Business integration in a learning organization: the role of management development. (Management development concepts in learning organization.) Willem Overmeer.

Abstract: The difficulties inherent to business integration were examined based on the case of Citadel Companies, a US real estate development and management company. A brief review was conducted on the role of competence-based concept in the field of strategic management. The use of management development in strategic management is established, addressing the problems on competency integration to develop a meta-competence of integrated competencies that serve organizational purposes.

Full Text: COPYRIGHT 1997 MCB University Press Ltd.

Introduction

During the early 1990s, two ideas -- "core competence" and "learning organization" -- have captured the imagination of practitioners and academics alike and have quickly become ideas in good currency[1,2]. A core competence is defined as an organization-based capability, that combines and integrates the skills of a set of practitioners working across different business units, and creates superior value for a client[3,4]. A core competence is the organizational version of unique individual know-how. A learning organization is defined as an organizational environment that facilitates individual learning which, in turn, is harnessed by the organization[5].

The combination of individuals learning from experience and the integration of individual skills into a competence holds out the promise of organizational learning that provides a competitive advantage. This thinking breaks out of a long tradition of writings in organization theory which raised serious questions about the ability of organizations to learn from experience and to change (e.g. March[6] and many who build on his work). A number of firms have gone so far as to create an overlay of "competence groups", each embodying a core competence, on top of their existing organizational structure designed around function, product and region. For example, Andersen Consulting[7] has identified four groups -- information processing, information technology, change management, and strategy -- each embodying a unique capability that differentiates the firm from its competitors[8].

Increasingly, the organization members embodying those (core) competencies need to work together, combine their efforts in new projects and address emerging needs of the client, customer, consumer or patient. Executives in a number of companies are beginning to realize that combining and recombining competencies for creating superior value in the client system requires the effective integration of these competencies. The knowledge and know-how informing these constituting competencies often need to be restructured and uniquely designed for the requirements of the client system. This is what we call "business integration". For firms like Andersen Consulting, business integration of its own competencies is a must for helping clients to achieve business integration of their competencies, for example through the design of information systems that match the needs of strategic management.

Business integration is also critical in other domains. Increasingly, when firms contemplate strategic alliances, mergers or acquisitions, their managers think in terms of unbundling and rebundling competencies to become a market or industry leader[9]. In internationally operating firms, the integration of a product division manager's perspective and a country manager's perspective is seen as critical for competing in a globalizing environment[10,11]. Finally, when Normann and Ramirez[12] made a bold attempt to reframe thinking about strategy making by introducing the concept of an "offering", which combines the making of a product and the delivery of services related to the product, they stated that a firm should "integrate its own knowledge and that of its customer to discover new ways of creating more value" for the client system. It may amount to "configuring activities in or even into the customer's productive system more effectively".

While the importance of creating knowledge and competencies is getting increasing attention in the field of strategic management[13,14] and a host of administrative and structural prescriptions are forwarded, there is at the same time a long history of research findings in the field of organization theory detailing the difficulties if not impossibility of this kind of organizational learning[e.g. 6]. Very few authors, however, have entered the territory of how executives can effectively integrate competencies in actual practice from a prospective view and how they should address the non-trivial problems they will encounter. There is a remarkable silence among practitioners and academics alike on the micro level of management. Yet it is at this level that integration of competencies and organizational learning actually takes place.

In this paper, I will examine the actual difficulties of business integration by reporting on the findings of a scholarly consulting project. I will start with a brief review of the emerging competence-based view in the field of strategic management. I will then discuss the importance of integration of competencies and identify the common strategies prescribed. Next I will discuss the barriers to integration and focus on defensive routines. The case will illustrate the problems a renowned, medium-sized US real estate development and management company faced when it tried to integrate several competencies as it entered a new market. In the final section, I will draw conclusions for the role of management development, and point to the need to help managers to integrate competencies in real life projects.

