Organization Change AAL & IPS

The case addresses Aid Association of Lutherans (AAL), along with IPS (Insurance Product
Services) its key departments need for organization change in order to stay competitive and be
prepared for the future. Although the seeds were planted in 1982, it wasnt until the change in
upper management (CEO) that the plan achieved maximum capacity. With Dicks experience in
the insurance industry, he set a goal of cutting costs by $50 million over the next 5 years. To
support that, he brought in consultants and set up internal manager teams to develop a vision,
snapshot current standing and understand the gap between the vision and current standing. In
doing so, he addressed the two most important tactical choices for bringing change the speed
and style of change.
1. Speed Although there was a consensus that AAL wasnt operating at full efficiency,
they were still far from a crisis. Dicks vision of cutting costs by $50 mil in 5 years
helped set a pace to bring in lasting change over time.
2. Style AAL used a participatory approach where leaders sought ideas from associates
and lower level managers. Examples can be found ranging from using 100 managers to
draw the vision for AAL to conducting over 200 interviews within the field and at home
offices to find AALs strength and weaknesses.
Hiring Dick (from outside the organization) vs an internal promotion was another tactical choice.
The effect can be seen throughout the implementation of vision as Dick was not committed to
previous strategies and could bring in change faster. Nor did he care about maintaining status
quo. This is evidenced by the fact that in the corporate restructuring 25 of the 26 top positions
were provided different responsibilities.
Although AAL faced internal pressure to change, there was resistance from the employees and
management. The main factor identified for this resistance was the lack of understanding. The
fact that AAL/IPS was not in crisis mode, made it harder for everyone to accept change. This
resistance was overcome by providing the employees a sense of positive dissatisfaction. This is
a common tactic used in the unfreezing phase of a planned change. In my opinion this was one of
the main reasons, the participatory approach was chosen over a top-down approach. Involving
employees made the aspiration-performance discrepancies clear, bringing forth an internal need
for achieving greater results.
Set within the backdrop of much larger change effort of AAL was IPSs desire for a new
organizational design. A change study showed that IPS employees felt
1. underutilized
2. a need to be truly customer oriented
3. excessive growth
4. management had the wrong approach to measuring productivity
As with AAL, IPS received a new department head Jerome Laubenstein. IPS was given
independence from top management and didnt need to present or require approval to make
changes in their department. With the change in management and results of the study provided
ample pressure for ushering in department re-organization. A planned change hoped to

1. provide a flat hierarchy and fewer supervision for IPSs functioning.

2. be more customer oriented - customers included agents (primary customers) and policy
holders (ultimate customers)
3. model participative management - involve more employees in daily functioning and
providing more power to make decisions
4. from a stronger team relationship
The first step in the process for this planned change involved unfreezing IPS from current state.
Management desired employees to buy in to the need for restructuring. They facilitated various
ways to communicate this need. Initially, individual business units were asked to convey this
message via meetings. But this didnt take hold. A later approach included participation by Dick
and Jerry, with groups of 100 employees, to generate interest. This provided a sense of safety to
the employees as upper management participated in the discussion and agreed to the decisions
that came out of it. Moreover, employees were guaranteed employment at AAL. Employees were
provided early retirement but no one was fired.
The second step involved transforming the current structure to match the proposed change. Ten
teams with approx. 125 employees each were formed. They were provided distinct role clarity
which decreased confusion and goof-ups. Most importantly, these teams were self-managing
teams who shared the responsibility for carrying out significant work with almost no supervision.
Everything from the formation of the teams to the physical moving was planned out and
implemented without a hitch. A periodic newsletter re-affirmed the need for a change and gave
updates on the process allowing everyone aware of the status.
The third and final step included refreezing the organizational structure. In order for the change
to set in a supportive compensation system was implemented. Compensation was based on
learning and implementing new value added services and team contribution to productivity while
still rewarding individuals efforts. Another initiative included providing training to the teams
and employees so that they could excel in this sociotechnical management environment. Finally,
a peer (individual) and group (team) appraisal system was set up to satisfy the altered demands
of the organization.
Fortunately, during the whole process there wasnt an inkling of the DADA syndrome.
Individuals (& teams) were ready to take on change as they were the ones suggesting it.
Once everything was set up and the process was frozen, measures were taken to support
continuous improvement. Regular surveys and customer interaction provided success stories.
The Center for Effective Organization was contracted to gauge the effect of restructure on
employee satisfaction and reassess the direction after five years. Progress was monitored using
various individual and team metrics and suitably rewarded. Various relationship techniques were
employed for team building and producing a cohesive workforce. Training and survey feedbacks
empowered the self functioning teams. All-in-all the massive efforts undertaken proved positive
results in getting closer to the customer, empowering employees and getting to the right staff
levels. Its safe to say the pain of change seems worth it.