Chapter 12 Effecting Organizational Change

1. Chapter 12Effecting Organizational Change

2. Scope of Chapter 12 The challenge of organizational change Context of change Varieties of organizational change Transformation and change Process of change Issues in planning change Balancing demand and capacity for change Business process re-engineering

3. The Challenge of Organizational Change • Companies now need to make organizational changes almost continuously • Change today relies less on top management plans and more on initiatives taken throughout an organization • There are many barriers to accomplishing successful change. Many attempts at change fail.

4. The Context of Change External Drivers Globalization, including opportunities for entering new markets, reconfiguring value-chains Hypercompetition and threat of new entry New institutional constraints in areas such as corporate governance, environmental protection Internal Drivers Strategic choice to opt for: market leadership innovation above average returns

5. Capability to Renew and Transform To avoid hazards and/or capitalize on opportunities, firms have to: learn adapt innovate This requires the capability to: implement changes from time to time, undertake a more fundamental shift or renewal: “transformation”

6. Varieties of Organizational Change • How radical is the change? • Is the change planned or emergent? • What is the focus of the change?

7. How Radical is the Change? Robert Marshak identifies metaphors for four levels of increasingly radical change: • Fix and maintain • Build and develop • Move and relocate • Liberate and recreate

8. Planned or Emergent Change? Planned change • A new set of organizational arrangements and the process for moving toward them are articulated in advance • Normally top-down Emergent change • A continuous and decentralized process of learning from experience and adaptation to new circumstances • Initiatives can come from any part and level of the organization

9. What is the Focus of the Change? • All changes, even those in a specialized area of activity, have impacts on other parts of an organization • The question of focus is therefore most usefully framed in terms of where to start the change. Some changes may start small (e.g. as pilot projects), while others may take in the whole organization from the outset

10. Types of Change Planned Emergent Radical Incremental Transformation The learning e.g. BPR organization Annual Bottom-up targeted initiatives improvements

11. Transformation: Radical and Planned Change Transformation involves a fundamental rethink and radical redesign of the whole system It is normally planned in advance, though over time emergent change could lead to an organizational transformation

12. Business process reengineering Restructuring Total quality programmes Mergers and acquisitions Strategic change Change of corporate culture Common Types of Transformation

13. Process of Planned Change Kotter’s eight-stage process of creating major change [See Figure 12.3, Chapter 12] Key phases in structured work design [See Figure 12.4, Chapter 12]

14. Three Phases of Change unfreezing change (moving to the new) refreezing

15. Process of Emergent Change continuous process of experiment and adaptation best achieved through many, mainly small-scale, incremental changes which over time can lead to a major reconfiguration role of managers is not to plan or implement change but to facilitate experimentation and develop people to take responsibility for identifying the need for change and implementing it managers retain responsibility for developing collective vision and purpose E.g. the “learning organization”

16. “Planning” for Emergent Change E.g. the 3M approach to innovation: structuring to encourage intrapreneurship target: 30% of every unit’s sales must come from new products introduced within last 4 years 15% of budget for new idea projects encourages individuals to form new project teams - bottom up teams can grow into new departments, eventually divisions top management organizes wide collegial networks for advice and assistance projects must meet clear objectives for continued funding Example: development of the Post-it note

17. Key Organizational Activities Permitting Emergent Change information-gathering on opportunities communicationand diffusion of information resourcing targetting Emergent change is really about an organization’s capability to learn and implement that learning [See Chapter 13]

18. Major Issues in Planning Change the need for vision field-force analysis time-scale resistance to change use of pilot projects: “short-term wins” use of outsiders/third parties participation

19. Need for Vision without vision, there is likely to be lack of coherence in the change process vision also required to reassure and motivate people, given the threat that change poses vision should be based on analysis of changing circumstances and connect with establishing a sense that change is needed vision requires sufficiently powerful backing in the organization

20. Force-Field Analysis assessment of the strength of forces driving change versus the strength of factors restraining change helps diagnosis of: what to change how to change when to change

21. Time-Scale usually underestimated - pressure for results “real transformation takes time” Kotter curtailing time-scale can jeopardize the phases of social and psychological adjustments that are required

22. 1. Personal acknowledgement - may take six months 2. Expression of resistance to change; willingness for people to express views and feelings openly - may last another six months or so 3. Identification with the objectives of the change - a phase of active mutual effort towards implementing a change - may take two years or so 4. Building in to the organization an ability to self-monitor and move towards continuing emergent change - if it does not already exist, this ability may only be achieved after some three years or so after the start of the change process Too pessimistic? Realistic? Phases of Social and Psychological Adjustment to Major Change

23. Resistance to Change Especially if, change directly threatens people’s real interests - e.g. downsizing change is perceived to disrupt payment & status differentials, career opportunities and other “hygiene” factors change is perceived to routinize or devalue jobs - threaten “motivator” factors there is fear of the unknown, perhaps because of low trust in management It is their perception of change that determines how people react to it, not what its architects see as the “reality”

24. Guidelines for Managing Resistance to Change understand the reasons for resistance view resistance as a natural and inevitable reaction to the disruption of people’s expectations anticipate likely areas of resistance to change encourage overt expressions of resistance and discuss people’s concerns distinguish between: resistance due to unwillingness to accept change resistance due to deficiencies in ability to cope

25. Use of Pilot Projects can provide “short-term wins” can provide a valuable learning experience - trial and error can reassure people about the effects of the change - that if the pilot project does not work out then the change will be modified or will not proceed need to pick good winning prospects for pilots

26. can conduct relevant research into need for change may have skills to unlock hidden fears, and be regarded as sufficiently neutral to do so can facilitate action research process of change BUT: danger of consultants peddling standardized solutions need for members of the organization itself to accept full responsibility for change Use of Outsiders/Third-Parties

27. raises ethical as well as pragmatic issues if the proposed change creates a fundamental conflict of interests, there is little value in participation except to negotiate over terms where zero-sum bargaining is not involved, evidence indicates that the involvement of the people affected by change is beneficial: lessens people fears stemming from lack of information and feeling of powerlessness allows those with specific knowledge, including tacit knowledge, to input this develops capability to promote emergent change in the future Participation

28. considerable danger today that pressures for change exceed capacity of an organization to absorb it there will often be a number of changes that should be made as “a matter of urgency” vital to prioritize these, otherwise risk that none will succeed capacity to cope with change depends on both: individuals’ resilience the organizational culture: how supportive of risk-taking and error, how open, etc. Balancing Demand and Capacity for Change

29. Business Process Reengineering BPR was a viable philosophy of planned radical change that attracted much attention in the 1990s It lost credibility because of misapplication; often used an an excuse for downsizing

30. Principles of BPR • start with a clean slate: • “don’t automate, obliterate”; “should not embed outdated processes in silicon and software” (Michael Hammer) • fundamental rethinking and radical redesign • large-scale organizational change from functional to customer value-adding process orientation Examples of application: new product development, preparation of insurance policies

31. Dramatic improvements in process completion times, customised services, etc. are unlikely if key operational decisions cannot be made effectively by those who are closest to the action. BPR therefore requires: empowerment information access skilled and self-confident employees BPR Necessary Conditions