Managing Change and Organizational Learning Chapter Sixteen

After reading the material in this chapter, you should be able to: LO16.1 Discuss the external and internal forces that can create the need for organizational change. LO16.2 Describe Lewin’s change model and the systems model of change. LO16.3 Explain Kotter’s eight steps for leading organizational change. LO16.1 Discuss the external and internal forces that can create the need for organizational change. LO16.2 Describe Lewin’s change model and the systems model of change. LO16.3 Explain Kotter’s eight steps for leading organizational change.

After reading the material in this chapter, you should be able to: LO16.4 Review the 11 reasons employees resist change. LO16.5 Identify alternative strategies for overcoming resistance to change. LO16.6 Define the term learning organization LO16.7 Review the factors that hinder an organization’s ability to learn from success and failure. LO16.4 Review the 11 reasons employees resist change. LO16.5 Identify alternative strategies for overcoming resistance to change. LO16.6 Define the term learning organization LO16.7 Review the factors that hinder an organization’s ability to learn from success and failure.

Forces of Change External forces for change Internal forces for change originate outside the organization Internal forces for change originate inside the organization. External forces for change originate outside the organization Internal forces for change originate inside the organization.

External Forces Demographic characteristics Technological advancements Customer and market changes Social and political pressures Demographic characteristics Technological advancements Customer and market changes Social and political pressures

Internal Forces Low job satisfaction Low productivity Conflict Strikes Internal forces for change come from inside the organization. These forces can be subtle, such as low job satisfaction, or can manifest in outward signs, such as low productivity, conflict, or strikes. In general, internal forces for change come from both human resource problems and managerial behavior/ decisions.

Question? ABC Trucking, conducted an analysis of employee job satisfaction and turnover, and concluded that its turnover rate was 48%. This was primarily attributed to job dissatisfaction by employees. This represents a(n) ______ for ABC. External force for change Social and political pressure Technological advancements Internal force for change The correct answer is “D” – internal force for change AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  423

Lewin’s Change Model Unfreezing Focus is to create the motivation to change Begin by disconfirming the usefulness or appropriateness of employees’ present behaviors or attitudes Unfreezing Focus is to create the motivation to change Begin by disconfirming the usefulness or appropriateness of employees’ present behaviors or attitudes

Lewin’s Change Model Benchmarking the overall process by which a company compares its performance with that of other companies, then learns how the strongest-performing companies achieve their results Benchmarking the overall process by which a company compares its performance with that of other companies, then learns how the strongest-performing companies achieve their results

Question? Fredfirst, a securities trading company, regularly compares its performance with that of high performing organizations in the industry, such as Merrill Lynch. This process is described as Change. Refreezing. Benchmarking. A strategic plan The correct answer is “C” – benchmarking. AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  424

Lewin’s Change Model Changing providing employees with new information, new behavioral models, new processes or procedures, new equipment, new technology, or new ways of getting the job done change can be aimed at improvement or growth, or it can focus on solving a problem such as poor customer service or low productivity Changing providing employees with new information, new behavioral models, new processes or procedures, new equipment, new technology, or new ways of getting the job done change can be aimed at improvement or growth, or it can focus on solving a problem such as poor customer service or low productivity

Lewin’s Change Model Refreezing Change is stabilized by helping employees integrate the changed behavior or attitude into their normal way of doing things Giving employees the chance to exhibit new behaviors, which are then reinforced Refreezing Change is stabilized by helping employees integrate the changed behavior or attitude into their normal way of doing things Giving employees the chance to exhibit new behaviors, which are then reinforced

A Systems Model of Change Systems Approach Based on the premise that any change, no matter how large or small, has a cascading effect throughout an organization Takes a “big picture” perspective of organizational change Systems Approach Based on the premise that any change, no matter how large or small, has a cascading effect throughout an organization Takes a “big picture” perspective of organizational change

A Systems Model of Change Mission statement represents the “reason” an organization exists Vision a long-term goal that describes “what” an organization wants to become. A mission statement represents the “reason” an organization exists, and an organization’s vision is a long-term goal that describes “what” an organization wants to become

A Systems Model of Change Strategic plan outlines an organization’s long-term direction and the actions necessary to achieve planned results Target elements of change components of an organization that may be changed Strategic plan outlines an organization’s long-term direction and the actions necessary to achieve planned results Target elements of change components of an organization that may be changed

Target Elements of Change Organizational arrangements Social factors Methods People Target elements of change are the components of an organization that may be changed. They essentially represent change levers that managers can push and pull to influence various aspects of an organization. The choice of which lever to pull, however, is based on a diagnosis of a problem, or problems, or the actions needed to accomplish a vision or goal: A problem exists when managers are not obtaining the results they desire. The target elements of change are used to diagnose problems and to identify change-related solutions.

