how organizational change works -...

How Organizational Change Works

By the end of this session

you will be able to:

Plan stages of a change process and

increase the likelihood of success by

adhering to proven principles of change

management

Management and Strategy Institute


• Change is a process that needs to be handled carefully.

It consists of an organizational restructuring as well as

changing attitudes and behaviors. As with any complex

problem, there are many ways to fail. History is full of

case studies on companies who either failed to change

or who went through a change program and still failed

due to bad execution or bad planning.



• In this session, you will learn about one of the most

popular models on how to plan for change step-by-step

and learn how to get the most from it. You will also

explore a number of critical principles and guidelines on

change management that will help increase the

likelihood of success.


The Frog

• A South American tribe had an abundant supply of frogs

as a food source. They experimented first by dropping a

frog into boiling water. The frog jumped out immediately,

spoiling the food!


The Frog

• The tribe eventually discovered an easier way to deal

with the frogs. They would put them into a pan full of

cold water. They would then place the pan over fire. The

water would heat up gradually and due to frog’s specific

physiology, they got more and more comfortable. This

means that the frogs would simply sit in the pan until

boiled!


The Frog

• This fable by Charles Handy beautifully captures what

change can mean and what happens when one reacts

too slowly to a changing environment.

• In short, there are people out there that are about to be

“boiled” alive, though they have no idea that the

impending massive change is coming. They see the slow

changing environment around them and take it at face

value.

• Let’s see how change can be managed so people don’t

end up with the same fate as the South American frogs.


Principles of Effective Change

• “To lead people, walk beside them…

As for the best leaders, the people do not notice

their existence. The next best, the people honour

and praise. The next, the people fear; and the next,

the people hate… When the best leader’s work is

done the people say, “We did it ourselves!”

Lao-Tzu

• Change management must follow a predefined well-

thought out strategy. According to Nadler and Tushman

there are a number of principles you need to consider for

effective change (Price 2009). These are as follows:


The Vision Principle

“What could we

change”

“What should we

change”


The Vision Principle

• Change is about going from one state to another. This

requires knowing where you want to go and a vision to

get you there.

• As part of communicating the vision you must establish

the need for change. You will need to consider:

• Rational of change

• Impact on stakeholders

• The values behind the change

• Performance objectives

• Target operational culture


The Energy Principle

• A successful organization is usually stable. This stability

helps them to handle threats. However, the downside is

that this stability makes them resistive to change. To get

past this resistance, the organization must have energy

to carry out the change. You must work on increasing

this energy by creating a sense of urgency and

motivating people to act.


The Diagnosis Principle

• Diagnostic thinking means that you need to know the

“what” as well as the “how”. This helps avoiding

organizational mimicry which is copying other

organization’s response to a changing environment

without understanding its relevance to your organization.


The Centrality Principle

• It is absolutely critical to define the position and labelling

of the change accurately so that the change is clear to

the entire organization.


The Three-Theme Principle

• You cannot run and manage several potentially

contradictory changes at once. When bombarded daily

with a variety of changes employees start to become

selective and ignore anything they can get away with.

Change must be focused.

• As a general rule, change managers can initiate and

sustain approximately three key themes during a specific

period. You must focus on areas that most people

associate with and have energy to engage in.


The Magic Leader Principle

Can create a sense of urgency

Have distinctive behavior

Provides theme consistency

Can exhibit a mix of styles

The Leader-is-Not-Enough Principle Management and Strategy Institute

The Magic Leader Principle

• Large scale organizational change can significantly benefit from the existence of a unique leader who can represent, articulate and encourage the change. Such magic leaders have the following qualities:

• Can create a sense of urgency – The magic leader is critical in articulating the need for change and the need to do

it sooner rather than later.

• Have distinctive behavior – The magic leader envisions, energises and enables the change.

• Provides theme consistency – The magic leader guards the consistency of change.

• Can exhibit a mix of styles – Magic leaders seem to have the capability to show two simultaneous styles of

leadership; on one hand they can be directive, stubborn and uncompromising. They are hell-bent on achieving the objective of the change and nothing will convince them otherwise. On the other hand, they are open to new ideas, actively encourage open discussions and want to get people involved in the process. In short, great magic leaders seem to have simultaneous autocratic and democratic tendencies which make their roles more effective.


The Leader-is-Not-Enough Principle

• Although a magic leader is essential, by its own is not

enough to sustain a change. Successful change

depends on an army of supporters, helpers and people

who believe and have a stake in the change.

• Attempts must be made to broaden the change

leadership beyond one or two people. The change

executive team must possess a consistent shared vision

of the change.


