Week 1 Discussion 1

1 Organizational Change Management: An Introduction

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Learning Objectives

After reading this chapter, you should be able to do the following:

1. Explain planned organizational change and analyze Kotter’s eight-step change process.

2. Compare and contrast the fields of organizational development and change management.

3. Examine Lewin’s force-field analysis and how it can be used to overcome resistance to change.

4. Describe the forces for change and organizational responses to these forces.

5. Summarize the various types and models of organizational change.

6. Differentiate between the balanced scorecard, contingency alignment framework, and stakeholder approach.

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Introduction

Everybody has accepted by now that change is

unavoidable. But that still implies that change is like

death and taxes—it should be postponed as long as

possible and no change would be vastly preferable.

But in a period of upheaval, such as the one we are

living in, change is the norm.

—Peter Drucker

Pretest Questions

1. True/False: Planned organizational change is a process that shields an organization from external legal and technological changes.

2. True/False: The fields of organizational development (OD) and change management are similar in that both are based in the discipline of operations management.

3. True/False: Change is the result of opposing forces that move with and against an organization’s status quo.

4. True/False: As a force for change, competitive advantage means advancing within an industry while maintaining some degree of organizational stability.

5. True/False: Tactical models of organizational change seek to address short-term issues and opportunities.

6. True/False: The stakeholder approach to change suggests that an organization can- not be socially responsible and seek profitability at the same time.

The Chinese international commerce company Alibaba was founded in 1999 by Jack Ma, a visionary businessman with a knack for change in his DNA. He launched Alibaba.com—an e-commerce platform that focused on small export firms—from his Hangzhou apartment. It has since grown to an estimated market cap of $223 billion and has more than 24,000 employees (Alibaba Group, n.d.; China Internet Watch Team, 2014; Pearlman, 2014; Reeves, Zeng, & Venjara, 2015).

This company is a good example of how organizations in complex, uncertain environments must continually change to remain competitive. This is especially true of technology-driven firms that rapidly expand in size and scope to gain and maintain market dominance. Alibaba, like Amazon, Google, and Netflix, uses automatic algorithms (a decision-making form of artificial intelligence) to routinely change, adjust, and leverage product choices for millions of customers in real time, a process known as self-tuning (Reeves et al., 2015). The company then extends this type of practice into its business plan by utilizing current consumer behavior to influence its vision, strategy, structure, and culture, as well as product offerings. As researchers Reeves et al. (2015) stated, “Self-tuning is related to the concepts of agility (rapid adjustment),

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Introduction

adaptation (learning through trial and error), and ambidexterity (balancing exploration and exploitation)” (p. 78).

A quick examination of Alibaba’s brief history demonstrates how the company has used self- tuning concepts to adjust to—and even create—customer demand. The company moves quickly to diversify its product offerings and markets by creating spin-off companies. This practice characterizes Alibaba’s successful change and evolution—at least to date. For example, in 2003 Alibaba launched Taobao Marketplace to test China’s consumer demand. It then rapidly created yet another spin-off, Aliwangwang, in 2004 that enabled instant messaging on the Taobao website. Enlarging the company’s business model, Alipay was also started in 2004, creating an infrastructure that experimented with and strengthened consumer confidence in online business transactions. It worked. In 2008 Taobao was renamed TMall, which included a business-to- customer platform and e-commerce ecosystem.

In 2009 Alibaba Cloud Computing was started to keep up with bleeding edge storage and retrieval technology. AliExpress was launched in 2010, which moved the company into a global position and provided it with an online international consumer website. In 2011 TMall and eTao (a shopping comparison website) became independent platforms in order to enable Alibaba to explore the future of customer demand and e-commerce in China. Cainiao, China Smart Logistics, was then launched in 2013, further enlarging the company’s scope from e-commerce to emphasizing infrastructure. In 2014 Ant Financial Services Group was formed, which further enlarged the scope of the company. In 2015 Alibaba’s innovative adaptation to Chinese customers surpassed Baidu’s (the Chinese version of Facebook) mobile ad revenue in China.

The company’s leadership has and is likely to continue to balance experimentation with innovation and real-time data algorithmic analysis to form self-adjusting organizational systems ( for example, vision, strategy, culture, business models, and product offerings).

Critical-Thinking Questions

1. Traditionally and currently, planned organizational change has been characterized by solving problems or crises that have arisen. Alibaba and other industry-leading technology-driven firms have employed organizational change to gain and expand market share and dominance. Briefly explain how Alibaba has used organizational change, and offer a few examples.

2. How would you feel about working within a fast-paced, ever-evolving company like Netflix, Alibaba, or Google? Explain your reasoning.

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Introduction

Introduction: Importance of Organizational Change The prevalence of organizational change management is growing exponentially. Three decades ago, most university curricula did not include courses on change management. Now such courses are commonplace (Worren, Ruddle, & Moore, 1999; see also Project Manage- ment Institute, 2015). A McKinsey & Company study of 189,000 employees from 81 diverse organizations found that championing desired change was one of the most important leader- ship behaviors (as cited in McKeown, 2015). The growing popularity and need for organiza- tional change management is due in large part to the rapid and pervasive amount of change we regularly face.

The world has changed dramatically over the past 30 years, as have how we think, what we think, and how we communicate. Globalization and technology have made the world far more interconnected, so what affects one business sector or one part of the world invariably affects everyone. Economic uncertainty in Europe and Asia affects exports in the United States. An oil spill in the Gulf of Mexico affects the restaurant industry in every corner of the country, from Boston to Seattle. Decades ago, events could be isolated; today change is everywhere and can occur at any time. To be effective in such a marketplace, it is essential to manage change. Lead- ing and managing organizational change has become a core competency for business profes- sionals. Companies not only need to manage change to survive, but to create a competitive advantage.

Rival Internet companies Google and Facebook are good examples of the importance of using change to gain a competitive advantage. Although Facebook is the leading social network- ing website and has overtaken websites like Friendster and Myspace, larger competitors like Google, Microsoft, and Apple are not waiting for their territory to be encroached on—they are therefore continually moving forward with technological breakthroughs. In the words of David Rowan, editor of Wired magazine, Facebook and Google are “in the ultimate battle for control of the Internet” (Rowan, 2010). He asserts that Google hires the world’s smartest soft- ware engineers, and this, along with algorithm-based computing power, has helped them dominate the desk- top-Internet era for a decade. On the other side, he suggests that Facebook strives to know all of what society is thinking, doing, and purchasing, and this helps it play a critical role in all of its members’ big and small life deci- sions (Rowan, 2010; see also Nagarkar, 2015).

As Facebook’s scope and reach con- tinues to grow, Google’s executives are taking note and ensuring they follow suit. Both companies are extending into markets that no one ever antici- pated. As this trend unfolds, more companies will no doubt implement change to maintain their competitive advantage as well.

Christoph Dernbach/picture-alliance/dpa/AP Images

Companies like Google and Alibaba continually scan their environment, buying and integrating new and innovative companies to stay ahead of rivals. Some of Google’s main revenue streams and major com- petitors include the Google website (versus Yahoo! and AOL) and total advertising (versus the Walt Disney Company, Facebook, and Twitter).

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Section 1.1 Kotter’s Eight-Step Approach

Change is not an issue for only giant corporate firms. Universities, hospitals, nonprofits, and small businesses (with 250 employees or less) across all industries must also plan for change. The U.S. Small Business Administration estimates that more than 50% of small businesses fail in the first year and 95% fail within the first 5 years (Scuteri, 2015). Note that 7 out of 10 new firms survive just 2 years. A major challenge for small businesses in general is competitiveness (the ability of a business or organization to succeed in meeting the owners’ broad business goals to serve customers). In particular, small firms fail for many reasons, which include being unable to gain access to needed capital and effectively innovate and market; failing to adequately control growth; demonstrating poor accounting and operational inefficiencies; not enabling employees to work smarter (using technology); and failing to address regulations (U.S. Small Business Administration, 2015; see also All Business, 2015).

Not all changes are dramatic, or even involve the entire organization. Some divisions, busi- ness units, departments, teams, and individuals may require varying amounts of change to increase effectiveness and obtain desired results. As we discuss in a later section, experts in change management offer particular knowledge in diagnosing and addressing issues. Although we focus on large-scale change here, we also acknowledge and discuss different types, scales, and scopes of organizational change, grounded in models and skills with which to plan and implement these strategies.

In large and small organizations, significant changes are typically not easy or linear to imple- ment. Larger changes tend to become overly complicated, especially if an organization lacks a realistic plan. Because organizational change involves people and their emotions, resistance is natural. Who wants to change jobs and routines they know? A survey of 3,199 executives worldwide found that only 1 in 3 transformational organizational change programs succeeds. Other experts estimate that between 50% and 70% of major organizational change efforts fail (All Business, 2015; Salim, 2015).

Organizational change efforts could avoid failure if leadership followed different strategic and tactical plans and implementation steps. Leadership is particularly crucial to executing an effective change program. Effective change projects call for leaders and managers who are emotionally intelligent and mindful. Such leaders need to be flexible, creative, and good com- municators who work well with people. Also, companies must not only know what types of change to watch for, but how to implement effective strategies to survive and thrive. This chapter will provide a broad overview of types of changes, the forces that induce change, and organizational frameworks for dealing with change. We begin with two of the most well- known frameworks for planned organizational change.

1.1 Kotter’s Eight-Step Approach Broadly speaking, planned organizational change is a process that moves companies from a present state to a desired future state with the goal of enhancing their effectiveness. Ultimately, the goal of planned organizational change is to improve an organization’s capabilities, thus enhancing its value to stakeholders and stockholders (Beer, 1980). Organizational leaders, managers, and employees who do not—or cannot—use change to their strategic and opera- tional advantage may see change as threatening and may resist efforts to alter a problematic situation. Those leaders and professionals who work with change specialists are more likely to view change as a competitive advantage if change is conscientiously planned and implemented.

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Section 1.1 Kotter’s Eight-Step Approach

One of the most widely used planning methods is John Kotter’s (1996, 1998, 2008) eight-step change process. This approach is used as a planning diagnostic and implementation method:

�Step 1. Establish a sense of urgency. �Step 2. Form a powerful guiding coalition. �Step 3. Develop a vision and strategy. �Step 4. Communicate the change vision. �Step 5. Empower others to act on the vision. �Step 6. Generate short-term wins. �Step 7. Consolidate gains and produce more change. �Step 8. Anchor new approaches in the culture (Kotter International, 2006).

These eight steps are vital to producing change. Each step is discussed in detail in the follow- ing sections.

Step 1. Establish a Sense of Urgency

Kotter (2008) argued that significant change generally fails if a sense of urgency is not first cre- ated and realized. The sense of urgency refers to the “pressing importance” of action needed to address critical issues—those that are essential to a group’s success, survival, or failure (Lohr, 2015). This goes against conventional wisdom, which assumes that planning processes start with a vision or goal. However, Kotter believes that individuals are not motivated with- out an initial sense of urgency. Creating one involves examining markets and competitive realities and identifying and discussing crises, potential crises, or major opportunities. Small companies and start-ups usually have a greater sense of urgency to change than do large organizations, because their very existence is at stake.

Kotter (2007) has found that more than 50% of companies fail during this first phase because executives (a) either underestimate the difficulty of moving people out of their comfort zones or overestimate their own ability to create a sense of urgency; (b) lack patience—or as some say, “Enough with the preliminaries, let’s get on with it”; or (c) become paralyzed by the pos- sible drawbacks, which can include defensiveness among employees, lack of morale among senior employees, or an overarching fear that things will spin out of control, business will suffer, stocks will sink, and they will be blamed for these and other mistakes. Kotter states the urgency rate is high enough when 75% of a company’s management actually believe that “business as usual” is no longer acceptable.

Step 2. Form a Powerful Guiding Coalition

According to Kotter (2007), the second stage of planning change is to form a powerful guiding coalition. This is accomplished by assembling a group with enough power to lead the change effort and encouraging the group to work as a team. The team can consist of top-level officers and/or involve other key influential people in the organization. Starting with one or two and including up to five people may be sufficient in large and small companies. A critical mass in this coalition is later needed for the effort to succeed.

The highest top-level executives are needed for an enterprise change initiative, with another 15 to 50 leadership members (including senior managers), depending on the size of the

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Section 1.1 Kotter’s Eight-Step Approach

company and the scope of the change. The coalition can include board members, important customers, and union leaders. Without a powerful guiding coalition, the change will likely incur opposition and fail.

Step 3. Create a Vision

This coalition next creates a vision that directs the change effort and presents a picture of the organization’s future envisioned state once the change is achieved. Not only is the vision articulated, but strategies for achieving it are clearly laid out and communicated later in the process, based on this step. The process of creating a sensible, realistic statement and strate- gies can take 3 to 12 months. Large-scale change efforts that fail either have several plans and programs but no vision or a vision that is overly complicated and “blurry.”

Step 4. Communicate the Vision

Kotter (2008) states that the coalition must actively communicate the vision, which involves using every vehicle possible to ensure that employees understand the new vision and strategies for achieving it. Communication also involves teaching new behaviors, which the guiding coali- tion should model and exemplify. Vision should be simple, crisp, and concise: A vision that can- not be communicated to someone in 5 minutes will usually not work. Effectively communicating the vision can make or break the buy-in from employees, who may be required to make signifi- cant sacrifices if the change is to succeed. Kotter notes that employees will not make sacrifices if they do not believe the change is possible. Therefore, credible communication must win so- called hearts and minds if employees are to accept the changes. Moreover, a successful vision typically includes a plan for growth and certain assurances, such as if employees are laid off, they will be treated justly.

The guiding coalition should use words and actions to communicate the vision. Leaders and coalition members must “walk the talk” rather than sim- ply “talk the talk.” They become exam- ples of the new corporate culture (an organization’s shared behaviors and values) and of its change. To that end, all types of communication channels are featured in successful transfor- mations. Messages contain essential information about business problems and the new vision and are framed and delivered to employees in interesting, exciting, and engaging ways.

Step 5. Empower Others to Act on the Vision

Communication alone, however, will not empower employees to adopt and adapt to the required changes. Enlisting competent and willing individuals to enact change is important

monkeybusinessimages/iStock/Thinkstock

If change is to be successful, the guiding coalition must effectively communicate the new vision to employees.

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Section 1.1 Kotter’s Eight-Step Approach

and is critical for success. The more people involved in trying new behaviors and changes, the better. It is therefore important to remove obstacles that hinder change. Organizational structures, compensation and performance criteria, or outdated technologies may have to be removed or altered. Obstacles can also be individuals, such as department heads or managers who do not believe in the change and/or refuse to adjust their attitudes, behaviors, and prac- tices. However, whether someone accepts or resists the change, everyone should be treated equally and in a manner that reflects the new vision (Kotter, 2007).

Step 6. Plan for and Create Short-Term Wins

Next, Kotter (2008) advises planning for and creating short-term wins, which involves estab- lishing visible and tangible performance improvements. Once these improvements are evi- dent, it is important to recognize and reward the employees that facilitated them. Change efforts are unsuccessful when executives do not systematically plan for or create short-term wins. Since large-scale transformations take time, employees need to see results around 12 to 24 months into the change; otherwise, resistance may set in.

Step 7. Consolidate Improvements and Produce More Change

After planning and celebrating short-term wins, Kotter (2008) says change leaders must con- solidate improvements and produce still more change. They can do this by using the credibility they have accrued from their expertise and experience to change systems, structures, and policies that do not fit together or with the new vision. They can also hire, promote, and train employees who can implement the vision and reinvigorate the process. It is important to note that Kotter warns about declaring victory too soon into a major change initiative and empha- sizes that real change takes time. As he says:

In one of the most successful transformations that I have ever seen, we quanti- fied the amount of change that occurred each year over a seven-year period.… The peak came in year five, fully 36 months after the first set of visible wins. (Kotter, 2008)

Step 8. Institutionalize New Approaches in the Culture

Finally, it is important to anchor and institutionalize new approaches in the culture. This means making the change accepted and established in the organization’s culture. Organizations accomplish this by increasing their performance through customer- and productivity-related behaviors. It is also important to articulate and reinforce productive and empowering rela- tionships between the new behaviors and organizational successes so that employees do not misinterpret the effects of the change. This is the first step toward institutionalizing the new approach in the company’s culture. The second step is to cultivate the means to ensure leader- ship development and succession so that future leaders understand and embody the changes.

Therefore, according to Kotter (2008), succession planning (that is, setting the next chief executive officer [CEO] and other leaders in place) is a worthy goal and one that helps an orga- nization anchor and institutionalize effective changes. When a strong leader guides an organiza- tion through an effective change but fails to select and ready a successor, the changes may not be sustained. However, finding a strong successor is easier said than done, especially for those who must follow superstars like Apple’s Steve Jobs and General Electric’s (GE’s) Jack Welch.

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Section 1.2 Organizational Development and Change Management

For example, Jeff Immelt, who replaced Welch as GE’s chair and CEO in 2001, has won over many critics who originally disapproved of Immelt’s leadership. During one of the worst economies in U.S. history, Immelt had to meet many unexpected difficulties in reshaping the company. As Immelt commented of his journey, “The trick, if you follow someone famous, is that you’ve got to drive change every day without ever pretending anything was ever wrong. It takes confidence and it takes time” (Lohr, 2015, para. 3).

Tim Cook, Jobs’s successor, has his own share of challenges in maintain- ing Apple’s dominance (see Chapter 2). Cook has effectively transitioned into his role as CEO, sustaining the innova- tions Jobs created and moving on to newer ones. Anchoring and institu- tionalizing effective transformational changes from one CEO or management team to another is not easy, but effec- tive succession planning allows compa- nies to continue approaches that have worked in the past and plan new ones to meet future environmental challenges.

Let’s now turn our attention to how planned organizational change is developed, by whom, and how an understanding of two types of change

specialists can help organizations negotiate and manage changes that occur both internally and externally.

Check Your Understanding

1. The first step in Kotter’s eight-step model is to establish a sense of urgency. How do you think companies like Apple, Amazon, and Google can create a sense of urgency when they are already leaders in their industries?

2. Kotter believes it is necessary to create short-term wins when establishing change. Why do you think this is important?

1.2 Organizational Development and Change Management

Who plans and helps architect planned organizational changes? The larger the planned change, the more top-level leaders and human resources (HR) staff are involved, especially if the change affects most, if not all, of the enterprise. Organizational consultants and change specialists are generally called in to partner with internal staff to diagnose and implement changes. Depending on the organization’s size, high-level leaders may not be heavily involved if a change involves a division, a department, or work units.

AP Photo/Eric Risberg

Steve Jobs’s successor at Apple, Tim Cook, has a dif- ficult task in living up to Jobs’s legacy and in helping Apple stay strong and competitive—but so far, he is succeeding.

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Section 1.2 Organizational Development and Change Management

In this section, we compare and contrast the two fields that created the modern principles of planned change: organizational development and change management. The approaches used by specialists in these fields are essential for achieving planned change in organizations, and these specialists are in high demand.

Organizational Development

The field of organizational development (OD) is “the practice of changing people and orga- nizations for positive growth” (OD Portal.com, n.d., para. 1). OD is the planned, organization- wide improvement of business processes to increase a company’s effectiveness and overall health. The planned changes are managed by executive leadership and based on behavioral science knowledge.

