Managing Change for Organizations

Inside and Outside Forces for Organizational Change

Inside forces include strategic and human resource changes, while outside forces include macroeconomic and technological change.

LEARNING OBJECTIVE

• Identify the internal and external pressures for change, which drive organizations to adapt and evolve

KEY POINTS

• Change management is an approach to shifting individuals, teams, and organizations to a desired future state. Examples of organizational change can include strategic, operational, and technological change that can come from inside or outside the organization.

• Outside forces for change include macroeconomics, technological evolution, globalization, new legislation, and competitive dynamics.

• Inside forces for change include intrapreneurship, new management, and restructuring.

• The first step in effective change management is being prepared, in a timely and knowledgeable fashion, for internal and external potentialities that may force organizational adaptation.

TERM

• macroeconomic 

Relating to the entire economy, including the growth rate, money and credit, exchange rates, the total amount of goods and services produced, etc.

Change management is an approach to shifting or transitioning individuals, teams, and organizations from their existing state to a desired future state. Examples of organizational change can include strategic, operational, and technological changes coming from inside or outside the organization. Understanding key internal and external change catalysts is critical to successful change management for organizational leaders.

Outside Forces

While there are seemingly endless external considerations that can motivate an organization to change, a few common considerations should be constantly monitored. These include economic factors, competitive dynamics, new technology, globalization, and legislative changes:

• Economics - The 2008 economic collapse is a strong example of why adaptability is important. As consumers tightened their belts, organizations had to either do the same and lower supply to match lowered demand or come up with new goods to entice them. Migrating from one volume to another can financially challenging, and change strategies such as creating new affordable product lines or more efficient operational paradigms are key to changing for success.

• Competition - Changes in the competitive landscape, such as new incumbents, mergers and acquisitions, new product offerings, and bankruptcies, can substantially impact a company's strategy and operations. For example, if a competitor releases a new product that threatens to steal market share, an organization must be ready to change and adapt to retain their customer base.

• Technology - Technological changes are a constant threat, and embracing new technologies ahead of the competition requires adaptability. When media went digital, adaptable companies found ways to evolve their operations to stay competitive. Many companies that could not evolve quickly failed.

• Globalization - Capturing new global markets requires product, cultural, and communicative adaptability. Catering to new demographics and identifying opportunities and threats as they appear in the global market is integral to adapting for optimal value.

• Legislation - New laws and legislation can dramatically change operations. Companies in industries that impact the environment must constantly strive to adapt to cleaner and more socially responsible operating methodologies. Failing to keep pace can result in substantial fines and financial detriments, not to mention negative branding.

Inside Forces

There are many inside forces to keep in mind as well, ranging from employee changes to cultural reform to operational challenges. Understanding where this change is coming from is the first step to timely and appropriate change management.

• Management Change - New CEOs or other executive players can significantly impact strategy and corporate culture. Understanding the risks associated with hiring (or promoting for) new upper management is key to making a good decision on best fit.

• Organizational Restructuring - Organizations may be required to significantly alter their existing structure to adapt to the development of new strategic business units, new product lines, or global expansion. Changing structure means disrupting hierarchies and communications, which must then be reintegrated. Employees must be trained on the change and the implications it will have for their everyday operations.

• Intrapreneurship - New ideas come from inside the organization as well as outside the organization, and capitalizing on a great new idea will likely require some internal reconsideration. Integrating a new idea may require reallocation of resources, new hires and talent management, and new branding

Source: Boundless
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Understanding Change Management

When change is implemented in an organization, there is often resistance. This resistance often stems from people's fear - of change in the work itself, of change in the process of completing work, or of the possibility that the change may result in the loss of their job. As a result, managers and organizational leaders should have a strategic approach to enabling change that ensures it is maximally effective in the organization.

Change management is the study of how to integrate changes without damaging the organizational culture or efficiency. At its core, change management is about knowing strategically what to change and how to manage the human element of this process. Change management is broken into 4 elements:

1. Recognize the changes in the broader business environment
2. Develop the necessary adjustments for the company's needs
3. Train employees on the appropriate changes
4. Win the support of employees

Managers as Leaders of Change

Leaders are in the unique role of not only designing change initiatives but also enacting and communicating them.

LEARNING OBJECTIVE

• Review the strategies leaders must use to lead change effectively

KEY POINTS

• Managing change requires more than simple planning; the significant human element of change resistance needs to be addressed to ensure success.
• Leaders must define change strategy and communicate it effectively to shareholders, empower and support employees, and mitigate resistance to the change initiative.
• Conner identifies six distinct leadership styles related to change: anti-change, rational, panacea, bolt-on, integrated, and continuous. Each leadership style represents a unique set of perceptions, attitudes, and behaviors regarding how organizational disruption should be addressed.
• Conner also posited that the six leadership styles are related to two different types of organizational change: first-order change and second-order change. Different leadership styles are more effective in different situations.

