History Can Be a Recipe for Organizational Change
In the recent article, “Let Go of What Made Your Company Great,” (Harvard Business Review, April 13, 2016), Vijay Govindarajan raises an excellent question: how is it possible for an organization to selectively forget the past in order to try new things?

Professor Govindarajan rightly notes in "Let Go of What Made Your Company Great", just how contemporary businesses mindsets can become “embedded in systems, structures, processes, and cultures that are self-perpetuating,” making it difficult for an organization to innovate and explore new territory. Within organizations that find themselves stuck in this type of systemic rut, managers are often extremely comfortable with the types of established practices that contributed to past victories. What is an organization to do?

Look to history.

History can provide guidance in two ways: first, by demonstrating that although contemporary circumstances may be new, the organization has undergone major changes in the past; and second, by showing how past practices were rooted in a context that no longer applies.

The organization has changed in the past. In our work with a global management consultancy, we documented the firm’s history to better understand how the consultancy had navigated past economic and reputational shocks. Only by understanding how and why the firm had evolved, senior members of the firm reasoned, could its partners and associates live up to the high standards they had inherited. The firm had grown from humble, Depression-era origins into one of the most influential professional service firms in the world. In the process, it had also survived several near-death experiences.

This private history documented several key turning points, when the firm had been forced to grapple with issues of leadership, knowledge management, and the very fine line between aspiration and hubris. The firm’s values were, in fact, the result of change. They had been formed, shaped, and tested in moments of crisis. Over time, the consultancy had grown more diverse and highly decentralized – shifts in structure and process that helped to empower success and create its reputation. By taking these past changes seriously, the organization was better equipped to adapt current practices for the future.

The historical context has changed. On the second issue – that of recognizing shifting circumstances – consider the case of Pendleton Woolen Mills. This iconic and family-owned American company was founded in 1909 and can trace its origins back six generations to the arrival of Thomas Kay in Oregon in 1863 – just four years after Oregon became a U.S. state. Based on his work with Pendleton, Winthrop historian and archivist Richard Hobbs points out that Pendleton has accommodated changing historical circumstances by operating according to a set of core principles that include promoting alliances with Native American tribes, operating with a vertically integrated corporate structure, producing quality merchandise, adhering to a strong “Golden Rule” value system, and remaining committed to fiscal conservatism.

For more than a century, Pendleton remained true to its corporate identity, while adapting to dramatic changes in the U.S. economy and society. In the 1990s, for example, the consolidation of department stores and increased overseas competition led Pendleton to shift business to retail stores, catalogs, and the Internet. The company’s commitment to reciprocal Native American tribal partnerships evolved to include support for the American Indian College Fund and the use of blanket designs by tribal artists. It pursued new corporate collaborations– with Nike, Vans, Hurley, and Adidas, for example – precisely because Pendleton recognized the need for continual, thoughtful evolution in the face of ever-changing changing circumstances. In very real ways, an appreciation of changing historical circumstances contributed to Pendleton’s survival.