Organizational Change Chapter 14 IBUS 681, Dr. Yang

Learning Objectives Define organizational change Learn why managing change is an important part of international management Understand the individual, group, and structural levels of change Know what internal and external factors influence organizational change IBUS 681, Dr. Yang.

Learning Objectives (cont.) Explain the role of national and organizational culture on organizational stability and change Understand the processes involved in planning organizational change, including sources of resistance to change and ways to overcome them Understand how macro level theories of organizational change influence the management of change IBUS 681, Dr. Yang

Roberto C. Goizueta Former Chairman and CEO Coca-Cola Company There is no permanent organizational chart for the world… It is of supreme importance to be ready at all times to take advantage of new opportunities. Roberto C. Goizueta Former Chairman and CEO Coca-Cola Company

Organizational Change Reconfigures components of an organization to increase efficiency and effectiveness Including any alternations in people, structure, or technology IBUS 681, Dr. Yang

Levels of Organizational Change Levels of analysis: Structural change Group change Individual change Cross-culture variation in restructuring U.S. Japan Germany China South Africa IBUS 681, Dr. Yang

Internal Change Factors Technical Production Processes Production New Technologies Quality Political Processes New Organizational Goals Conflict New Leadership Organizational Culture Values Norms New Member Socialization IBUS 681, Dr. Yang

External Change Factors Immediate Environment Domestic Competition Population Trends Social Trends Government Actions General Environment Foreign Competition Social Movements Political-Economic Movements Technology Professionalization Culture Contact IBUS 681, Dr. Yang

External Change Factors for Germany Inc. Post WWII How it is changing Organizational change Ownership Structure Big companies and financial institutions controlled stakes in one another, offering mutual protection from hostile takeovers and outside pressures. This stability helped Germany rebuild shattered industries. Companies are unwinding their stakes in on another to profit from a cut in the capital-gaining tax in 2001, free up capital for their main businesses and reduce the risk that non-core holdings will generate losses. Companies are subject to more intense capital market pressures MGMT-Labor Relations Co-determination gave labor 50% of seats on corporate management boards, laying the foundation for decades of labor peace. A center-right government is likely to assume power and try to curtail unions, weakening ties between labor and management. Supervisory boards are giving CEOs more decision-making power Outside Capital Foreign investors have little or no say in running companies or forcing management changes. Cross-border mergers were rare. A glut of foreign investment, including private equity funds that now total $54 billion, is putting pressure on German companies to restructure. Spin-offs, mergers and plant shutdowns are accelerating. IBUS 681, Dr. Yang

National Culture and Organizational Change Time Orientation: Past Present Future Short-term vs. long-term oriented Resistance to Change Tradition Habit Resource Limitations Power and Influence Fear of the Unknown Values IBUS 681, Dr. Yang

Resistance to Change in Different Clusters of Countries Dimension Scores Resistance level PD ID UA Country Clusters 4 (strongest) 3 (strong) high low high med med high high high high high med high high low med Most of Latin America, Portugal, Korea, the former Yugoslavia Japan Belgium,France Spain, Argentina, Brazil, Greece, Turkey, Arab Countries Indonesia, Thailand, Taiwan, Iran, Pakistan, African countries IBUS 681, Dr. Yang

Resistance to Change in Different Clusters of Countries (cont.) Dimension Scores Resistance level PD ID UA Country Clusters high low low low med high med high med med high low low high low 2 (medium) 1 (week) 0 (weakest) Philippines, Malaysia, India Austria, Israel Italy, Germany, Switzerland, South Africa Singapore, Hong Kong, Jamaica Anglo countries, Nordic countries, Netherlands IBUS 681, Dr. Yang

Managing Change Organization development Lewin’s model of change Managing resistance to change Impact of cultural values OD model Consulting Power versus employee participation IBUS 681, Dr. Yang

Lewin’s Model of Change Phase 1 - Diagnosis Phase 2 - Unfreezing Phase 3 - Movement Phase 4 - Refreezing Phase 5 - Renewal IBUS 681, Dr. Yang

Managing Resistance to Change Education and communication Participation and involvement Negotiation and agreement Manipulation and cooptation Coercion IBUS 681, Dr. Yang

The Interaction of National and Organizational Cultures National culture Organizational culture IBUS 681, Dr. Yang

Change Strategies for Different Groups of Countries Dimension Scores Change Strategy PD ID MA UA Country Clusters 5 (power) 4 (power, manipulation/persuasion) Columbia, Ecuador, Venezuela, Mexico Rest of Latin America, Spain, Portugal, former Yugoslavia, Greece, Turkey, Arab countries, Korea High low high high High low med high IBUS 681, Dr. Yang

Change Strategies for Different Groups of Countries (cont.) Dimension Scores Change Strategy PD ID MA UA Country Clusters med med high high high high med high high low med low med low high low low med med high med high high med low high high low low high low low Japan Belgium, France Indonesia, Thailand, Taiwan, Iran, Pakistan, African countries Philippines, Malaysia, India Singapore, Hong Kong, Jamaica Austria, Israel Italy, Germany,Switzerland, South Africa Anglo countries Nordic countries, Netherlands 3 (manipulation/ persuasion) 2 (manipulation/ persuasion, consultation) 1 (consultation, participation) IBUS 681, Dr. Yang

Macro-organizational Change Theories Life-cycle theory Teleological theory Dialectical theory Evolutionary theory Cultural implications IBUS 681, Dr. Yang 12-17

Convergence or Divergence? Competitive pressures Attempts to standardize product quality on a worldwide basis Diffusion of advanced management techniques Transfer of technological innovations Problems with diffusion of organizational innovations Culture and local conditions as barriers to change Cultural and legal conditions influence and limit change and methods for change. IBUS 681, Dr. Yang 12-18

Implications for Managers Culture influences organizational change. When formulating a change program, it is necessary to assess need for change, what changes are appropriate, nature of resistance to change, and how to implement planned changes. Be aware of internal and external forces for change and how different cultures may respond to them. Understand larger processes affecting organizational change and how they may limit change. IBUS 681, Dr. Yang 12-19