TERMS

• attribute
  A characteristic or quality of a thing.

• leading
• To conduct or direct with authority.
  Managing change requires strong leadership and an understanding of how organizational change occurs. Leaders are in the unique role of not only designing change initiatives but enacting and communicating them to subordinates. Managing change requires more than simple planning: the significant human element of change resistance needs to be addressed to ensure success.

Leadership Strategies for Change

• Create a definable strategy - Define measurable stakeholder aims, create a business case for their achievement (and keep it continuously updated), monitor assumptions, risks, dependencies, costs, return on investment, and cultural issues affecting the progress of the associated work.
• Communicate effectively - Explain to stakeholders why the change is being undertaken, what the benefits of successful implementation will be, and what how the change is being rolled out.
• Empower employees - Devise an effective education, training, or skills upgrading scheme for the organization.
• Counter resistance - Identify employee issues and align them with the overall strategic direction of the organization. Adapt the change initiative when necessary to mitigate discontentment.
• Support employees - Provide personal counseling (if required) to alleviate any change-related fears.
• Track progress - Monitor the implementation and fine-tuning as required.

These six components of change are the responsibility of management to create and implement.

Six Leadership Styles for Change

Conner (1998) identified six distinct leadership styles related to change: anti-change, rational, panacea, bolt-on, integrated, and continuous. Each leadership style "represents a unique set of perceptions, attitudes, and behaviors regarding how organizational disruption should be addressed". Stopper (1999) characterizes each of Conner's leadership styles in this way:

• The anti-change leader - A leader embracing this style seeks to avoid change as much as possible. The message is, "Stay the course. Keep adjustments small. No need to change in any major way".
• The rational leader - This leader focuses on how to constrain and control change with logical planning and clearly defined steps.
• The panacea leader - The panacea leader believes that the way to respond to pressure for change is to communicate and motivate. These leaders understand the resilience to change they are likely to encounter as well as the inevitability of change as organizations evolve. They tend to focus on fostering enthusiasm for change.
• The bolt-on leader - This leader strives to regain control of a changing situation by attaching (bolting on) change management techniques to ad-hoc projects that are created in response to pressure for change. This manager is more concerned about helping others change than creating a strategy for the actual change itself.
• The integrated leader - The integrated leader searches for ways to use the structure and discipline of what Harding and Rouse (2007) called "human due diligence" (the leadership practice of understanding the culture of an organization and the roles, capabilities, and attitudes of its people) as individual change projects are created and implemented. The concept is simply to combine or integrate human and cultural concerns with the strategy itself.
• The continuous leader - The continuous leader works to create an agile and quick-responding organization that can quickly anticipate threats and seize opportunities as change initiatives are designed and implemented. Continuous leaders believe that disruption is continuous, and adaptability a necessary organizational competency.

Conner says that these six leadership styles are related to two different types of organizational change: first-order change and second-order change. First-order change is incremental, piecemeal change. According to Conner, second-order change is "nonlinear in nature and reflects a movement that is fundamentally different from anything seen before within the existing framework".

Conner identifies the first four leadership styles as appropriate for managing first-order change. When an organization is engaging in discontinuous, transformational change, however, integrated and continuous leadership styles are more appropriate.

Types of Organizational Change

There are three main categories of change: business process re-engineering, technological change, and incremental change.

LEARNING OBJECTIVE

• Differentiate between business process re-engineering, technological change, and incremental change as the three main categories of organizational development

KEY POINTS

• Business process re-engineering focuses on the analysis and design of workflows and processes within an organization.
• Technological change refers to the process of invention, innovation, and diffusion of technology or processes.
• Incremental change means introducing many small, gradual changes to a project instead of a few large, rapid changes.

TERMS

• incremental
  Occurring over a series of gradual increments, or small steps.
  
  
• devise
  To use one's intellect to plan or design something.
  
  
• incremental model
  A method of product development where the model is designed, implemented, and tested incrementally (a little more is added each time) until the product is finished.

Change management is an approach to shifting or transitioning individuals, teams, and organizations from their current state to a desired future state. It is an organizational process aimed at helping stakeholders accept and embrace change in their business environment. In some project management contexts, change management refers to a project management process wherein changes to a project are formally introduced and approved.

Kotter defines change management as the utilization of basic structures and tools to control any organizational change effort. Change management's goal is to maximize organizational benefit, minimize impacts on workers, and avoid distractions. There are different types of change an organization can face.

