be said about the impact of OD methods and resources in the period 1973–82?
One way of thinking about the development of an organisation over time is to regard change as a natural process combining elements of external pressure and internal management action. In this process four stages may be discernible.5
1. The development of concern by a subset of people in the organisation that, possibly as a result of environmental change, the present stage of the organisation no longer is compatible with its operating environment.
2. The acknowledgement and understanding of the problem the organisation now faces, including an analysis of the causes of the difficulties, and alternative ways of tackling those difficulties.
3. Planning and acting to create specific changes in the light of the above diagnostic and objective-setting work.
4. Stabilising the changes made by detailed and careful implementation plans which include how the organisation's reward, information, and power systems reinforce the intended direction of change.
Thinking back to the pattern of events described earlier in this chapter, it is clear that for much of the 1970s those that were pushing for change in ICI essentially were locked into a process which encapsulated the first and second of the above two stages.6 For reasons already described, the planning and action stage had to wait until the business crisis of 1980–82, and the stabilisation process will stretch on into the mid and late 1980s. No doubt the stabilisation processes necessary to absorb the changes of 1980–82 will themselves be overtaken by further environmental change, and if the cultural changes intended in the early 1980s revolution work – more assertive and entrepreneurial management action.
In assessing the impact, if any, of OD methods and resources in the above long-term process of change two overriding points should be made. Firstly, as we have seen, Harvey-Jones was and is the biggest single intervention in ICI in the OD field. Secondly, aside from questions of impact, what is unique about the ICI experience of OD in the United Kingdom is that internal and external OD resources have been involved at all in processes of strategic change where the targets for change have included the role, size, and mode of operation of the main board, the senior operating structures and systems of the ICI group, the relationships between the main board and the chief executives of operating units, the merging of divisional organisations, and the attempt to change the management culture of senior levels of the company.
On the question of impact, in broad terms specialist OD resources have been involved in stages 1, 2 and 4 of the above processes, but have been largely excluded from the planning and acting stage. Throughout most of the 1970s the role that Dudley, Mercer, and James played was to help Harvey-Jones and others to raise the level of concern and dissatisfaction with the status quo in ICI, and to help create flows of information, meetings, organisation mechanisms, and processes whereby a critical mass of senior people in ICI then began to acknowledge that questions of organisation, systems, and management culture and processes were legitimately connectable to issues of business environment, strategy, and business survival. Dudley's paper “A Look at ICI in 1974”, Mercer's “bad news” meeting in 1974 with the outgoing chairman Sir Jack Callard, Mercer's access to the main board, and Sir Rowland Wright's decision to pick up the bad news and set up sensing meetings to draw on views throughout the company can all be seen as part of the development of concern stage. The work done in the mid-1970s to draw the division chairmen together as a more effective advisory group to the main board, the creation of the important mechanism of the Chairman's Group Conference which altered the character of head office – field relationships both continued the process of opening ICI up to the possibility of further changes. The process planning work which went into the board task forces on organisation of the period 1976–77, the process support work on the Pan-European changes of 1978, and the important climate-building and skill-development objectives of the management of change workshops all contributed to the acknowledgement and understanding stage.
However, looking back over this period one is struck by the slowness, the meanderings, the massive inefficiency of this process of change. One of the consultants commented:
The most frustrating experience has been the amount of time and energy it has taken over many years to get the board to function anything like optimally in its decision-making. Another has been the inability of the board to change almost anything – the slowness of things. Another one has been the lack of capacity of Millbank to act as an entity, to make it as active as a division, to try and clean it up.
Only the business crisis of 1980 was able to short-circuit this meandering and often deadlocked process. When action was finally deemed necessary the working up of the plans and the action itself were in the hands of a small group of very senior executives. Depending which group of senior executives were involved in which change would condition whether OD methods were deemed relevant or not. Discussing the formulation stage of the Petrochemicals and Plastics Division merger, Harvey-Jones said:
On the Petrochemicals and Plastics thing we've been working on it for over a year with a group of three division chairmen and three main board directors. I would say we've done that entirely on an OD basis but we have not in fact used an OD resource . . . I do believe I'm capable of organising a process plan for myself now.
