Chapter 4 What Changes in Organizations

Scale of Change First-order change: Second-order change: Incremental Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges First-order change: Incremental Maintains and develops the organization – adjusting systems, processes, structures, but not strategies and values E.g. continuous and smaller changes to the structure of an organisation Second-order change: Transformational Fundamentally changes the way an organization functions E.g. downsizing 4-2

Scale of Change First-order change: Second-order change: Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges First-order change: Taking of individual initiatives Development of local routines Second-order change: Move from entrepreneurial to professional management structure Revitalization of already-established company Visionary change in the business 4-3

Beyond 1st & 2nd Order Change Scale of Change: 1st order 2nd order Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges Mid-range changes Overcomes inertia but is not revolutionary Avoids the alarming implications of large scale change Punctuated equilibrium Long periods of stability followed by short bursts of change and instability Robust transformation Considers environmental conditions as being temporary and requiring robust responses including the enactment of new capabilities. 4-4

Types of Change DOWNSIZING Approaches to downsizing: Scale of Change: 1st order 2nd order Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges DOWNSIZING Approaches to downsizing: Retrenchment Downscaling Downscoping Does not necessarily lead to increased productivity Can be an excessively costly exercise 4-5

Types of Change TECHNOLOGICAL CHANGE Scale of Change: 1st order 2nd order Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges TECHNOLOGICAL CHANGE There are a variety of new technologies being used, for example: Customer relationship management (CRM) systems Enterprise resource planning (ERP) Wireless technology Business process reengineering (BPR) Six Sigma 4-6

Types of Change MERGERS AND ACQUISITIONS Scale of Change: 1st order 2nd order Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges MERGERS AND ACQUISITIONS Enable organizational growth at an accelerated rate Types of mergers and acquisitions: Excessive capacity Neighbouring market expansion New product or market investment Research and development Leveraging to create industries 4-7

Key Change Challenges Scale of Change: 1st order 2nd order Between 1st & 2nd Order Change Types of Change: Downsizing Technological Mergers Key Change Challenges This table outlines the key change challenges for the three types of change. These issues need to be addressed when managing change: Downsizing New Technologies Mergers & Acquisitions Employee retention. Goal synthesis. Cost savings. Avoiding “hard landings”. Choice of technology Cultural adjustment. Minimizing political behavior and loss of teamwork. Identifying political barriers. Balancing change and continuity. Survivor syndrome The IT team. Due diligence. Communication Employee retention Due diligence Time frame. Contingency planning. Contingency planning Power structure. Choice of restructuring technique 4-8

Chapter 5 Diagnosis for Change

Advantages of Diagnostic Tools Diagnostic Models: Organization Components Readiness for Change Help understand what to change, how and why. Simplify a complex situation. Identify priorities for attention. Highlight various organizational properties (e.g. strategy and structure) and their interconnectedness. Provide a common “language” with which to discuss organizational characteristics. Provide a guide to the sequence of actions to take in a change situation. Help us be more efficient and rational as we attempt to understand and change an organization. 5-10

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Six-box organizational model: The key focus here is on six variables – purpose, structure, rewards, helpful mechanisms, relationship and leadership. This model is useful to maintain awareness of all areas for consideration even though one variable may be identified as the main area for attention. 7-S framework: The 7-S framework: this focuses on seven key components that affect organizational effectiveness – structure, systems, style, staff, skills, strategy and superordinate goals. The interconnectedness of these variables is vital to the success of change. Star model: An organization is effective when the five components of organizational design – strategy, structure, processes and later capability, reward systems and people practices – are in alignment. 5-11

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Six-box organizational model 5-12

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change 7-S framework 5-13

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Star model 5-14

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Congruence model: The organization is broken down into four components – task, individuals, formal organizational arrangements and informal organisation. This is influenced by the context where the strategy is formulated and the output is then the performance of the organization. Burke-Litwin model: This model identifies the transformational – external environment, mission and strategy, leadership and organizational culture - and transactional sources of change. Four frame model: This offers four frames for the managers to conceptualize how the organization operates. These frames are structural, human resource, political and symbolic frames. Diagnosis by image: This technique allows organizational members to use images to describe the organizations and this can be used as a basis for discussion. 5-15

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Congruence model 5-16

Diagnostic Models: Organization Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Burke-Litwin model 5-17

Diagnostic Models: Components Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change PESTEL Framework This analyses the external environment in terms of six factors – political, economic, social, technological, environmental and legal. Scenario analysis Creates stories of possible future scenarios that are considered to be vital to the future of the organization. Gap analysis This is a tool used for reviewing the organization’s position based on where they are and where they want to get to. Elements of strategy These are five elements of strategy that are considered mutually reinforcing – arenas, vehicles, differentiators, staging and lowest costs through scale advantage. Any misalignment of these signifies the need for change. Strategic inventory This aims to identify the strategic assumptions of managers and determine their consistency with the business environment. This determines whether the strategy should be a focal point for change. 5-18

Diagnostic Models: Components Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Newsflash exercise: This is an exercise that encourages managers to be very specific and succinct about change and clearer about the intended outcomes. Cultural web: This provides a way of mapping the organizational culture through seven elements – paradigm, rituals and routines, stories, symbols, control systems, power structures and organizational structure. Structural dilemmas: Six possible structural dilemmas that can be encountered during change are diagnosed so areas that have been “traded-off” during the change process can be identified The Boundaryless Organization: Success is arguably achieved only if four types of organizational boundaries are diagnosed and reduced. These are vertical, horizontal, external and geographical boundaries. 5-19

Readiness for Change Advantages of diagnostic tools Diagnostic Models: Organization Components Readiness for Change Assessing the organization's readiness to change can be a mediating variable between change management strategies and the outcomes of desired strategies. A perchance audit of the readiness of an organization for change can provide an indication of the likely outcome of a change initiative at a particular point in time. Some ways of doing this include: Questionnaires Stakeholder analysis: This focuses on the position of stakeholders in the change process and allows the manager to be better informed of how to confront potential issues. Force-field analysis: This identifies factors that are driving forces for change as well as restraining forces. 5-20