OD was the first professional field in management/organizational behavior and development to establish social science–based strategies and tools to diagnose, plan, and help business leaders implement organizational improvement changes. OD as a specialized area has been described as a “data-based process supported by survey feedback, a sociotechnical approach that is centered on job tasks and characteristics, and an interpersonal process approach led by group dynamics” (Waclawski & Church, 2002; see also Burke & Noumair, 2015, p. 16). This field differs from those such as accounting, law, or politics, because it overlaps with other fields such as organizational behavior, change management, and consulting processes. Other disciplines have a focused sense of purpose, whereas OD is always evolving and does not yet have basic boundaries or parameters, despite discussion and debate from OD practitioners regarding the nature of the field (Church, Hurley, & Burke, 1992; Friedlander, 1976; Greiner, 1980; Weisbord, 1982; Waclawski & Church, 2002).

Pioneers and those active in OD pride themselves on the inclusivity and diversity of their pro- fession’s values and methods. Organizational development specialists, many of whom are academics and organizational behavior professionals, are a major source of organizational change expertise, both theoretical and applied.

OD differs from change management in several ways. OD is based on humanistic, egalitar- ian, and process-oriented values; in short, it is grounded more in the “people side” of things. Change management, on the other hand, is based on the content-based disciplines of busi- ness, finance, strategic, and operations management. Both fields have expanded to include parts of each, while still maintaining certain subject matter expertise. Leaders and consul- tants from both fields are important and complementary to planning organizational change. We use the term specialists for both OD and change management experts. This term encom- passes consultants, practitioners, and others with expertise in these areas.

Specialists use organizational development methods that focus mainly on people and the human dimensions of organizations, such as culture, climate, leadership, and communication. These methods involve team building, survey feedback, quality of work life, restructuring work and positions, and job satisfaction (French & Bell, 1978). As the field of OD has evolved, it has incorporated change planning and interventions that also focus on structural, work process, and organizational design changes for top-level leaders as well as the entire organization.

Consider the following example of an OD specialist’s work. Suppose the leaders of a mid- size firm need to identify objective criteria for the outputs of key goals of a major division.

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Section 1.2 Organizational Development and Change Management

The CEO and the division manager want to hold employees accountable for the stated goals, the criteria underlying the goals, and the desired results from the goals. However, no one at the company has this expertise.

An OD consultant is hired to identify the criteria of each goal and articulate the goals that match those criteria. The consultant meets with the hiring manager to clarify the desired work and outcomes. She submits a proposal outlining the work to be done, how it will be done, and the anticipated deliverables. This type of project requires interviewing, examining goals and documents, and constructing criteria that support the goals. After the consultant successfully completes this project, she may be asked to train teams in that division on how to effectively implement these goals. During her work with this division, she may discover that the goals do not connect well with the company’s overall strategy. When reporting her findings to the hiring manager, she shares this discovery and perhaps extends the contract to address larger related issues in the organization.

OD specialists rely on a variety of theories, concepts, and practical applications that are dis- cussed in more detail in the following chapters. For example, specialists use systems theory. This is the idea that organizations are a system comprising interdependent subsystems that have individual components that include people, technology, work, and culture, all of which operate together to respond to external environmental changes such as competitors, custom- ers, or government regulations (Katz & Kahn, 1978).

OD specialists also conceptualize organizational systems using contingency theory, which views organizational dimensions (strategy, structure, people, work, rewards) as parts of a whole that “fit” together. Issues emerge when one of these dimensions is out of sync with the others. When all subsystems function together and fit into the external environment, the organization has a higher probability of fulfilling its goals (Burke & Bradford, 2005).

OD specialists use a wide array of skills and tools in their change work, including intraper- sonal (self-management and emotional intelligence) skills; interpersonal skills; one-on-one coaching and mentoring; group facilitating; interviewing and surveying; collecting, analyz- ing, and diagnosing data and information; problem solving; assessing; program planning; and implementing. Specialists need to look at an organizational problem in a number of differ- ent ways to accurately diagnose what is wrong and to implement the most effective strategy. Major approaches that OD specialists may take include:

• A long-term change approach that focuses on lasting effects through cultural norms; these changes include interventions that alter attitudes, behaviors, processes, knowledge, and structures.

• A top-down approach that seeks to gain top management commitment and involve- ment in order to have the authority and legitimacy to significantly effect intended changes. Although change begins at the top, it is implemented throughout the organization.

• A collaborative approach that involves professionals who are affected by the changes and support them.

• An analytical approach that examines data, diagnoses problems, and motivates change to resolve issues. Accurate diagnostic skills are a core competency of OD change agents.

• A facilitation approach that uses skilled dialogue and discussion, listening, and feedback when helping professionals identify the organization’s weaknesses and

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Section 1.2 Organizational Development and Change Management

strengths. It also involves planning for change; managing the change process; and employs implementing, coaching, and problem solving during the change.

• A design approach that helps leaders and managers develop meaningful work cli- mates in which organizational members can accomplish their goals and objectives in healthy ways (Cummings & Worley, 2015; Church, Burke, & Van Eynde, 1994).

An OD specialist may choose to join the Organization Development Network (http://www .odnetwork.org), an OD international professional association. The OD Network has commit- ted to expanding the practice and theory of OD by supporting and developing individuals who wish to practice it. It pledges to represent the discipline by promoting visibility, credibility, and influence for all members and has clearly defined core values, principles of practice, and ethics by which its members must abide.

There are several notable trends in the field of OD. One involves ensuring that process inter- ventions in organizational change are “transparent, possess integrity, treat people with dignity, and serve diverse stakeholders,” and have a primary goal of “help[ing] organizations create such processes; whether they subsequently lead to performance outcomes is of secondary import” (Cummings & Worley, 2009, p. 694). Another pragmatic trend calls for increased pro- fessionalization and the need to provide relevant expertise to organizations (Church, 2001). Management consulting in general, and change consulting specifically, is an unregulated indus- try, which means almost anyone can claim to be an expert in these fields. Certification and degrees or concentrations in these fields should be a minimum requirement for practitioners.

Finally, trends in the “context of Organizational Development” (Cummings & Worley, 2010, p. 697) indicate that the field is becoming more focused on “driving effectiveness in a broader range of organizations.” It is also helping both technical and managerial innovation, support- ing cultural diversity, and is more centered on ecological sustainability. As global, regional, national, and local economies, industries, and organizations change and evolve, so too will some change management and OD skills and practices. In many ways we are all involved in organizational change—as drivers and recipients. Hopefully, the readers of this text will become more informed and knowledgeable about change processes as a result.

Change Management

To review, OD emphasizes an organization’s human and behavioral dimensions organiza- tion (that is, explores ways to enhance motivation and productivity, which in turn enhances the organization as a whole) while, at the same time, improves the overall alignment of its systems (that is, large-scale changes are more acceptable when they are congruent with the organization’s strategy, culture, and reward system and meet employee satisfaction and effec- tiveness). We will now focus on a complementary field called change management, which has more recently expanded its domain to include both business and behavioral aspects of organizational change.

Change management encompasses the approaches used by business content and behav- ioral process specialists to help leaders move entire organizations, or units, from a present to a desired state. Whereas OD specialists focus on process (how leaders, managers, and

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http://www.odnetwork.org/

Section 1.2 Organizational Development and Change Management

employees communicate, relate, strategize, sell, and solve problems) and general systems- oriented interventions (how strategy, culture, structure, accounting, and HR systems work together to meet goals), change management specialists address issues and areas such as:

• competitive business strategy; • strategic firm (HR benefits, budgeting, profit sharing) planning; • information technology (IT) and engineering solutions design and development; • IT infrastructure support; • business process engineering and reengineering; • marketing planning; • financial analysis, inventory control and analysis, work-flow analysis, and design

solutions; and • project management methods.

Part of a change management specialist’s role is to align a business’s objectives and practices with the new or desired strategy, structure, and system. To do this effectively, change special- ists must focus on both the content and process; for example, they must be concerned with how organizational leaders commu- nicate business strategy to IT teams, although this may not be their primary expertise. Change management con- sultants usually specialize in particular content areas such as strategy, manu- facturing and operations, marketing, and IT, whereas OD consultants deal with identifying and solving broader organizational integration issues—for example, structuring organizational units for effectiveness, coaching and advising leaders on communication and relational skills, working with teams to improve their project man- agement processes, and other organi- zational behavior topics.

One expert in the field noted that technical experts such as manufacturing engineers focus on how to standardize and regulate tasks, so these can be consistently repeated. Such is the role of a change management specialist. In contrast, OD specialists find that these regulations and procedures suppress creativity and cause dissatisfaction in an organization (Worren et al., 1999).

In larger organizations it is common to find change management teams from different con- sulting companies that are composed of people with complementary skills. For example, members may come from entirely different segments of a business, such as IT, marketing, engineering, and organizational design.

michaeljung/iStock/Thinkstock

Change management specialists often work in teams and must coordinate many facets of an organization to effectively execute a change plan.

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Section 1.3 Lewin’s Force-Field Analysis and Resistance to Change

Check Your Understanding

1. List five of the major skills or tools that OD specialists must use in their change work and explain why they are important.

2. Describe the major differences between OD and change management specialists. Provide an example of when each type of specialist is needed.

1.3 Lewin’s Force-Field Analysis and Resistance to Change The term resistance to change was first introduced by Kurt Lewin in his field theory and work on group dynamics (Lewin, 1947; Gravenhorst, 2003). Lewin’s force-field analysis is such a widely used method that its use has become commonplace. When used systematically, the method can help individuals, groups, and organizations understand and overcome resistance to specific changes.