Who Moved My

Cheese


Who Moved My Cheese

• In 1998, Spencer Johnson published a motivational book

on change called, “Who Moved My Cheese?” (Spencer

1998). It is a business fable and an allegory. It is an

entertaining read and a popular book. This short book is

highly recommended to anyone who is involved in

managing a change or is subjected to change.


http://www.amazon.com/Who-Moved-My-Cheese-Amazing/dp/0399144463/ref=sr_1_1?ie=UTF8&qid=1410532552&sr=8-1&keywords=who+moved+my+cheese

Who Moved My Cheese

• The story involves four characters, two mice and two

little people (miniature humans), Hem and Haw in a

maze, an allegory for a person’s complex environment.


Who Moved My Cheese

• The two pairs set of in the maze searching for cheese.

One day, the little people find cheese in a part of the

maze called “Cheese Station C”. They set up a routine

to consume it daily and get accustomed to the existence

of the cheese until one day they discover that there is no

cheese left.


Who Moved My Cheese

• From this point, the story focuses on how the little people

handle this change and it covers many aspects of

handling change through allegory.

• Hem believes that the change is unfair and refuses to do

anything about it. Haw is however eager to go off in the

maze and search for other sources of cheese.


Who Moved My Cheese

• Eventually, Haw finds a new source of cheese, with more

varieties and in abundance while Hem has refused to

move and look for more cheese.

• Haw decides to summarize his thoughts on the wall of

this newfound cheese station:


Change Happens

They keep moving the cheese

Anticipate Change

Get ready for the cheese to

move

Monitor Change

Smell the cheese often so you

know when it is getting old

Gra

nd

R

ule

s


Adapt to Change Quickly

The quicker you let go of old

cheese, the sooner you can

enjoy new cheese

Change

Move with the cheese Gra

nd

R

ule

s


Enjoy Change!

Savour the adventure and

enjoy the taste of new

cheese!

Be Ready to Change Quickly

and Enjoy it Again

They keep moving the

cheese

Gra

nd

R

ule

s


The World is Changing... Fast

Factory

Mass Production

Mass Customization



• We are about to enter the third industrial age. The first

industrial age began with the invention of factory in

Britain in the late 18th century. It was centred on

mechanisation of the textile industry. Rather than

producing the textile by hand in hundreds of weaver’s

cottages, it was all brought under a single cotton mill.

The production ramped up and soon put pressure on

many of the traditional producers.



• This led to the first great change in the modern era.

People had to adapt and understand the new trend.

From our position, we can easily see that there was no

point for anyone to resist the change or protest, or even

worse, try to stop it. Many of the advances and the

subsequent prosperity that followed were as a result of

this significant change to industrial production.



• The second industrial revolution started at the beginning

of the 20th century. This is perhaps best symbolized by

Henry Ford’s car production company where he

mastered the moving assembly line. This great era of

mass production led to design and manufacturing of

products on a scale never seen before. This revolution

has continued to this day. Today large range of products

are manufactured and distributed at a huge scale. This

makes them extremely cheap so many people can now

afford products that were once considered luxury.



• This led to the second great change of the modern era.

Now companies and organizations had to adjust to

compete with mass production. If they did not join, they

risked ending up producing lower quality products at

much higher prices which could not possibly compete

with the cheap mass manufactured products produced in

ever more sophisticated and streamlined factories.



• All signs seem to suggest that we are entering the third

industrial revolution, this time as a result of the digital

revolution. In short, manufacturing and services are

going digital. There are a number of exciting

technologies that are converging; novel and exotic

materials, real-time software, ubiquitous access to

networks, advanced robotics, web-based services, social

networks and 3D printing.



• In contrast with the second industrial revolution where

the focus was on mass producing an identical product

and reducing its cost of production through economy of

scale, the third revolution seems to be about mass

customization.



• Companies are now gearing up towards production of

products based on specific customer demands. The

demands are channelled through sophisticated

networks, connecting customers to designers, factories,

suppliers and to logistics services. There has already

been great progress in some of these areas. For

example a customer can go to a particular

manufacturer’s websites, choose the exact components

of a laptop and customize it based on his needs.



• He can then order it through the manufacturer avoiding

the middle man. The order then goes through a complex

maze of supply-chain processes and on-demand

manufacturing before being assembled in a factory

which covers the customer’s particular area and finally it

gets shipped.



