Radical Organizational Change

1. Radical Organizational Change Presented by Amanda Hinojosa

2. Radical change Focus on whether and how an organization can move from one organizational form to another

3. Background • 1960s-change seen as non-problematic, assumed it would happen when necessary • Structural-contingency theory • Strategic choice theory • 1970s-change became seen as problematic, highlight obstacles hindering change • Resource-dependency theory • Configuration theory • Institutional theory • Ecological theory

4. Background • Organizations reactive, environments determinant • Structural-contingency theory • Institutional theory • Ecological theory • Organizations proactive, can shape their environment • Resource-dependence • Strategic Choice

5. Theories of Organizations 1960-1985 • Structural-contingency theory • Strategic Choice • Configuration Theory • Behavioral Theory of the Firm • Resource dependence • Ecological Theories • Networks

6. CHANGE according to:Structural-Contingency Theory • Organizations out of alignment will move to gain a better fit • I.e. if environment becomes uncertain, organization will become more flexible

7. CHANGE according to:Strategic Choice • Organizations are driven by their contingencies • Executives have minimal discretion in designing their organizations • Organizations can choose not to adapt (Child, 1972) • Critique: Donaldson (2001) says evidence disconfirms strategic choice: choice over structure is limited

8. CHANGE according to:Configuration Theory • Miller and Friesen 1980; 1982;1984; Miller 1981; 1982) • Strategies, structures and processes should be considered holistically • Orchestrating themes • Momentum and Simplicity work against change

9. CHANGE according to:The Behavioral Theory of the Firm • Cyert and March (1963): How organizations adapt to their environments • Adaptation to shifting circumstances is normal • Change is evolutionary (not dramatic) • Firm’s history, encoded in its routines, shapes and reproduces its responses • Elaborates the routines used by organizations as they seek alignment with their context and explains why radical change occurs less frequently than convergent change • Gives precision to why change happens • Identifies the importance of aspiration defined performance feedback • The theory underlines that organizational adaptation is dynamic, an ongoing consequence of organizational learning.

10. CHANGE according to:Resource-Dependency Theory • Pfeffer and Salancik (1978), Aldrich (1979) • Acknowledges the interaction of market and regulatory structures. • Organizations attempt to control their contexts • Connects exogenous shifts to 2 intra-organizational dynamics • Cognitive frames of senior executives • Distribution of power between functional groups • Focuses on the economic context, introduces importance of regulatory structures

11. CHANGE according to:Neoinstitutional Theory • Tolbert and Zucker (1983) • Process model of change (pre, semi, full institutionalization) • Institutionalized norms and values affect the choice-set and choice processes available to organizations • Level of focus is the organizational field • Recognition that insititutionalized structures embody patterns of power and privilege.

12. CHANGE according to:Ecological Theories • Structural inertia theory—timely organizational adaptation is difficult to achieve • Routines lead to reliability but also make organizations resistant to structural change • Macro-contextual factors interact with organizational actions to constantly produce novel organizational forms • Specifies the exogenous variables that affect organizational alignment and shape organizational performance • Ability of organizations to achieve adaptive change is not evenly distributed

13. CHANGE according to:Network Theories • Reinforces that organizational change cannot be understood without giving proper attention to the interorganizational network level of analysis • Ability of organizations to change is affected by their embeddedness within a network of organizations, which affects speed and content of change • New organizational forms are likely to arise from the periphery of the field because central organizations are more caught within the reproductive network of exchanges

14. Three Theories of Change • Punctuated Equilibrium • Determinants and locus of change • How manage organizations manage change • Neo-Institutional approach to change • How changes occur in the choice-set of available forms • Continuity and change • Change at the organizational level

15. 1. Punctuated Equilibrium • Periodicity of change • Dynamics of Change (Why does change occur and where) • Whether organizations can adapt (what are the enabling factors?) Tushman and Rosenkopf 1992

16. Periodicity of Change • Technological discontinuities punctuate and destabilize prevailing market practices • Era of ferment where competing expressions of the new technology struggle for adoption. • Dominant design emerges • Incremental changes improve the dominant design

17. Dynamics of Change • Why organizations change? • Technological discontinuities that destroy or enhance the competence of existing firms (Tushman • Where change occurs • Competence-enhancing technologies more likely to originate from incumbents • Competence-destroying technologies are promoted by new start-ups

18. What circumstances enable or constrain organizational adaptation? • Organizational forms- the ambidextrous organization (O’Reilley & Tushman 2004) • Separate structures used for exploiting current technologies and facilitating breakthrough technologies • External integrative capability—identify and synthesize knowledge from outside the firm • Complementary assets such as marketing and distribution systems or service networks (Teece 1986) • Enables orgs to ‘buy time’ for adaptation

19. 2. Neo-Institutional approach to change • Approaches radical change as change in the range of socially legitimated forms • Notes the differential embeddedness of organizations within fields—proivdes clues to locus of institutional entrepreneurship • Articulates the role of theorization in the legitimation of new forms—explicit attention to use of language • Addresses why some organizations change and others don’t by pointing to intraorganizational dynamics that link organizations to their context and direct their responses to it

20. Stages of Change • Institutionalization • Deinstitutionalization • Arises from precipitating jolts or endogenous sources (i.e. contradictions) • Pre-institutionalization • Localized institutional entrepreneurship (peripheral players) • Emphasis on pragmatic legitimacy • Theorization • Process whereby new organizational forms gain legitimacy and how renegotiations of meaning take place • Diffusion

21. 3. Continuity and change • No single theory of change, because orgs are different in their specific contexts and histories • Content of change-the what of change • Characteristics of the change • Outer and inner context- the why of change • Outer-economic, political and social environment • Inner-capacity of organization to recognize the need for change and to formulate & implement a response • Process-the how of change • Actions, reactions and interactions of the various interested parties as they negotiate around proposals for change

22. Change is problematic because: • Cognitive frames that blind org. members to the need for change • Modern organizational forms are more complex than predecessor forms • Holistic nature of organizational systems • Multiple parts of the org. have to move before performance benefits begin to be realized

23. Will change occur? • Change will not occur without sustained market or institutional pressures • Pressures must be recognized by skillful leaders who prepare organizations for change by delegitimating existing frames and legitimating new ones • Leaders must juggle between persuading members to change and making change occur speedily

24. Leadership processes • Effective processes include simplifying mechanisms that guideand stabilize progress towards change • Leadership has to recurrently simplify the purpose of change (why) and the processes of achieving it (how)

25. Current questions about Change • What are the dynamics that precipitate change? • Where do new organizational forms arise and how is the choice-set of socially approved organizational templates extended or revised? • What are the temporal and organizational processes by which change unfolds? • Can change be successfully managed, and if so, how?

26. Emerging questions • In what ways do institutional and market structures interact with each other? • What are the consequences of change? • Where and how do new organizational forms arise? • To what extent and by which means can organizations exercise choice between choice-sets? • What are the consequences of organizations moving within a choice-set? (i.e. vertically integrated M-form to geographically dispersed organizational network)