Force-Field Analysis

Lewin views change as the result of opposing forces that move with and against the status quo at any given time. Change comes to a standstill when the opposing forces are of equal strength. To move the state of change in one direction or the other, one set of forces must be increased, decreased, or both. This model is based on the law of physics that holds that an object at rest will remain so unless the forces exerted on the object (to move it) are greater than the forces working against it (to keep it at rest). Therefore, behavioral change will occur if (a) the forces for change are strengthened, (b) the forces against change are weakened, or (c) a combination of the two is applied.

Lewin’s method is also used to diagnose and develop strategies to alter the dynamics of change at any stage of a change process. It is an excellent method for engaging employees and managers in identifying hidden assumptions, issues, and perceived opportunities related to a desired end state to be achieved, a plan to be implemented, or an initiative to be tested.

The following steps can be used to identify the forces for and against a particular situation, problem, or opportunity:

1. Describe the opportunity, problem, or issue. 2. Identify the desired end state. 3. List the potential benefits derived from having achieved the end state. 4. Identify the driving forces, strategies, and tactics for change toward the end state. 5. Identify the resisting forces against change toward the end state. 6. Identify tactics that can be used to weaken the forces against change. 7. List tactics to strengthen the forces for change to reach the desired end state. 8. Develop an action plan.

Figure 1.1 uses an initiative to implement a new software program to illustrate Lewin’s force- field analysis. In this situation, a consultant collaborates with an organization’s leadership team to interview and survey a work group whose support is needed to implement the soft- ware. Their opinions of the change are indicated in this figure. Those who supported the change indicated that the new software would provide added capability, while those who opposed it countered with their fear and hesitancy of the change.

Forces for change

Equilibrium Forces resisting

change

• Added capability

• Perform work more quickly

• Maintain technological edge

• Network everyone on same system

• Fear of change

• Resistance to new training

• Old habits

• No benefits of change identified

Organizational initiative:

Implement a new software

program organization wide

+ −

Figure 1.1: Force-field analysis

This chart shows the ways in which forces for change and its resistance meet in the middle at equilibrium.

Source: Lewin, K. (1997). Field theory and learning. In D. Cartwright (Ed.), Field theory in social science: Selected theoretical papers (pp. 212–230). Washington, DC: American Psychological Association.

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Forces for change

Equilibrium Forces resisting

change

• Added capability

• Perform work more quickly

• Maintain technological edge

• Network everyone on same system

• Fear of change

• Resistance to new training

• Old habits

• No benefits of change identified

Organizational initiative:

Implement a new software

program organization wide

+ −

Section 1.3 Lewin’s Force-Field Analysis and Resistance to Change

Check Your Understanding

1. List five of the major skills or tools that OD specialists must use in their change work and explain why they are important.

2. Describe the major differences between OD and change management specialists. Provide an example of when each type of specialist is needed.

Force-Field Analysis

The following steps can be used to identify the forces for and against a particular situation, problem, or opportunity:

Forces for change

Equilibrium Forces resisting

change

• Added capability

• Perform work more quickly

• Maintain technological edge

• Network everyone on same system

• Fear of change

• Resistance to new training

• Old habits

• No benefits of change identified

Organizational initiative:

Implement a new software

program organization wide

+ −

Figure 1.1: Force-field analysis

This chart shows the ways in which forces for change and its resistance meet in the middle at equilibrium.

After analyzing the number and strength of supporters and resisters, the consultant and orga- nizational HR professional might conclude that support for change outweighs the resistance. Also, evidence from interviewing and surveying the work group may also indicate that the consultant needs to educate individuals who doubt the new software’s additional capability and technological advantages. Doing so may encourage those who were initial dissenters to embrace the change and carry it out.

The Three Stages of Change: Unfreezing, Moving/Changing, Refreezing in the Force Field

Lewin’s force-field analysis also argues that there are three stages of change: unfreezing, moving/changing, and refreezing.

The unfreezing stage focuses on creating an emotional need for change by increasing the motivation to change. Individuals are encouraged to abandon old behaviors and attitudes and become open to accepting new ones. Managers can participate in this stage by reducing barriers to change, creating incentives to change, and introducing rewards for new behaviors. Individuals begin to unfreeze old behaviors and attitudes when they can see and experience their uselessness.

For example, imagine that directors of an organization have been required to use a new finan- cial reporting system that tracks their expenses. Most do so and immediately see its benefits, which include helping them make more objective decisions about activities and resources. However, those who refuse to use the new system start to fall further behind in their work.

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Section 1.3 Lewin’s Force-Field Analysis and Resistance to Change

They feel discouraged and helpless. A few leave, whereas others realize it is time to change— that is, their attitudes and old behaviors start to unfreeze.

In the moving/changing stage, employees experience changes in their attitudes and behaviors. New information, attitudes, and skills are introduced. A new organizational vision, mission, strategy, structure, and technology facilitate new directions for change. Mentors, role models, and training assist employees in the transition from old to new attitudes and behaviors.

In the example of the new financial reporting system, responsible managers design and assign a training program with mentors to help the directors learn and adapt to the new system. The man- agers begin the training by relating the new financial system to the company’s new vision, mis- sion, and direction. This alignment process—linking the need to use the financial system to the company’s larger vision and goals—motivates the directors to change old attitudes and habits.

Finally, the refreezing stage focuses on reinforcing and institutionalizing new behaviors and attitudes. Enabling employees to practice new behaviors with appropriate rewards helps stabilize changes during this phase. Managers must ensure that the culture, structure, and reward system support the new behaviors.

The managers meet frequently with the directors and others in the company who have been positively affected by the new system. They discuss its issues and benefits. The managers also introduce bonuses and other perks to the directors and employees who have increased their productivity by using the system. An overall feeling of accomplishment and pride takes hold, and the company’s culture is revitalized.

Managing Change

Confronting Resistance

Rather than reduce a large number of staff members, a financial services company chose cost-cutting measures to weather the financial crisis. These included consolidating its office space, renting out one of its floors, and overhauling employee health insurance options. The traditional health maintenance organization was still available, but at a much higher price, which offset the company’s rising cost of providing the benefit. A new high-deductible plan was also put into place. Open enrollment usually took place every year in November, and e-mails were sent out to employees notifying them of the changes at the end of September.

Employees complained that as part of the high-deductible plan, they were required to pay more out of pocket to meet the deductible before any insurance benefits kicked in. Company executives explained the complicated process and pointed out that the company would contribute half of each employee’s deductible responsibility in a health reimbursement account and that employees could draw the other half from pretax dollars in a flexible spending account.

Serious discontent flowed through the office; groups were meeting to discuss their dissatisfaction with the company and go to HR with complaints. Some employees even left

(continued)

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Section 1.4 Driving Change in Organizations

Check Your Understanding

1. Explain why so many people resist organizational change. 2. Use Lewin’s concepts to explain how planned change can be better understood and accepted.

1.4 Driving Change in Organizations Organizational change is generally triggered by external and/or internal forces. Such forces could include special industry events, an unforeseen opportunity for company growth, indus- try trends, or any myriad of pressures from inside or outside the company. Detecting signs of external change is important, since failure to do so could cause an organization to miss oppor- tunities or fail to see impending threats. Planned change begins with learning to interpret and respond to trends that are triggered in external environments.

Macro-level external sources of change are depicted in Figure 1.2. These include government and political, economic, technological, sociocultural, and natural- and human-related forces. When planning a change, this broader level of analysis is completed before identifying more specific operational dimensions of change—that is, the particular industry and the niche of the organization in that industry.

From a change perspective, these environmental forces can have many effects on an organiza- tion’s internal systems—that is, its leaders and employees, its strategy and operating systems (IT, HR, and so on), and even its very culture. See Figure 1.3 for a depiction of the external influences on an organization’s internal systems.

To understand how organizational leaders and change specialists analyze environments, try this exercise. Think of an organization in which you work or have worked, or one you’ve learned about from the media. Then, answer these questions as you read this section.

the company because of a perceived devaluation of health insurance benefits.

Discussion Questions

1. What are some of the naturally occurring reasons to generally oppose this change? 2. Imagine you are an employee at the company who understands that these changes

are being made to avoid layoffs. You therefore accept the change wholeheartedly. How could you help other employees advance to the moving/changing stage?

3. How could the unfreezing, moving/changing, and refreezing stages be applied to this situation?

(See the end of the chapter for possible answers.)

Managing Change (continued)

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Sociocultural Forces • Demographic trends • Lifestyle changes • Availability skills • Attitudes toward work • Gender issues • Willingness to move • Ethics

Technological Forces • Information technology/the Internet • New production processes • Computerization of processes • How technology is sold and serviced

Economic Forces • Globalization • Competitors/suppliers • Currency exchange rates • Employment and wage rates • Government economic policies • Lending policies of financial institutions

Government & Political Forces • Government legislation • International law • Wars • Local regulations • Taxation • Trade unions activities

Organization

Natural Disasters & Human-Induced Forces • Weather • Extreme storms (hurricanes, tsunamis, volcanoes, earthquakes) • Pollution • Health, food, stress

Political–Legal Forces

Sociocultural Forces

Technological Forces

Internal Environment The Organization

External Environment

Informal Subsystem Managers, Culture, Norms, Relationships, Politics, Leadership

Formal Subsystem Leadership, Strategy, Management, Goals, Marketing, Operations, Technology, Structure

Economic Forces

Section 1.4 Driving Change in Organizations

Figure 1.2: Macro forces and organizational change

The five macro-level, external forces of change are economic, technological, sociocultural, natural and human-induced, and government and political. These forces produce potential opportunities or critical issues for an organization.

