Summary Managing Organizational Change - chapter 2-6
Organisational Theory & Dynamics (BAB21)
Erasmus Universiteit Rotterdam
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OTD Managing Organizational Change
Chapter 2 - 6
Chapter 2: Images of Change
The images we hold of organizations affect our interpretations of what we think is going on, what we think needs to happen and how we think things should happen These images are held by us often without our being aware either of their existence or of how they affect our thinking, perception, and actions
Images of Managing Change: Where they come from
Images of Managing
Two images: 1. Management as Control Underlies the classic Fayol characterization of management as involving activities such as planning, organizing, commanding, coordinating and controlling Associated with top-down, hierarchical view of management Organization is treated as a machine 2. Management as Shaping Sees managing as being about shaping an organization and what happens in it Associated with a participative style of managing in which people are encouraged to be involved in decisions and to help identify how things can be done better The final behaviour of the organism can only be shaped not controlled It is through such shaping actions that organizational capabilities are enhanced
Images of Change Outcomes
Intended Change Outcomes: Dominant assumption is that intended change outcomes can be achieved Change is treated as the realization of prior intent through the action of change managers o Empirical Rational Strategies: assume that people are rational and follow their own self- interest. Effective change occurs when a change can be demonstrated as desirable and aligned with the interests of the group affected by the change o Normative-re-educative strategies: assume that changes occur when people dispense with their old, normative orientations and gain commitment to new ones o Power coercive strategies: rely upon achieving intentional change by those with greater power gaining compliance in behaviour from those with lesser power.
Partially Intended Change Outcomes: Some, but not all changes intentions are achievable
Unintended Change Outcomes: This image implies that managers often have great difficulty in achieving intentional change outcomes, because there are a variety of forces that either lead to change outcomes that are not
intended by managers or inhibit the ability of managers to implement changes that they desire. These forces may be internal or external: o Internally: may include departmental or interunit politics o Externally: may include a variety of factors such as confrontational industrial relations environment
Six Images of managing Change
Image 1: Change Manager as Director
Director image is based on an image of management as control and of change outcomes as being achievable Assumption: change is a strategic choice that managers make and the survival and general well- being of the organization depends on them
Image 2: Change Manager as Navigator Navigator image: control is still seen as at the heart of management action, although a variety of factors external to managers mean that while they may achieve some intended change outcomes, others will occur over which they have to little control managing change is only partially controllable
Image 3: Change Manager as Caretaker the ideal image of management is still one of control, although the ability to exercise control is severely constrained by a variety of forces that propel change relatively independent of a managers intentions
Theoretical Underpinning of the Image Life-Cycle Theory: views organizations as passing through well-defined stages (birth, growth, maturity, decline, death). Managers can do little change to stop this natural development. Caretakers help the organization through the different stages. Population Ecology Theory: focuses on how the environment selects organizations for survival or extinction, with whole populations of organizations changing as a result of ongoing cycles of variation. managers have little sway over change o Organizational Variation: can occur as the result of random change o Organizational Selection: can occur when an environment selects organizations that are of best fit to its conditions o Organizational Retention: consists of forces that retain various organizational forms and thereby serve as a counterinfluence to the forces of variation and selection Institutional Theory: argues that change managers take similar actions across populations of organizations, by pressures of interconnections within the industry. Three types of pressures: o Coercive: compulsiveness, for example by the government o Mimetic: imitate the structures and practices of other organizations o Normative: changes occur through the professionalizing of work such that managers in different organizations utilize similar values
Image 4: Change Manager as Coach
Three Key uses of the Six-Images Framework
Surfacing our assumptions about change The six-images framework guides us in reflecting on the images and assumptions we hold about managing change
Assessing Dominant Images of change The six images framework encourages change managers to reflect an whether they are dominated, for all changes, by a particular view of change – and the limitations of such and image Directs attention to whether the organization in which the change is to occur is dominated by a particular view of what is achievable and how change should unfold.
