DR. ROY PHILIP Conflict and Change Management Night 1

 Change is accelerating  Power shifting from sellers to buyers  The power of the Internet  Unlimited substitution over competition  Leadership and management domain is worldwide now  Knowledge age  New world Rapidly Changing World

 Allowing Too Much Complacency  Failing to Create Sufficiently Powerful Guiding Coalition  Understanding the Power of Vision  Undercommunicating the Vision by a Factor of 10 (or 100, or even 1,000)  Permitting Obstacles to Block the New Vision  Failure to Create Short-Term Wins  Declaring Victory Too Soon  Neglecting to Anchor Changes Firmly in the Corporate Culture Why Firms Fail

Consequences of Errors New Strategies aren’t implemented well Acquisitions don’t achieve expected synergies Reengineering takes too long and costs too much Downsizing doesn’t get costs under control Quality programs don’t deliver hoped-for-results

McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Technological Change Faster and better communication Faster and better transportation More information networks connecting people globally Forces driving the need for major change

McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Technological Change International Economic Integration Faster and better communication Faster and better transportation More information networks connecting people globally Fewer tariffs (GATT) Currencies linked via floating exchange rates More global capital flows Forces driving the need for major change

McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Technological Change International Economic Integration Maturation of markets in developed countries Faster and better communication Faster and better transportation More information networks connecting people globally Fewer tariffs (GATT) Currencies linked via floating exchange rates More global capital flows Slower domestic growth More aggressive exporters More deregulation Forces driving the need for major change

McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Technological Change International Economic Integration Maturation of markets in developed countries Fall of communist and socialist regimes Faster and better communication Faster and better transportation More information networks connecting people globally Fewer tariffs (GATT) Currencies linked via floating exchange rates More global capital flows Slower domestic growth More aggressive exporters More deregulation More countries linked to the capitalist system More privatization Forces driving the need for major change

McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Forces driving the need for major change The Globalization of Markets and Competition More Hazards More competition Increased speed More Opportunities Bigger markets Fewer barriers More Large-scale change in organizations To avoid hazards and/or capitalize on opportunities, firms must become stronger competitors. Typical transformation methods include: ReengineeringMergers and acquisitions RestructuringStrategic change Quality programsCultural change

Establishing a Sense of Urgency Creating the Guiding Coalition Developing a Vision and Strategy Communicating the Change Vision Empowering Broad-based Action Generating Short-term Wins Consolidating Gains and Producing More Change Consolidating Gains and Producing More Change Anchoring New Approaches in the Culture Anchoring New Approaches in the Culture Kotter’s Eight-Stage Change Process

Management The process of achieving organizational goals by engaging in the four major functions of planning, organizing, leading, and controlling. It characterizes the process of planning, leading, and directing all or part of an organization, through the deployment or manipulation of resources The process of achieving organizational goals by engaging in the four major functions of planning, organizing, leading, and controlling. It characterizes the process of planning, leading, and directing all or part of an organization, through the deployment or manipulation of resources

Leadership Leadership is the ability to influence others towards the achievement of goals Leadership is the ability to influence others towards the achievement of goals

Management Management Leadership Leadership Planning and budgeting Organizing and staffing Controlling and problem solving Establishing direction Aligning people Motivating and inspiring Management vs. Leadership Produces a degree of predictability and order and has the potential to consistently produce the Short-term results expected by various stakeholders (e.g. for customers, always being on time, for Stock-holders, being on budget) Produces a degree of predictability and order and has the potential to consistently produce the Short-term results expected by various stakeholders (e.g. for customers, always being on time, for Stock-holders, being on budget) Produces change, often to a dramatic degree, and has the potential to produce extremely useful change ((e.g. new products that customers want, new approaches to labor relations that help make a firm more competitive) Produces change, often to a dramatic degree, and has the potential to produce extremely useful change ((e.g. new products that customers want, new approaches to labor relations that help make a firm more competitive)

