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Organisational Change

Chapter 1

Organisations and

Their Changing Environments

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Chapter 1 Objectives Describe the general characteristics of

organisations and their essential components; Say how different methods of wealth creation,

viewed from a historical perspective, have influenced present-day organisational strategies and focus;

Discuss the concept of organisations as systems operating in multi-dimensional environments and its implications for understanding the causes of organisational change;

Recognise that change can be triggered from any number of directions: through historical influences, from the external environment and from within the organisation itself - the internal environment.

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1. Views of Organisations

‘Organizations are social arrangements for the controlled performance of collective goals.’

(Huczynski & Buchanan, 1991: 7).

‘Organization: a group of people brought together for the purpose of achieving certain objectives. As the basic unit of an organization is the role rather than the person in it the organization is maintained in existence, sometimes over a long period of time, despite many changes of members.’

(Statt, 1991:102).

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The Meaning of Organisation (1)

A typical working definition of an organizationorganization might say it is:

A social entity that.

Has a purpose.

Has a boundary, so that some participants are considered inside while others are considered outside, and.

Patterns the activities of participants into a recognizable structure (Daft, 1989).

Source: Butler, R. (1991) Designing Organizations. A Decision-Making Perspective, London, Routledge, pp. 1-2.

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The Meaning of Organisation (2) Although organizations are real in their

consequences, both for their participants and for their environments,

they are essentially abstractions

Source: Butler, R. (1991) Designing Organizations. A Decision-Making Perspective, London, Routledge, pp. 1-2.

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The Meaning of Organisation (3)... the hospital, the firm, or the school ... have something real and physical about them but this is not the organization; People are doing tasks to which there is a pattern, raw materials are taken in, converted, and distributed to markets; Capital is provided by banks and other financial institutions; Systems provide information for decision making and co-ordination; People are talking about matters which do not necessarily appear to have anything to do with the job, some people remote from the physical plant, perhaps a continent away, are making decisions critical to our factory.’

Source: Butler, R. (1991) Designing Organizations. A Decision-Making Perspective, London, Routledge, pp. 1-2.

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THE ORGANISATION

Formal Sub-System

strategy goalsstructure operations

technology management

leadershipculture politics

conflict

co-operation

INPUTS * materials * resources

* organisational goal achievement * employee satisfaction OUTPUTS

The Organisation as an Open System

Informal Sub-System

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Other Views on Organisations (1) It is useful to conceive organisations as

OPEN SYSTEMS. Nevertheless, the concept of

organisations as systems has been criticised.

One contrasting view is that organisations are composed of individuals and groups with multiple, different interests (the social action view).

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Other Views on Organisations (2) Another contrasting view of

organisations relates to theories of modernism and post-modernism, and regards organisations as more unpredictable, fluid and chaotic than is implied in the systems diagram.

Yet another view stresses the complexity of organisations and the impossibility of establishing a single, ‘correct’ representation and understanding of an organisation.

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2. The Historical Context for Change

Organisations operate in multiple environments, of which the temporal environment is just as important as the current internal and external environments.

Goodman (1995) offers a reasoned framework for considering the influence of the past on the present and future.

An interesting question is the extent to which present-day organisations have moved into what Goodman calls ‘value-oriented time’.

Some regions of the world are only just entering the industrial age, so organisations operating in a global context will need to be aware of this.

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Three Historical ‘Ages’ (1) Agricultural Age – local markets,

subsistence level living, predictable cycles of activities.

Industrial Age – inventions lead to mass production; predictable cycles of supply and demand; mechanistic and hierarchical organisation; strong demand means that organisations operate in a seller’s market.

Neo-Industrial Age (also called ‘Post-Industrial Age’, ‘Services Age’ or ‘Information Age’) – enormous pace and scale of change; global competition; emphasis on the nurturing of human creativity, energy and foresight.

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Three Historical ‘Ages’ (2)

Different regions and countries are at different historical ‘ages’. China is moving from Agricultural/Industrial Age to Industrial/Information Age at breathtaking speed.

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The Move to ‘Value-oriented Time’

Entering the information age requires organisations to embrace value oriented time

This involves a constant emphasis on: Relationship marketing New product development Achieving differentiation through innovations of products,

of supply methods, and of marketing methods ‘Lean’ production Responsiveness to customer demand Product variety High quality Networking Ideas, intelligence, brainpower, ingenuity, creativity’ Complex problem solving Autonomous units Project focused teams; Cross-functional teams

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3. An Uncertain Future

The WINDS OF CHANGE are blowing at typhoon strength. (…All that is solid melts into air).

The idea that the future is extremely uncertain has become accepted wisdom for most organisations today.

‘The future is full of surprises, uncertainty, trends and trend breaks, irrationality and rationality, …the results of innumerable… forces’.

Issues of creativity and innovation are uppermost in many managers’ minds as they strive to keep their organisation at the forefront of their industry and the market.

Consequently, it is important that managers and others remain constantly alert to the changes in their current environments and to anticipating changes in the future.

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Organisations As Symphony Orchestras

Peter Drucker had the idea that organisations of the future are modelled on as symphony orchestras.

In a symphony orchestra, over 100 individuals may perform together on stage, but there is only one manager – the conductor.

There are no vice-conductors or assistant conductors.

Each player is a highly-trained specialist. They play directly to the conductor, with no

intermediaries. The idea is contentious but serves as a debating

point.

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4. Environmental Triggers of Change

The environment is:

‘All factors, including institutions, groups, individuals, events, etc., That are outside the organisation…but that have a potential impact.’

