Organization Transformation and Strategic Change Chapter 15 Organization Transformation and Strategic Change An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Learning Objectives (part 1 of 2) Identify and define organization transformation. Understand basic strategy-culture matrix and other approaches to changing culture. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Learning Objectives (part 2 of 2) Recognize importance of corporate culture and its relation to strategy. Experience these concepts in management simulation. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategy and Transformation Success can work against a company when it looses touch with customers. Radical changes may be only choice for organization in desperate need of change. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Organizational Transformation (part 1 of 3) OT refers to drastic changes in: How organization functions. How it relates to environment. OD strategies represent more gradual approaches to strategic change. OT approaches are drastic and abrupt change. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Organizational Transformation (part 2 of 3) OT may or may not be developmental. OT tends to use directive, not participative, approaches to change. Usually top-down, top-management driven. OT shaped by use of power rather than collaboration. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Organizational Transformation (part 3 of 3) Requires: Shared vision. Willingness to clean house. Restructure. Tackle many problems. Due to immediate threat, this may be only way for organization to survive. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Large-Scale Change Strategies Incremental. Long-term planned change. Relies upon collaboration. Transformative. Immediate, drastic change. Uses directive methods. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Large-Scale Change Model Model based on 3 key dimensions. Time frame of change—short or long. Level of support of organizational culture. Degree of discontinuity with environment. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Figure 15.2 Strategies for Planned Change An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Four Change Strategies (part 1 of 2) Participative evolution. Incremental and anticipates change. Support of culture through collaborative means. Charismatic transformation. Radical change in short time with support of culture. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Four Change Strategies (part 2 of 2) Forced evolution. Incremental adjustments over longer period without support of culture. Dictatorial transformation. Used in times of crisis. Major restructuring running counter to internal culture. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Results of OT OT may be best or only way to bring back an organization under immediate threat. OT more likely to be used by externally recruited managers. OT is risky and outcome is uncertain. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

The Corporate Culture System of shared values held by members that distinguishes one organization from another. CEO and managers’ actions, not words, produce culture. A culture is organization’s major strength when consistent with strategies. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategy-Culture Fit Strategy: Culture: Course of action used to achieve objectives. Relates resources of organization to opportunities in environment. Culture: Set of values for setting priorities. Critical factor in implementation of strategy. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Core Characteristics of Culture Individual autonomy. Sensitivity to customers and employees. Managers provide support and assistance. Employees initiate new ideas. Openness of communication channels. Risk-seeking encouraged. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Sharing the Vision Management theorists feel vision is essence of leadership. Vision involves several stages. Share the vision. Empower the individual. Develop trust. Reward performance. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Figure 15.3 Sharing the Vision An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strong Versus Weak Cultures Strong culture. Basic values intensely held and widely shared. Weak culture. May be seen in young company or one with high turnover. Culture is product of key components. Structure, systems, people, and style. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Figure 15.4 Relative Strength of Cultures An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategy-Culture Matrix (part 1 of 4) Four basic alternatives in determining strategy changes: Manage change (manageable risk). Change important and compatible with culture. Use cultural reinforcement as strategies. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategy-Culture Matrix (part 2 of 4) Reinforce culture (negligible risk). Forge vision that emphasizes shared values. Reinforce existing culture. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategy-Culture Matrix (part 3 of 4) Manage around culture (manageable risk). Change important and incompatible with present culture. Reinforce value system, reshuffle power, use leverage in the organization. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategy-Culture Matrix (part 4 of 4) Change strategy to fit culture (unacceptable risk). Change important but incompatible with culture. Changing culture is explosive, long-term process that may be impossible. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Figure 15.5 Strategy-Culture Matrix An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategic Change Management Seeks to align organization’s strategy, structure, and human resources to fit environment. Parts of system in perpetual interaction with environment. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Organizations Composed of 3 Systems Technical - solve production problems. Political - solve allocation problems of resources and power. Cultural - solve value/belief problems. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Figure 15.6 Environmental Forces and Organizational Systems An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Three Steps to Strategic Change Step 1: Develop image of desired organization. Step 2: Separate systems and intervene separately in each one. Step 3: Plan for reconnecting three systems. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Reasons for Large-Scale Cultural Changes Company has strong values that do not fit changing environment. Industry competitive and changes quickly. Company mediocre or worse. Firm about to join ranks of very largest. Firm small but growing rapidly. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Cautions in Cultural Change Cultural change can be difficult and time consuming. Should be attempted only after less-difficult solutions have been ruled out. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

OD Application Transformation at Home Depot Home Depot is number-one home-improvement retail chain in U.S. It had unstructured and entrepreneurial culture. Competitor Lowe’s began taking market share. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Nardelli was brought in as CEO to turn around dysfunctional culture. Nardelli brought in new top management team. Lacked support from lower levels. Changes resulted in unintended consequences. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Culture became one of revolt. Innovation and sense of ownership declined. When market share declined more, board replaced Nardelli with Ellison. Ellison has made methodical and long-range changes. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Key Words And Concepts Culture. Incremental approach. Reflects organization’s past and is rooted in firm’s history. Incremental approach. Long-term planned change that relies on collaboration. Organization transformation (OT). Drastic, abrupt change to structure, management, and culture. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Strategic change management. Focus on alignment with strategy, structure, and human resources systems. Strategy. Course of action used to achieve major objectives. Strategy-culture matrix. Assess readiness of culture for strategic changes. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Technical, political, and cultural systems. Organizational systems of strategic change management model. Transformational change. Immediate drastic change accomplished by directive methods. Vision. Mental image of a possible and desirable future state of organization. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

OD Skills Simulation 15.1 The GenTech Company Purpose. To experience and observe how information affects strategic decision making. To develop strategy and culture in an organization. To receive feedback on your risk-taking level. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

Preparations for Next Chapter Read Chapter 16. Complete the Profile Survey and Profile Form in Simulation 16.1, Part A, Step 1. Complete Step 1 of OD Skills Simulation 16.2. An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall

An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall