Managing a Business/Managing Change in Organisations
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1. Briefly discuss the relevance of change in organizations, enlist the types of change and describe the factors contributing to change citing suitable examples.
2. Discuss the concept of ‘process-based change’. Cite organizational examples where process based change has taken place successfully.
3. Describe the approaches and methods of evaluating change. Illustrate few examples of evaluation of organizational change.
4. Explain the concept of organizational diagnosis. Describe any two methods of diagnosis and its benefits and limitations with the help of examples.
5. Write an essay on ‘managing transitions’. Differentiate it from ‘managing change’. Take a hypothetical organization and apply the rules for managing transition.
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1. Briefly discuss the relevance of change in organizations, enlist the types of change and describe the factors contributing to change citing suitable examples.
Any business in today's fast-moving environment that is looking for the pace of change to slow is likely to be sorely disappointed. In fact, businesses should embrace change. Change is important for any organization because, without change, businesses would likely lose their competitive edge and fail to meet the needs of what most hope to be a growing base of loyal customers.
Without change, business leaders still would be dictating correspondence to secretaries, editing their words and sending them back to the drawing board, wasting time for all involved. Change that results from the adoption of new technology is common in most organizations and while it can be disruptive at first, ultimately the change tends to increase productivity and service
Technology also has affected how we communicate. No longer do business people dial a rotary phone, get a busy signal, and try again and again and again until they get through. No longer do business people have to laboriously contact people, in person, to find out about other people who might be useful resources - they can search for experts online through search engines as well as through social media sites. Today's burgeoning communication technology represents changes that allow organizations to learn more, more quickly, than ever before.
Customers who were satisfied with conventional ovens many years ago are sometimes impatient with the microwave today. As the world evolves, customer needs change and grow, creating new demand for new types of products and services -- and opening up new areas of opportunity for companies to meet those needs.
The economy can impact organizations in both positive and negative ways and both can be stressful. A strong economy and increasing demand for products and services will mean that companies must consider expansion that might involve the addition of staff and new facilities. These changes offer opportunities for staff, but also represent new challenges. A weak economy can create even more problems as companies find themselves needing to make difficult decisions that can impact employees' salaries and benefits and even threaten their jobs. The ability to manage both ends of the spectrum are critical for organizations that want to maintain a strong brand and strong relationships with customers as well as employees.
Change is important in organizations to allow employees to learn new skills, explore new opportunities and exercise their creativity in ways that ultimately benefit the organization through new ideas and increased commitment. Preparing employees to deal with these changes involves an analysis of the tools and training required to help them learn new skills. Training can be provided through traditional classroom settings or, increasingly, through online learning opportunities. Importantly, organizations need to do a good job of evaluating employees' capabilities and then taking steps to fill the gaps between current skills and the skills required to respond to growth.
Challenging the Status Quo
Simply asking the question "Why?" can lead to new ideas and new innovations that can directly impact the bottom line. Organizations benefit from change that results in new ways of looking at customer needs, new ways of delivering customer service, new ways of strengthening customer interactions and new products that might attract new markets. New employees joining an organization are especially valuable because they can often point to areas of opportunity for improvement that those who have been long involved in the company might have overlooked. But even existing employees should be encouraged to question why things are done a certain way and look for new ways to get work done faster, better and with higher levels of quality and service.
process in which an organization optimizes performance as it works toward its
ideal state. Organizational change occurs as a reaction to an ever-changing
environment, a response to a current crisis situation, or is triggered by a leader.
Successful organizational change is not merely a process of adjustment, but also
requires sufficient managing capabilities. However, there are many topics to be
considered to achieve successful change. Hence, this paper discusses the causes of
organizational change, its elements, approaches, process, resistance, management,
and finally the possible factors leading to its breakdown.
Keywords: organizational change, organizational development, causes of
organizational change, processes of organizational change, resistance &
management of organizational change
Based on a five year survey conducted by the world-renowned McKinsey
consulting firm , out of the 1536 companies that underwent
organizational change, only 38% of the company managers claimed that the
process succeeded in increasing work performance. Regarding long term health
goals (such as increasing ability, better customer relations, supplier relations,
positive work culture), only 30% of the managers associated these with
organization change. Hence, the goals of organizational change are rather
multi-faceted. The most common goal stated by over 50% of the interviewees is
“minimizing costs”. Other goals include bettering the firm, mergence, crisis
intervention, or overcoming competition. Seemingly, successful organizational
change is not merely a process of adjustment, but also requires sufficient
The following discussion attempts to understand the causes of organizational
change and its elements, approaches, process, resistance and management, and
finally the possible factors leading to its breakdown.
