Chapter

1. Chapter Sixteen MANAGING ORGANIZATIONAL CHANGE

2. After reading this chapter you should be able to: 1. Characterize the prevalence of the change process in organizations. 2. Understand what occurs during organizational change and the forces responsible for unplanned organizational change. 3. Describe strategic planning, and explain the types of strategic changes that organizations make. 4. Identify the 10 steps in the strategic planning process. 5. Explain why people resist organizational change and how this resistance may be overcome. 6. Identify and describe the major organizational development techniques in use today. 7. Identify both sides of the debate regarding whether organizational development is inherently unethical.

3. Prevalence of Change in Organizations (Pp. 585-587) Organizational Change - planned or unplanned transformations in an organization’s structure, technology, or people First-order change - change that is continuous in nature and involves no major shifts in how an organization operates Second-order change - radical change that causes major shifts involving many different levels of the organization and aspects of business - different forces may be shaping change at different rates in different places throughout the world, but change is a universal fact of life for organizations

4. The Nature of the Change Process (Pp. 587-592) Targets of Change Organizational structure - modify rules, responsibilities, and procedures - alter the power structure - change the design of the organization Technology People - alter how people behave - three stage process Unfreezing - recognition that the current state of affairs is undesirable and that change is needed Doomsday management - practice of introducing change by suggesting an impending crisis is likely Changing - planned attempt to create a more desirable state for the organization Refreezing - incorporating changes into employees’ thinking and organizational operations

5. The Nature of the Change Process (cont.) Forces Behind Unplanned Organizational Change Shifting employee demographics - changing sociological trends and associated shifts in the demographic composition of the workforce Performance gaps - differences between real and expected levels of organizational performance - most compelling force for change Government regulation - new regulatory legislation or rules are quite common causes for organizational change Global economic competition - demands that organizations make effective changes in order to survive - only the most adaptive organizations can survive Advances in technology - change operations in organizations

6. Strategic Planning: Deliberate Change (Pp. 592-598) Strategic Planning - process of formulating, implementing, and evaluating decisions that enable an organization to achieve its objectives Three Basic Assumptions Strategic planning is deliberate - strategic plans are conscious decisions to make fundamental changes in the organization Strategic planning occurs when current objectives no longer can be met - new strategies required to turn things around New organizational objectives require new strategic plans - if the organization wants to move in a different direction, new strategies are required to get them to the new objectives About What Do Companies Make Strategic Plans? Products and services - decision to add a new product or service requires a fair amount of organizational change Organizational structure Downsizing - process of systematically reducing the number of employees needed to perform restructured jobs Outsourcing - elimination of non-core sectors of the business hiring outside firms to perform these functions

7. Strategic Planning: Deliberate Change (cont.) Ten Steps of Strategic Planning Define goals - a strategic plan must begin with a stated goal - company’s overall goals must be translated into corresponding goals to be achieved by each unit Define the scope of products or services Scope - the businesses in which a company already operates and the new business in which it wants to operate Assess internal resources - determine whether company has the human, physical, and financial resources required to meet the new strategic goals Assess the external environment - determine the extent to which the environment is likely to assist or hinder a company - dependent upon the company’s competitive advantages and resources Analyze internal arrangements - examine the nature of the organization itself Assess the competitive advantage - company’s customers perceive its products and services as superior to those of competitors

8. Strategic Planning: Deliberate Change (cont.) Strategic Planning Process (cont.) Develop a competitive strategy - the means by which a company achieves its goal Market-share increasing strategy - deliberate attempt to develop a broader share of an existing market Profit strategy - attempt to derive more profit from existing businesses Market concentration strategy - withdraw from markets where a company is less effective and concentrate resources in markets where the company is likely to be more effective Turnaround strategy - attempt to reverse a decline in business by moving to a new product line or radically restructuring Exit strategy - withdraw from a market

9. Strategic Planning: Deliberate Change (cont.) Strategic Planning Process (cont.) Communicate the strategy to stakeholders Stakeholder - any individual or group in whose interest an organization is run - informing stakeholders enables them to contribute to the success of the company, whether actively or passively Implement the strategy - likely to produce some unrest as people try to adjust to the new ways of doing things Evaluate the outcome - determine whether goals have been met

10. 9 Implement the strategy 1 Define goals 10 Evaluate the outcome 2 Define the scope of products and services 3 Assess internal resources 4 Assess the external environment 8 Communicate the strategy to stakeholders 5 Analyze internal arrangements 7 Develop a competitive strategy 6 Assess competitive advantage Figure 16.8 Strategic Planning

11. Resistance to Change: Maintaining the Status Quo (Pp. 598-602) Resistance to Change - tendency of employees to be unwilling to go along with organizational change because of individual fears of the unknown or organizational impediments Readiness for Change - likely to occur when the people involved believe that the benefits associated with change outweigh the costs - benefits of change determined by: - amount of dissatisfaction with status quo - availability of a desirable alternative - existence of a plan for achieving that alternative - benefits combine multiplicatively to determine the benefits of making a change - if any factor is zero, the likelihood of change is zero