Source: Senior, B., & Fleming, J. (2006a). The leadership of change. In B. Senior & J. Fleming (Eds.), Organizational change (3rd ed.). Essex, UK: Prentice Hall, Figure 1.3, p. 17.

Sociocultural Forces • Demographic trends • Lifestyle changes • Availability skills • Attitudes toward work • Gender issues • Willingness to move • Ethics

Technological Forces • Information technology/the Internet • New production processes • Computerization of processes • How technology is sold and serviced

Economic Forces • Globalization • Competitors/suppliers • Currency exchange rates • Employment and wage rates • Government economic policies • Lending policies of financial institutions

Government & Political Forces • Government legislation • International law • Wars • Local regulations • Taxation • Trade unions activities

Organization

Natural Disasters & Human-Induced Forces • Weather • Extreme storms (hurricanes, tsunamis, volcanoes, earthquakes) • Pollution • Health, food, stress

Figure 1.3: Environmental influence on internal organization

The external forces of change influence an organization’s formal and informal subsystems.

Source: Senior, B., & Fleming, J. (2006a). The leadership of change. In B. Senior & J. Fleming (Eds.), Organizational change (3rd ed.). Essex, UK: Prentice Hall, Figure 1.4, p. 32.

Political–Legal Forces

Sociocultural Forces

Technological Forces

Internal Environment The Organization

External Environment

Informal Subsystem Managers, Culture, Norms, Relationships, Politics, Leadership

Formal Subsystem Leadership, Strategy, Management, Goals, Marketing, Operations, Technology, Structure

Economic Forces

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Section 1.4 Driving Change in Organizations

1. Identify an influence (or influences) from Figure 1.2 that has affected the way an organization markets, produces, sells, and delivers its goods and/or services (also see Figure 1.3).

2. Can you think of a particular way the organization changed (Figure 1.2) or must change to compete as a result of any of the environmental influences in Figure 1.3?

3. Do you buy or avoid buying any products because of how the company that makes them does business? If so, what product, what company, and what do you admire or dislike about the way it does business?

Your answers to these questions indicate changes that organizations need to make or plan for in order to meet new market and customer demands.

External Forces of Change

Let’s look more closely at Figure 1.2 to see how external forces and influences can create threats and opportunities for organizations.

Technology Forces Technology is a primary driver of innovation and change. Organizations use information technologies in their strategies and operations to gain speed, scale, scope, and reach with customers and stakeholders around the world. IT has enabled the creation of new industries, business models, professions, products, and services.

Take, for example, Google, Facebook, YouTube, and Amazon, to name just some of the promi- nent companies that have dramatically shifted customer-to-customer as well as business-to- customer relationships. Websites like Google have practically replaced the Yellow Pages and traditional map-printing companies like Rand McNally. Facebook created not only networks of friends but also those of clustered, self-promotional buyers. YouTube became an enter- tainment, educational, and journalistic resource center. Amazon took consumers from sifting through bookshelves in bookstores to online web pages—and then to Kindle.

These companies, along with PayPal, have changed the practices surrounding payment for services and products, marketing, advertising, sales, and delivery. These firms and their many uses of technology have helped shift power to customers, since they can now select from a wider and more differentiated set of websites and digital stores.

Technology not only drives changes within companies but has the ability to change industries worldwide. An example of the influence of technology on global health care comes from Zhu Ling, a Chinese student who became strangely ill in 1994. Her friend posted a description of the student’s medical condition on the Internet. After reading about her symptoms, doctors in the West diagnosed her with thallium poisoning and saved her life. Having the ability to receive diagnoses using technology is beneficial, since China had 1 general medical practitio- ner for every 10,000 individuals in 2013.

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Section 1.4 Driving Change in Organizations

Mobile technology like smartphones and iPads has profoundly impacted the way we think about and do business, as well as how we conceive of personal time in relation to work time. Mobile technology has greatly diminished the need for physical office space and face-to-face business time, and it has drastically increased the speed at which business communication and transac- tions are conducted. Because people can be reached almost anywhere and at any time, tradi- tional work hours are falling by the wayside. The print media industries—newspapers, maga- zines, and books—have also been significantly impacted by the availability of digital e-readers like the Nook and Kindle. Moreover, blogs and YouTube now complement and replace network news. Hulu and Netflix complement and may one day replace the movie theater.

Social networking technologies are changing politics and the way lead- ers interact with their constituents. It has become standard for an elected official or political figure to maintain a Facebook page and Twitter account to post updates, convey messages, and organize events. Moving forward, we can expect many social and politi- cal events—from election campaigns to grassroots social movements—to achieve their goals via social net- working technologies.

Social media is also well used in are- nas outside politics. In a 2014 report on social media marketing, 92% of marketers surveyed agreed that social media is important for their business, up from 86% in 2013. Sixty-eight per- cent of marketers plan to increase their use of blogging, which was the top investment area for marketers in 2014. Fifty-four percent of marketers use Google+, and Facebook (54%) and LinkedIn (17%) were considered the two most important social net- works (Stelzner, 2014).

Organizations, regardless of their size, are becoming more effective, efficient, connected, and “globalized” because of the Internet and related technologies. Real-time production that serves customized demand is the norm (Intuit, 2010). Many large firms with global supply chains are now networked to their suppliers, customers, and vendors through extranets and integrated internally through intranets, which are information networks that operate much like the Internet but are restricted to an organization’s employees. Extranets are intranets that also allow people outside of the business to access an organization’s system. According to Information Week, most IT managers expect a positive return on investment on these types of network infrastructure (“Intranets and Extranets,” 2011). Innovation in this field will lead to more widespread use by companies big and small.

Organizations that lag behind in their use of technology—either for production processes or to get products and services to customers in timely and efficient ways—are usually in need of

Rostislav_Sedlacek/iStock/Thinkstock

Mobile technology and devices such as the smart- phone have changed the ways we do business and consume information. To remain viable and competitive, organizations must effectively plan for how technology will continue to evolve in the future.

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Section 1.4 Driving Change in Organizations

organizational change. Changing a major production process affects other parts of an organi- zation’s internal system, from leadership to company culture, as indicated by Figure 1.3.

Economic Forces Sharing or collaborative economy companies like Uber and Airbnb offer a digital way for buy- ers and sellers to exchange products and services. This enables people to buy what they need from one another, rather than solely from corporations (Owyang, 2013). Although there are regulatory and competitive issues among rivals in this growing and changing industry, these firms are changing the ways business is done and adding to economies in the process.

As we discussed earlier, the world has become flatter, and what affects one region has direct and immediate consequences everywhere else. Previously, a troubled economy in a particu- lar country could be isolated to that region, but now it can quickly drag down economies the world over. This was evident during the Great Recession of 2008–2009. No country was spared in the fallout from the housing market crash in the United States. Likewise, uncertainty in the European Union (EU) from 2011 to the present has created economic instability in Asia and the United States. Economies and the governments that manage them are interconnected as in no other time in human history. Monitoring governmental decisions and economic con- ditions around the world has become a critical necessity for businesses of any size.

A variety of economic conditions predicted through 2020 are expected to impact both organi- zations and consumers, including an increase in consumer spending in developing countries, depleted savings in the United States, and continuing debt and deficits throughout the West- ern world that will restrain spending rates. However, global economic growth is predicted, with more than a billion new middle-class consumers who will increase spending. The information technologies discussed in the previous section will grow in demand. Both large and small compa- nies will need new businesses and business models that can meet the demands of the new mid- dle-class consumers (Etsy, 2013, 2014; Intuit, 2010) and, at the same time, meet the demands of diminishing economies.

Environmental Forces Environmental issues present another factor that drives change. Chronic smog and air pol- lution in cities throughout the world are major health hazards that must be addressed. Climate change and sustainability considerations (“green” initiatives) also present chal- lenges for organizations, but managing these forces is no longer a choice; it is becom- ing a competitive requirement, especially as companies try to dig their way out of the Great Recession or to compete in the new so-called purpose economies, in which consum- ers are interested in companies that “bring value to their lives and to society at large” (Fields, 2014).

Consider Havas Media’s Meaningful Brands Index, a ranking of consumer-conscious compa- nies. The index measures various areas of customer well-being and ranks brands accordingly. The Meaningful Brands 2015 top global performers were Samsung, Google, Nestlé, Bimbo, and Sony. A Havas Media survey of 134,000 participants in 23 countries showed that they would not care if 70% of brands disappeared because they are “ultimately meaningless” (Fields, 2014).

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Section 1.4 Driving Change in Organizations

Some companies—such as household products manufacturer Method, funding platform Indi- egogo, and media company Participant Media—are seeing higher profits resulting from the fact that they exhibit a clear purpose. This effect resonates with employees and customers throughout the value chain. Prices and resource supplies put pressure on a company’s growth, however, and influence, and are influenced by, regulation, taxes, and other restrictions that seek to reduce companies’ carbon footprints. In addition, consumers expect businesses to incorporate sustainable practices into their operations, products, and services (Fields, 2014; Watson, n.d.).

In response to these pressures, some companies are taking the lead not only to manage these changes but also to make sustaining a healthy and clean environment a goal of change man- agement. For example, Apple, Starbucks, and Procter & Gamble are committed to powering all their factories with renewable energy within the next 10 years. FedEx committed to improve vehicle fuel efficiency by 20% by 2020. Walmart has pledged to sell $1 billion of fresh produce that was sourced from 1,000 small- and medium-sized farms (Ceres, n.d.). In 2013 Hasbro (2014) obtained 85% of its paperboard packaging from recycled materials; the company ranked second in Corporate Responsibility Magazine’s 100 Best Corporate Citizens 2015 list (http://www.thecro.com/files/100BestList2015.pdf) (Hasbro, 2015; Watson, n.d.).

