Chapter 13 – Management of Change

1. Chapter 13 – Management of Change The Management of Change It is argued that, while people accept that change is inevitable, most prefer change to be continuous, predictable and comfortable. for a modern organisation, the process of change is characterised by discontinuity and unpredictability. The Concept of Organisational Change Taking an existing organisation, altering it and establishing a new or altered form. Changes occur due to pressures from: - Structure - Activities - Policies - Behaviours - Processes - Culture SCSC Year 12 Business Management . Weebly . com

2. Chapter 13 – Management of Change The Concept of Organisational Change For Change to be successful the following components must be present and occur smoothly: - Vision - Values - Strategy - Resources - Capability - Motivation - Feedback There are a number of emotional stages of change for employees and the more an organisation accepts and understands this, the easier the change process will be.The four (4) stages of change for employees are: 1. Negotiation – employees deny the change, ignore it or panic 2. Self-justification – employees give reason for resisting or oppose the change 3. Exploration – this may involve a SWOT analysis or some type of cost benefit analysis 4. Resolution – This is when an employee focuses on the future and are positive about opportunities. SCSC Year 12 Business Management . Weebly . com

3. Chapter 13 – Management of Change The Dynamic nature of the internal and external (Macro & Operating) environment as Sources of Change In order to understand and manage change, organisationsneed to examine and understand the pressures for change. There are a number of layers of the environment in which an organisation operates. The internal environment is one that is unique to the organisation itself. Each enterprise will have a mix of internal pressures that includes corporate culture, employees, policies and management styles and roles. External pressures for change can be examined in terms of the operating and macro external environments. These can include pressures on an organisation or an industry. External pressures include: the economic environment, social and demographic changes, environmental pressures, technological advancements, suppliers, competitors, creditors and trade unions. (The internal and external environments are discussed in more detail in chapter 2.) SCSC Year 12 Business Management . Weebly . com

4. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Internal Pressures as a source of change. Management of change is difficult but essential on Large Scale Organisations. However there can be no progress without it, so management must be committed to the change to ensure the organisations success and future, and maintain the confidence of employees, Corporate Culture Policies Management Employees SCSC Year 12 Business Management . Weebly . com

5. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Internal Pressures as a source of change. Corporate Culture If the culture is seen to be inappropriate or negative, management must decide how it can be changed. This may include training and retraining of employees, changes in the way promotion and performance appraisals are completed, and how new employees and managers may be recruited externally in an effort to bring in new ideas, values and attitudes. Policies A change in legislation or the introduction of a new law may require an organisation to comply with these requirements. For example changes to or the intro of new health and safety laws or anti-discrimination legislation will require organisations to review and amend their policies and formulate new ones if necessary. SCSC Year 12 Business Management . Weebly . com

6. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Internal Pressures as a source of change. Management Recent management literature argues that the style of manager, particularly at the top levels within the organisational structure will have a far reaching impact. Some CEOs have started to get out amoung the employees to talk with them, and to delegate many tasks to senior management. It is found that the most effective managers are masters of delegation and have excellent time management skills Employees Employees are an integral part of an organisation and therefore can have an influence on its performance as well as being able to exert pressure on the organisation for changes to areas such as training, performance appraisals and policies. SCSC Year 12 Business Management . Weebly . com

7. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change LSO must respond to forces for change that can arise from customers behaviours, suppliers availability, competitors, work place unions and legislation and other pressures beyond its control if it is to be successful. - Customers - Suppliers - Competitors - Creditors - Unions SCSC Year 12 Business Management . Weebly . com

8. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change - Customers Customers are crucial to the existence and success of an organisation. Any organisation that is not customer-focused will find that its customers will not return, whereas those that value customers and deliver quality service will find that customers stay with them. Changing customer preferences have a direct impact on the organisation. Successful organisationsmake sure they are in tune with the tastes and requirements of customers (both existing and potential). SCSC Year 12 Business Management . Weebly . com

9. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change - Suppliers Organisations can be affected by their suppliers as they are a key stakeholder. Suppliers provide the organisation with the inputs necessary to produce a product or service. If there is a problem with a supplier, the organisation cannot produce its products as inputs are not available. Having a preferred supplier or a good relationship with a supplier may mean the organisation has assured supply of inputs. Some industry sectors, such as the car industry, can have their business activities affected by industrial disputes within the suppliers’ organisations. An industrial dispute at a windscreen company, for example, can mean the car manufacturers, who usually operate on minimal inventory levels, have their production halted by an issue outside their control. SCSC Year 12 Business Management . Weebly . com

10. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change - Competitors Most organisations in Australia face competition. A business, therefore, has to ensure that it can out-perform its competitors. It also means that an organisation cannot rest on its reputation and must focus on product quality, innovation and customer service. Changes may be required if competitors change their business practices, while an organisation wanting to be successful will also have to be proactive and introduce changes to stay ahead of the competition. SCSC Year 12 Business Management . Weebly . com

11. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change - Creditors When a supplier allows an organisation to take goods and delay payment for a period of time, usually a month, it provides a business with a line of credit and allows it to manage its cash flow. The development of secure lines of credit enables a business to operate more efficiently. SCSC Year 12 Business Management . Weebly . com

12. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change - Unions Trade unions represent employees in the workplace. Trade unions may exert pressure for change in an organisation, particularly in terms of a collective agreement (see chapters 10 and 11), which can affect the wages and working conditions within the business. SCSC Year 12 Business Management . Weebly . com

13. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. Operating Environment as a Source of Change Complete Activity 13.1 Activity 13.2 SCSC Year 12 Business Management . Weebly . com

14. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. The Macro Environment as a Source of Change LSO have little to no control over the macro environment. The complexities of this environment must be dealt with in a proactive manner by the organisation. - Economic pressures - Political pressures - Social and demographic pressures - Technological pressures - International pressures - Geographic pressures - Environmental pressures SCSC Year 12 Business Management . Weebly . com

15. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. The Macro Environment as a Source of Change LSO have little to no control over the macro environment. The complexities of this environment must be dealt with in a proactive manner by the organisation. COMPLETE AS A CLASS Economic pressures Political pressures SCSC Year 12 Business Management . Weebly . com

16. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. The Macro Environment as a Source of Change LSO have little to no control over the macro environment. The complexities of this environment must be dealt with in a proactive manner by the organisation. Social and demographic pressures Technological pressures SCSC Year 12 Business Management . Weebly . com

17. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. The Macro Environment as a Source of Change LSO have little to no control over the macro environment. The complexities of this environment must be dealt with in a proactive manner by the organisation. International pressures Geographic pressures Environmental pressures SCSC Year 12 Business Management . Weebly . com

18. Chapter 13 – Management of Change The dynamic nature of the internal and external environments as sources of change. The Macro Environment as a Source of Change Complete Activity 13.3 SCSC Year 12 Business Management . Weebly . com

19. Chapter 13 – Management of Change Forces for Change in Large Scale Organisations Organisationsare affected by change in many ways. To successfully manage or cope with change, organisations must try to become more proactive and look at the driving forces behind change, rather than waiting for the change and then reacting to manage its effects. Driving and Restraining Forces for Change In 1969 Kurt Lewin, a management theorist, developed the concept of force field analysis based in the physical sciences. He developed his theory as a tool to understand problems and effects of change within organisations. He described a problem situation as one where there is a difference between the way things are and the way they are desired to be. Force field analysis - looks at forces that are either driving movement towards a goal or change (helping forces) or blocking movement towards a goal or change (hindering forces) SCSC Year 12 Business Management . Weebly . com

20. Chapter 13 – Management of Change Forces for Change in Large Scale Organisations Driving and Restraining Forces for Change Driving Forces are those forces affecting a situation that are pushing in a particular direction and are supporting the goal or proposed change. They tend to initiate a change and keep it going. If a proposed change relates to improving productivity in a work group, the driving forces may be from a supervisor, incentive earnings and competition. Restraining Forces are forces acting to restrain or decrease the driving forces. These may include apathy, hostility, and poor maintenance of equipment. SCSC Year 12 Business Management . Weebly . com

21. Chapter 13 – Management of Change Forces for Change in Large Scale Organisations Typically, users of Lewin’s model take the following steps: 1  Define the target of change. 2  Identify which are driving forces and which are restraining forces. 3 Analyse the forces that can be changed.4 Develop an action plan on what can be changed. See Figure 13.5 force field analysis (page 296) SCSC Year 12 Business Management . Weebly . com

