amazon mission statement

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Organisational Change

Chapter 2

The Nature of Change

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Introduction

The chapter: Discusses a number of frameworks for

categorising change. Explains why, in order to be effective, it

is necessary to understand the differences between various types of change.

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ObjectivesTo:

Emphasise the complex nature of organisational change;

Describe and discuss the multi-dimensional nature of organisational change;

Analyse change situations in order to choose appropriate methods of managing and implementing change;

Recognise that there are limitations to the ‘common-sense’ approach to managing change that assumes that change can be planned as a logical. Step by step, sequence of activities.

This because of cultural, political and leadership dynamics.

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Background: A definition of strategy

Strategy is:

the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfill stakeholder expectations.

Source: Johnson, G. & Scholes, K. (1993) Exploring Corporate Strategy, London, Prentice Hall, p. 10.

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Environmental turbulence Ansoff & McDonnel (1990) (recap)

– Level 1. Predictable– Level 2. Forecastable by extrapolation– Level 3. Predictable threats & opportunities– Level 4. Partially predictable opportunities– Level 5. Unpredictable surprises

Strebel (1996)– Weak forces– Moderate forces– Strong forces

Stacey (1996) (recap)– Close to certainty– Far from certainty

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Varieties of change (overview) Grundy (1993)

– Smooth incremental– Bumpy incremental– Discontinuous

Tushman et al (1986)– Converging (fine-tuning)– Converging (incremental)– Discontinuous or frame-breaking

Dunphy & Stace (1993)– Fine tuning– Incremental adjustment– Modular transformation– Corporate transformation

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Varieties of change (Grundy)

Smooth incremental – evolves slowly, in a systematic and predictable way.

Bumpy incremental – periods of relative quiet interrupted by sudden bursts in the rate of change (e.g. re-organisations).

Discontinuous – ‘divergent breakpoint’, changes involving crisis, breakthrough, response to high turbulence.

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Major Types of Change (Grundy)

Rate

of change

Time

Discontinuous

Bumpy incremental

Smooth incremental

Source: Grundy, T. (1993) Implementing Strategic Change, Kogan Page, p. 25

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Varieties of change (Tushman et al) Converging (fine-tuning) - trying to do better

what is already being done well. Converging (incremental adaptation) - small

changes in response to small shifts in the environment.

Discontinuous or frame-breaking – major, rapid (spread over 18-24 months) and revolutionary changes in strategy, structure, people & processes in order to meet radically new or different circumstances. Also termed ‘upheaval.’Most organisations follow a pattern of

convergence/upheaval cycles. This pattern can apply at all levels (department, unit, corporation).

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Pressures for Frame-breaking Change Industry discontinuities, e.g. sharp changes in

the legal, political or technological conditions which shift the basis of competition

Product life-cycle shifts, i.e. strategic change to fit the next stage of the cycle

Internal dynamics, e.g. new management team, with different strategy preferences

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Examples of Frame-breaking Change Change of mission or core

values Power shifts, resource re-

allocation Total reorganization New workflow procedures New CEO coming from

outside

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Scale of change (1) (Dunphy & Stace)

1. 1. Fine Tuning. At departmental level. Making re-alignments to ensure that

there is a match between strategy, structure, people and processes.

2. 2. Incremental Adjustment. Bit by bit changes to match the

changing environment. Minor modifications to strategies or

structures…..

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Scale of change (2) (Dunphy & Stace) 3. Modular Transformation.

Major realignment of one or more departments or divisions.

Downsizing, re-engineering. 4. Corporate Transformation

(frame-breaking effecting the whole organisation).

As described earlier as discontinuous or frame-breaking change.

A contemporary research study found that most organisations have been undergoing types 3 & 4 change.