A Systems Model of Change A systems model of change offers managers a framework or model to use for diagnosing what to change and for determining how to evaluate the success of a change effort. The four main components of a systems model of change are inputs, strategic plans, target elements of change, and outputs (see Figure 16–1).

Applying the Systems Model of Change Two ways to supply the systems model: Aid during the strategic planning process Using the model as a diagnostic framework to determine the causes of an organizational problem and to propose solutions Two ways to supply the systems model: Aid during the strategic planning process Using the model as a diagnostic framework to determine the causes of an organizational problem and to propose solutions

Steps to Leading Organizational Change Table 16-1 Kotter’s eight steps shown in Table 16–1 subsume Lewin’s model of change. The first four steps represent Lewin’s “unfreezing” stage. Steps 5, 6, and 7 represent “changing,” and step 8 corresponds to “refreezing.”

Question? Dale needs to change the manufacturing processes of his firm. This will cause many changes to his labor force. He shares a compelling reason to his employees. Which step is this in leading change? Generate short term wins Develop a vision and strategy Establish a sense of urgency Create a guiding coalition The correct answer is “C”. See previous slide.

Creating Change Through Organization Development consists of planned efforts to help persons work and live together more effectively, over time, in their organizations Organization Development consists of planned efforts to help persons work and live together more effectively, over time, in their organizations

The OD Process Diagnosis: What is the problem and its causes? Intervention: What can be done to solve the problem? Evaluation: Is the intervention working? Feedback: What does the evaluation suggest about the diagnosis and the effectiveness of how the intervention was implemented?

OD Research and Practical Implications Planned organizational change works Change programs are more successful when they are geared toward meeting both short-term and long-term results Organizational change is more likely to succeed when top management is truly committed to the change program Effectiveness of OD interventions is affected by cross-cultural considerations Planned organizational change works Change programs are more successful when they are geared toward meeting both short-term and long-term results Organizational change is more likely to succeed when top management is truly committed to the change program Effectiveness of OD interventions is affected by cross-cultural considerations

Why People Resist Change in the Workplace Resistance to change emotional or behavioral response to real or imagined work changes Resistance to change emotional or behavioral response to real or imagined work changes

Why People Resist Change in the Workplace An individual’s predisposition toward change Surprise and fear of the unknown Fear of failure Loss of status and/or job security Peer pressure Past success An individual’s predisposition toward change Surprise and fear of the unknown Fear of failure Loss of status and/or job security Peer pressure Past success

Question? Jamie is not directly affected by the change introduced in her company, but she is actively resisting it to protect the interests of her friends. This describes which reason for resistance to change? Surprise and fear of the unknown Personality conflicts Peer pressure Lack of tact The correct answer is “C” – peer pressure. AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  434

Why People Resist Change in the Workplace Disruption of cultural traditions and/or group relationships Personality conflicts Lack of tact and/or poor timing Leadership style Failure to legitimize change Disruption of cultural traditions and/or group relationships Personality conflicts Lack of tact and/or poor timing Leadership style Failure to legitimize change

Overcoming Resistance to Change Resilience to change represents a composite characteristic reflecting high self-esteem, optimism, and an internal locus of control, was positively associated with recipients’ willingness to accommodate or accept a specific organizational change Resilience to change represents a composite characteristic reflecting high self-esteem, optimism, and an internal locus of control, was positively associated with recipients’ willingness to accommodate or accept a specific organizational change

Overcoming Resistance to Change Commitment to change A mind-set “that binds an individual to a course of action deemed necessary for the successful implementation of a change initiative” Commitment to change A mind-set “that binds an individual to a course of action deemed necessary for the successful implementation of a change initiative

Overcoming Resistance to Change Provide as much information as possible to employees about the change Inform employees about the rationale for the change Conduct meetings to address employee’s concerns Provide employees the opportunity to discuss how the proposed change might affect them Employees are more likely to resist when they perceive that the personal costs of change overshadow the benefits. If this is the case, then managers are advised to (1) provide as much information as possible to employees about the change, (2) inform employees about the reasons/rationale for the change, (3) conduct meetings to address employees’ questions regarding the change, and (4) provide employees the opportunity to discuss how the proposed change might affect them.