22. Chapter 13 – Management of Change Forces for Change in Large Scale Organisations Harnessing the Forces for Change It can be argued that an organisation’s ability to successfully implement change can be influenced by whether the change is being driven by restraining or driving forces: 1  When driving forces are more dominant in an organisation, the change is likely to be successful. 2  If the driving forces are met by restraining forces at a similar level, it is likely that the change will not be successful. 3 If the restraining forces are more powerful than the driving forces, it is unlikely that the change will be successfully introduced. SCSC Year 12 Business Management . Weebly . com

23. Chapter 13 – Management of Change Forces for Change in Large Scale Organisations Harnessing the Forces for Change The change process must take into account all elements of the organisation. The organisationcan be thought of as an iceberg – that is, there is more to the organisation than can be seen. The ‘above the water’ part represents the more tangible aspects of the organisation, such as structures, plans, policies, performance agreements and formal business processes. The ‘below the water’ aspects are more difficult to manage and change. These hidden or implicit aspects include people’s aspirations and the feelings of support or lack thereof. Table 13.2 – Examples of driving and restraining forces for change Page 297 SCSC Year 12 Business Management . Weebly . com

24. Chapter 13 – Management of Change Chapter Summary Questions: Question 2 – Pressures on an organisation Question 3 – economic events influence manufacturers Question 4 – Driving and restraining forces SCSC Year 12 Business Management . Weebly . com

25. Chapter 13 – Management of Change The Kotter Theory of Change Management John Kotter is a well-known lecturer and author of books relating to change and leadership in organisations. He states in one of his books about change management: “First, useful change tends to be associated with a multistep process that creates power and motivation sufficient to overwhelm all the sources of inertia. Second, this process is never employed effectively unless it is driven by high-quality leadership, not just excellent management.“ In another of his books he says about change management: “Our main finding, put simply, is that the central issue is never strategy, structure, culture, or systems. But the core of the matter is always about changing the behaviour of people, and behaviour change happens in highly successful situations mostly by speaking to people’s feelings.” SCSC Year 12 Business Management . Weebly . com

26. Chapter 13 – Management of Change The Kotter Theory of Change Management Kotter developed the eight-stage model for understanding and managing change. Each stage acknowledges a key principle he has identified relating to people’s response and approach to change, in which people see, feel and then change. It can be summarised as: 1 Establish a sense of urgency 2 Assemble a group of people 3 Create a vision for the organisation 4 Communicate the vision 5 Empower others 6 Plan to achieve short term gains 7 Consolidate all of the changes 8 Institutionalise new approaches SCSC Year 12 Business Management . Weebly . com

27. Chapter 13 – Management of Change The Kotter Theory of Change Management Kotter developed the eight-stage model for understanding and managing change. Each stage acknowledges a key principle he has identified relating to people’s response and approach to change, in which people see, feel and then change. It can be summarised as: 1 Establish a sense of urgency Inspire people to move, make objectives real and revelant 2 Assemble a group of people who will lead the organisation through the changes. It is important that an organisationgets the right people in place with the right emotional commitment, and the right mix of skills and levels. 3 Create a vision for the organisation It is necessary to get the team to establish a simple vision and strategy and to focus on emotional and creative aspects necessary to drive service and efficiency. This team also needs to clarify how the organisationwill be different from in the past. SCSC Year 12 Business Management . Weebly . com

28. Chapter 13 – Management of Change The Kotter Theory of Change Management 4 Communicate the vision to all within the organisation. It is important to involve as many people as possible, communicate the essentials simply, and to appeal and respond to people’s needs. It is also critical that as many people as possible understand and accept the vision and strategy. 5 Empower others to act on the vision and try to remove any obstacles that may undermine the change process and the new vision. It is important to create a situation that will enable constructive feedback and lots of support from leaders. It is also important to reward and recognise progress and achievements. SCSC Year 12 Business Management . Weebly . com

29. Chapter 13 – Management of Change The Kotter Theory of Change Management 6 Plan to achieve short term gains and wins rather than aim for large instant changes. It is also important to finish current stages and celebrate this before moving on to the next part of the plan and change. 7 Consolidate all of the changes that have taken place and develop employees who can help the change. This phase can simply be ‘don’t let up’ and press harder after the first success. 8 Institutionalise new approaches and create a new culture. Reinforce the connections between the new behaviourand changes and organisational success. To ensure that change is successful in the long term, it is also important to reinforce the value of successful change via recruitment, promotion, and appointment of new change leaders. SCSC Year 12 Business Management . Weebly . com

