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Chapter 15

Chapter 15. Organization Transformation and Strategic Change. Learning Objectives (part 1 of 2). Identify and define organization transformation in relation to change process. Understand basic strategy-culture matrix and other approaches to changing culture to fit the strategy.

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Chapter 15

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  1. Chapter 15 Organization Transformation and Strategic Change An Experiential Approach to Organization Development 7th edition

  2. Learning Objectives (part 1 of 2) • Identify and define organization transformation in relation to change process. • Understand basic strategy-culture matrix and other approaches to changing culture to fit the strategy. An Experiential Approach to Organization Development 7th edition

  3. Learning Objectives (part 2 of 2) • Recognize importance of corporate culture and its relation to strategy. • Experience these concepts in management simulation. An Experiential Approach to Organization Development 7th edition

  4. The Revolution at Home Depot that Left Some Behind (part 1 of 2) Home Depot is number-one home-improvement retail chain in U.S. It had unstructured and entrepreneurial culture. Competitor Lowe’s began taking market share. CEO Bob Nardelli was brought in to turn around dysfunctional culture. An Experiential Approach to Organization Development 7th edition

  5. The Revolution at Home Depot that Left Some Behind (part 2 of 2) Lack of support for changes from lower levels. Changes resulted in unintended consequences. Nardelli brought in new top management team. Innovation and sense of ownership declined. HR manager said it was revolution, not evolution. An Experiential Approach to Organization Development 7th edition

  6. Strategy and Transformation Success can work against a company when it looses touch with customers. Radical changes may be only choice for organization in desperate need of change. An Experiential Approach to Organization Development 7th edition

  7. Organizational Transformation(part 1 of 3) Refers to drastic changes in how organization functions and relates to its environment. OD strategies represent more gradual approaches to strategic change. OT approaches are drastic and abrupt change. An Experiential Approach to Organization Development 7th edition

  8. Organizational Transformation(part 2 of 3) OT may or may not be developmental. OT tends to use directive, not participative, approaches to change. Usually top-down, top-management driven. An Experiential Approach to Organization Development 7th edition

  9. Organizational Transformation(part 3 of 3) Requires shared vision, willingness to clean house, restructure, tackle many problems. OT tends to be shaped by use of power rather than collaborative approaches. Due to immediate threat, this may be only way for organization to survive. An Experiential Approach to Organization Development 7th edition

  10. Possible Large-Scale Change Strategies Large-scale change approaches are: • Incremental - long-term planned change. • Transformative - immediate, drastic change. An Experiential Approach to Organization Development 7th edition

  11. Large-Scale Change Model Model based on 3 key dimensions: • Time frame of change—short or long. • Level of support of organizational culture. • Degree of discontinuity with environment. An Experiential Approach to Organization Development 7th edition

  12. Figure 15.1Strategies for Planned Change An Experiential Approach to Organization Development 7th edition

  13. Four Change Strategies (part 1 of 2) • Participative evolution - incremental; anticipates change; support of culture through collaborative means. • Charismatic transformation - radical change in short time with support of culture. An Experiential Approach to Organization Development 7th edition

  14. Four Change Strategies (part 2 of 2) • Forced evolution - incremental adjustments over longer period without support of culture. • Dictatorial transformation - used in times of crisis; major restructuring running counter to internal culture. An Experiential Approach to Organization Development 7th edition

  15. OD in Practice: Masters of Transformation (part 1 of 3) Vince Lombardi, coach of Green Bay Packers, and Jack Welch, CEO of GE, provide insight into 2 successful change agents. An Experiential Approach to Organization Development 7th edition

  16. OD in Practice (part 2 of 3) Lombardi: “We’re not just going to start with a clean slate, we’re going to throw the old slate away.” Welch: “I tell people, if this place is stifling you shake it, shake it, break it. Check the system, because it wants to be a bureaucracy.” An Experiential Approach to Organization Development 7th edition

  17. OD in Practice (part 3 of 3) Lombardi: Got rid of players, even those he liked, when they did not perform. Welch: “No leader enjoys making the tough decisions. … Keeping people around who aren’t going to grow and prosper is ‘false kindness.’ ” An Experiential Approach to Organization Development 7th edition

  18. The Corporate Culture Culture includes shared values and behaviors formed by members of organization. CEO and managers’ actions, not words, produce culture. A culture is organization’s major strength when consistent with strategies. An Experiential Approach to Organization Development 7th edition

  19. Strategy-Culture Fit Strategy: • Course of action used to achieve objectives. • Relates resources of organization to opportunities in environment. Culture: • Set of values for setting priorities. • Critical factor in implementation of strategy. An Experiential Approach to Organization Development 7th edition