The knowledge-based and competence-based view in strategic management

The field of strategic management has made a remarkable transformation over the last decade. From a concern about defending a given competitive advantage and positioning a firm within a changing industry structure[15], the attention focused on how a firm has built resources[16], how a firm can create corporate-based, intangible assets[17], and how a firm should develop organization-based core competencies so as to create and sustain competitive advantage over a long time in a dynamic environment[3,4]. This strand of thinking developed in response to the failure of prevailing management and strategic planning theory which combined a portfolio theory of autonomous strategic business units with (excessive) organizational decentralization during the 1970s[18]. These theories were, in turn, a response to the failed theory of strategic diversification based on the notion of synergy of the 1960s[19]. The assumed synergy, the working together of two or more units in order to achieve an effect greater than the sum of their individual effects, did not materialize[20].

Thoughtful authors within the industrial organization perspective as well as within the resource-based perspective, concerned about helping managers, have increasingly pointed to the compelling forces in economic, technological and competitive development to exploit interrelationships between business units. Porter states that "explicit coordination among business units is, perhaps, the most critical item on the strategic agenda" and he advocates formulating "horizontal strategies" among business units. At the same time, he acknowledges that "the organizational difficulties of achieving even clearly beneficial interrelationships is, perhaps, the single biggest reason why many managers have rejected the concept of synergy"[20, p. 384].

While Porter focused on the integration of activities of various business units based on an analysis of the value chain, Hamel and Prahalad[3, 4] go a step further. They advocate the identification of core competencies that cut across strategic business units within "a strategic architecture" of the firm. The notion of an organization-based competence implies the effective integration of the skills of practitioners located in different strategic business units, each of which is in itself a competence centre made up of skilled practitioners. They acknowledge that business unit managers may hide practitioners who are critical to a firm's core competence and that core competencies may therefore be "imprisoned".

Finally, Mintzberg[21] describes a process of "crafting an emerging strategy" in response to an environmental change by a manager anywhere in the organization. Such a process, described through the metaphor of an individual potter developing a new artistic style through a series of pots, may lead to the creation and development of a new competence. Within an organization, at times of reconfiguration of the overall strategy, such a newly emerged competence needs to be integrated with existing competencies in the firm. The process, according to Mintzberg, only takes place when the existing strategy of the firm has moved so far out of focus with the firm's environment that pent-up tensions within the organization (i.e. among various competence groups) create a rapid quantum leap in which the new strategy/competence may dominate the other existing competencies. As a result of this process, integration of competencies may be (severely) limited.

Strategies for business integration and the requirements of organizational learning

The prevailing underlying perspective for business integration is that of combination and recombination of input factors, resources, assets or competencies, and goes back to Schumpeter[22]. Based on a theory of specialization of work that can be traced back to Smith[23], it holds that in the face of new opportunities, existing resources need to be redeployed into a new configuration matching that opportunity. Theories of modern bureaucracy[24] and organization[e.g. 25,26] provide structural design strategies. In addition, theories of administration and management have tried to specify "integrating mechanism"[27,28] to address differentiation of roles. Porter[20], noting that these mechanisms were developed for intra- rather than inter-business unit integration, lists the following critical horizontal management development practices: "cross-business unit job rotation, some firm-wide role in hiring and training, promotion from within, cross-business units management forums and meetings, education on interrelationship concepts"[20, p. 394]. These practices should come in addition to developing a "horizontal structure", "horizontal systems", "horizontal conflict resolution", a role of corporate entailing among others "sending clear messages" and "setting firm-wide values and strong corporate identities", "internal diversification" and management policies differentiated according to business unit[20, p. 394].

