m a n a g e m e n t 2e H i t t / B l a c k / P o r t e r

1. m a n a g e m e n t 2eH i t t / B l a c k / P o r t e r Chapter 15: Organizational Change and Renewal

2. Learning Objectives After studying this chapter, you should be able to: • Identify the internal and external forces for change in an organization • Discuss the focus of change, including strategy, structure, systems, technology, culture, and staff • Analyze the process managers should use in evaluating the need for change • Describe the process of organizational change

3. Learning Objectives • Explain common sources of resistance during the process of change • Discuss key approaches to overcoming such resistance • Outline the choices managers must make in managing change • Describe the most important elements involved in evaluating change outcomes

4. Learning Objectives • Describe three approaches to comprehensive organizational change and compare their similarities and differences

5. Fundamental Issues of Change • How much change is enough? • How fast should change take place? • How should the need for continual changes be balanced against the need for a minimum level of stability and continuity? • Who should be the major players in change processes, and what should their roles be? • Who, exactly, is likely to benefit and who could be harmed by particular changes?

6. Forces for Change Economic Conditions Legal/Political Developments Technology Developments Managers’ visions, ideas, and actions Employees’ suggestions and actions Social and Demographic Shifts Competitors’ Actions Adapted from Exhibit 15.1

7. Strategy Structure Systems Focus Technology Shared values and culture Staff Focus of Organizational Changes Adapted from Exhibit 15.2 Adapted from Exhibit 17.2: Forces of Organizational Changes

8. Examples of Focus of Changes Focus Examples Strategy • Change from niche market to general market focus • Change focus from individual customer to large corporate customer Structure • Change from a geographic to a customer structure • Implement an international division Systems • Replace batch with continuous flow manufacturing • Change from last in/first out to first in/first out inventory valuation Adapted from Exhibit 15.3 Adapted from Exhibit 17.3: Some Specific Examples of Focus of Changes

9. Examples of Focus of Changes Focus Examples Technology • Update computer systems • Use holography in product design Shared values and Culture • Is implement diversity awareness program • Institute participatory decision making throughout organization Staff • Encourage cooperation through cross-training program • Increase number and availability of training workshops for lower-level employees Adapted from Exhibit 15.3 Adapted from Exhibit 17.3: Some Specific Examples of Focus of Changes

10. Recognizing the Need for Change • Proactive recognition • Effective managers recognize need for change at earliest possible time • Systematic monitoring of the environment • Reactive recognition • Not all change needs can be identified in advance • How and when to react rather than whether to react • Crisis recognition • Distinct threat to success of the organization and the manager

11. Relative Cost of Change High Crisis Cost Reactive Proactive Low Early Late Time when change is begun Low High Problem severity and immediacy Adapted from Exhibit 15.4

12. Process of Change Change goes through three distinctive phases: 1. Unfreezing 2. Movement 3. Refreezing

13. Phase 1: Unfreezing • Habits are strongly patterned ways of behaving • We can also have patterned ways of viewing and interpreting events • To change a patterned way of behaving or thinking, that pattern must be “unfrozen” 1. Unfreezing

14. Factors Causing Resistance to Unfreezing • Inertia • Being comfortable with the status quo • Mistrust • Of those communicating the need for change • Lack of information • About both the need for change and its effects 1. Unfreezing

15. Phase 2: Movement Major determinants of movement • Level of certainty or uncertainty associated with the change • Magnitude of the change 2. Movement

16. Factors Causing Resistance to Movement • Lack of clarity • If change is not clear, people will likely resist • Lack of capabilities • If people lack capabilities, they will probably resist • Lack of sufficient incentives • If negative consequences outweigh positive ones 2. Movement

17. Phase 3: Refreezing • Habitual behaviors and perceptions are strong • Change may not be permanent • After a change is made, actions should be taken to prevent reversion to old patterns • Reinforce the change until it becomes more established 3. Refreezing