Management aims to give consistency and order to organizations Management aims to give consistency and order to organizations Leadership seeks to provide constructive and adaptive change Leadership seeks to provide constructive and adaptive change Management is directed toward coordinating activities in order to get the job done Management is directed toward coordinating activities in order to get the job done Leadership is concerned with the process of developing mutual purposes. Leadership is concerned with the process of developing mutual purposes. McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Management vs. Leadership -1

Management relies more on a one-way authority relationship Management relies more on a one-way authority relationship Leadership relies more on a multidirectional influence relationship Leadership relies more on a multidirectional influence relationship Managers are people who do things right Managers are people who do things right Leaders are people who do the right things Leaders are people who do the right things McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Management vs. Leadership -2

ADAPTING DIAGNOSIS COMMUNICATING McGraw-Hill/Irwin©2006 The McGraw-Hill Companies, Inc. All rights reserved. Three Competencies of Leadership

The Need for Management Skills Managerial Skills and Life Success Managerial Skills and Hiring Managerial Skills in the New Work Environment Need for Management Skills

 Knowing How to Learn  Reading  Writing  Mathematics  Listening  Oral Communication  Problem Solving  Creative Thinking  Self-Confidence  Motivational Goal Setting  Personal and Career Development  Interpersonal Skills  Negotiation  Teamwork  Organizational Effectiveness  Leadership 16 Basic Skills Employees Need

Demand for Managerial Skills Entrepreneurship Downsizing and Delayering Job Enrichment and Empowerment Self-Managed Work Teams Hiring for the Second Job Growth in Management Positions Managerial Skills in the New Work Environment

Conceptual Human Technical Top-Level Managers Middle-Level Managers First-Level Managers Managerial Skills

21 Time Activity industry evolution diffusion of innovation tipping points FAST SLOW Rate of Change is not Constant

22 Degree of change time Discontinuous change Continuous and Discontinuous Change

23 The gradualist paradigm posits that an organization:  changes and develops though a continuous process of incremental adjustment,  these adjustments (changes) accumulate over time to ensure that the organisation is always aligned with its external environment. Gradualist Paradigm

24 While a process of continuous gradual adjustment might be the ideal, evidence suggests that most organisations experience change as a discontinuous process often referred to as a pattern of punctuated equilibrium. Degree of change time Discontinuous change Long periods of equilibrium during which there is little change Punctuated by short periods of radical (discontinuous) change Punctuated Equilibrium

25 Intensity of change time Continuous and discontinuous change can be viewed from the perspective of the intensity of change

26 Intensity of change Continuous change involves a stream of low intensity changes that (according to the gradualist paradigm) can accumulate to transform the organization.

27 Intensity of change Discontinuous change involves ‘doing things differently or doing different things’ Incremental change involves ‘doing things better’ Dropouts Punctuated equilibrium involves long periods of low intensity incremental changes punctuated by short bursts of high intensity discontinuous change

28 This is the dominant pattern of change because a number of factors act to limit the degree of change that occurs in the periods of low intensity change equilibrium : periods of low intensity change Punctuated equilibrium is the dominant pattern of change

Many people are reluctant to change because:  FEAR (they prefer the status quo to an uncertain future; they anticipate that the cost of changing might outweigh the benefits) 29 Why is it so hard to change?

30 Persistent deep structures are the fundamental choices that determine an organization’s pattern of activity. Football analogy The rules of the game represent deep structures – taken for granted and difficult to change. The game-in-play describes activity in periods of equilibrium when the coach and players can make changes that will affect team performance but not the rules of the game. Why is it so hard to change?

31 Tight and loose coupling Football analogy It would be difficult for one team to modify the rules. A football club is tightly coupled with the other clubs that play in the same league Forces for inertia are strongest when a group, department or organisation is part of a network of tightly coupled mutual dependencies Why is it so hard to change?

