chapter 4 what changes in organizations mcgraw-hill/irwin copyright © 2009 by the mcgraw-hill...
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Chapter 4
What Changes in
Organizations
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Scale of Change
• First-order change:– Incremental– Maintains and develops the organization– E.g. continuous and smaller changes to
the structure of an organisation– Change process, system or structure, but the
strategy, vision, goals remain the same
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
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Scale of Change
• Second-order change:– Discontinuous– Transformational– Fundamentally changes the way an
organization functions– change the strategy, the vision, the
“core” of the organization
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
4-3
Types of Changes
1st order (incremental)
2nd order (discontinuous)
Anticipatory Improvement ReorientationReactive Adaptation Re-creation
1st Order Change - Individual Initiatives
• Individuals (often front line workers) are the ones most able to identify relevant and innovative organizational change at a local level
• Two conditions must be met– Some individuals must take initiative– Organization must provide space for indiv.
Initiatives
1st Order Change – Development of Local Routines
• When local departments can interpret how a process should be implemented, given centralized “guidelines”
• Process evolves over time and then may be centralized
2nd Order Change – Why?
2nd order change
• Eight commonly occurring recommendations for major org. change:– Delayering– Networks and Alliances (strat. collab.)– Outsourcing– Disaggregating– Empowerment– Flexible Work groups– Short term Staffing– Reduction of external or internal boundaries
2nd Order Change - Rationale
2nd Order Change - Rationale
2nd order change - Rationale
2nd Order Change – Transformation Types
Between 1st & 2nd Order Change
• Mid-range changes– Overcomes inertia but is not revolutionary– Avoids the alarming implications of large
scale change
• Punctuated equilibrium– Long periods of stability followed by short
bursts of change and instability
• Robust transformation– Considers environmental conditions as being
temporary and requiring robust responses including the enactment of new capabilities.
• Change is not always linear!!
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
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Implications for change Managers
• Type of change requires a specific type of manager
Change Manager as…
Implication
Interpreter How is the change viewed by those it affects
Navigator Discontinuous change may be complex, but can be achieved with many small changes
Nurturer Change may have unintended effects, and people’s reactions can only be shaped, not controlled
Coach Inertia may need to be overcome
Director People need directions for stability as well
Implications for Change Managers
Implication for Change Manager
Image of Managing Change
Care needs to be taken in assuming that types of organizational changes can be neatly categorized as small, adaptive, and incremental compared to those that are large and transformational.
Interpreter: The change manager as interpreter image reminds us that whether a change is adaptive, reactive, or transforming will depend upon the perspective of the person doing the considering
Multiple types of changes simultaneously should also be considered. In addition, some changes require other changes nested under them in order for another change to proceed.
Navigator: when implementing multiple changes, there is likely to be contact with different groups that will require negotiation and navigation through a range of issues—not all of which they will be able to control.
From chaos theory we know that small changes, at an individual level, may have larger, unanticipated consequences throughout the organization
Nurturer: Change managers can nurture and shape people’s perceptions and reactions to change but not control them.
There are a number of inertial forces that act as a drag on individuals and organizations in adopting adaptive, first-order change.
Coach: the managers of change are likely to assume that, as long as people have been well “coached” in a variety of organizational skills, then, when organizational “problems” are triggered, they will take the initiative and make appropriate adaptive changes to alter organizational practices and routines.
Change managers need to remember what might appear at first sight to be a paradox, that often change is needed in order to remain stable.
Director: Change managers who adopt a directing image of change also need to remember that they will need to provide directions about stability: telling people what will not be changing, or what will remain the same.
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
4-15
Implications for Change Managers
Implication for Change Manager
Image of Managing Change
Change may mean adding on to, and integrating, rather than removing and replacing current practices.
What this reminds the managers of change is that they need to assess how carrying out a change will impact upon current practices
There is often an implicit assumption that incremental, adaptive changes are less risky than large, second-order transformational changes.
For the manager of change, this requires both assessing the scale of change (incremental/radical) from the perspective of the affected parties as well as assessing the risk involved (of changing rather than staying the same) and the different ways in which risk can be ameliorated.
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
4-16
Types of Change
DOWNSIZING
• Approaches to downsizing:– Retrenchment (Centralization)– Downscaling (Reduction)– Downscoping (Divestment)
• Does not necessarily lead to increased productivity
• Can be an excessively costly exercise
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
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Challenges to Downsizing
• Employee Retention• Loss of Core Competencies• Minimizing Political Behaviour• Survivor Syndrome• Communication
– About the situation faced
• Due Diligence– Was it necessary?
• Cultural Adjustment• Choice of Technique
Types of Change
TECHNOLOGICAL CHANGE• There are a variety of new
technologies being used, for example:– Customer relationship management
(CRM) systems– Enterprise resource planning (ERP)– Wireless technology– Business process reengineering (BPR)– Six Sigma
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
4-19
Challenges to Technological Change
• Goal synthesis.
• Choice of technology
• political barriers (loss of control)
• The IT team working with the board
• Communication
• Time frame and disruption
• Contingency planning
Types of Change
MERGERS AND ACQUISITIONS
• Enable organizational growth at an accelerated rate
• Types of mergers and acquisitions:– Excessive capacity
– Neighboring market expansion
– New product or market investment
– Research and development
– Leveraging to create industries
Scale of Change:-1st order-2nd order
Between 1st & 2nd Order Change
Implications for Change Managers
Types of Change:-Downsizing-Technological-Mergers-Key Change Challenges
4-21
Challenges to Mergers and Acqusitions
•Mergers & Acquisitions•Cost savings are Overvalued initially
•Cultural adjustment when 2 cultures merge•Balancing change and continuity•Due diligence on values•retention of key employees•Contingency planning•Power structure.•Communication
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