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Change Management

Change Management. Lecture 4 What changes in organizations. Scale of Change. Not all change is the same magnitude First-order change: Incremental To maintain and develop the organization E.g. continuous and smaller changes to the structure of an organisation Second-order change:

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Change Management

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  1. Change Management Lecture 4 What changes in organizations

  2. Scale of Change • Not all change is the same magnitude • First-order change: • Incremental • To maintain and develop the organization • E.g. continuous and smaller changes to the structure of an organisation • Second-order change: • Transformational • Fundamentally changes the way an organization functions • E.g. downsizing

  3. Nadler and Tushman Incremental Discontinuous Anticipatory Reactive Tuning Reorientation (frame bending) Adaptation Re-creation (frame breaking)

  4. First order – personal initiative • According to Frohman, not enough attention has been paid to the overall impact on organizations of small-scale changes and the role of personal initiatives • Technological leads are short-lived • What is most important is people who are able to identify relevant, innovative (local) organizational changes • Go beyond their job, strive to make a difference, are action-oriented, focus less on teamwork more on results • Managers tend to want to go for the Big Bang theory of change and ignore front line performers • Vaill calls this unlocking the ‘latent energy’ of the organization

  5. First order – Adapting local routines • Feldman • Routines have traditionally been seen as static and in need of disruption through transformational change • Feldman argues that routines are in flux and can be a first order source of change because: • Past outcomes fall short of aspiration levels • Performance exceeds aspiration levels • Different people place their own interpretations and actions on how a routine should occur • Therefore, routines evolve over time and have aspects of stability and flexibility • Do we buy this argument? What are the implications?

  6. Types of transformational change • Type 1 • Moving from an entrepreneurial to professional management structure • Type 2 • Revitalization – same business but increasing efficiency and/or effectiveness • Type 3 • Visionary – fundamental change of the business model

  7. Examples of transformational change • Strategies • Delayering • Networks/alliances • Outsourcing • Disaggregation • Empowerment • Flexible work groups/project-based organizations • Short-term staffing • Reduction of internal and external boundaries • Questions • How prevalent are these practices? • Are some practices more prevalent than others? • Are old routines replaced, modified or co-exist?

  8. Downsizing • Key points • Common – millions downsized every year • Does not necessarily lead to increased profit/productivity (2 in every 3 cases failed to generate benefits) • Short term share price spike, long term loss of value • Can be an excessively costly exercise ($7K per $30K employee) • Key challenges: • employee retention, survivor syndrome, communication, due diligence, cultural adjustment

  9. Technological change There are a variety of new technologies and techniques being used, for example: • CRM, ERP, RFIDs, BPR, Six Sigma • Key challenges • Piloting, integration, timing, technology choice, communication, training,

  10. Mergers and acquisitions • Key points • Many rationales for acquisitions • Usually to achieve growth and/or synergy • Low success rate (~30%) • Key challenges • Cost savings, cultural adjustment, due diligence, employee retention, power structure, communication

  11. Between First and Second Order Change • Mid-range changes • Overcomes inertia but is not revolutionary • Avoids the alarming (high stress) implications of large scale change • “tectonic change” • Destroy outdated elements but keep the good ones • Punctuated equilibrium • Traditional view: Long periods of stability followed by short bursts of change and instability • Robust transformation • Change is continuous • May be permanent or temporary (we don’t know) • Develop dynamic capabilities to respond to any situation (experiment)

  12. Questions • How do you approach the paradox of change? • Is the risk of failing less risky than not changing? Is this a good assumption for all changes that you undertake? What criteria can you develop to assess this balance? • Traditional organizational practices • When should they be replaced? Retained? Modified? • Are you more open to transformational, tectonic, or incremental change? Why? • How aware have you been to sense-making routines? How might knowledge of sense-making assist you?

  13. Nestle Case • List examples of first and second order change in the Nestle case. • B-L emphasizes the need for incremental change – is this what he has done? • Explore the differences and similarities between his views about change and yours

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