Pressure to deliver short term results This pressure:  directs managers’ attention towards improving internal alignment in order to increase efficiency.  diverts their attention away from external alignment. 32 structure technology systems people All three factors (fear of change, persistent deep structures and the pressure to deliver short term results) combine to inhibit change and promote strategic drift. The organization does not change fast enough or in the ways that will ensure that it remains aligned with its external environment. Why is it so hard to change?

33 Eventually this misalignment with the external environment reaches a point where major change (radical transformation) is precipitated. The trigger for discontinuous change

34 Romanelli and Tushman examined the life histories of 25 minicomputer producers and found a pattern of discontinuous, episodic change  changes in strategy, structure and power-distribution were clustered in time - the pattern of change predicted by the punctuated equilibrium model  changes were not spread over relatively long periods of time as predicted by the gradualist paradigm. Evidence supporting the theory of punctuated equilibrium

35  Improvisation that leads to a continuous modification of existing work practices Continuously adaptive organizations experience the kind of continuous change described by the gradualist paradigm This requires organizations to engage in repeated patterns of:  Learning and new insights which facilitate changes in the way the organization responds to problems and opportunities  Translation that involves the editing and imitation of ideas as they travel through the organization

36 But the evidence suggests that most organisations, if they survive long enough, will experience change as a pattern of punctuated equilibrium There are three exceptions:

37 1.The small minority of “learning organizations” that do manage to continuously adapt through ongoing processes of improvisation and learning 2.Companies operating in niche markets or in slow moving sectors where they have not yet encountered the kind of environmental change that requires them to transform their deep structures. 3.Organizations that are able to continue functioning without transforming themselves because they have sufficient ‘fat’ to absorb the inefficiencies associated with misalignment.

38 Combining notions of continuous and discontinuous change with the way an organisation responds to change (proactive or reactive) provides a useful typology for classifying types of change A Typology of Change

39 - Proactive (Anticipatory) Reactive Incremental (doing things better) Transformational/discontinuous (doing things differently or doing different things) 1.Fine Tuning Citibank 2. Adaptation Other banks reaction to Citibank’s move 3. Re-orientation Nestle – 1980s 4. Re-creation Asda – 1990s A Typology of Change

40 1.Focus for change effort 2.Locus for change: who will manage the process? 3.Sequence of steps in the change process 4.Role of change agent Implications of these different types of change for change management practice

41 With incremental change the aim is to improve the alignment between existing organizational components in order to ‘do things better ’ Task StructureCulture People With discontinuous/transformational change the aim is to seek a new configuration of organizational components that are aligned to external circumstances. The outcome may be that the firm ‘does things differently’ or ‘does different things’ Task StructureCulture People OUTPUTS required by external stakeholders INPUTS required to support the transformed business 1. Focus for change efforts

42 Discontinuous change is more intense than incremental change, and reactive change tends to be more intense than anticipatory change Most intense Least intense Re-creation Re-orientation Adaptation Tuning The intensity of change (indicated by the stress, dislocation and trauma associate with change) affects the point in the organization where the leadership for change is located. 2. Locus for change

43 Low intensity change High intensity change Executive led change Change through delegation (Project managers and external consultants) Change through normal management processes 2. Locus for change - Example

44 Change typically involves a three step process that follows the sequence: UNFREEZE MOVE REFREEZE 1.Unfreezing the restraining forces that maintain the status quo 2.Moving the organisation to a new state 3.Refreezing to consolidate the change 3. Sequence of change

45 FREEZE REBALANCE UNFREEZE Freezing in order to take stock, identify patterns and highlight what is happening Rebalancing – reinterpreting history, identifying and amplifying best practice and re-sequencing patterns Unfreezing to enable patterns of activity to resume with fewer blockages. 3. Sequence of change - Example

46 With discontinuous/transformational change the role of the change agent is to be the prime mover who initiates and manages a process of planned change With rapid continuous change the role of the change agent is to help others make sense of the change dynamics already under way 4. Role of Change Agent

Lewin’s Model UNFREEZE CHANGE REFREEZE