• A more disruptive revolution is perhaps centred on 3D

printing where the possibilities seem to be endless and

hugely revolutionary. Imagine downloading a design

from the net and getting the widget printed in your 3D

printer machine. You could order spare parts of old

products and you could order them even if you are in a

remote location. All you need is net access, a 3D printer

and required materials. But above all, you can get

precisely what you want as you can customise the

design to your specific needs down to the smallest

details.



• This will also revolutionize the assembly line. It will

become more flexible, more customizable, require less

labour to run and hence more efficient. It may no longer

be critical to operate these factories in low-wage

countries and so this trend may lead to another

significant change for factory locations globally.



• Even companies that provide services are getting

affected by the trend towards mass customization.

Everywhere you look, you will see companies offering

more choices and options to address every need. In turn

customers are becoming more expectant and want more

customization.



• What should the companies do to survive in this world?

Would 3D printing or other technologies be as significant

and disruptive as we think? What is the impact of

ubiquitous access to the net along with sophisticated

smartphones?



• What would be the effect of augmented reality when you

see the world through a digital contact lens with

superimposed live content on everything you see? How

would the governments respond to make their countries

more competitive and cater for the social aspects of the

new change from job losses to factory relocations, to

changes in transport demand, to handling copyrights, to

real-state and so on?


Managing Resistance



Understand why people are afraid of

change and use behavioral techniques to

overcome their resistance to change


Why People Resist Change

“You can’t teach an

old dog new tricks.”

“From the frying

pan into the fire.”

“Let sleeping dogs

lie.” Management and Strategy Institute


• No matter how you approach the implementation of

change there are always some people that resist it.

There are fears associated with change and people are

susceptible to react to it rather than comply. Hence,

handling resistance to change is a critical part of any

change management program and must be planned for

before any change campaign commences. In this

session, you will learn about these fears and learn about

strategies that can be employed to handle them.



• It is natural for people to feel sceptical about change.

Various sources contribute to this fear. Identifying them

can help you to consider these fears when designing the

change management process and address them in due

course.

• Sources of fear can be categorized as the following:


Fears of Change

Fear of Reorganization

Fear of Loss Fear of

Implications

Fear of Uselessness

Fear of Loss of Control

Fear of Direct Change

Fear of Losing Face

Fear of Surprise

Fear of the Unknown



• Fear of reorganization. Disturbs the status quo and

gets people out of their comfort zones.

• Fear of loss. Desire not to lose something of value.

• Fear of implications. Misunderstanding of the change

and its implications. It is effectively fear of “walking off a

cliff while blindfolded.”

• Fear of uselessness. Belief that the change does not

make sense for the organization.

• Fear of loss of control. Change is exciting when it is

carried out by us but threatening when it is done to us.



• Fear of direct change. Some individuals have low tolerance to change.

• Fear of losing face. Belief that by going with the new change, they are accepting that their previous decisions and processes were wrong. They resist change to remain consistent with the past.

• Fear of surprise. When change is suddenly announced, most people are so shocked that they would rather resist the change or undermine it than to accept it.

• Fear of the unknown. People are afraid of what will happen if they go through change. One of your aims should be to make the status quo appear more dangerous than launching to the unknown.


How to Deal With Resistance

• Organizations often underestimate the variety of ways

that people react to change and resist it. They also

seem to be aware of only a few methods to handle this

resistance (mainly directly) or are simply unaware of the

drawbacks of methods they currently use or have used

in the past.


Stakeholder Engagement

• When going through change, it is important to gain the

support of key stakeholders. Research shows that if a

significant percentage (about 75%) of top management

is not involved or convinced of the change, the change is

likely to fail.



• As a result you will need to get the commitment of

stakeholders (managers, investors, creditors,

employees) in the process of change. However,

stakeholders are not all equal and should not be treated

uniformly. At times, you may need to focus on different

types to strengthen support or to eliminate resistance.



• The following matrix shows the relationship between

power and interest of stakeholders in contrast with

change. As you can see most of the focus should be on

Q1 as they are powerful stakeholders that once

convinced can join the cause and support it.



• It is important to remember that stakeholder positions

are not fixed and change over time. Your strategy needs

to address this change and constantly adapt so you can

stay ahead in the game. If you lose powerful

stakeholders, they can cause all sorts of issues by

attempting to block the change or undermine the change

effort.



Q1

Lobby & Raise Interest

Q2

Seek Commitment and

Contribution

Q3

Harmless at Present

Q4

Be Careful not to Alienate

Interest HIGH LOW

HIG

H

LO

W

Pow

er


How to Manage Change



Identify skill gaps and required

infrastructural changes through a

structured approach



• “Change is hard because people overestimate the

value of what they have and underestimate the value

of what they may gain by giving that up.”