Corporations and organizations will be pressured to plan, budget, and implement green logic into their business strategies, production, and manufacturing. They will need to factor con- cern for the environment, sustainable energy use, and responsible waste disposal into all their strategies using the three Rs: reduce, reuse, and recycle. As technology allows for more ways to meet these environmental concerns, companies will be well served to remain on the innovative forefront by seeking cost-effective ways to implement such technologies. Manag- ing change in this regard will help companies become more efficient and appeal to a growing consumer base.

Some industries and companies do not practice sustainable clean air and water strategies in their operations. Supporters of environmental sustainability contend that industries and firms that use coal particularly contribute to pollution (Johnson, 2011). It can be expensive to convert to clean energies and sustainable business practices, and pollution and other unhealthy consequences can result when governments do not offer industries and companies incentives to change.

Health Care Forces With an aging population, ever-evolving medical innovations, and consumer demand for the highest quality medical products and services, the cost of health care has continued to rise at an alarming rate, with no end in sight. Globally, health spending is estimated to have cost $7.2 trillion in 2013, or 10.6% of the global gross domestic product (GDP). It is estimated that this spending will rise approximately 5.2% per year from 2014 to 2018, up to $9.3 trillion (Deloitte, 2015).

These costs will likely increase the national debt in the United States and compete with funding for other government programs. Likewise, businesses are saddled with escalating insurance premiums for their employees, which contributes to a flattening of real wages and handcuffing what companies can offer in terms of compensation and benefits packages. It has

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http://www.thecro.com/files/100BestList2015.pdf

Section 1.4 Driving Change in Organizations

yet to be determined what ultimate effects the Affordable Care Act, passed in 2010, will have on these issues.

However, one thing is certain: Companies will have to manage change on this front better than ever before. Health care expansion will present business growth opportunities, but it will also present potential dangers. Change management will be critical in determining these outcomes.

Government and Political Forces Organizations and companies will also continue to cope with and respond to external politi- cal and governmental changes. Such uncertainty stems from regime changes, wars, terrorism, and global economic instability. Political unrest can have the same effect as economic unrest. A Harvard report on competitiveness illustrates business leaders’ opinions of actions they would like to see the government take to cope with uncertainty, including controlling fed- eral spending, reforming the tax code, and streamlining regulations. Divisive politics that do not address the root causes of lack of competitiveness prevent productive change (Denning, 2013).

In this volatile era, the U.S. government waivers between a lowered and less-than-acceptable credit rating from the Standard & Poor’s credit rating agency. This signals a need to continue to decrease unemployment and increase job creation—particularly in critical sectors such as engineering, manufacturing, and technology; decrease the national debt; rebuild infra- structures; restructure the education system; and balance regulation with innovation in the financial, banking, and investment industries. At the same time, EU countries must absorb the soaring debts of several member countries like Greece and Italy. Corporate leaders must think innovatively to move their economies forward; this will involve investing in new industries and creating new jobs.

Generating positive change in such unstable political and economic times is not easy. Accord- ing to the Global Competitiveness Report 2014–2015 (Schwab, 2014–2015), the United States ranked third in competitiveness, behind Switzerland (first) and Singapore, and was followed by Finland, Germany, Japan, Hong Kong, Netherlands, Sweden, the United Kingdom, and Norway. The United States rose to third from its fifth-place ranking in 2013, while Japan climbed from ninth place to sixth. Increasing global competitiveness will require innova- tive and bold organizational strategies and structures to meet external opportunities and demands. Transformational change is needed, which is discussed in a later section.

Sociocultural Forces Brainpower and talent are the keys to reigniting corporate and economic growth and pro- viding opportunities for a new generation of students. At the same time, companies must provide meaningful and challenging work to employees who value learning, ethics, and flex- ible working conditions. Work/life and work/family issues are also major sources of work- force and workplace change. The increasing number of women (single with children and married with children) in the U.S. workforce has pressured management to rethink work schedules. Male and female employees from the “sandwiched generation”—so called because they are tasked with caring for both their children and their aging parents while working full

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Section 1.4 Driving Change in Organizations

time—will require and benefit from flextime, telecommuting, and other forms of virtual work arrangements.

The modern workforce features aging workers and the physically chal- lenged, highly skilled and unskilled international entrants, and dual- career couples with children. All of these changing demographics pres- sure management to think outside the box in terms of what organizational changes are needed to attract and retain an increasingly diverse and, in many instances, technologically savvy workforce.

Globalization Forces With China’s quest for competitive research and its excellence in its man- ufacturing development growth, and

India’s presence as a high-volume, low-cost labor manufacturer, Western countries are being pressured to find even more ways to innovative and compete. China is now the second largest economy. The Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) have emerged as advanced economies that serve as financial centers and IT innovators. This change, along with new technology, has enabled low-cost international competitors to drive down business costs and thus force companies to streamline structures and change strategies and business practices.

The firm PricewaterhouseCoopers estimates that China will overtake the United States as the largest economy in purchasing power parity (PPP) terms by 2017 and in market exchange rate terms by 2027 (Hawksworth & Danny, 2015). It has been estimated that by 2050, India will become the third global economic giant and Brazil will rise to fourth. Russia may become the largest European economy in PPP by 2020 and in market exchange rates by 2035 (Simha, 2014).

Although there are many negative aspects of globalization, there are many positive aspects too. As discussed earlier, international economies are more interrelated than ever before. International investments and movements in the U.S. stock markets affect American pension funds, corporate earnings, and market forecasts. Industry regulation and deregulation (espe- cially in telecommunications, banking, financial services, and the airlines) continue to stir large-scale downsizing and company restructuring. Mergers, acquisitions, and consolidations within and across industries have also created significant organizational change. Competition remains an important driver of organizational change on the global stage, as well as in local communities. Because of the Internet and information technologies, local communities are now global in reach.

Monkeybusinessimages/iStock/Thinkstock

Telecommuting and flexible schedules are among the ways companies are adapting to sociocultural forces.

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Section 1.4 Driving Change in Organizations

Organizational and Managerial Responses to Change

Companies have responded to the external forces of change in a number of ways. Some firms have surrendered. For example, Borders closed because its brick-and-mortar book- stores could not compete with the handheld, Internet-connected devices and services pro- vided by companies such as Amazon. Other organizations like Ford, Sun Microsystems, International Business Machines Corporation (IBM), Mitsubishi, and GE have strategically responded to external changes with innovative organizational structures, including net- works, strategic alliances, and virtual corporations. Solutions and pathways to navigat- ing change will definitely involve different information and communication technologies (Grajek, 2015).

Businesses understand that they must change in order to survive and succeed in today’s envi- ronment and are thus working to become more streamlined, ecologically sustainable, and responsive to external demands. They are striving to be more proactive and taking the initia- tive in managing change (Cummings & Worley, 2015).

It is important to point out that not all organizations will or should respond to external environmental change, and not in the same way. The external environment is not always a completely objective phenomenon. The ways in which the environment is perceived and responded to depend on individual interpretations—in this case, the interpretations of orga- nizational leaders and managers. How leaders and managers perceive pressures and forces in their environments affects whether and how they develop change strategies to respond (Smircich & Stubbart, 1985).

Type 1 and 2 Errors Boyd, Dess, and Rasheed (1993) identified two types of errors that leaders and managers can make in perceiving and acting on change. A type 1 error occurs when the environment is stable, but leaders and managers perceive it as turbulent and take unnecessary actions in response. A type 2 error happens when leaders and managers perceive the environment as stable when in actuality it is turbulent, and they fail to take necessary actions, thus threaten- ing the survival of their organizations.

An example of a type 1 error occurred in 2003 when President George W. Bush and his cabinet, with congressional approval, hastily declared war on Iraq based on the belief that its regime possessed weapons of mass destruction and intended to use them against its neighbors and the United States. This was shortly following the terrorist attacks of September 11, 2011, a time of high anxiety and upheaval. After years of war it was ultimately found that Iraq had no weapons of mass destruction; the costs from this misperception were and continue to be substantial.

An example of a type 2 error occurred when U.S. auto manufacturers perceived the environ- ment in the 1980s as stable and failed to design and manufacture four-cylinder fuel-efficient cars, as opposed to the Japanese, who later won and maintained a sizable market share in the U.S. auto industry as a result of their first-move advantage with quality cars. The lesson is that trends and forces in the external environment must not only be monitored but also carefully scrutinized in conjunction with governments and companies. Individuals can also learn from type 1 and 2 errors when perceiving and planning a change.

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Section 1.4 Driving Change in Organizations

Balancing Forces for Change and Stability Organizational leaders and change specialists must consider the interaction and balance between the forces for change and for stability. The need or drive for change can sometimes be exaggerated or romanticized. In their consideration of hypercompetitive environments, Leana and Barry (2000) argued that there are forces for stability and for change, and both are essential for an organization’s long-term functioning. Table 1.1 lists these forces and the balancing effects of each in organizations.

Table 1.1: Change and stability forces

Forces for change Forces for stability

Competitive advantage: flexible and responsive to changing markets

Predictability and uncertainty reduction: stability enables, rather than impedes change

Control: less hierarchy and more power through management performance targets

Organizational social capital: trust among employ- ees is created as an asset

Impatient capital markets: short-term investments favored over long-term ones

Sustained advantage: created through stable inter- actions over time

Cost containment: Human resources seen as a cost, not an asset

Transaction costs: stability creates rational invest- ment in employee development

Environment adaptability: stability impedes adapt- ability; flexibility adapts to change

Institutionalism: power structures self-perpetuate, solidify relationships and practice

Source: Leana & Barry, 2000; Palmer, Dunford, & Akin, 2009.