Why does an organization need organizational change?
What is organizational change? It is a process in which an organization
optimizes performance as it works toward becoming its ideal state. Why does an
organization need organizational change ?
From a passive
perspective, organizational change occurs as a reaction to an ever-changing
environment or as a response to a current crisis situation. On the other hand, a
more proactive viewpoint is that it is triggered by a progressive manager.
Furthermore, organizational change is especially evident when the organization
has just undergone a transfer of executive power .
the causes of organization change
can be explained by one of the following theories: teleological theory, life-cycle
theory, and dialectical theory. The teleological perspective believes that
organizational change is an attempt to achieve an ideal state through a continuous
process of goal-setting, execution, evaluation, and restructuring. Life-cycle theory
claims that the organization is an entity that depending on the external
environment, cycles through stages of birth, growth, maturation, and declination.
Dialectical theory hypothesizes that the organization is like a multi-cultural society
with opposing values. When one particular force dominates over others, a new
organizational value and goal is established, resulting in organizational change.
The targets of organizational change
The influential factors of organizational effectiveness are widespread,
including factors that are related to external environmental changes, and factors
which will improve the internal managerial effectiveness. The organization must
consider the reasons for change, the external environment, and the internal
situation to decide which factors to change.
The most common known targets of organizational change include vision,
strategy, culture, structure, system, production technology, and leadership style
Vision includes a firm’s organizational core value but one that also adapts
accordingly to the external environment. When an organization undergoes change,
its core value needs to be determined so that in the process of transformation, it
can be preserved.
Strategy refers to the organization’s long term goals and the steps and
resources needed to be considered in its decision-making. The strategy change can
be divided into the enterprise strategy change (Ex: low cost strategy), the overall
strategy change (Ex: multiple-angle management), and the global expansion
Culture is referring to its members’ collective value, norm, and basic
assumptions. The change involved is altering the content of this collective value
and/or basic assumption. Typically, the explicit culture is more easily manageable
or changed than the implicit culture.
Structure is an official system of the duty and the authority relations of an
organization. Structural change is transforming the organization’s vertical
disintegration or horizontal differentiation, power allocation, and level of
System is the formal regulations, policies and procedures such as reward
system, performance evaluation methods, goals budget system, etc. that are used
to operate the organization.
Production science and technology is the technology, the knowledge, the
ability, the material, the machine, the computer, the tool and other equipments
which transforms inputs to outputs.
Leadership is the influential force within the organization. Leadership style
impacts the group dynamic and also the interaction of its members.
The above targets of organizational change will influence each other. For
example, the actualization of vision depends on the incorporation of suitable
strategy and the organization’s culture. Therefore, in the process of organization
change, the “systematic viewpoint” has to be taken, so that different change targets
can be considered as a whole to achieve the organizational change successfully.
The different types of organizational change
Managers continually face choices about how best to respond to the forces for
change. There are several types of change that managers can adopt to help their
organizations achieve desired future status. In general, the types of change fall into
two broad categories: evolutionary change and revolutionary change. Evolutionary
change is gradual, intermittent, and narrowly-focused . Its main purpose is to make continuous improvement in order
to adjust to the environment changes .
change is rapid, dramatic, and broadly focused. It often happens when the current
operation method can no longer fulfill the demand of the external environment,
and a significant change has to be made in a short period of time to keep the
The most widely known types of evolutionary change is socio-technical
systems theory, total quality management, and management by objectives . Socio-technical systems theory
emphasizes the importance of the social and technological aspects within the
organization during the process of change. In other words, it emphasizes the
development of the most optimal partnership between members/workers of the
organization and the technology. Total quality management is an ongoing and
constant effort by all of an organization’s functions to find new ways to improve
the quality of the organization’s good and services .
Management by objectives specifies the importance of regular meetings between management
and its subordinates. The objective is to assess future work goals, evaluate work
performance, and discuss challenges and obstacles in an attempt to motivate work
efficacy and coherence .
