Analysis: Monsanto Is Built for Change

The shift in business focus wasn't as important as the shift in day-to-day operations, says Edward Lawler of the Marshall School of Business

Watch the Video…

This may pain some managers at troubled companies to know, but simply going through a wrenching shift in the business isn't enough. So argues Edward Lawler, a management and organizational behavior professor at the University of Southern California's Marshall School of Business. What really matters isn't only overhauling the business model, but remaking the corporate culture, up and down the ranks, so that everyone is prepared for continuous adaptation.

The difference between transformational, or episodic, change, and continual change, is the key distinction in Lawler's book Built to Change, co-written with colleague Chris Worley. And that's the lens through which Lawler views the changes implemented by Monsanto CEO Hugh Grant.

In one sense, Grant did lead what's a pretty classic case of a transformational change, as evidenced by his successful transition of the company from focusing on lower-margin agricultural chemicals to biotech seeds. But more important, says Lawler, who has studied Monsanto for many years, Grant seems to have inculcated a sense of agility that the company was lacking before. "Monsanto's history up until Hugh became CEO was one of episodic mega-changes. And I must say it was not terribly successful," Lawler says. "Under Hugh's leadership, Monsanto transformed itself into a different kind of business—into a business that's built to change."

Pounce on Opportunities

In an era of hyper-competition, when most strategic advantages can be eroded very quickly, Lawler's thesis is that companies ought to be agile enough to pounce on new opportunities—and ditch old ones—when the situation arises. Lawler cites three areas that are helping Monsanto get there: strategic planning, communication, and team-building. "He has not just successfully completed the change of the company becoming a biotech company, from being a chemical/pharmaceutical company," Lawler says. "He has started building an organization that will continue to adapt and change and will not have to go through the kind of sometimes-dramatic, often-failed transformational change."

Lawler notes that the strategic planning methods employed at Monsanto are a best practice. Rather than take three days a year for a huge management retreat, strategic decisions are mulled both at weekly Monday-morning meetings of the top executives and frequent off-sites for deeper-dives. "This usually leads to not only flexibility, but a very core identity that this an organization that changes and can change, and will change as the environment changes," says Lawler. "That is tremendously important to any organization that wants to be adaptive or change-oriented."

Of course, engaging the executive suite isn't enough. While undergoing the massive business model overhaul, Grant made sure to communicate often with employees at many levels. That helps, Lawler says, to get people on board with the strategic vision. It also empowers individuals to be proactive about making decisions, without fear of what top management might say. "[Grant has] created a very nice shared leadership model in the organization," says Lawler. "In those kinds of situations, people don't sit and wait for directions from the top. They take the lead from the top, but they initiate the change."

That empowerment is helped by a smart use of cross-functional teams. Monsanto has started to solve problems by assigning to them temporary teams of managers from different parts of the business—teams that form and break up as needed. "That kind of structural fluidity is crucial because it moves the organization away from a structural model of fixed jobs and fixed assignments," says Lawler.

Hindo is BusinessWeek's Corporate Strategies editor in New York .