30. Chapter 13 – Management of Change The Kotter Theory of Change Management Activity: Complete Activity 13.5 In groups of two or three, investigate a recent change in your school or place of employment. 1 Why was the change introduced? 2 How were the students, parents and teachers informed of the change? 3 Report back to the class on the issue. 4 Was the change successful? Give reasons for your answer. 5 Link the change process back to Kotter’s theory. Were the eight stages followed? SCSC Year 12 Business Management . Weebly . com

31. Chapter 13 – Management of Change Strategies for Effective Change Management The majority of people do not like change. While some see change as exciting and welcome a challenge, most people become comfortable with routine and tend to stay in their comfort zone. The uncertainty of change, and of the future, means that it becomes a stressful experience. If organisational change is to be successful, it is necessary to carefully plan and implement appropriate strategies. When people are confronted with the need or opportunity to change, especially when they feel it is ‘enforced’ by the organisation, they can become emotional and so can the managers who try to manage the change. If the change process can diffuse the emotional feelings and objectivity is used by those involved, this will provide the climate for the change to be managed correctly. Strong resistance to change is often based on the history and traditions of the organisation. A change to the way something has always been done in an organisation may be enough for people to see this change in routine as a threat. In these situations, patience and tolerance are required to help people to see things differently. Managers must be mindful of people’s strengths and weaknesses. Before taking action, managers must make time to understand the people they are dealing with, and how and why they feel the way they do. One study by Sabre Corporate Development found that ‘people resistance’ was cited in 76 per cent of organisations as the greatest cause of failure in major organisational change projects. Somers. G, Cain. J, Jeffrey. M.,2011 3rd edition, Essential VCE Business Management Units 3 and 4 SCSC Year 12 Business Management . Weebly . com

32. Chapter 13 – Management of Change Strategies for Effective Change Management Low risk Practices and high risk practices for change When implementing change, organisations should try to use low-risk practices. Low-risk practices include: Two-way communication between manage- ment and employees Empowerment of employees to make decisions Establishment of work teams to implement changes Support for those going through the change. This support may include time and counsel- ling if required. Low risk practices – Participative approach to implementation of change, use of communication, empowerment, work groups and support for those who are impacted SCSC Year 12 Business Management . Weebly . com

33. Chapter 13 – Management of Change Strategies for Effective Change Management Low risk Practices and high risk practices for change On the other hand, some organisations may decide to use high-risk practices. Such practices can include: Coercion and threats to employees who do not agree with the change Manipulation of the situation – for example, information distorted or details left out Use of autocratic management styles where employees are told what to do and there is little or no opportunity for discussion. High risk practices – Autocratic approach to implementing change, involving use of force, threats and manipulation of situations. SCSC Year 12 Business Management . Weebly . com

34. Chapter 13 – Management of Change Strategies for Effective Change Management Read: Figure 13.8 SCSC Year 12 Business Management . Weebly . com

35. Chapter 13 – Management of Change Strategies for Effective Change Management Table 13.3 – Practices to successfully implement change in an organisation This model builds on the ideas of Kotter 1 Educate leaders to ensure that they understand what the change is. 2 Use a ‘systems’ approach to ensure that all aspects of the organisation are considered when planning and implementing change. 3 Use a team approach and involve stakeholders in the change process. 4 Empower managers and employees to make decisions and implement changes. 5 Develop plans, but also allow for flexibility so that they can be changed if required. 6 Acknowledge that there is tension between establishing readiness for change and the need to get people implementing new approaches quickly. 7 Provide training and staff development for those involved. 8 Choose innovative practices that are research based and supported by data. 9 Change can only happen through people. Understanding emotional effects and reasons for resistance is vital. 10 Be prepared for an ‘implementation dip ’things often get worse before improvement appears. 11 Help employees understand the new practices. 12 Seek out ‘paradigm shifters’ and those who are interested in making substantial changes. 13 Take along term view– change takes time. SCSC Year 12 Business Management . Weebly . com

36. Chapter 13 – Management of Change The Role of Leadership in Change Management Managers and leaders of the organisation play a vital role in the successful implementation of organisational change. Leadership is to managing organisations through periods of change or crisis. There are three skills necessary for effective leadership: • diagnosing – being able to understand the situation as it is now and knowing what could be expected in the future • adapting – being able to adapt behaviour and other resources to help close any performance gaps • communicating – even if a leader knows what needs to be done, it is important to communicate this to others. SCSC Year 12 Business Management . Weebly . com