There are, apart from the structural-functionalist approach embedded in the work by Porter, at least two other perspectives on the problem of integration of competencies. One is found in the work of Nonaka reporting on "the ability of highly successful Japanese companies like Honda, Canon, Matsushita, NEC, Sharp and Kao, to respond quickly to customers, create new markets, rapidly develop new products, and dominate emergent technologies"[13, p. 96]. Nonaka puts "knowledge creation exactly where it belongs: at the very center of a company's human resources strategy"[13, p. 97]. He advocates the view of a dynamic interaction between tacit and explicit knowledge in "a spiral of knowledge" based on externalizing tacit knowledge and internalizing explicit knowledge. A critical example is a description of the design of a home breadmaking machine, and how a software designer of an electronic consumer product manufacturer trained with the best baker in Osaka to learn how he kneaded bread. The strategy of becoming an apprentice to learn from a master baker provides access to tacit knowledge but is, in essence, a one way learning process; the baker is not reported to have learned from Matsushita's competence. While this approach is critically important in developing a competence (in this case in designing and manufacturing home bread-making machines), and could be an important step in integrating two competencies, Nonaka does not report how a competence in home bread-making machines could now be combined with another critical competence of the firm, found in a different business unit, for example in the design and manufacture of dedicated microprocessors. While he does emphasize the importance of "self-organizing teams", he does not report on how "team members create new points of view through dialogue and discussion", how "they pool their information and examine it from various angles", and how "eventually, they integrate their diverse individual perspectives into a new collective perspective" in practice. Nor does he report on the non-trivial problems managers may encounter[13, p.104].

A second approach to business integration can be inferred from the work on (top) management teams. The composition of such teams in terms of roles[29], the level of "behavioural integration" between members of the team[30], "the sociocognitive ability" or "corporate mastery" of teams to resolve tensions and dilemmas between conflicting strategic forces[31], influence strategic development style, direction, and performance of a firm. Grounded within a contingency perspective, there is an emphasis on establishing relationships between variables retrospectively rather than on how to integrate different competencies within a team.

While these strategies and mechanisms for business integration provide an organizational context for business integration, they do not address the problems practitioners from different competence groups face from their own prospective point of view when they try to put together their respective competencies and integrate them to the point that new know-how, knowledge and competence is created; that is, to the point that out of different, constituent competencies that may have had conflicting norms of performance, a synthesis develops in the form of a newly emerging competence, a newly emerging organization-based action. (The notion of "synthesis" came out of a discussion with Joseph Lampel.) This is essentially a dialectic and constructivist point of view on knowledge, action and competence.

Barriers to business integration: a competence-based view

The integration of various competencies of a firm so as to achieve a more integrated business proposition that adds superior value to clients is difficult and requires certain kinds of competencies on the part of the practitioners involved. While a process of contagion of tacit knowledge from master to apprentice could work for bread making, increasingly highly trained professionals work together within organizational settings. These practitioners are faced with non-trivial real-time pressures to put their knowledge and competence together and to address highly complex problems composed of multiple, conflicting, unstable demands within the client system. On rare occasions -- often under high time pressure, physical and mental exhaustion, after having tried various other less successful ways of combining their competence, and with their reputation on the line -- very competent practitioners are able to come to see their own and each other's position in a new way, and begin a process of integrating their know-how and knowledge to the point of achieving a new synthesis[32-34]. It requires from these practitioners a competence to undertake experiments on the spot, to probe while acting, and to reflect on their thinking in action, as well as an ability to engage in a conversation about the problems at hand with other practitioners embedded in other competencies.

Such occasions are rare and often defensive actions and routines get in the way. Defensive routines are "thoughts and actions used to protect individuals', groups', and organizations' usual ways of dealing with reality"[35, p. 5]. They can be both productive "when they protect the present level of competence without inhibiting learning", and counter-productive "when, in order to protect, they inhibit learning". According to Argyris, while we often think of "defensive routines in a response to pathological or unjust acts, these are not the most frequent defenses found in most organizations"[35, p. 7]. Undiscussable defensive routines in response to "thoughtfulness, caring, diplomacy, concern, and realism" are "part of the wool and fabric of most organizations" and taken for granted because they are "as inevitable as power, scarce resources, coalitions, and other features of everyday life in organizations"[35, p. 7]. According to Porter[20, p. 402] "simply overcoming cynicism will yield a major competitive advantage".