Using Multiple Images and Perspectives of Change One of the advantages of exposure to the range of images of managing change and associated techniques is that it reduces the likelihood of a change manager using a single image because of a lack of understanding of the range of options upon which he or she is able to draw o Image-in -use depends on the type of change o Image-in -use depends on the context of the change o Image-in -use depends on the phases of change o Image-in -use depends on simultaneous involvement in multiple changes
Chapter 3: Why Organizations Change
Why do managers engage in change if it is such a risky activity? One position based on economic perspective, closely aligned to images of organizational change that adopt a management as control assumption and assumes: o In competitive economies, firm survival depends on satisfying shareholders. Managers conduct change in order to produce better organizational performance in the form of better quarterly results with correspondingly better company share prices Alternative position: more aligned with change management images associated with the management as shaping assumption organizational learning perspective o Organizations and human systems of all sorts are complex and evolving and therefore cannot be reduced to a single, linear objective of maximizing shareholder value. Building in the capacity to both respond to , ad shape, external changes is an alternative rationale for explaining why managers conduct change Result of change is supposed to be stability!
Environmental Pressures for Change
Often occur where an organization ́s resources base decreases as a result of reduced demand for products and sales, decrease in market share, and bad investment decisions.
Fashion Pressures:
Mimetic isomorphism: occurs when organizations imitate the structures and practices of other organizations in their field or industry, usually ones that they consider as legitimate or successful Organizational change can occur on response to the latest management fad or fashion: in order to be seen as professional, modern or progressive managers may change their organizations in line with the latest innovation in management practices.
Mandated Pressures: Corporations which do not address social and environmental requirements face fines, workers ́ compensation cases, criminal convictions and payment of clean-up costs Sometimes change is forced onto an organization through formally mandated requirements. This is referred to by neo-institutional theorists as coercive isomorphism where organizations are forced to take on activities similar to those of other organizations because of outside demands placed on them to do so These mandated pressures may be either formal or informal: o Formal coercive pressure: incl. gov. mandates such as new laws and policies. Organizations are forced to change to meet new legal requirements (pollution, tax laws...). o Informal coercive pressures: incl. commitment to certain types of organizational changes such as empowerment in order to get the support of other organizations also committed to such programs.
Geopolitical Pressures: May be in the form of immediate crises or long-term geographical realignments (such as 9/11 or the fall of the Berlin Wall) Often leading to a drop in sales and related activities Other geographical pressures for change may occur through an escalation of mergers and acquisitions, which can have a profound effect on an industry Four global environmental forces for change: o Technological: requires more globally connected people and faster communication and transportation o Greater economic integration: of currencies and international capital flows o Maturation and slowdown: of domestic markets, leading to greater emphasis on exports and deregulation o Fall of socialist countries: and their reorientation toward capitalist economies
Hypercompetitive Pressures: Aligned with the rise of e-commerce and the use of internet, organizations are confronted with global changes in consumer preferences, industry boundaries, social values and demographics
Reputation and Credibility Pressures: Change is associated with maintaining proper corporate governance mechanisms to ensure a positive corporate reputation Corporate reputation: “collective representation of a firm’s past actions and results that describe the firm’s ability to deliver valued outcomes to multiple stakeholders” Maintaining and enhancing corporate reputation is therefore an important part of managing firm survival
Bridging strategies are designed to keep the organization effective by adapting parts of it to changes happening in the outside environment Buffering strategies are designed to keep the organization effective by avoiding change through shielding parts of it from the effects of the environment Managers use a variety of techniques to smooth jolts in the external environment including forecasting, planning and stockpiling In practice, buffering is a “subtle concept” and various arguments exist regarding the way organizations in networks may buffer each other and the extent to which decentralizing an organization pushes buffering mechanisms further in the organization
Organizational Pressures for Change
Growth Pressures
As companies age, change in from of growth is brought about Small business owners resist the growth of their business beyond the point at which they lost personal control of day-to-day operations
Integration and Collaboration Pressures
Some changes are made in order to better integrate the organization or create economies of scale across different business units
Identity Pressures
New Broom Pressures
New broom phenomenon, when a new CEO arrives, can act as a signal that the old ways are about to change
Power and Political Pressures
Can come in a variety of forms: some are well documented and relate to internal political pressures associated with changes at board and CEO levels
Chapter 4: What Changes in Organizations
Types of Changes
Distinguishing between First-Order and Second-Order Changes
First-order, incremental change: “may involve adjustments in systems, processes, or structures, but it does not involve fundamental change in strategy, core values, or corporate identity”. They maintain and develop the organization is seen as small-scale and adaptive Second-order, discontinuous change: “is transformational, radical, and fundamentally alters the organization at its core”. Entails not developing but transforming the nature of the organization is seen as large-scale and disruptive Fine-tuning: occurs where incremental changes are made that anticipate changes to the external environment. These changes involve adjustment or modification to enable a better fit between organization and the environment Adaptive: changes are incremental but reactive to changes made by other organizaitons Reorientation: anticipatory, discontinuous change that involves “frame bending”, that is major modification of the organization but by building on past strength and history Re-creation: is second-order change that is reactive and involves “frame breaking”, that is major upheaval where the organization breaks with past practices and directions
First-Order, Adaptive Changes
Changes as the taking of Individual Initiatives Managers have ignored the bottom-line impact of smaller, local organizational changes and, in many organizations, do not foster the conditions that allow personal initiative to emerge. Autocratic organizations discourage initiative by removing responsibility Meritocratic organizations constrain individual initiative and action by tightly regulating controls and procedures throughput the company Social club organizations discourage individual initiative by requiring conformity to them rather than to the work itself
Frohman prospers that personal initiative directed toward local change is likely to occur when attributes from each of these three organizational types – strong leadership, bureaucratic systems, and teamwork – are balanced.