  20. Definition of Culture System of shared values held by members that distinguishes one organization from another. An Experiential Approach to Organization Development 7th edition

  21. Core Characteristics of Culture Individual autonomy. Sensitivity to customers and employees’ needs. Support and assistance provided by managers. Interest in having employees initiate new ideas. Openness of communication channels. Risk-seeking encouraged. An Experiential Approach to Organization Development 7th edition

  22. Sharing the Vision Many management theorists feel vision is essence of leadership. Vision involves several stages: • Share the vision. • Empower the individual. • Acknowledge performance. • Reward performance. An Experiential Approach to Organization Development 7th edition

  23. Figure 15.2Sharing the Vision An Experiential Approach to Organization Development 7th edition

  24. Strong Versus Weak Cultures Strong culture characterized by basic values intensely held and widely shared. Weak culture may be seen in young company or one with high turnover. Culture product of key components: structure, systems, people, and style. An Experiential Approach to Organization Development 7th edition

  25. Figure 15.3Relative Strength of Cultures An Experiential Approach to Organization Development 7th edition

  26. Strategy-Culture Matrix (part 1 of 3) Four basic alternatives in determining strategy changes: • Manage change (manageable risk) • Change important and compatible with culture. • Use cultural reinforcement as strategies. An Experiential Approach to Organization Development 7th edition

  27. Strategy-Culture Matrix (part 2 of 3) • Reinforce culture (negligible risk) • Forge vision that emphasizes shared values. • Reinforce existing culture. • Manage around culture (manageable risk) • Change important and incompatible with present culture. • Reinforce value system, reshuffle power, use leverage in the organization. An Experiential Approach to Organization Development 7th edition

  28. Strategy-Culture Matrix (part 3 of 3) • Change strategy to fit culture (unacceptable risk) • Change important but incompatible with culture. • Changing culture is explosive, long-term process that may be impossible. • Determine if strategic change is viable alternative or if strategy should be modified to fit more closely with existing culture. An Experiential Approach to Organization Development 7th edition

  29. Figure 15.4Strategy-Culture Matrix An Experiential Approach to Organization Development 7th edition

  30. Our Changing World: All the Information at Google (part 1 of 2) Google managed by CEO Schmidt and the two founders, Page and Brin. Decisions made by 3-way discussions. Engineers migrate to projects that interest them. An Experiential Approach to Organization Development 7th edition

  31. Our Changing World (part 2 of 2) The VP of engineering, “We’re encouraging creativity and tolerating chaos.” Googles’ strategic moves set them apart from competition. One goal is to put all of world’s information into Google. An Experiential Approach to Organization Development 7th edition

  32. Strategic Change Management Seeks to align organization’s strategy, structure, and human resources to fit with environment. Organizations composed of 3 systems: Technical Political Cultural These systems in perpetual interaction with environmental change and uncertainty. An Experiential Approach to Organization Development 7th edition

  33. Three Steps to Strategic Change Step 1: Develop image of desired organization. Step 2: Separate systems and intervene separately in each one. Step 3: Plan for reconnecting three systems. An Experiential Approach to Organization Development 7th edition

  34. Figure 15.5Environmental Forces and Organizational Systems An Experiential Approach to Organization Development 7th edition

  35. Reasons for Large-Scale Cultural Changes Company has strong values that do not fit changing environment. Industry very competitive and changes quickly. Company mediocre or worse. Firm about to join ranks of very largest. Firm small but growing rapidly. An Experiential Approach to Organization Development 7th edition

  36. Cautions in Cultural Change Cultural change can be difficult and time consuming. Culture change should be attempted only after less-difficult solutions have been ruled out. An Experiential Approach to Organization Development 7th edition

  37. Key Words And Concepts • Culture - reflects organization’s past and is rooted in firm’s history. • Incremental approach - long-term planned change that relies on collaboration. • Organization transformation (OT) - drastic, abrupt change to structure, management, and culture. An Experiential Approach to Organization Development 7th edition

  38. Strategic change management - focuses on alignment with strategy, structure and human resources systems and a fit with environment. • Strategy - course of action used to achieve major objectives. • Strategy-culture matrix - assess readiness of culture for strategic changes. An Experiential Approach to Organization Development 7th edition

  39. Technical, political, and cultural systems - Organizational systems of strategic change management model. • Transformational change - immediate drastic change accomplished by directive methods. • Vision - a mental image of a possible and desirable future state of organization. An Experiential Approach to Organization Development 7th edition

  40. Preparations for Next Chapter • Read Chapter 16. • Complete Profile Survey and Profile Form in Simulation 16.1, Part A, Step 1. • Complete Step 1 of OD Skills Simulation 16.2. An Experiential Approach to Organization Development 7th edition

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