Being able, under these interpersonal and intergroup conditions, to generate valid information which allows for free and informed choice among those involved, combined with the joint monitoring of further development, is an essential competence for developing new competencies that creates superior added value[35-38]. Specifically, when they feel threatened or embarrassed when the effectiveness of their skills is being challenged, practitioners need to master reflective and interpersonal competencies that combine advocacy and inquiry, patterned on Model Two theory of action, so as not to provoke unnecessarily unproductive defensive actions and routines.

It is at this micro level that practitioners put their know-how and knowledge together and integrate organization-based competencies, either through mere combination and recombination, or through superficial integration, or by achieving a new synthesis that forms the basis for a new competence. The emergence of such a new competence through "de-signing" based on constituent competencies is fraught with problems, even if the common repertoire of strategies of integration are followed. In the following section, I will illustrate and explore these problems through a case study of the Citadel Companies (a detailed study can be found in Overmeer[39]).

Business integration in practice

Citadel Companies is a family-owned and run real estate development and management firm. It is renowned for its sensitivity to community concerns, for its professional management (it attracts managers from the best engineering and business schools in the USA, and has several former professors in its ranks), and for its ethics (it is known as a firm that will not make illegal contributions, regardless of the effect on the business of the firm). The firm's overall mission is to be "an investment builder which owns what it builds and manages what it owns". Top management sees the firm as an entrepreneurial, integrated, real estate development and management firm, which has the basic competencies in-house while at the same time making use of substantial subcontracting.

Throughout the 1970s the firm had focused on two lines of business: low-income housing and luxury office buildings. By the early 1980s it was made up of four competence groups:

(1) Business developers (including the general partners), able to create projects, find investors, and make deals; they had a reputation of "never walking out of a deal", no matter how financially straining a project was.

(2) Project managers, able to "deliver" a project from a concept to its construction; they had a reputation for building "landmarks".

(3) A construction group, able to supervise the building of skyscrapers; they had a reputation for delivering projects in time and within budget, despite numerous and "impossible" design changes.

(4) A real estate management group able to maintain high quality buildings, and able to provide "privileged" planning and design information for new development projects.

Each of these groups not only did projects for Citadel but, at times, also for third parties.

By the early 1980s both existing development programmes in housing and offices were not generating new projects and Citadel had entered the hotel development business and the hotel management business (for a detailed discussion, see Overmeer[40]). The partners hired several executives from a large hotel chain, who had been involved in the development of what they saw as a "revolutionary" hotel concept. It was based on "suite rooms" without much public space and broke with the European tradition of "grand hotels". These new executives had a detailed knowledge about the hotel market and specific locations for new hotels. In addition, Citadel hired very experienced hotel managers who had run large, luxury hotels like the Four Seasons. Towards the middle of the 1980s, the firm's organization included the competence groups detailed in Figure 1.

[Figure 1 ILLUSTRATION OMITTED]

The core competencies of the firm were several, and they were recognized by insiders of the industry who looked at the firm with awe:

(1) It was able to spot trends in the markets early and to respond to those trends by developing landmarks carrying the firm's "signature".

(2) It was able to create high quality buildings that would appreciate in real estate value over time.

(3) It was able to deliver projects in time and within budgets, even when design and budget changes were required mid-way in order to respond to competitive moves or changing regional economic or local political conditions.

These abilities had been shaped into a formidable firm-wide competence by doing over a hundred projects up to the mid-1980s.

Throughout each development project, a core team of managers and engineers from different competence groups work together and pull in an amazing variety of other competencies, either from within or without the firm, during different phases of the project. Team members may work on more than one project at a time. Projects are supervised by one of the top managers, a general partner. Daily management of projects is assigned to a development project manager (from the project management group). The integration of the work of constituent competence groups was critical in bringing to bear the firm's core competencies on the development of a series of hotels in batches of five. Senior executives figured that if they could create a competence in developing (and managing) "first class luxury hotels" and if they could preempt competitors, then they might "ride the wave of the future". It thus became critical to integrate the real estate development competence of the firm and the hotel planning and operations competence of the new hotel group in the sense of developing a new synthesis.