Six Strategies for Overcoming Resistance to Change As shown in Table 16–2, Participation 1 Involvement does have its place, but it takes time that is not always available. Also as indicated in Table 16–2, each of the other five methods has its situational niche, advantages, and drawbacks

Creating a Learning Organization proactively creates, acquires, and transfers knowledge throughout the organization Learning organization proactively creates, acquires, and transfers knowledge throughout the organization

Creating a Learning Organization Team mental model Represents team members’ “shared, organized understanding and mental representation of knowledge about key elements of the team’s relevant environment” Team mental model Represents team members’ “shared, organized understanding and mental representation of knowledge about key elements of the team’s relevant environment

Leadership Is the Foundation of a Learning Organization Building a commitment to learning Working to generate ideas with impact Working to generalize ideas with impact Helping the organization to “unlearn” old mental models Building a commitment to learning Working to generate ideas with impact Working to generalize ideas with impact Helping the organization to “unlearn” old mental models

Factors That Detract from an Organization’s Ability to Learn from Failure Professor Edmonson studied organizational failures for 20 years and concluded that there are a host of factors that deter the extent to which organizations learn from failure (see Table 16–3).51 She recommends that organizations need to focus on overcoming the barriers shown in Table 16–3 in order to maximize learning from failure. A review of these barriers reveals that managers need to use evidence-based decision making, which was discussed in Chapter 10, if they want to learn from failure

Working to Generate Ideas with Impact Implement continuous improvement programs. Increase employee competence through training, or buy talent from outside the organization. Experiment with new ideas, processes, and structural arrangements. Go outside the organization to identify world-class ideas and processes. Implement continuous improvement programs. • Increase employee competence through training, or buy talent from outside the organization. • Experiment with new ideas, processes, and structural arrangements. • Go outside the organization to identify world-class ideas and processes. • Instill systems thinking throughout the organization.

Working to Generalize Ideas with Impact Measuring and rewarding learning. Increasing open and honest dialogue among organizational members Reducing conflict. Increasing horizontal and vertical communication. Promoting teamwork. Measuring and rewarding learning. Increasing open and honest dialogue among organizational members. Reducing conflict. Increasing horizontal and vertical communication. Promoting teamwork.

Working to Generalize Ideas with Impact Rewarding risk taking and innovation. Reducing the fear of failure. Increasing the sharing of successes, failures, and best practices across organizational members. Reducing stressors and frustration. Reducing internal competition. Rewarding risk taking and innovation. Reducing the fear of failure. Increasing the sharing of successes, failures, and best practices across organizational members. Reducing stressors and frustration. Reducing internal competition. Increasing cooperation and collaboration. Creating a psychologically safe and comforting environment

Helping the Organization to Unlearn Old Mental Models Management must seriously question and challenge the ways of thinking that worked in the past if they want to create a learning organization. For example, the old management paradigm of planning, organizing, and control might be replaced with one of vision, values, and empowerment. Management must seriously question and challenge the ways of thinking that worked in the past if they want to create a learning organization. For example, the old management paradigm of planning, organizing, and control might be replaced with one of vision, values, and empowerment.

Video Case: Louisville Slugger – Hillerich & Bradsby What role do information systems play at H&B? What were the internal and external trade-offs between reconfiguring the old information system and designing a new one? Why was the transition to the new system difficult? How could Kotter’s eight steps be used to facilitate such a transition? Why did some people resist change and experience stress? What strategies could H&B have used to overcome resistance to change? H&B had to decide whether to reconfigure the old system or implement a new one. A new system would streamline information flow in sales, supply chain management, accounting, finance, and marketing. However, the new system also caused a decrease in morale and increase in stress as employees struggled to learn the new system and change the way they operated. Kotter’s steps to leading organizational change include establishing a sense of urgency, creating a guiding coalition, developing a vision and strategy, empowering broad-based action, generating short-term wins, consolidating gains, and anchoring new approaches in the organization’s culture. Successful implementation of these steps facilitate organizational change. Surprise and fear of the unknown, fear of failure, and loss of status or job security were likely reasons H&B employees resisted change and experienced stress in the transition process.