18. Factors Causing Resistance to Refreezing • Pull of past competencies • If previous actions were successful, people see little need for change • Non-immediate results • If results are slow, people will resist change 3. Refreezing

19. Forces for Failure Done well Right thing Wrong thing 3. Refreezing 1. Unfreezing Done poorly 2. Movement Adapted from Exhibit 15.5

20. Overcoming Resistance to Change Overcoming resistance to: Create contrast to help employees see differences Provide training and other tools 1. Unfreeze 2. Move Celebrate early “wins” and reinforce successful behavior 3. Refreeze

21. Dealing with Resistance to Change Adapted from Exhibit 15.6

22. Dealing with Resistance to Change (continued) Adapted from Exhibit 15.6

23. The Change Process Planning and Preparation Implementation Evaluation of outcomes Dealing with resistance to change Adapted from Exhibit 15.7

24. Planning Choices for Change How soon is change needed? Whose support will be critical for success? Planning Timing How should the change be communicated? Method How can support for the change be developed? Participation Incentives Adapted from Exhibit 15.8

25. Force Field Analysis Driving forces (examples) Restraining forces (examples) New technology Cost of updating old plant and equipment Visionary leader Employee groups opposed to change Pressure from managers for workers to implement new products Norms that punish risk taking Equilibrium Driving forces = Restraining forces Adapted from Exhibit 15.9

26. Matrix of Agreeability and Influence Potential Key Supporter (if numbers are large) Most Important Supporters High Agreeability Low Least Important Supporters Potential Key Supporters (if they listen to "most important supporters") Low High Influence Adapted from Exhibit 15.10

27. Implementation Choices Technology Shared values and culture Strategy Structure Systems Staff Focus Small Moderate Major Amount Implementation Seldom Often Frequency Slow Rapid Rate Adapted from Exhibit 15.11

28. Evaluating Change Outcomes Collect data Compare outcomes against goals Feedback of results Process • Type of data: • Quantitative • Qualitative • Amount • Cost • Timing Goals, standards and benchmarks to be used in this step must have been set early on in process • To whom? • How? Issues Adapted from Exhibit 15.12

29. Organizational Development (OD) Approach to Change • Organizational development (OD) approach • Strong behavioral and people orientation • Emphasis on planned, strategic, long-range efforts • Focus on people and their interrelationships in organizations • Evolved from T-groups

30. Organizational Development (OD) Approach to Change • Values and assumptions • Basic approach to the process of change • Change agents • Interventions • Behavioral process orientation • Organizational renewal

31. Types of OD Interventions Adapted from Exhibit 15.13

32. Types of OD Interventions (cont.) Adapted from Exhibit 15.13

33. Issues in Process Redesign Objectives Coverage Potential Drawbacks • Reduce Costs • Shorten Cycle Times • Improve Quality • Breadth • Depth • Requires high level of persistence and involvement of top management • Effort may be greater than results • High chaos factor • High levels of resistance Adapted from Exhibit 15.14

34. Process Redesign (Reengineering) • Process redesign (reengineering) • Fundamental redesign of business processes to achieve dramatic improvements • Technology driven • Most successful efforts have both breadth and depth (across units and core organizational elements)

35. Organizational Learning Organizational learning • Occurs in a organization that is skilled at • Creating, acquiring, and transferring knowledge, • Modifying its behavior to reflect new knowledge and insights • Factors that facilitate learning by organizations • Central, core competencies of current personnel • Organizational culture that supports continuous improvement • Organizational capabilities (such as managerial expertise) to implement necessary changes

36. Organizational Learning • Systematic, organized,and consistent approach to problem solving • Experimentation to obtain new knowledge • Drawing lessons from past experiences • Learning from the best practices and ideas of others • Benchmarking • Focus groups • Transferring and sharing knowledge

37. Top Ten Business Processes BeingBenchmarked Adapted from Exhibit 15.15

38. Major U.S. Organizations Using Benchmarking Adapted from Exhibit 15.16