At the senior management level of the firm, among the presidents and vice-presidents of the various competence groups, there was a mutual appreciation of the respective competencies and this remained throughout the episode. At the outset, these managers knew that integration would be difficult, and that conflicts would arise in the field during projects. In order to address these conflicts "in the best interest" of the general partners, various groups, in particular the hotel group and the project management group, had decided that conflicts would be dealt with at the president and vice-president level. In order to make sure that they would be able to work out the conflicts, they had created social gatherings so as to develop relationships beyond the strict business sense.

A critical feature in integrating their competencies was that the project management group had been engaged in one-of-a-kind, landmark kind of projects, while the hotel group managers used to work for hotel chains, replicating a standardized hotel design through repetitive projects. The collaboration of the two groups evolved according to broad and partly overlapping development categories described below. The account of the integration of these competencies is based on extensive discussions with 38 senior and middle managers of the firm.

Exploring

The co-operation started when the president of the hotel group took the senior project manager (PM) (and later vice-president of the project management group) around on a tour to show his design ideas. The PM reported that he immediately sensed that "this was not what Citadel was all about" and that he got caught in "an internal conflict". While the president was "teaching me without me knowing it", "I provided absolutely no feedback and was sort of absorbing". He also believed that the president "was not interested in my feedback".

Deal making

Soon afterwards the president began to acquire sites for hotels. However he did not consult with the PM about the technical issues, even though the latter quickly discovered very expensive errors. For instance, the president acquired a site that turned out to be under water. Because it was winter, the ice had been covered with snow. It required extensive drainage afterwards and increased the development costs. When the PM initially reported his findings to the hotel group, they answered "don't worry, we can overcome it, it's part of the deal".

Planning

Next the PM was confronted with the construction budgets coming from the hotel group. He considered them "a joke from the beginning", attributing to the president fabrication of low numbers in order to have him, the PM, work harder. When the PM presented his budget, the president called it "crazy" because it did not match budgets he was used to while working for a hotel chain. The hotel budget also contained items not related to construction as such (like furniture, fixtures and equipment), and the PM had "no idea how to challenge that number". Under time pressure, he knowingly put up with cost figures that he did not agree with.

Designing

When the design phase started, the PM needed very specific architectural information in order to make a design that could be submitted to the city for timely zoning and approval procedures. The PM, who had worked on building skyscrapers, was unfamiliar with the specific design concepts of hotel projects. When he could not get the technical information from the president (nor his former hotel chain from which the hotel concept was franchised), the PM attributed to the hotel group "a lack of definition" and a lack of competence in operating hotels. He did so even though one of his colleagues sensed that the president was "not really good at visualizing" and could not read the sketches and drawings of the PMs nor could he express his ideas in this medium of the building professionals.

The PM and his colleagues began to see the hotel group's approach as "marketing", i.e. they attributed a shallow knowledge of "cookie cutting" hotel projects. Their distrust was reinforced by the hiring of a senior VP for hotel operations, who the PMs saw as "telling mean jokes and stretching the truth". Increasingly, the PMs began to rely on intermediaries like a hotel architect "who spoke ... design" and a hotel interior purchaser who became "a driving force". They also, at times, began to fill in the design and make certain assumptions without testing these with the hotel group.

Constructing

As the construction process began, two sources of design changes emerged. First, in view of the competitive situation, the hotel planners made changes in the overall strategy, for example, an upgrade in the level of luxury. Second, nine month prior to the opening of hotels, general managers (GMs) were hired for each hotel. Even though these GMs were supposed to accept the design part and parcel, they nevertheless (and understandably) went over the design and budget of their hotel. In a number of instances they held that a design change was "a must" if they were to be held "responsible for the bottom line". While the PMs tried to challenge such changes in order to keep costs down, the hotel group resorted to stating "marketing reasons" which the PMs could not challenge. The PMs felt that these design changes were forced on them and that the changes "destroyed their credibility" in job meetings. While they had initially put up with budgets they did not believe in and had defended the partner's position of "a minimum scope", suddenly there seemed to be "ample money". Either, they concluded, it must appear to others that they, the PMs, did not know what they were doing or they had played politics. As a result, the PMs felt threatened and embarrassed.

