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aircraft, and information systems that will keep the U.S. Navy both at its current size and preeminent in quality in the future.

The magnitude of the change required is very large and will be difficult to achieve. The difficulty is compounded by the fact that the Navy is a tradition-driven organization that has changed only slowly over the years. The entire Navy organization will have to reengineer itself to become more businesslike and cost-efficient. This will require senior leadership to engage all elements of the Office of the Chief of Naval Operations (OPNAV) and second-echelon commands in the change process. Since the fleet forces levy the requirements on the shore-based and support organizations, all of these groups must engage in a consensus-building change process that will establish the desired balance between forces, modernization, and infrastructure. The comprehensive change process must begin immediately.

Significant change, unfortunately, is not a natural process for most people. Most people become very comfortable with the present state that they have helped create. Their contributions have established their sense of self-image and worth to the organization and of their organization to the world. Even when situations and conditions arise that demand rapid, responsive change, such as the budget crises within the Navy, many people are reluctant to take action because they (1) refuse to recognize the seriousness of the threat, (2) are not sure what to do, (3) do not want to give up what they currently possess, or (4) fear the unknown future state. Change must be managed by senior leaders who have a compelling reason to move to a new state, have a clear vision of that future state, and have a plan to deal with the obstacles and impediments that stand in the way of that future.

Fortunately, there are numerous examples of organizations that have successfully managed major change in response to threats to their existence. There are key elements for success that have been derived from these cases. The processes or methodologies used by successful leaders to bring about permanent, lasting change within their organizations have also been identified.

Unfortunately, numerous examples of failure to change quickly and decisively also exist. U.S. automakers in the 1980s failed to recognize the serious threat from Japanese automakers and lost significant worldwide market share that has not been recovered. U.S. commercial shipbuilders failed to deal with the serious cost threats from Japanese, Korean, and other shipbuilders and have essentially become minor players in the world market. IBM failed to recognize and deal with the threat that minicomputers brought to the mainframe computer business and required many years to rebound. Digital Equipment Corporation failed to recognize quickly enough the impact that personal computers would have on the minicomputer business. As a result, Digital Equipment Corporation has been consumed by Compaq, a personal computer manufacturer. The consequences of failure to act quickly can be significant.

In this chapter, the committee highlights the vital role of leadership in mak-

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