There are also three important types of revolutionary change: reengineering,
restructuring, and innovation .
Reengineering involves the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvement in critical, contemporary
measures of performance such as cost, quality, service, and speed . When organization experiences a rapid deterioration in
performance, manager may try to turn things around by restructuring. For example,
an organization tries to simplify its organizational structure by eliminating
divisions, departments, or levels in the hierarchy; and downsizing employees to
lower operating costs. Innovation is the successful use of skills and resources to
create new technologies or new goods and service so that an organization can
change and better response to the needs of customers .
The processes of organizational change
Regardless of what type of evolutionary or revolutionary change an
organization adopts, managers face the problem of getting the organization to
change. Many scholars have devoted to the study of organizational change process,
and most of them follow Lewin’s “Force Theory of change”.
Based on the observation of real world organizational change, Lewin
proposed a three-step process for successful organizational change: unfreezing,
moving, freezing .
Unfreezing starts from the members’ understanding of the organizational
crisis or vision that motivates them to change, normally, unfreezing will go
through three stages. First of all, there must be enough information indicating that
the current organizational condition is not ideal. Secondly, this information has to
be related to the important goal of the organization, thus elicits members’ anxious
feeling. Finally, a solution has to be proposed that will reduce the members’
insecure feeling and resistance to change .
Moving is taking certain actions to transform the organization to an
expected condition. The moving process is quite complicated; it involves goal
setting, support seeking, resource finding, planning and execution. There are two
forms of moving: problem-solving orientation, and vision orientation. The
organization may adapt either one according to their specific situation.
Freezing is to stabilize the change achieved in moving stage. The individual,
the department, and the organization, all have an inertial way of thinking and
doing, so that the change achieved in moving state will return to the status quo
ante if freezing is not done. Form new rules, regulate members’ new behavior
directly, reinforce appropriate responses, are all possible ways to internalize the
new value or behavior into the organizational culture.
Forces in organizational change
According to Lewin’s force-field analysis model, an organization is an open
system. There are two forces in organization change , one is the
pushing of the organization to a new direction; it is the driving force. The other is
preventing organization from changing; it is the restraining force.
When driving force is stronger than the restraining force, organizational
change occurs, and the organization will move towards a new direction. When
restraining is stronger than the driving force, organization will stay where it was;
and when these two forces are equally powerful, it will stay stable temporally.
When organization is about to change, there are different forces to prevent
them from change, which is the above-mentioned restraining forces. Restraining
forces can be divided into three levels: organization level, secondary unit level,
and individual level . Factors in the organizational level
include the organizational structure inertia and system pressure, organizational
culture, and the pressure from past success. Factors in secondary unit level include
the standpoint difference and interest conflict between different departments.
Factors in individual level include the misunderstanding, lack of trust, own benefit
threat feeling, uncertainty, custom, etc.
How to manage these factors that may hinder the successful change of the
organization. The active ways to gain organization members' support includes
education, communication, participation and involvement. The passive ways to
eliminate members' resistance include assistance, negotiation control, and coercion. These methods are most effective in different
situations therefore the superintendent must manage the organization change
according to the situation, and use the combination of suitable methods to
implement the change.
Kotter’s 8 Step Change Model can be used as a good framework :
1. Step One: Create Urgency
2. Step Two: Form a Powerful Coalition
3. Step Three: Create a Vision for Change
4. Step Four: Communicate the Vision
5. Step Five: Remove Obstacles
6. Step Six: Create Short-term Wins
7. Step Seven: Build on the Change
8. Step Eight: Anchor the Changes in Corporate Culture
Why does organizational change fail?
According to Mckinsey investigation , only 38%
interviewees think their company’s organization change has successfully increased
their work performance, and only 30% believe their organization change has
achieved the organization’s goal of long-term health. It is mainly because there are
many factors that will affect the success or failure of organizational change. The 6
most important factors include the insufficient readiness for change, lack of
systematic plan for organization change, fast solution expectation, the focus of
change activity instead of result, poor management in change process, and
mismatch between change plan and organization context . To achieve successful organizational change, all these factors have to be
considered carefully. The following section will explain each of them briefly.