In response, the PMs began to make "an anatomy of the process" and concluded that the partner was being "snookered" by fashion sensitive hotel executives, supporting "fads" that would fade away. "These hiccups at the tail end of construction" interrupted and interfered with the "steamroller" of fast track construction at full speed. As a result of this unilaterally arrived-at diagnosis, the PMs dug in and claimed there was no money in the construction budget. In doing so, they made themselves as unconfrontable as the hotel group had done in the beginning. In addition, in an attempt to regain control over the budget process, the PMs instituted a rigorous system for tracking and approving design changes. The amount of paperwork, however, infuriated the construction group managers who felt that they were "watching the ball while it was going". In addition, the architects and the construction managers could no longer sort things out in the field. When the CEO of Citadel and the CEO of the architectural firm tried "to thrash things out quietly" as they had done in the past, they irked the PMs and the construction managers even more. The PMs wanted to prevent the CEO from adding extra costs and to protect their own authority, while also "protecting the CEO against himself".

Operating

When the operating results of the first hotels became available, this in turn led to more design change proposals by the hotel operators. The VP of operations, concerned about the competitive positioning of each hotel, felt that the hotel general manager's "feet were held to the fire" and brought the design changes to the attention of the president who was deeply involved in new deals. The latter decided unilaterally to stem the flow of design changes into his office and "to push the issues back to the field" by drawing on the extensive experience in hotel renovation of some of these hotel general managers. However, the decision was not communicated to the PMs and was against agreed corporate policy. As a result, proposals for minor design changes became battles of will between PMs and GMs, in which each would have his or her position backed up by consultants. Unable to settle on solutions, those issues would then again go up to the VP and president level. However, by this time, the president of the project management group and the hotel group were no longer on speaking terms with each other. It was not uncommon for such issues to go up all the way to the corporate office where the partners felt uncomfortable inquiring into the issue because they did not have the technical knowledge. The CEO of the architectural firm observed that the decisions became "diffused as in the rail road and the post office".

The president of the hotel group acknowledged that the PM and the GM will "make the trade-offs in the field", and will "cross-fertilize". However, he added "nobody knows how and nobody cares". A liaison officer between the two groups reported that as a result of these minor design changes becoming major organizational conflicts, he could no longer address them. He concluded that "we have to live with" the initial design and cast, what he saw as design errors in concrete, only to be removed once the hotel is opened. While "frustrating" and "upsetting", he did not want "to lose any sleep over it". One of the hotel general managers, who had been severely reprimanded by the president of the project management group when he pushed through a design change by using the corporate office, concluded that he could only pick a very limited number of fights with the project managers. The hotel group VP concluded that he needed a budget for renovations right after the opening to correct the design errors.

At the same time, one of the PMs said that as a result of these conflicts, she had learned not to dig in any more and not to pick fights. Other PMs decided to work on projects far away from the head office where they would have more authority.

Upping the ante

The problems increased when Citadel began to develop a large-scale project that required the integration of housing, offices and a grand, luxury hotel in one design. The PM and her assistants had learned by this time: to educate themselves in design aspects typical of such hotels on which the hotel group was, they thought, less knowledgeable, so as to be able to deny "fads"; to use their detailed knowledge of the budget to deny design changes; and to mobilize one of the general partners as their "hatchet man" in dealing with the hotel group.

When, eventually, top management tried to respond to the situation by creating an owners' meeting for each project, where key actors could review the problems, the PMs decided for themselves that they were "not going to use that forum to put somebody [from the hotel group] up against the wall". At the same time, the corporate office discovered that the owners' meetings were used by the PMs as opportunities to expose themselves to the corporate office and as popularity contests. The task of integrating competencies to the point of synthesis began to move beyond the ability of the managers involved. The partners called in their long-time outside consultant.