Business Process Re-Engineering

Business process re-engineering (BPR) is a business management strategy first pioneered in the early 1990s that focuses on the analysis and design of workflows and processes within an organization. BPR aims to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. In the mid-1990s, as many as 60% of the Fortune 500 companies claimed to have either initiated re-engineering efforts or begun planning for it.

BPR helps companies radically restructure their organizations by focusing on their business processes from the ground up. A business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering emphasizes a holistic focus on business objectives and how processes relate to them, encouraging full-scale recreation of processes rather than iterative optimization of sub-processes.

Business process re-engineering is also known as business process redesign, business transformation, and business process change management.

Incremental Change

Incremental change is a method of introducing many small, gradual (and often unplanned) changes to a project instead of a few large, rapid (and extensively planned) changes. Wikipedia illustrates the concept by building an encyclopedia bit by bit. Another good example of incremental change is a manufacturing company making hundreds of small components that go into a larger product, like a car. Improving the manufacturing process of each of these integral components one at a time to cut costs and improve process efficiency overall is incremental change.

Technological Change

Technological change (TC) describes the overall process of invention, innovation, and diffusion of technology or processes. The term is synonymous with technological development, technological achievement, and technological progress. In essence, TC is the invention of a technology (or a process), the continuous process of improving a technology (which often makes it cheaper), and its diffusion throughout industry or society. In short, technological change is based on both better and more technology integrated into the framework of existing operational processes.

Organizational Development

Organizational development is a deliberately planned effort to increase an organization's relevance and viability.

LEARNING OBJECTIVE

• Explain the role of organizational development in leadership and organizational change

KEY POINTS

• Organizational development (OD) is an ongoing, systematic process of implementing effective organizational change.
• The purpose of organizational development is to address the evolving needs of successful organizations.
• Organizational development is often facilitated with the assistance of a "catalyst" or "change agent" such as an effective or influential leader.
• An important role of a leader is to analyze and assess the effectiveness of this developmental process and motivate the organization to achieve developmental targets.

TERMS

• viability
  The ability to live or to succeed.
  
  
• catalyst
  Someone or something that encourages progress or change.

Organization development (OD) is a deliberately planned effort to increase an organization's relevance and viability. Vasudevan has referred to OD as a systemic learning and development strategy intended to change the basics of beliefs, attitudes, and relevance of an organization's values and structure. This process helps the organization to better absorb disruptive technologies, market opportunities, and ensuing challenges and chaos. Essentially, organizational development is the framework for a change process that is designed to produce desirable and positive results for all stakeholders and the environment.

The Nature of Organizational Development

Organizational development is a lifelong, built-in mechanism to improve an organization internally. This is often done with the assistance of a "change agent" or "catalyst" who enables appropriate theories and techniques from applied behavioral sciences, anthropology, sociology, and phenomenology. The terms "change agent" and "catalyst" suggest a leader who is engaged in transformation leadership as opposed to management (management being a more incremental or efficiency-based change methodology).

Although behavioral science provided the basic foundation for the study and practice of OD, new and emerging fields of study have made their presence felt. Experts in systems thinking and organizational learning have also emerged as OD catalysts. These emergent perspectives view the organization as the holistic interplay of a number of systems, all of which impact the processes and outputs of the entire organization.
 

Applications of Organizational Development

The purpose of OD is to address the evolving needs of successful organizations. It represents a concerted collaboration of internal and external experts in the field to discover the processes an organization can use to become more effective.

Organizational development aims to improve an organization's capacity to handle its internal and external functioning and relationships. This includes improving interpersonal and group processes; communication; the organization's ability to cope with problems; decision-making processes; leadership styles; conflict and trust; and cooperation among organizational members.

Weisbord

Weisbord presents a six-box model for understanding – and thereby changing and improving – an organization:

1. Purposes: Are employees clear about the organization's mission, purpose, and goals? Do they support the organization's purpose?
2. Structure: How is the organization's work divided? Is there an adequate fit between the purpose and the internal structure?
3. Relationships: What are the relationships between individuals, units, or departments that perform different tasks? What are the relationships between the people and the requirements of their jobs?
4. Rewards: For what actions does the organization formally reward or punish its members?
5. Leadership: Does leadership watch for "blips" among the other areas and maintain balance among them?
6. Helpful mechanisms: Do planning, control, budgeting, and other information systems help organization members accomplish their goals?

Phases of Organizational Change: Lewin

Kurt Lewin's phases of change (unfreezing, change, and freezing) describe how people react and adapt to change.
Lewin's description of the process of change involves three steps:

1. Unfreezing: Faced with a dilemma or issue, the individual or group becomes aware of a need to change.
2. Changing: The situation is diagnosed and new models of behavior are explored and tested.
3. Refreezing: Application of new behavior is evaluated, and if it proves to be reinforcing, the behavior is adopted.