37. Chapter 13 – Management of Change The Role of Leadership in Change Management In the current period of great change and uncertainty for organisations, the role of the leader is of utmost importance. Organisations capable of overcoming the obstacles to change have been identified as having a number of shared characteristics, as listed in table 13.4. (page 303). The leader is a vital component of the change process. In the more ‘traditional’ approaches to change management, the role of the leader was overlooked. Senior management simply announced a change when employees had already concluded that something was going on. The focus and the mindset of the managers was on the long term rather than on how change could be introduced in the short to medium term and with little consultation, evaluation or review. If leaders do not have the skills to articulate strategy, implement changes effectively and keep all staff informed about decisions impacting on them, the introduction of a change can lead to a situation where employees become cynical and begin to resist the change. For change to be successful and sustained, leaders need to focus on building relationships with employees and external stakeholders. By cultivating teamwork, coaching, encouraging diversity, developing talent within the organisationand having open communication, change is more likely to be successful. SCSC Year 12 Business Management . Weebly . com

38. Chapter 13 – Management of Change The Possible Impact of Change on the Internal Environment There are many ways that macro, operating and internal pressures have influenced the structure and activities of organisations. Changes will also occur to the operations and human resource functions of the organisation. Changes to internal environment Structure Business may expand through joint ventures, mergers, takeovers and acquisition Maybe horizontal or vertical integration of the organisation Unprofitable parts of the business maybe sold off Some departments maybe relocated interstate or overseas Flatter organisational structures with fewer levels of management are more likely Non-core business activities maybe outsourced Business operations maybe diversified Some older plants maybe closed SCSC Year 12 Business Management . Weebly . com

39. Chapter 13 – Management of Change The Possible Impact of Change on the Internal Environment Changes to internal environment Corporate culture Changes to the size of the workforce may mean existing employees are negative about the future Changes in tasks and jobs may impact on culture Policy New methods and structure may mean that the organisation develops policies and procedures in areas such as recruitment and selection, training, codes and contracts with suppliers Management styles, skills and roles Effective change may mean the use of consultative and participative styles – use of two-way communication, group decision making and decentralised authority Need for skills such as interpersonal/communicationskills, decisionmaking, delegation and vision Focus on roles of planning and leading through the change process Need for controlling and organising – ensure that the change process has been implemented and evaluated SCSC Year 12 Business Management . Weebly . com

40. Chapter 13 – Management of Change The Possible Impact of Change on the Internal Environment Changes to the Operation Management Function Emphasis on work groups of teams New plant and equipment Introduction of programs such as Total Quality Management (TQM) Introduction of new value-added programs Pressure on organisations to use ‘green’technology to lessen the impact on the environment New technology training and equipment New production methods SCSC Year 12 Business Management . Weebly . com

41. Chapter 13 – Management of Change The Possible Impact of Change on the Internal Environment Changes to the Human Resource Function Down sizing may lead to a reduction in the number of staff Decentralisation of power, decision making and accountability with more emphasis on employees Changing jobs and tasks Employees may become multiskilled HR managers will need to recruit staff with the right skill set, and manage ways to provide career paths and retain talented and skilled employees New ways of performing tasks and training programs maybe introduced Many job descriptions and tasks will change as a result of change with in the organisation Award restructuring and the introduction and extension of collective agreements and industry awards Legislative changes such as occupational health and safety, equal opportunity and affirmative action Appointment of new senior managers, new management styles and new corporate culture SCSC Year 12 Business Management . Weebly . com

42. Chapter 13 – Management of Change READ TABLE 13.6 The Management of Significant Change Issues: Overview of the impact on organisations This will help you to understand more about the issue/topic we will study in more detail in relation to Management of Change. COMPLETE ACTIVITY 13.8 SCSC Year 12 Business Management . Weebly . com

43. Chapter 13 – Management of Change COMPLETE Chapter Summary Questions: 5 –Kotters principles 6 – Impact of leaders on org change 7 – qualities of a good leader 8 – 3 types of changes that may occur in an org 9 – describe High& low risk practices used in Change Mgt 10 – transition period can be a dangerous period! Explain! SCSC Year 12 Business Management . Weebly . com