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Environmental conditions and types of change

ENVIRONMENTAL FORCES FORCHANGE

TYPES OF CHANGE

Ansoff andMcDonnell (1990)

Strebel(1996)

Stacey(1996)

Tushman et al.(1988)

Dunphy &Stace (1993)

Grundy(1993)

Stacey(1996)

Predictable

Forecastable byextrapolation

Predictable threatsand opportunities

Partially predictableopportunities

Unpredictablesurprises

Weak

Moderate

Strong

Close tocertainty

Close tocertainty

Far fromcertainty

Converging(fine-tuning)

Converging(incremental)

Discontinuousor frame-breaking

Fine-tuning

Incrementaladjustment

Modulartransformation

Corporatetransformation

Smoothincremental

Bumpyincremental

Discontinuous

Closed

Contained

Open-ended

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Phases of Emergent Versus Planned Change (1)

Fine tuning and incremental change are usually also seen as emergent, ‘unfolding as it happens’.

The organisation, an open system, engages ‘naturally’ in emergent change as it tries to maintain equilibrium with its changing environment.

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However, organizations that rely only on making emergent change may ignore ‘warning signs’ of the need for more radical forms of change, and the organisation will suffer ‘strategic drift’, i.e. the strategy and perceptions of the organisation will become less and less in tune with the environment.

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Some theorists argue that PLANNED CHANGE that is also frame-breaking may then be necessary as a drastic remedy to bring the organization back to health.

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“Logical Incrementalism” (1)

Quinn does not agree that change is either emergent or planned. Quinn believes that although managers may have an idea of the destination, they do not really plan change in ‘big chunks’.

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“Logical Incrementalism” (2) Quinn says that managers:

Are flexible about how to get to the destination. Arrive at strategic change through negotiation

with stakeholders. Allow strategic change to evolve incrementally,

although this is not piece-meal or haphazard because it is based on agreed purposes and involves constant critical re-assessment.

The planned change process involves opportunist learning as it goes along.

Logical instrumentalism is both emergent and planned.

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Predictable Change (1)Some theorists think that change might be neither wholly emergent nor wholly planned.

Instead, change may reflect the organisation’s LIFE-CYCLE.

Greiner identifies 4 stages or 5 phases through which organisations go as they grow and develop.

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Predictable Change (2)Each of Greiner’s stages contains a crisis period.Stage 1 is entrepreneurial - survival

oriented.Stage 2 is collective - based on division

of labour.Stage 3 is formalised- based on

bureaucracy.Stage 4 is elaborated - based on

problem oriented teams.

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Phase 1Entrepreneurial

Phase 2Direction

Pahse 3Delegation

Phase 4Co-ordination

Phase 5Collaboration

Structure *Informal *Functional*Centralized*Hierarchical*Top down

*Decentralized*Bottom up

*Staff functions*SBUs*Decentralized*Units mergedinto productgroups

*Matrix-typestructure

Systems *Immediate responseto customerfeedback

*Standards*Cost centres*Budget*Salary systems

*Profit centres*Bonuses*Management byexception

*Formal planningprocedures*Investmentcentres*Tightexpenditurecontrols

*Simplified andintegratedinformation systems

Styles/people

*Individualistic*Creative*Entrepreneurial*Ownership

*Strongdirective

*Full delegationand autonomy

*Watchdog *Team-oriented*Interpersonal skillsat a premium*Innovative*Educational bias

Strengths *Fun*Market response

*Efficient *High managementmotivation

*More efficientallocation ofcorporate andlocal resources

*Greater spontaneity*Flexible andbehaviourialapproach

Crisis Point *Crisis of leadership *Crisis ofautonomy

*Crisis of control *Crisis of red tape ?

Weaknesses *Founder oftenempermentallyunsuited tomanaging*Boss overload

*Unsujited todiversity*Cumbersome*Hierarchical*Doesn’t growpeople

*Top managerslose control asfreeom breedsparochial attitudes

*Bureaucraticdivisions betweenline/ staff,headquarters/field, etc

*psychologicalsaturation

Source: Clarke, L. (1994) The Essence of Change, Prentice Hall, p.12.