Changes as the Development of Local Routines Organizational routines can be the source of change in organizations when they are enacted by different people who place their own interpretations and actions on how the routines should occur 2 internal dynamics drive routines toward continuous change: o Past outcomes fall short of what was intended o Achievement of outcomes opens up new possibilities
Second-Order, Transformational Change
Palmer & Dunford found 8 commonly occurring recommendations for major organizational change in order to cope with hypercompetitive business environments: Delayering: reducing of the number of vertical levels in the organization Networks/Alliances: involving internal and external strategic collaboration Outsourcing: of activities in which the organization has no distinctive competences Disaggregation: breaking up the organization into smaller business units Empowerment Flexible work groups: for specific purposes that are disbanded or reformed upon completion of the task Short-term staffing
Mayer suggest that large groups of organizations undergo discontinuous, often unanticipated change. This can take 3 forms: Jolts: shocks that can temporarily disrupt organizations but then eventually subside Step Functions: new conditions that emerge that are permanent and require organizations to move from one position to another in order to achieve a better fit with the environment Oscillation: situations where cycles of discontinuity occur, including expansions and contractions of an organization ́s market or operating environment
Implications for Change Managers
7 implications that need to be considered by the managers of change: 1. Care needs to be taken in assuming that type of organizational changes can be neatly categorized as small, adaptive, and incremental compared to those that are large and transformational. The change manger as interpreter image reminds us that whether a change is adaptive, reactive or transforming it is not necessarily a given objective 2. Some changes require other changes nested under them in order for another change to proceed. Change managers need to avoid simply focusing on one change without an understanding of the way other related changes may impact upon their staff 3. Small changes, at an individual level, may have larger, unanticipated consequences throughout the organizations. Change managers can nurture and shape people ́s perceptions and reactions to change but not control them. Nurturer image. 4. Adopting the coach image, the managers of change are likely to assume that, as long as people have been well coached in a variety of organizational and team skills, they will take the initiative and make appropriate adaptive change to alter organizational practices and routines 5. Often change is needed to remain stable. The more things change, the more they stay the same (paradox). Change managers who adopt a director image need to remember that they will need to provide directions about stability. 6. Changes may mean adding on to, and integrating, rather than removing and replacing current practices. What this reminds the mangers of change is that they need to assess how carrying out a change will impact upon current practices. 7. There is often an assumption that incremental, adaptive changes are less risky than large, second- order changes. An alternative position is that staying the same is risky! This requires both, assessing the scale of change (incremental/radical) from the perspective of the affected parties as well as assessing the risk involved (of changing rather than staying the same) and the different ways in which risk can be ameliorated.
Types of Changes: Lessons from the Front Line
Downsizing Downsizing, or the intentional process of permanently reducing staff members has been widespread since the 1970 ́s. There is a variety of approaches to downsizing: retrenchment, downscaling and down-scoping. Reasons for downsizing may include restructuring, closing or selling of a business unit, cost reduction and cost saving, increased productivity through greater efficiency and effectiveness, coping with external pressures, technological change and increased competitive pressures through greater globalization of business. It will not necessarily lead to gains in productivity where it is not associated with other changes in business strategy. And it can be financially costly.
