1. Change Management Lecture 3 Why Organizations Change

2. Why change? Change is a risky activity – many organizational changes fail or do not realize their intended outcomes. This raises the question of why change is so prevalent? Pressure to change comes from:  External, environmental pressures  Internal, organizational pressures

3. Images of pressure for change How does a:  Director  Navigator  Caretaker  Coach  Interpreter  Nurturer understand why organizations need to change?

4. External, environmental pressures PressureExamplesDescription Fashion pressures Boeing Co. This is based on mimetic isomorphism – imitating companies that are legitimate and successful Mandated pressures Chevron Texaco This is based on coercive isomorphism – when change is demanded by outside sources. Geopolitical pressures 3M This is when global crises greatly impact an organization and change is necessary for survival.

5. External, environmental pressures PressureExamplesDescription Market decline pressures AOL Time Warner When current markets that the organization operates in begin to decline there is pressure to find newer, more viable markets. Hypercompetitio n pressures Gateway This affects the way organizations respond to their consumers and their competitors to cater for the increasingly rapid pace of business. Reputation and credibility pressures Walt Disney Company In light of recent corporate governance scandals in organizations, the pressure to maintain a good reputation and high level of credibility has increased.

6. Internal organizational pressures PressureExamplesDescription Growth pressuresMicrosoft Existing systems and processes in a smaller organization may no longer be applicable when the size of the organization increases. Integration and collaboration pressures EDS Integration and creating economies of scale can lead to pressure for change in organizations. Identity pressuresForte Hotel A common organizational identity and the unified commitment of staff in different areas/departments of an organization can be difficult to manage and may encourage change.

7. Internal organizational pressures PressureExamplesDescription New broom pressures Bank of America New authority figures in an organization can herald a new era and often signal significant changes an organization in an organization. Power and political pressures Morgan Stanley Power relationships and politicking can change internal processes and decision making. This has significant flow on effects within the organization.

8. Questions To what extent can you identify environmental pressures propelling your organization toward change?  To what extent do you have influence over whether and how to change? Which of the reasons to avoid change have you experienced or seen?  How easy is it to raise issues in your organization about the rationale for engaging in specific changes? Is there a dominant rationale? Why?  What personal criteria might you adopt for initiating a specific change “for the right reasons”?

9. Why organizations may not change: Five frictions Distorted perceptions  Hubris, cognitive biases, constructivism etc. Dulled motivation  Costs of change, cannibalization costs, cross subsidy comforts Failed creative response  Speed or complexity or vision is lacking Political deadlocks  Departmental politics creates blockages Action disconnects  Leadership inaction  Embedded routines are sticky  Cultural values resist change

10. Case: Chipping away at Intel What were the different changes at Intel over the first 3 years of Bartlett’s tenure?  Which environmental pressures were experienced by Intel?  Which internal pressures?  Are there other pressures you can identify? What overall conclusions do you draw about why Barrett made the changes he did? Which issues were dominant? Why?  What pressures might Barrett face in the future?  What advice would you give for how to cope with these change pressures?