Epilogue

The firm succeeded in achieving its objective of building at least 15 hotels and creating a hotel chain. It pre-empted its franchiser as well as other regional hotel developers. However, the firm remained vulnerable to unexpected outcomes of the development process. For instance, one of the general partners noted that a hotel project in the "backyard" of the corporate office came out one million under budget while it could have been the other way around. The latter scenario would have generated a terrible financial strain on the firm, and he wondered what might happen in a project several thousands of miles away. In order to reach "a critical mass" more quickly, to spread the higher than expected cost of operating a hotel, and to continue to pre-empt the competition, the firm eventually bought a complementary hotel chain.

Limited organization learning and limited business integration

The managers in action described above were well-intentioned and well-educated. Most of them had left positions in other reputable firms where they believed the quality of the work was not as good as in Citadel. The strive for excellence and uniqueness in the Citadel organization and its partner created great pride; they felt they "could do it differently here". Despite intentions, education, training and experience, the task of integrating competence, critical for excellence, quality and uniqueness, eventually moved beyond their control. Through "cognitive rubbing"[41] they tried to do their best to combine two constituent competencies -- developing unique skyscrapers/landmarks and planning and operating repetitive hotels -- and create a new competence that, if carried out well and timely, would make it possible for Citadel to take advantage of a major opportunity top management has spotted very early. While the company succeeded in its immediate business objectives, there is evidence to suggest that the hotels were more expensive to build and operate than necessary, and that the firm was vulnerable to unexpected financial crises.

More importantly, however, there is ample evidence to suggest that the defensive actions by the PM and the president described above triggered existing, older defensive routines in the firm between the construction group and the project management group. This further complicated the task of development to the point that minor design issues triggered major organizational conflicts wearing out managers, sapping their energy, choking the organization's communication channels, and undermining their creative and entrepreneurial deal making. A renowned psychoanalytically-oriented scholarly consultant recommended repeated structural change so as to "align the organizational structure with the vision, insecurities and &fences of the senior managers". His advice did temporarily address these overt conflicts but the unilateral nature of these interventions (seen by the rest of the organization as unilaterally "changing the ground-rules") created defensive organizational structures and routines that undermined a meta-core competence of the firm -- the ability to respond early, quickly and uniquely to opportunities in the marketplace[40]. Most importantly, these interventions did not address the lack of competence on the part of the PM and the president to address and work through their differences productively right from the beginning. A careful study of past organizational problems revealed that the dynamics occurring in the 1980s were also prevalent during episodes in the 1970s and 1960s.

The firm achieved a new combination of two constituent competencies and achieved an integration of these two competencies in the sense of actually building hotels (physical integration) and of setting up a viable hotel development and management group (organizational behaviour integration). However, the degree of synthesis, in the form of integrating knowledge and know-how to the point of creating a competence that was uniquely and timely matched to the emerging market niche and based on a unique interpenetration of two competencies, leading to superior added value, was questionable. Moreover, the meta-competence of the firm to undertake such an integration when a new opportunity will arise, is, very likely undermined. Hence, Citadel displayed organizational single-loop learning, an accomplishment all in itself, but at the expense of its ability to engage in organizational double-loop learning.

From integration to synthesis

In order to create a learning organization that is able to engage in organizational double-loop learning which in turn can lead to high quality business integration (more synthesis), the members of the firm have to learn to address the defensive dynamics, described in the case above. These dynamics tend to undermine the very competence they need most in order to sustain competitive advantage -- a meta-core competence to integrate existing competencies to the point of developing a new synthesis uniquely and dynamically matched to an emerging opportunity.

It is important to make several caveats at this point. First, a synthesis may not be developed during the first project, and may take a series of projects. Second, a synthesis may not last for a very long time. Finally, such a synthesis does not imply fully integrated knowledge in one person, or knowledge replicated in all individuals involved in such a competence.

The lack of synthesis at a level of competence, at a level of action, is often clearly visible for appreciative customers, clients, and users, even though they may not express it. For instance, Argyris (personal communication) found that clients of consulting firms often saw the lack of business integration in the work of such firms but chose not to comment on it because the clients themselves have experienced the difficulties of business integration and see those difficulties as endemic and intractable. Thus, defensive routines of a client firm may interweave with those of the consultant firm.