Retrenchment Done by centralizing or specializing a firm ́s operations to sustain or improve Downscaling Constituted by permanent alterations to employment and tangible resource capacity Down-scoping When the firm divests activities or markets in which it operated
Change Challenges of Downsizing Employee retention Avoiding hard landings: occur when core competencies are lost or underutilized because they were linked to key people who were lost in downsizing. Minimizing political behaviour and loss of teamwork Survivor syndrome: they question why change occurred, feel guilty that they remain while some of their valued work colleagues are unemployed Communication: occur when companies are not open about the market situation they face Due Diligence: unplanned and nonselective downsizing can lead to issues for companies such as whether the downsizing was really necessary and why it was that some people were retained and others let go. Cultural adjustment: restructuring an organization trough any means requires significant cultural change. Choice of restructuring technique
Technological Change Impact of new systems may not be manifested for a significant amount of time Managers often seek to use technologies for short term solutions without paying attention to long term results
Change Challenge to Introducing New Technologies Goal synthesis: problem when implementing a new technology is identifying its place within the organization Choice of technology: Identifying political barriers: may occur through perceived loss of control and authotrity under the new system The IT team: it is important that the It department works closely together with other departments Communication: is the direction of, and the process for implementing a technological change Time frame: short-term or long-term basis? Contingency planning: overhauling a fundamental part of a firm ́s infrastructure can seriously damage its day-to-day operations
Merger and Acquisitions
M&A enable organizational growth at accelerated rates M&A can take many different forms o Excessive capacity: acquiring the firm has the opportunity to excessive capacity and consolidate operations in more mature industries o Neighbouring market expansions: before industry maturity, when a strategically sound firm acquires operations in neighbouring areas. Assumes the increased benefits to the acquired firm through lower overhead costs and increased value for the consumers. o New Product or market investment: 2 firms wish to explore the other ́s advantages in relation to extending product lines or global scope
Successful change requires attention to the interconnectedness of the variable o Structure: refers to the formal organizational design o Strategy: refers to the chosen route to success o Systems: various procedures in areas such as IT o Style: reference to patterns in actions of mergers and others in the organization o Skills: the crucial attributes, the dominating capabilities o Superordinate goals: refer to the organization ́s vision All these variable are interconnected
The Star Model Strategy: the basis on which all decisions are based Structure: defined as the formal authority relationships and grouping of activities as represented on an organization chart Processes and lateral capability: refer to the processes, either formal or informal, that coordinate activities throughout the organization Reward systems: seek to align individual actions to organizational objectives People practices: combines HR practices Misalignment produces suboptimal performance
The Congruence Model By Nadler & Tushman based on the proposition that the effectiveness of an organization is determined by the consistency (congruence) between the various elements the comprise the organization The model sees organizations as comprising 4 components: o Task: the specific work activities that have to be carried out o Individuals: the knowledge, skills, needs and expectations of the people in the organization o Formal organizational arrangements: structure, processes and methods o Informal organization: implicit, unstated values, beliefs, etc. Context: comprised of the environment, resources and history o Environment: refers to factors outside the organization such as the economic, social, and technological conditions o Resources: assets, tangible and intangible, internal to the organization o History: refers to the organization ́s own history
The Burke-Litwin Model
Differentiates between those elements of the model that are seen as likely to be the source of major (transformational) change and those that are more likely to be the source of change that is experiences as incremental (transactional). 4 transformational factors are external environment, mission and strategy, leadership, and organizational culture Fundamental premise of the model is that planned change should flow from the top of the diagram (environment) to the bottom (performance)
The Four-Frame Model
Without the capacity to use multiple frames, managers may become locked into their one favoured way of seeing the world Structural frame presents organizations as akin to machines that are designed to efficiently turn inputs into outputs Human resource frame directs attention to the relationship between the organization and the people that comprise it Political frame suggest that we see organizations as sited where participants interact in pursuit of a range of objectives Symbolic frame proposes that the essence of an organization may lie not in its forma structure and processes but in its culture
Component Analysis
The PESTEL Framework
PESTEL characterizes the organizational environment in terms of six factors: Political (e. threat of terrorism) Economic (e. unemployment rate) Social (e. demographic changes) Technological (e. new product development) Environmental (e. environmental rules on emissions) Legal (e. new laws)
Scenario Analysis Several scenarios will be discussed so that the change manger is prepared.