Whether organizations need to change, and to what extent, involves the need to balance per- ception and decisions with wisdom and experience. As Figure 1.1 shows, performing a force- field analysis is one way that leaders, managers, and individuals can address if and to what extent it is helpful to move forward with a change to part or all of an organization. Table 1.1 shows the forces at play that can help decision makers weigh the benefits and costs of a change.

Note in Table 1.1 that competitive advantage as a force for change is counterbalanced by the need to achieve predictability and reduce uncertainty. Competitive advantage requires organi- zational flexibility and responsiveness, but effective organizations also require stability and cer- tainty to thrive. Although control as a force for change means less hierarchy and more emphasis on performance targets, organizational social capital requires employers to develop and nourish coworker trust, which is an invisible force for stability. Impatient capital markets that demand immediate, short-term investment are indeed a force for change, but organizations also need to have sustained advantage that is gained over time through stable organizational relationships and interactions. Finally, organizations that wish to become competitive must adapt to multiple environments, but at the same time, organizations need to rely and draw on institutionalized best practices of what worked well in the past, including sound relationships.

In summary, macro external forces affect organizations’ operational and internal environ- ments. Trends, events, and crises that occur in the global, technological, economic, govern- mental, political, and demographic/social environments influence organizations. These influences are felt by organizations through changing markets, laws and regulations, finances, natural disasters, and so on. Leaders and managers must create and change visions, strategies,

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Section 1.5 Types of Organizational Change

structures, systems, and talent to compete and survive in their industry sectors. Organiza- tions that excel in changing environments have become more streamlined and nimble, more responsive to external and customer demands, and more ecologically sustainable. They have also adopted information technologies in their marketing and operations to enhance speed, scale, and reach.

It is important to consider those dimensions of an organization that need to be balanced with change forces. As a student of organizational change, your skills include the ability to identify which environments are exerting changes on organizations and, as this course progresses, to suggest different types of changes and change strategies that organizations can use to respond to environmental opportunities and threats. In the next section, we present specific types of organizational change that are used, depending on relevant criteria.

Check Your Understanding

1. Find an example of a company that changed due to one of the external forces discussed in this section. What was the force, and how did the company change?

2. Explain why forces for stability and forces for change are essential to organizational functioning.

1.5 Types of Organizational Change Not all changes are the same. The nature of change and change frameworks presented here illustrate these differences. Some frameworks overlap and are complementary, whereas oth- ers have dissimilar change philosophies and approaches. However, all illustrate the multiple perspectives change specialists can use to understand change and gain insight into the types of interventions and strategies for effectively responding to it.

At the most general level, Ackerman and Anderson (2010) identified three types of change: developmental, transitional, and transformational.

Developmental change involves improving what already exists. For example, an organization may improve on a previously established process, such as an HR policy regarding employee leave time or a marketing department’s procedure for sharing expertise on certain projects. The change does not have to be large or complex. Consequently, little stress is created with this type of small-scale change.

Transitional change involves achieving a known desired state that is different from the existing one. Examples of this more intrusive, larger change include organizational mergers or replacing an established process with a new one, such as installing a new technology sys- tem. Such changes can shake up an organization’s culture, disturb relationships, unsettle jobs, and require retraining and hiring.

Finally, transformational change involves the emergence of a new, unknown state for the organization. Examples of such changes include a shift in radically different markets that require a new strategy and skills, a move to incorporate bleeding edge technologies, or a new CEO and top-level team that change the company’s structure and culture.

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Section 1.5 Types of Organizational Change

This model differentiates among the three types of change, each of which has a distinct pur- pose, requires different change interventions, and presents unique risks. The following mod- els expand on these three fundamental change types.

Dunphy and Stace’s Four Levels of Change

After determining whether the desired change is developmental, transitional, or transforma- tional, it is helpful to refer to Dunphy and Stace’s (1993) four levels of change.

Level 1—fine tuning. This involves an ongoing process of matching and fitting an organiza- tion’s strategy, structure, people, and processes with the environment. This type of change occurs more at a divisional and departmental level, although for some firms like Alibaba, the enterprise is involved. It includes such activities as refining policies, methods, and pro- cedures; developing personnel; fostering group and individual morale; and commitment to the organization’s mission and departments. Fine tuning has traditionally required minimal effort and resources.

Level 2—incremental adjustments. These are predictable changes within the organization that evolve slowly and systematically at a constant rate over time to fit the external environ- ment. No radical changes are needed, but modifications are made, such as shifting emphasis among products, expanding a sales territory, and modifying a mission statement to employ- ees. Incremental adjustments and fine tuning are comparable to developmental change. As Ashkenas (2015) observes, change management refers to implementing predetermined ini- tiatives that may or may not affect the entire organization; focus is placed on making a well- defined change to a process or procedure.

Ashkenas (2015) provides an example that illustrates how a large technology company integrated specialized engineers into regional sales teams, which involved changes in roles, client assignments, compensation, goals, and teamwork. Hundreds of people were affected, but well-known change management principles and tools were used, including (a) making a case for the business change, (b) building a coalition of leaders, (c) showing early results, (d) involving stakeholders, and (e) executing by plan and with discipline. The new sales approach was effectively implemented and showed improved results.

Level 3—modular transformation. Organizational change is radical in modular transforma- tion, but it is focused on subparts rather than on the entire organization. Examples of this level of change include restructuring departments or divisions, changing key executives’ and managers’ responsibilities, and introducing a new business process. This type of change is related to transitional change.

Level 4—corporate transformation. Like transformational change, corporate trans- formation involves a radical shift in the business strategy and changes to the company’s vision, mission, culture, and systems—the company may essentially be reinvented. The plan and projected outcomes are more unpredictable, and there is experimentation and risk. New executives and key management positions are often recruited from the outside. Most, if not all, of the organization’s internal systems and dimensions are affected. Kot- ter’s eight-step change process addresses this type of planned change. At this level of

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Section 1.5 Types of Organizational Change

change, “a portfolio of initiatives, which are interdependent or intersecting” (Ashkenas, 2015) are involved, and the change may not produce the desired outcomes.

For example, when Meg Whitman became CEO of Hewlett-Packard (HP) in 2011 and then chair in 2014, she realized she would be leading a transformational turnaround for one of the world’s largest computer and printer firms. With stocks trending downward and the company operating according to a seemingly confused strategy, she moved forward with her predecessor’s plan to divide HP into two companies: an enterprise-computing technologies company and a consumer products company, which sells products such as personal comput- ers and printers (Chenmay, 2015). The journey is not over, and though industry analysts have mixed reviews, Whitman remains in charge for now.

Managing Change

Organizational and Managerial Response to Change

Suppose you oversee marketing and communications for a consumer bank. The business environment in the banking industry has undergone remarkable changes in recent years, given the merging and acquisition of companies, the effect of the economic recession on consumers, and the reputational impacts of corporate misconduct by banking executives, which in some cases has required extensive publicity campaigns and rebranding. In addition, the proposal of many national banks to charge fees on accounts is challenging customer attitudes about your bank.

In a reactive decision, you and top leadership have decided to implement a new website with rapid-response online customer service functions. The goals are to strengthen competitive advantage, increase customer loyalty, and respond to growing consumer demands for adequate attention to customer needs.

Technology frequently drives the need for organizational change, and IT is an integral part of change management within companies. Not only is the proposed change IT based, but technology can also be used to manage the change internally. In addition, the change will not only involve the IT department, but should be integrated with many other departments so that everyone embraces the goals of the plan and the firm overall—a mark of an effective organization.

Discussion Questions

1. How do you get employees on board, both regarding the planned change’s urgency and the skill sets needed to implement it?

2. How will you communicate this change to employees and stakeholders? 3. What areas of the company will you direct the change management team to align in

order to achieve this objective? 4. Which levels of change are involved in this type of initiative?

(See the end of the chapter for possible answers.)

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Transformation Realignment

Nature of Change

End Result

Revolution Reconstruction

Evolution AdaptationIncremental

Big Bang

Section 1.5 Types of Organizational Change

Balogun and Hope-Hailey’s Change Model

Balogun and Hope-Hailey’s (2004) model includes four types of change that combine into four strategies. Figure 1.4 illustrates these different types, which are organized along two axes: “nature of change” on the vertical axis and “end result” on the horizontal axis. The two clas- sifications of change under nature of change are incremental and big bang (a sudden change that occurs all at once). Such change can be significant in size, scope, and impact, depending on the situation. The two classifications of change under the end result perspective include transformation and realignment. Transformational change, as discussed earlier, has a sig- nificant impact on organizations, including their culture, people, and systems. Realignment types of change involve adjustment but do not generally entail a fundamental reassessment of the central assumptions and beliefs in an organization’s culture. Still, a major restructuring can have a large impact on an organization (Balogun, 2001).

The four strategies for estimating the nature of a change and the desired end result are as follows:

1. Evolution: when the change is incremental but the end result is transformation. This strategy suggests proceeding in a progressive way by analyzing the internal and external environments while implementing the change. An example would be imple- menting a new software system in a division over a 2-year period.

2. Adaptation: when the change is incremental and the end result is realignment. This has the least intrusive impact on the organization and is the most commonly used. Examples include installing software applications, revising job descriptions, and using online training.

3. Revolution: when the change is big bang and transformational. For example, sup- pose a company is acquired by another firm. The new owner might request that the current leaders and managers change the vision and mission, and then replace a majority of the workforce.

Figure 1.4: Balogun and Hope-Hailey’s change model

Balogun and Hope-Hailey’s change model demonstrates the end results of immediate changes and those that occur over a longer period of time.

Source: Balogun, Julia; Hope Hailey, Veronica; Johnson, Gerry; Scholes, Kevan. Exploring Strategic Change, Third Edition. Fig. 2.2, p. 20. Copyright © 2008. Reprinted by permission of Pearson Education, Inc., New York, New York.