Stages of organisational growth

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Predictable Change (3) Greiner’s model is potentially useful in

identifying what stage an organization is at, and therefore what type of change situation it is in and will be in.

The model may therefore help an organisation to plan change and predict the next crisis point.

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Diagnosing Change Situations Diagnosis of change situations is not an

exact science. Various diagnostic methods can be used

in combination, e.g. SWOT, PETS, multi-cause diagrams.

Some more methods are now discussed.

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Evolutionary Cycle of Competitive Behaviour - 1

Strebel has suggested a model that examines the industry within which the organisation is located, i.e. the organisation’s competitive environment.

Two key concepts are: the ‘evolutionary cycle of competitive behaviour.’ ‘breakpoints’, when companies must change their

strategies in response to changes in competitors’ behaviour.

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The cycle involves two main phases.1. The DIVERGENT PHASE, based on

innovation/variety: beginning when one organisation discovers a new business opportunity, the industry as a whole strives to create differentiated products and services that add customer value.

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Evolutionary Cycle of Competitive Behaviour - 32. Eventually a breakpoint occurs, as the

emphasis shifts to the CONVERGENT PHASE, based on efficiency/survival, which begins with imitation of competitors’ best features, and then leads to an emphasis on reducing costs. Competitors converge on total quality management, continual improvement & re-engineering to cut costs and maintain market share. Only the fittest survive.

3. Then back to 1, as further savings are marginal.

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Progressively, with cycle after cycle, industries deliver both more customer value through various generations of differentiation (e.g. mobile phone technology) each followed by more cost reduction. Industries vary according to the relative emphasis on

divergent phases versus convergent phases

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Concern for Innovation &

customer value

LowCustomer

Value

HighCustomer

Value

Low Costs

Delivery of efficiency & cost savings

= breakpoints

pioneering/novelty phase

cost reduction phase

High Costs

differentiation phase

cost reduction phase

new generationof products

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Evolutionary Cycle of Competitive Behaviour - 6 Spotting the breakpoints. Formal Methods include:

Environmental scanningBenchmarkingMonitoring, data collection and data interpretation

Detecting when a new divergent phase is about to begin is more difficult because the new wave of innovation cannot yet be seen.

Informal methods include:Open-minded attitudesCooperation across the organisationCulture supporting innovation and change

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Difficulties and ‘Messes’Difficulties. These are characterised

by ‘hard complexity’. There are lots of factors

and variables. But they can be

meaningfully quantified. Optimal solutions can be

developed.

Messes. These are characterised by

soft complexity. People’s description of

events is ambiguous. There are multiple

interpretations and reconstructions of what the problem is.

Stakeholder groups will see things according to their stake in the problem.

Thus there are many different ideas about what kind of solutions there might be.

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DIFFICULTIES - Smaller scale, well-defined, ‘hard complexity’, multiple variables, cerebral

BOUNDED

limitedtimescale

prioritiesclear

limitedapplications

can be treatedas a separate

matter

limitednumber of

people involved

know whatneeds to be

known

know whatthe problem is

know whatwould be a

solution

UNBOUNDED

longer uncertaintimescale priorities called

into question

can’t bedisentangled

from its contextmore people

involved

don’t know whatneeds to be known

uncertainbut greater

implications;worrying

know whatthe problem is

no solutions

MESSY PROBLEMS - bigger, poorly defined, ‘soft complexity’, multiple perspectives, emotionalMESSY PROBLEMS - bigger, poorly defined, ‘soft complexity’, multiple perspectives, emotional

________________________________________________________________________________________________________________________________

Difficult versus messy problems

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Concluding Remarks Diagnosing necessary change and managing

subsequent change is usually not just a matter of objective calculation.

Soft problems present various emotional and social dimensions which demand a broad range of managerial change competencies and approaches.

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