In addition, there are other caveats. An integration of competencies into a new competence does not mean the creation of replicable knowledge in the form of mere application or in the form of an algorithm. Nor does it mean integration of constituent competencies to the point of a one time integration only (as this would not constitute a new competence) although the first project in what might be a newly emerging competence may have such a characteristic. Finally, synthesis into a new competence does not mean the complete elimination of errors, inconsistencies, differences and conflicts, particularly if the competence develops in response to an evolving situation and the development of a competence takes on the form of a strategic probe[42]. It means that at the core of the diversified business is a transition towards "less simplicity, greater ambiguity, more subjectivity, and potentially more conflict"[20, p. 415].

It is not uncommon to view the integration of competencies as a process of incremental evolution towards a new competence, carried out by a population of firms each engaging in design variation and mutation (see for example, the development of the VCR[43, 44]). It is also not uncommon to find the view that it is likely that better knowledge of the overall process of development and better use of all kinds of organizational mechanisms and devices for facilitating integration will help integration (see[42, 44]). The case described above indicates that distinct individual competence would greatly facilitate the integration process. This competence is twofold: the competence to hold one's own competence as a subject of inquiry through reflection in action[33]; and the competence to go beyond a private process of reflection and publicly (meaning within a setting with relevant and competent actors) to advocate, test and inquire into one's own positions and those of others[35,36]. The ability to experience, acknowledge and use one's surprise in action are at the core of this competence[39].

Management development in action and business integration

Management development, then, could make a contribution to the field of strategic management by focusing on how to address the practical problems of integrating competencies in such a way that new competencies can develop earlier, faster and better, while such competencies remain at the same time subject to joint inquiry, refraining and reshaping. In particular, management development could focus on the real life predicaments which practitioners face in action while they try to create new knowledge and to develop new competencies, in particular in an evolving and shifting business context. Thus, management development could specifically help in developing an organization's meta-competence of integrating competencies.

To do so, individual management developers will have to inquire into the actual problems managers experience as a result of prevailing strategies for integration of competencies. In helping to frame and address these strategies, management developers will have to help practitioners above all to invent and produce solutions in action so as to deal with the considerable defensive actions and defensive routines in organizations these practitioners face, and to which these practitioners themselves may contribute. In doing so, the management developers will have to engage themselves in the specifics of the situation, into the content of the practitioner's work, and bridge the often found separation between "content" and "process" in practice, and between "strategy" and "organizational behaviour" in academics. This compartmentalization is often grounded in defensive reasoning itself.

It is not unlikely that management development in many organizations has developed as a competence, much like in Anderson Consulting "change management" had developed into a fairly autonomous competence group. If that is the case and management developers would like to focus on helping the rest of the organization with the integration of competencies, then management developers themselves would have to face the task of integrating their own competence with other competencies. In bridging what is often construed as an issue of "content" versus "process", of "line managers" with bottomline responsibility versus "staff", management developers both working from the inside or outside may find out how they themselves contribute to the maintenance of the defensive routines in organizations, as briefly illustrated in the Citadel case with the psychoanalytically-oriented scholarly consultant.

As they learn to deal more competently with these defensive structures and how to reflect in action and publicly test, inquire and advocate, management developers will engage themselves in the real life issues practitioners face. By helping practitioners surface and reflect on their thinking in action, such as the way they frame a problem, they may interpenetrate the knowledge and competence of the managers they work with. By trying to integrate their own competence into the integration process of competencies, they will (have to) display the same kind of meta-competence to integrate competencies as they try to help managers achieve. Rather than developing managers outside the action context, they may have to step into the action context with the managers, and engage in management development in action. If they accomplish this successfully, the managers with whom they work may develop the same competence for management development in action and help colleagues in specific situations. In such an event, management development will have contributed to the development of the meta-core competence of the firm - i.e. its competence to integrate competencies into new competencies to the point of syntheses that lead to superior added value for the managers involved.

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