• James Belasco and Ralph Stayer, Flight of the Buffalo



• As you have seen so far, going through a change

process requires structure. This session presents

various areas of change management, planning change

management and how to identify skill gaps in order to

provide appropriate support for staff.


The Three Components

• When managing change you need to consider three

critical areas:


The Three Components

• What do you want to achieve as a result of change?

Outcome

• What strategy do you need to follow to achieve this goal?

Infrastructure

• What resources do you need to achieve this change?

Resources


• What do you expect to change?

– Expected structural changes

– Expected cultural changes

• What are the benefits of these changes?

• What are the success criteria?

• What is the process to achieve the change?

Outcome


Infrastructure

• Next, you need to consider all the infrastructural

changes. Effectively this leads to your strategy in

implementing the change to achieve your outcome. Use

the following guidelines to maximise the likelihood of

your success.


Use early and open communication

Understand who knows what

Set correct pace

Use workshops

Carry out surveys

Infrastructure


Provide management training

Use project-based approach

Use external support

Monitor and control

Infrastructure


Infrastructure

• Use early and open communication. The process

must be transparent. Getting employees involvement

and participation can help the process significantly.

• Understand who knows what. Managers who initiate

change often assume that they have all the relevant

information required to carry out the change and those

that who will be affected by it have access to the same

facts. In reality, it is likely that neither is true. This

information disparity is a great source of

miscommunication and potential resistance to change.


Infrastructure

• Set correct pace. Employees don’t have a responsibility

to manage change. The responsibility rests with

executive management and the team in charge of the

change. They must manage change in a way that

employees can cope with.

• Use workshops. This allows you to reach collective

agreement and develop shared policies and approaches

towards the desired change.


Infrastructure

• Carry out surveys. This allows you to receive feedback

and take steps to reassure staff, correct

misunderstandings and build trust. Use anonymous

surveys to allow people talk freely.

• Provide management training. Management is

essential to the change process. They must be able to

understand, empathise and facilitate the process. If they

appear rigid and strict in following a policy set in stone,

the people are likely to resist and resent the change.


Infrastructure

• Use project-based approach. Research shows that it is

more effective to manage the process of change as a

project. The project would then have an established

target, clear objectives, known resource requirements

and a specific schedule to follow. This creates order and

clarity which improves the likelihood of success. It will

also make it easier to coordinate activities between

various members of the change management team.

• Use external support. Always consider using external

consultants to improve the process of change.


Infrastructure

• Monitor and control. Without performance

management you wouldn’t know if the changes are

making any difference. You need to identify people,

processes and systems that contributed to positive

change and improved productivity. You can then reward

them or use them to guide others. A common way to do

this is by using the 360 degree feedback analysis to

collect employees’ views of change and the impact on

their performance.


Resources

• Once you have identified your outcome and your

strategy, you need to consider resources are required to

carry out the change. Implementing change costs a lot

of time and money. So you will need to have a clear

understanding before embarking on it. The most

significant resource required for change management is

the impact on senior management’s time.


Resources

• This can easily dictate how and when you can start the

change program so the management is ready and

wholeheartedly behind it. For a successful execution,

consider the following:


• Impact on senior management’s time?

• Monetary resources are required?

• Impact on business objectives?

• Disrupted systems?

• Replacement equipment/man power/services?

• Information?

Resources


Skill Management

• If you are following aspects of Theory O described

earlier and intend to change the organizational culture,

you would need to focus mainly on training staff.

behaviors can be changed through training. Use a skill

matrix to identify areas that need improvement. Focus

your training on these areas and skills.


Skill Management

STEP 1: Define Skill Level


Skill

Rate Skill Level Definition Experience Knowledge Qualifications

1 Trainee Help others under

guidance and learn on

the job

No current direct

experience

Theory and

conceptual familiarity

Informal, self-thoughts

and introductory

2 Analyst Perform and execute

while under guidance

Limited experience.

Involvement in small

projects.

General knowledge Entry level

qualification

3 Senior Execute and perform

without the need for

guidance

Practical real-world

application

Applied knowledge.

Completed projects.

Advanced

qualifications

4 Expert Specialist knowledge

and can advise others

on related subjects

Extensive and

competitive practical

experience

Abundant and

judgemental

Qualified and can

teach others


Step 2: Develop a Skills Profile for Each

Employee

• Design a questionnaire or use in-house online systems

to capture employees’ competencies.