Gap Analysis Based on three questions: Where are we now? Where do we want to be? How can we get there? High consensus can generate 2 different courses of action Act immediately to close the gap Suspend action until a direct challenge to the high consensus view can be arranged
The Elements of Strategy Strategy and change intersect because both strategies may change, and change may be deemed necessary in order to realize a set strategy. The elements are: Arenas: what business will we be in? Vehicles: how will we get there? Differentiators: how will we win the market place? Staging Economic logic
The Strategic Inventory Defining the boundaries of the competitive environment and the key assumptions
The appropriateness of the proposed change Senior management support for the change Personally beneficial nature of the change
Stakeholder Analysis Stakeholder analysis focuses on one specific aspect of change readiness: positions of key stakeholders in regard to the proposed change
Force-Field Analysis Model for looking at the factors that can assist or hinder the implementation of change. Forces pushing for change are: driving forces Forces working against change are: restraining forces
Chapter 6: Resistance to Change
Commonly cited causes for the lack of success of organizational changes is resistance to change.
Support for Change
People will often embrace change and work enthusiastically in support of change. Kirkpatrick identifies the following as possible outcomes that are likely to cause people to react positively to change: Security Money Authority Status/prestige Responsibility Better working conditions Self-satisfaction Better personal contacts Less time and effort
Signs of Resistance to Change
Resistance to change is “tridimensional”, involving affective, behavioural, and cognitive components. Affective component: how a person feels about a change Cognitive component: how a person thinks about a change Behavioural component: what a person does in the face of a change Behavioural responses may take many forms: Hultman draws a distinction between active and passive responses. Symptoms of active resistance: being critical, finding fault, ridiculing, appealing to fear etc.
Symptoms identified with passive resistance: agreeing verbally but not following through, failing to implement change etc.
Why do People resist Change?
Dislike of Change For the majority of people, it is contextual factors, that is, the specific characteristics of the specific change that determine how they react.
Discomfort with Uncertainty As individuals we tend to vary in terms of how comfortable we are with ambiguity. Strategic intent is not complemented by clarity as to expected actions, the chances increase that employees will fail to convert a change initiative into supporting action at their level of the organization.
Perceived Negative Effect on Interests Readiness for change will be affected by people ́s perception of the likely effect of the change on their interests.
Attachment to the Established Organizational Culture/Identity Readiness for change can be significantly affected by the degree of attachment to the existing culture. Two specific mental barriers tend to undermine the acceptance of change initiatives that are interpreted as inconsistent with the existing organizational identity Passive resistance: occurs when managers exhort subordinates to implement a change without first clarifying the connection between the change and some aspects of the organizational identity Active resistance: occurs when a change is interpreted as directly in conflict with key elements of the organizational identity
Perceived Breach of Psychological Contract A breach or violation of the contract occurs when employees believe that the employer is no longer honouring its part of the deal. Strebel argues that employees and the organization for which they work can be seen as involved in a “personal compact” that defines their relationship. This compact may be explicit or implicit and involves three dimensions: Formal: covers such things as the specific task that a person is employed to do, how performance is assessed and the associated level of remuneration. Psychological: relates to expectations in terms of trust, loyalty and recognition Social: refers to the espoused values of the organization
Lack of Conviction Helps change advocates if the belief that change is needed is widespread within the organization.
Lack of Clarity as to What is Expected Proposed changes, particularly of a strategic nature, are not complemented by clear information as to the specific implications at the level of action by individuals. Where this is the case, the chances increase that employees will fail to convert a change initiative into supporting action at their level of the organization.
Excessive Change Two forms:
There are associated techniques that can be used to help people reframe a change situation more positively
Tinkering, Kludging and Pacing Tinkering and kludging processes involve the reconfiguration of existing practices and business models rather that the creation of new ones The difference between tinkering and kludging is a matter of scale, with tinkering being the more modest Kludging is tinkering on a large-scale, as where the leveraging of existing capabilities results in the development of a new business of division Pacing: refers to the ability to mix major change initiatives, the ones most likely to be destabilizing and disruptive, with tinkering and kludging
The power of Resistance The approach is based on the view that showing respect toward resistors build stronger relationships and thereby improves the prospects of success to change. Five “fundamental touchstones”: Maintain clear focus Embrace resistance Respect those who resist Relax Join with the resistance
Summary Managing Organizational Change - chapter 2-6
Course: Organisational Theory & Dynamics (BAB21)
University: Erasmus Universiteit Rotterdam
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