Asked what his view of an “OD basis” was, Harvey-Jones replied:
By an OD way I mean we had meeting after meeting outside this building with flip charts, letting it all hang out, hacking about how was the best way of organising it, and what we were trying to achieve, until we got a real head of steam and commitment amongst the six of us, even though the three division chairmen knew that inevitably at least one of them, perhaps two, wouldn't make it.
The above change episode reveals two features about the impact of OD methods by 1980. One is, of course, the fact of some degree of institutionalisation of OD problem-solving processes on the main board of ICI. Unfortunately, even by 1983 that institutionalisation is probably still only confined to Harvey-Jones and Woodburn, the two executive directors of the 1970s who had already been converted to such methods. The bulk of the main board as individuals still remain neutral, to sceptical, to opposed to what are often described as “time-consuming” or “long-haired” processes. The problem still remains for OD that its diffusion is still highly dependent on a patchily spread cast of individuals.
The Petrochemicals and Plastics merger also illustrates the more general point that when it came to the crunch the planning and action about strategic change was perhaps inevitably a senior executive-conceived and designed activity, with the task of stabilising such changes left amongst others to the specialist OD resources. As one internal OD resource commented with some feeling:
OD has been more involved in picking up the pieces after the revolution, and not in the shock troops for forming the strategy of change. The personnel department deals with the human driftwood, and the OD people get involved in training others to accommodate to the new situation, to understand what's been done to you – you have no part in formulating what's being done.
This feeling that OD could only be used, had only been used to try and influence the climate for strategic change, and then to assist processes of accommodation and stabilisation after the change, led one external consultant to conclude “that efforts in OD are basically cosmetic, health maintaining and not health inducing”. One of his internal OD consultant colleagues had a similar way of reviewing the limited cultural impact of OD at the highest levels in ICI when he concluded:
I think in circumstances which are not panic circumstances we have marginally improved our ability to relax, and think more effectively about problems. But in panic situations, about panic situations, we've probably learnt nothing.
Continuity or change?
Stewart Dudley retired from ICI on 30 November 1982; he was followed 6 months later by Tom James. Ron Mercer is creeping towards his mid-60s and the question of any successor to him is being asked in terms of what are ICI's continuing needs at the highest levels for external consultancy help on matters of strategy, organisation, and change?
Nicholas Mann, supported by his successes in Mond Division, but suspecting that his job wouldn't exist and he woudln't have been in it had Harvey-Jones not been ICI Chairman, is now faced with the task of creating a role and a power base for himself as the central OD resource for the ICI group. Given the rate of change in ICI in 1983, there is no shortage of work to do in implementing and stabilising present changes, never mind thinking of organisation and employee development for the rest of the 1980s. At present Mann has taken on the operational management role as project manager of the move from Millbank to the new, but as yet undefined, London headquarters. This managerial task is clearly bringing him into regular contact with senior people on a matter of signal importance to the ICI group. His stance is already different from his predecessors, but these are early days yet. Given the history, will he find there is a job for him to do, and will he be able to fashion the circumstances to allow himself to do it? Certainly the lessons of ICI's history indicate it will be a number of years before the impact of this new role could become apparent in the ICI group.
1 Harvey-Jones had held this portfolio since 1973, and it had provided a lot of the legitimacy for his activities to create organisation change.
2 The name was changed from Central to Group Personnel Department in 1978.
3 By the Summer of 1983 the ICI main board was composed of a Chairman, 7 executive directors and 6 non-executive directors.
4 Mercer may not have been invited to attend the full meetings of the ICI main board. He has attended various meetings of the executive team which is a group including the Chairman and executive directors.
5 This four-stage process has been developed by Steward Dudley.
6 In Chapter 11, page 473, an initial stage of problem sensing is added to the above four-stage process. It is clear that those pushing for change in ICI were much concerned with signalling and legitimating certain problems as worthy of top-level discussion and decision.