Change Management Lecture 4 What changes in organizations

Scale of Change Not all change is the same magnitude First-order change:  Incremental  They maintain and develop the organization  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

Between First and Second Order Change Mid-range changes  Overcomes inertia but is not revolutionary  Avoids the alarming (high stress) implications of large scale change  “tectonic change” Destroy outdated elements but keep the good ones Punctuated equilibrium  Long periods of stability followed by short bursts of change and instability

Nadler and Tushman IncrementalDiscontinuous Anticipatory Reactive TuningReorientation (frame bending) AdaptationRe-creation (frame breaking)

Latent energy According to Frohman, not enough attention has been paid to the overall impact on organizations of small-scale changes and the role of personal initiatives Technological leads are short-lived What is most important is people who are able to identify relevant, innovative (local) organizational changes Managers tend to want to go for the Big Bang theory of change and ignore front line performers Vaill calls this unlocking the ‘latent energy’ of the organization

Local routines Feldman  Routines are continuously changing b/c: Past outcomes fall short of aspiration levels Performance exceeds aspiration levels Different people place their own interpretations and actions on how a routine should occur Therefore, routines evolve over time and are not stable and rigid but flexible Do we buy this argument? What are the implications?

Coping with hyper-competition Strategies  Delayering  Networks/alliances  Outsourcing  Disaggregation  Empowerment  Flexible work groups  Short-term staffing  Reduction of internal and external boundaries Questions  How prevalent are these practices?  Are some practices more prevalent than others?  Are old routines replaced, modified or co-exist?

Downsizing Key points  Common – millions downsized every year  Does not necessarily lead to increased productivity (2 in every 3 cases)  Can be an excessively costly exercise ($7K per $30K employee) Key challenges:  employee retention, survivor syndrome, communication, due diligence, cultural adjustment

Technological change There are a variety of new technologies being used, for example:  CRM, ERP, RFIDs, BPR, Six Sigma Key challenges  Piloting, integration, timing, technology choice, communication, training,

Mergers and acquisitions Key points  Many rationales for acquisitions  Usually to achieve growth and/or synergy Key challenges  Cost savings, cultural adjustment, due diligence, employee retention, power structure, communication

Questions How do you approach the paradox of change?  Is the risk of failing less risky than not changing? Is this a good assumption for all changes that you undertake? What criteria can you develop to assess this balance? Traditional organizational practices  When should they be replaced? Retained? Modified?  Are you more open to transformational or incremental change? Why?  How aware have you been to sense-making routines? How might knowledge of sense-making assist you?

Nestle Case List examples of first and second order change in the Nestle case.  B-L emphasizes the need for incremental change – is this what he has done?  Explore the differences and similarities between his views about change and yours