• What people think they know about themselves or

consider themselves experts in has a tremendous value

and can be used in all sorts of contexts to make

informed decisions.



Employee

• Of course this can also be used in conjunction with a 360

degrees review to create a good overall picture of an

individual’s abilities both from their point of view and

those of others.

• For each skill, ask the employees to rate themselves on

their skills from 1 to 4 using the skill matrix identified in

step 1.



Employee

• The skills identified can be a set of hard skills and a set

of soft skills. Some examples:

• Hard skills

– Ability to write a computer program in language X

– Ability to work with spread sheets

– Ability to operate the CNC machine

• Soft skills

– Ability to manage a small team

– Ability to chair a project meeting with clients

– Ability to handle customer phone calls



Employee

• With soft skills you may have to tone down on

qualifications (as many soft skills are not something that

you qualify for) and instead focus on people’s experience

and knowledge in that skill.



Employee

• Another important point is that people’s perception of

their own soft skills can sometimes be warped too

positively or they may not know they have a weakness in

a particular area. In addition to asking them to score

themselves on these skills, you should also carry out a

more sophisticated analysis to rate each employee on a

set of soft skills. For example you can measure their

emotional intelligence using industry standard analysis

tools to score them in various EI competences.


STEP 2: Develop a Skills Profile

Hard Skills Soft Skills

Person

Ability to

write a

computer

program

in

language

X

Ability to

work with

spread

sheets

Ability to

operate

the CNC

machine

Ability to

manage a

small

team

Ability to

chair a

project

meeting

with

clients

Ability to

handle

customer

phone

calls

John 3 4 1 2 1 3

Karen 1 1 1 1 2 4

Fiona 1 3 1 3 2 4

Tom 2 2 4 4 3 3

Jack 4 4 1 3 2 3 Management and Strategy Institute

Step 3: Identify Critical Skills

• Next, you need to identify skills that are critical to the

success of the organization. These skills must be

defined in line with the change process. Here are some

examples:


Step 3: Identify Critical Skills

• New skills because of change. To move to new machinery, you may require staff to have the new skill to operate it.

• New skills to increase efficiency. Suppose there have been customer complaints on handling phone calls. You think this is a critical skill and you want to train staff to be at skills level 3 or 4 on this.

• New transient skills for the change process. You may need specific skills required to go through the change. For example, as part of the change program you need to get staff to use the new contact management software. You will need to port the old contacts to the new system. For this, you will need an IT specialist who can carry out this one-time task. If you don’t want to hire a contractor to do this, you can consider training current IT staff on this specific transient skill.


Step 4: Analyze the Data to Generate

Conclusions

• Once you have created the table in Step 3, you should

identify the skill gap. For example, you may realize that

15 of employees have a skill level of 1 or 2 on the ability

to manage a project team meeting and therefore need

more training to become better at this skill.

• The results of this step should feed back to your general

change management strategy so the skills gaps you

identify here are consistent with the overall goal.


Step 4: Analyse the Data to Generate

Conclusions

Analyze Skill

Matrix

Identify Skill Gap

Identify Training Needs


Train or Acquire

• When you have identified that you have an skill gap in

your organization and want to embark on a change

program to fill the gap, you have generally two options;

you can train your current staff so they can become

skilled or you can recruit more experienced people from

the outside of the organization.

• Each solution has its own advantages and

disadvantages.


Training Current Staff

Employees know the organization

No induction necessary

The organization knows the employees

Can design effective tailored training

Employees know each other’s strengths

Already part of the network

Established loyalty

AD

VA

NTA

GE

S


Training Current Staff

Resistance to change

Some could be fixed on their old habits and resist change

Focused on old ideas

May lose the opportunity to get fresh new ideas D

ISA

DV

AN

TA

GE

S


Acquiring Staff

Require minimum training

Picked based on required skills

Bring fresh ideas

Can overcome resistance naturally

Can be catalysts

Can be role models

Can show how to move on

AD

VA

NTA

GE

S


Acquiring Staff

Can be expensive

Costly to find the right skills

Can lead to friction

Source of resentment

Need to settle in their new organization

Settling through change can be challenging Need 2/3 years to establish loyalty

Can leave when a crisis occurs

DIS

AD

VA

NTA

GE

S


Train or Acquire

• In practice you can also consider combining these two

approaches to get the best from both. Increasingly,

many organizations also consider using contractors

which can quickly give them specific skill set and an

ability to bring fresh people into the organizations. Since

there is no long term commitment, this allows employers

to manage staff smoothly once the change program is

completed.


Continue

• Please continue to the next lesson


how organizational change works -...

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