12. Change is made Amount of dissatisfaction with current conditions Compared to ? Benefit of making change Availability of a desirable alternative Existence of a plan for achieving a desirable alternative Change is not made Figure 16.10 Organizational Change Cost of making change

13. Resistance to Change: Maintaining the Status Quo (cont.) Individual Barriers to Change - create resistance to change Economic insecurity - changes on the job may threaten livelihood Fear of the unknown - disrupting established patterns creates unfamiliar conditions Threats to social relationships - weaken integrity of friendship groups Habit - habitual way of performing job replaced by challenge of learning a new skills and procedures Failure to recognize the need for change - vested interests in the status quo will prevail without appreciation of the importance of change Organizational Barriers to Change Structural inertia - organizations are designed to promote stability Work group inertia - change disrupts social norms developed by the group Threats to existing balance of power - advantageous position of those in control may be undermined by organizational change Previously unsuccessful efforts - earlier failures make people cautious before undertaking new change

14. Resistance to Change: Maintaining the Status Quo (cont.) Overcoming Resistance to Change - because organizational change is inevitable, must be able to deal with resistance to it Shape political dynamics - win support of the most powerful and influential individuals - build a critical mass of support for change Educate the workforce - explain what organizational change may mean to employees Involve employees in the change efforts - involved employees better understand the need for change Reward constructive behaviors - new behaviors required by change should be rewarded Create a learning organization Learning organization - organization that is successful at acquiring, cultivating, and applying knowledge that can be used to help it adapt to change Establish a commitment to change Adopt an informal organizational structure Develop an open organizational culture

15. Organizational Development Interventions (Pp. 603-608) Organizational Development (OD) - social science techniques to plan change in organizational work settings to enhance the personal development of individuals and to improve the effectiveness of organizational functioning Management by Objectives(MBO) - technique by which managers and subordinates work together to set and then to meet organizational goals - widely used technique - requires substantial participation of lower-level employees - top managers must be willing to accept cooperation and involvement of all employees - requires a great deal of time

16. 2. Implementation Progress toward the goal is carefully monitored, making corrections as needed 3. Evaluation Was the goal reached? If no, develop new plan If yes, set new goals Figure 16.12 MBO Process 1. Develop Action Plan Managers and subordinates work together to set goals that are specific and measurable. They develop a plan to attain them.

17. Organizational Development Interventions (cont.) Quality of Work Life (QWL) - OD technique designed to improve organizational functioning by humanizing the workplace, by making it more democratic, and by involving employees in decision making Work restructuring - process of changing how jobs are done to make them more interesting to workers Quality circles (QCs) - small groups of volunteers meet regularly to identify and to solve problems related to the work they perform and the conditions under which they work - members trained to solve problems - benefits - increased job satisfaction, organizational commitment, and reduced employee turnover - increased productivity - increased organizational effectiveness - cautions- management and labor must cooperate to design the program - must fully implement all mutually-developed plans

18. Organizational Development Interventions (cont.) Team Building - members of a group diagnose how they work together and determine how this can be improved -employees identify problems related to their work group’s performance and plans to solve them are developed and implemented - used effectively to combat many important organizational problems - cautions - all group members must participate in the entire process - disruptive interpersonal problems may arise and need to be neutralized by an outside party

19. Objective data Attitude surveys Group members recognize problem Diagnose group’s strengths and weaknesses Develop desired change goals Restart process Develop action plan to make changes Implement plan if Evaluate plan unsuccessful if successful Process completed Figure16.13 Team Building

20. Employees complete surveys to provide information about problems in their organization Feelings about the organization are summarized and shared with all employees Through group discussions, specific plans for overcoming problems are identified and developed Develop Action Plans Feedback Data Collection Organizational Development Interventions (cont.) Survey feedback - information collected by questionnaires and interviews about issues of concern to the organization is shared with employees and used as the basis for planning organizational change - widely-used OD technique - collects a great deal of information quickly - quality of the information depends on the quality of the survey instrument - flexible enough to fit the needs of different organizations facing a variety of problems Figure 16.14

21. Critical Issues in OD (Pp. 608-611) Effectiveness of OD - a great many interventions go unevaluated - based on the data available, most studies show that OD interventions are beneficial - qualifications - OD tends to be more effective among blue-collar employees than among white-collar employees - beneficial effects may be enhanced by using a combination of several OD techniques - effectiveness related to the degree of top- management support for the OD intervention Ethics of OD Interventions - there are arguments both pro and con - in sum, OD is not inherently good or evil - depends on the motives of those who implement it and the manner in which it is carried out

22. Figure 16.15 The Ethics of OD • OD is • ethical • The imposition of values • is an inherent part of life, • especially on the job • Abuse comes from • individuals, not from • the technique itself, • which is neither good • nor evil • OD is • unethical • Imposes values of the • organization; coercive • and manipulative • Potential for abuse