Change is a fundamental component of any organization looking to continuously improve and evolve. A few researchers and academics have determined how to best model and present methods of change for managing employees. Kurt Lewin was one of these academics and was known as one of the leaders of organizational psychology.

Kurt Lewin: Lewin was an influential behavioral and organizational psychologist who proposed the Phases of Change Model.

The Three Phases of Change

This early model developed by Lewin describes change as a three-stage process of unfreezing, change, and freezing. In this Phases of Change Model, Lewin emphasizes that change is not a series of individual processes but rather one that flows from one process to the next.

The first stage (unfreezing) involves overcoming inertia and dismantling the existing mind set. It involves getting over the initial defense mechanisms that people exhibit to avoid making a change. People eventually realize that change is necessary and urgent, and this realization allows them to move on to the next stage.

In the second stage, the actual change occurs. This is typically a period of confusion and transition in which people are unsure about the change and what may happen in the future. People are aware that the old ways are being challenged, but they do not yet have a clear picture as to what these ways will be replaced with. During this stage, an organization's leaders need to focus on clearly communicating to employees the reasons for change and the steps needed to achieve it.

Lewin labeled the third and final stage freezing, though it may be useful to think of this stage as "refreezing." During this stage, the new mindset of the change begins to become the standard, and people's comfort levels return to normal. Many people criticize this component of Lewin's model, arguing that there is never time for people to comfortably adapt to change in the fast-paced world of today.

Although some managers still use Lewin's model, its most important contribution is the idea that change should be thought of as a process instead of individual stages. This is important for understanding how employees may react to change in the workplace and why some may adapt more quickly to change than others.

Effectiveness of Organizational Development

The efficacy of organizational development is predicated on the adaptability of the organization and the overall successful integration of new ideas and strategies within an existing framework. Resistance to change is a fundamental organizational problem as all organizations have a degree of general inertia. This is further complicated by the difficulty in quantitatively measuring changes in areas that are generally intangible (i.e., culture).

To remedy this, organizations pursuing OD must set clear and measurable objectives prior to committing to a change initiative. An important role of the leader is to analyze and assess the effectiveness of this developmental process and motivate the organization to achieve developmental targets.

Common Targets of Organizational Change

Change management can be implemented to change an organization's mission, strategy, structure, technology, or culture.

LEARNING OBJECTIVE

• Recognize and discuss the various components of an organization which may undergo change through the evolution and adaptation of organizational strategy and/or objectives

KEY POINTS

• Organizational change management should begin with a systematic diagnosis of the current situation in order to determine the organization's need for and ability to change.
• Prior to a cultural change initiative, a needs assessment should examine the current organizational culture and operations. The goal is a careful and objective consideration of what is working and what is not.
• Areas of change include mission, strategy, operations, technology, culture, branding, employees, and work flows.
• Change management should also make use of performance metrics, such as financial results, operational efficiency, leadership commitment, communication effectiveness, and the perceived need for change.

TERMS

• organization
  A group of people or other legal entities with an explicit purpose and written rules.
  
  
• change management
  The controlled implementation of required changes to some system; includes version control and planned fallback.

When an organization requires changes to address counterproductive aspects of organizational culture, the process can be daunting. Cultural change is usually necessary to reduce employee turnover, influence employee behavior, make improvements to the company, refocus the company objectives, rescale the organization, provide better customer service, or achieve specific company goals and results. Cultural change can be impacted by a number of elements, including the external environment and industry competitors, changes in industry standards, technology changes, the size and nature of the workforce, and the organization's history and management.

Assessing Change Needs

Prior to launching a cultural change initiative, a company should carry out a needs assessment to examine the existing organizational culture and operations. Careful and objective consideration of what is working and what is not, as well as what is parallel with the broader organizational objectives and what is not, are critical to success here.
Areas that need to change can be identified through interviews, focus groups, observation, and other methods of internal and external research. A company must clearly identify the existing culture and then design a change process to implement the desired culture.

Common Areas of Change

Common areas of organizational change include:

• Mission
• Strategy
• Operational changes, including structure and hierarchies
• Technology
• Culture
• Employees and/or management
• Workflows (particularly relevant in manufacturing)
• Branding

Organizational change management should begin with a systematic diagnosis of the existing situation in order to determine the organization's need for and ability to change. The objectives, content, and process of change should be specified as part of the change management plan.

Change management processes can benefit from creative marketing to facilitate communication between change audiences and a deep social understanding of leadership styles and group dynamics. To track transformation projects, organizational change management should align group expectations, communicate, integrate teams, and manage and train people. Change management should also make use of performance metrics including financial results, operational efficiency, leadership commitment, communication effectiveness, and the perceived need for change in order to design appropriate strategies that make the change in organizational culture as smooth and as efficient as possible.