Readiness for change refers to the degree of positive acceptance of the
necessity of change, and the positive attitude toward the effect of change on self
and the organization . The higher the
preparation, the higher the acceptance and executive power of the member shall be.
The lower the preparation, the higher the resistance to change, and the higher the
probability of organization change to fail will be.
Another common reason for organizational change to fail is that many
organizations do not take the systematic viewpoint to make a holistic plan for
organizational change. For example, the attempt to make change through
education only, and to overlook other factors that may affect employee’s behavior
such as organizational system, structure, culture, etc. Moreover, some organization
applies the identical changes plans to all departments and individuals without
considering their differences.
The fast solution expectation is another error organization makes. They often
assume introducing a set of organizational changes can solve all the problems, and
recruiting an outside consultant can assist on everything. With this expectation, the
organization will depend on the consultant too much, and invest too little, and will
end the change plan too early if the achievement does not meet their expectation.
In addition, when planning the organizational change, members often take the
change activity too seriously, but neglect the change goal itself. Thus, members
participate in the activity vigorously, but the achievement is actually very limited.
Poor management in change process is another commonly made mistake. Many
factors have to be considered and attended to in the unfreezing, moving or freezing
stages. Overlook certain factors many lead to total failure of the organizational
Finally, the match between change plan and organizational context may also
play a significant role in the success or failure of organizational change.
Organizational change is to establish new pattern of thinking and behavior. When
the new pattern conflicts with the old ones, the oversized resistance tends to cause
the plan to fail. Therefore, in designing a change plan, the organizational context
must be incorporated.
Why Organizations Change
Organizations change for a number of different reasons, so they can either react to these reasons or be ahead of them. These reasons include:
1. Crisis: Obviously September 11 is the most dramatic example of a crisis which caused countless organizations, and even industries such as airlines and travel, to change. The recent financial crisis obviously created many changes in the financial services industry as organizations attempted to survive.
2. Performance Gaps: The organization's goals and objectives are not being met or other organizational needs are not being satisfied. Changes are required to close these gaps.
3. New Technology: Identification of new technology and more efficient and economical methods to perform work.
4. Identification of Opportunities: Opportunities are identified in the market place that the organization needs to pursue in order to increase its competitiveness.
5. Reaction to Internal & External Pressure: Management and employees, particularly those in organized unions often exert pressure for change. External pressures come from many areas, including customers, competition, changing government regulations, shareholders, financial markets, and other factors in the organization's external environment.
6. Mergers & Acquisitions: Mergers and acquisitions create change in a number of areas often negatively impacting employees when two organizations are merged and employees in duel functions are made redundant.
7. Change for the Sake of Change: Often times an organization will appoint a new CEO. In order to prove to the board he is doing something, he will make changes just for their own sake.
8. Sounds Good: Another reason organizations may institute certain changes is that other organizations are doing so (such as the old quality circles and re-engineering fads). It sounds good, so the organization tries it.
9. Planned Abandonment: Changes as a result of abandoning declining products, markets, or subsidiaries and allocating resources to innovation and new opportunities.
What Organizations Can Change
What organizations can change fall into the following broad areas:
1. Mission, Vision, & Strategy: Organizations should continually ask themselves, "What is our business and what should it be?" Answers to these questions can lead to changes in the organization's mission (the purpose of its business), its vision for the future (what the organization should look like), and its competitive strategy.
2. Technology: Organizations can change their technology (for example the way they produce whatever they sell) in order to increase efficiency and lower costs.
3. Human-Behavioral Changes: Training can be provided to managers and employees to provide new knowledge and skills, or people can be replaced or downsized. As result of the recent financial crisis, many organizations downsized creating massive unemployment that continues to this day.
4. Task-Job Design: The way work is performed in the organization can be changed with new procedures and methods for performing work.
5. Organizational Structure: Organizations can change the way they are structured in order to be more responsive to their external environment. Again to be more responsive to the marketplace, this also includes where decisions should be made in the organization (centralized or decentralized).
6. Organizational Culture: Entities can attempt to change their culture, including management and leadership styles, values and beliefs. Of all the things organizations can change, this is by far the most difficult to undertake.
These are the major elements that organizations can change. It is important to note that changes in one of these elements will usually have an impact on another element. As an example, changing technology may require changes in the human-behavioral area (new knowledge and skills on how to use the technology).