Transformation Realignment

Nature of Change

End Result

Revolution Reconstruction

Evolution AdaptationIncremental

Big Bang

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Section 1.5 Types of Organizational Change

4. Reconstruction: when the change is big bang combined with realignment. Recon- struction change strategies include cost cutting and sometimes downsizing. Focus will also shift to external markets but is also used symbolically to manage how change is perceived. For example, a university may start hybrid courses that combine online and in-class sessions. The strategy is to move more to online students but at the same time send the message that traditional courses are intact. The organization may experience turmoil as in a turnaround or large expansion, although the basic business model may remain intact.

These strategies allow change to be classified based on its extent and how quickly it should be accomplished.

Proactive Versus Reactive Changes

Organizational change can occur by choice or by force—in other words, it can be proactive or reactive. Proactive change occurs when an organization changes the workplace and its practices so as to avoid possible issues or to capitalize on a future opportunity. Reactive change is imple- mented in response to an issue or opportunity that has occurred (Williams, 2005).

Whether a change is proactive or reactive change can depend on a lead- er’s style in responding to change. Although change can be a disaster or crisis, it can also be less dramatic. Orga- nizational leaders deliberately choose proactive responses for different motivations, such as when the leader thinks there will be more gain than loss by actively responding to change; believes the risk taken by respond- ing can lead to even greater gains; or chooses to proactively respond even if losses will be incurred. Promis- ing market share growth, increased resources, and gaining ground with competitors are factors that encour- age proactive change responses. For example, in 2010 leaders of Groupon declined a $6 billion offer to be bought by Google.

Groupon’s owners and investors judged its short track record and potential to be of more value than Google’s offer. Groupon’s business model, which is more recognized now than a few years ago, is unique:

Groupon takes the old Entertainment Coupon Books that your mom used to buy and brings it to the social web. Groupon sells a “Deal of the Day” in each of its now 52 supported cities offering significant savings for local restaurants, service providers, activities and memberships, and takes a commission. The

AP Photo/Mark Lennihan

Andrew Mason, founder and CEO of Groupon, saw the company’s stock climb by nearly a third after rejecting Google’s offer to buy it in 2010. Since then, however, the company’s revenue from its “daily deals” has not grown, and investors are mixed on whether refusing to sell was the right decision.

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Section 1.5 Types of Organizational Change

trick is that the deal is only “triggered” once enough people buy in. This cre- ates the incentive to share the deal with friends and family, until “the deal is on.” It’s great for local businesses because they can set the parameters for the offer and they know a minimum for how many offers they will have sold in advance. (Carpenter, 2010)

Although the company started with a bang, especially with its initial public offering, its rev- enue from daily deals has not grown since 2011. The company launched Groupon Goods, in which it sells an array of discounted items, from iPhones to jelly beans. This business earns the majority of Groupon’s income, but the margins are only 20% for goods, in comparison to 88% for daily deals (Griffith, 2015). In the spring of 2015, the company was valued at an estimated $4.9 billion. Therefore, analysts and investors are divided over whether Groupon should have sold to Google for $6 billion.

Reactive change often occurs when external or internal influences pressure organizational leaders to respond. British Petroleum (BP) was slow to assume responsibility for its role in a disastrous oil spill in 2010. Similarly, Exxon avoided responsibility in 1989 when its tanker, the Valdez, hit a reef in Alaska, causing the largest oil spill in American history. Exxon’s CEO was hesitant to address the crisis directly, and afterward in court the company attempted to lay the blame on the ship’s captain, an Exxon employee. In a different example, Bill Gates chose not to go to court when Microsoft was charged with antitrust violations in early 1991 and continued responding to legal inquiries and lawsuits until 2001, and later with the Euro- pean Union from 2004 to 2008. He and his leadership team reacted defensively but eventually responded by making several technical changes to products.

All of these companies have since recovered, although great damage was done to the environment, some competitors, and communities. When responding to crises, many corpo- rate executives are cautious about admitting blame, so as to avoid costly liability. However, it is interesting to note that crisis management experts advise corporate leaders to actively respond, face the facts, and communicate honestly and directly with all involved— including victims—and then act responsibly to help resolve a crisis. Acting with deliberation and com- passion can sometimes decrease the costs—emotional, reputational, and financial—it takes to resolve crises.

Reactive leadership styles to change based on studies of crises indicate that the consequences to stakeholders are neither positive nor beneficial in the short or long term (Markovich, 2015). However, proactive leadership is more often preferred, since being proactive is more likely to herald solutions while decreasing stakeholder reactions. Reactive leaders act in fran- tic ways, since they are affected by constant activity while striving to meet company goals as best they can. Proactive leaders try to champion company missions and meet organization goals mindfully and with greater ease. Reactive leaders respond—or react—with events as they occur and often without a big-picture perspective; proactive leaders anticipate and plan accordingly. Proactive leaders also often show good citizenship, which increases a company’s social and reputational capital (Markovich, 2015).

Strategic Change Versus Tactical Change

Strategic versus tactical changes relate to the models presented earlier. Level 1 of Dunphy and Stace’s model and developmental changes are more likely to require tactical (hands-on)

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Section 1.5 Types of Organizational Change

specialist and managerial knowledge and expertise than changes that are transitional, trans- formational, or level 3 and 4 changes. Transformational, transitional, and level 3 and 4 changes require leadership styles that feature long-term thinking and vision, excellent people skills, and strong problem-solving skills.

Two organizations that have effectively handled strategic change are EMC Corporation and IBM. In the 1980s both companies were forced to change their direction, strategies, and mar- ket niches to survive and remain competitive. EMC, a leading information storage firm head- quartered in Massachusetts, decided to extend its direction and strategy into the software business. Based on the anticipation that the storage business had a lot of competition, EMC decided to spread its risk and venture potential gain.

When IBM extended its strategy from being a hardware firm to also becoming a global e-services technology company, it recruited new leadership and successfully expanded its vision, mission, and sales strategies. In 2015 IBM ranked 5th on Forbes’s World’s Most Valu- able Brands list and 44th on Forbes’s Global 2000 list (Forbes, 2015). EMC is ranked 222nd on the latter list, with a market capitalization of $52 billion. Both companies continue to effec- tively change according to their environments and the competition.

Tichy’s Three Types of Change

Tichy’s (1982) framework explains change from a combination of external forces (technical, political, and cultural) that affect internal organizational systems. Figure 1.5, based on Tichy’s work, summarizes his views from a change specialist perspective.

The technical system refers to external changes that influence an organization, such as tech- nological and economic pressures. Many of these external influences include IT systems such as enterprise resource planning and systems, applications, and products software that helps improve the enterprise’s operational efficiency and productivity of its business processes, to accommodate the external changes.

The political system includes pressures for change that relate to power, influence, and resource distribution. This dimension also refers to the organization’s internal system, in terms of who the new sources of authority and power are and who will distribute rewards and allocate resources. The cultural system includes the norms and values shared by the members of an organization. Cultural forces for change also include the demographic com- position and cultural diversity of the labor pool, and societal values. Internally, the organiza- tion’s employees, cultural values, relationships, and norms must align to the change.

Tichy (1982) argued that organizational leaders can successfully adapt to external change by strategically aligning their three basic organizational areas to specific pressures from these three systems of change. The three organizational areas include (a) the mission and strategy, which define the organization’s purpose, goals, and strategies, and the managerial processes used to implement them; (b) the organizational structure, which includes the means by which tasks are arranged, the employees who are coordinated to do the work, and the managerial processes that align structure and people; and (c) HR management, which refers to recruit- ing, selecting, hiring, training, evaluating, and developing people and systems to fit employees with other organizational systems.

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Section 1.5 Types of Organizational Change

Figure 1.5 demonstrates that when considering particular pressures from the technical sys- tem, leaders must be prepared with a change plan that addresses the following questions regarding the management area of their mission and strategy: Do the change plan and its accompanying interventions accommodate the new mission and strategy? Has an objective analysis been conducted inside and outside the organization to determine the new fit? The change plan should also address the following political pressures exerted on the organiza- tion: Have key stakeholders been informed of, and are they aligned with, the change’s strat- egy and direction? Finally, the change plan should address the key cultural question—that is, has the new vision, mission, and strategy been defined with the organization’s values?

Figure 1.5 also describes key questions that can be asked about a particular change plan by the organizational structure and the HR management system, as well as technical, political, and cultural forces that pressure an organization to change.

Managerial Areas Mission, vision, and strategy

Organizational dimensions: structure and systems

Human Resource management system

Change Forces

Technical system Does the change strat- egy accommodate these dimensions: new vision? Mission? Strategy? Has an objective analysis been conducted inside and out side the organiza- tion to determine the new fit?

Does the change strategy, invention fit with the new culture? Values? Structure? Systems? Have new roles been integrated into division, regions, departments?

Have performance crite ria been designed into new roles? Do people understand and accept their new roles and responsibilities? Is there training available for these adjustments?

Political system Have key stakehold- ers been informed and aligned to the new strat egy and direction of the change?

Has power been dis- tributed across func- tions, departments, business units, and roles?

Have reward, appraisal, and promotion sys tems been rede- signed, updated, and realigned? Are new reporting sys tems in place?

Cultural system Has the new vision, mission, and strategy been defined with regard to the values of the organization?

Are new leadership and managerial styles defined and aligned with the new culture, structure, and systems?

Have the right people been selected to develop and embed the new values and culture? Will people be rewarded for new behaviors?

Figure 1.5: Tichy’s change framework

Tichy believed that leaders who adapt to external change are successful because they align their mission and strategy, organizational structure, and HR management to pressures from technical, political, and cultural forces.