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Some Elements in an Organisation’s Environment

Markets, clients, customers Suppliers Government, regulatory bodies Trade unions Competitors Financial institutions Labour supply Levels of unemployment Economic climate Technological, computing, info systems, e-commerce, internet

advances Globalisation of trade Political ideology Family structure Distribution of wealth

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External Environments (a)

The use of the mnemonics PETS, or PEST, or STEP draws attention to the multiple facets of the external environment.

The speed at which the internet has come to be used in almost every type of organisation (as well as the ones which are built entirely upon its capacities) is a clear example of the influence of the TECHNOLOGICAL ENVIRONMENT.

Another example of the impact of this sector on organisational life is the threat to employee rights of using surveillance monitoring of emails and internet use, and the advent of sexual harassment via the sending of unsolicited pornographic emails.

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External Environments (b)

The POLITICAL ENVIRONMENT is constantly changing.

Governments change and new alliances are formed with old ones broken.

With the advent of the European Union and the Common European Currency, no longer do individual countries have sole power over what laws apply and even what economic policies they might pursue.

Groups such as the ASEAN-4 Group form significant trading blocs which must catch the attention of organisations trading worldwide.

The attack upon the World Trade Center Building and the Pentagon, is an example of an event, whose influence will continue to be felt in a multitude of ways for many years hence.

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External Environments (c)

The ECONOMIC ENVIRONMENT has always been of the utmost importance in forcing organisations to second guess what competitors might do and the changing needs and desires of actual and potential customers.

Intertwined with all these aspects of the external environment, as they are with each other, is the SOCIO-CULTURAL ENVIRONMENT.

Demographic changes, changes in living, working and leisure pursuits impact upon people’s needs and wants and the capacity of organisations to change to meet them.

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Some Elements in an Organisation’s Environment

Overall points: The various aspects of the PETS environment are

interrelated (e.g. socio-cultural factors will influence economic factors and vice-versa).

Some factors can be categorised in more than one sector.

Few ‘triggers’ for change emerging from the external environments can be responded to without taking other factors into account.

Any force for change has multiple and complex causes.

Organisations which ignore this deep complexity are unlikely to prosper.

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Internal Triggers for Change

Internal triggers can often be seen as changes in response to influences in the organization’s environment. Examples include:

Formation or disbandment of a labour union inside the company

Appointment of a new CEO or other top executive Changing the administrative structures Job redesign affecting many employees Factory redesign or office layout New IT equipment New marketing strategy Outsourcing Layoffs More resources to research and development

department

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Summary So Far The multiple environments of organisations

– The temporal environmentHistorical developments bringing change over

time to an industry and pointing to the need for brainpower and knowledge

– The external environmentPETS, or PEST, or STEP

– The internal environmentOrganisational changes that are often first-line

responses to changes in the temporal and external environments

5. Organisational Responses to Change

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– Agricultural Age(tradition, rhythms of nature)

– Industrial Age(bureaucracy, mechanisation, ‘Fordism’,

assembly-line)

– Neo-Industrial Age or Post-Industrial Age(services, information, knowledge-based

products, etc)

Reminder

The temporal environment

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Winds of Change Blow Through the Organisation

Organisations can be seen as systems operating in multidimensional environments.

For some organisations, the winds of change are strong, gusty, variable, swirling.

The next slide may not fully represent the possible turbulence in the external, temporal and internal environments.

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THE ORGANISATION

Formal Sub-System

management

goals strategy

structure operations

technology

leadership culture politics

Informal Sub-SystemInformal Sub-System

political-legal

influences

economic influences

socio-cultural influences

technological influences INTERNAL ENVIRONMENT

EXTERNAL ENVIRONMENTEXTERNAL ENVIRONMENT

The organisational system operating in multidimensional environments

ecological influences

TEMPORAL ENVIRONMENT

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Responding to Levels of Environmental Turbulence

It has been claimed (Ansoff & McDonnell) that the degree of aggressiveness and responsiveness of an organisation should match the level of turbulence of the organisation’s environment

The greater the level of turbulence, the stronger the forces are for change

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Levels of Environmental Turbulence

Level 1. Predictable. Stable markets. Pace of change is slow. Future will be like the past.

Level 2. Some complexity, but the environment is Forecastable by extrapolation.

Level 3. More complexity, but at least there are predictable threats and opportunities.

Level 4. Complexity is further increased by the winds of global and social-political changes, but nonetheless there are partially predictable opportunities.

Level 5. Unpredictable surprises. Unexpected events and situations occur more frequently that the organisation can respond to them.

Amount of Aggressiveness & responsiveness required

STRONG FORCES FOR CHANGE

WEAK FORCES FOR CHANGE

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Types of Change Situation

Closed change. When explaining this type of change, people involved in it would readily be able to agree on, and describe, what happened, why it happened, what the consequences were, and how the business has been affected.

Contained change. When explaining this type of change, people involved in it would only be able to say what probably happened, what the probable causes, consequences and business implications may be.

Open-ended change. When explaining this type of change, people involved in it would have different and possibly conflicting accounts and explanations of what happened, why it happened, and what its consequences and implications are.

Degree of Certainty

FAR FROM CERTAINTY

CLOSE TO CERTAINTY

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The multiple causes of the situation faced by Shell

Renewed criticism of Shell’s role in Nigeria

Successful experience in discovering oil in similar geological conditions in the USA

Shell’s new discovery

Demands for Shell towithdraw from Nigeria

International criticism of Shell’s role in Nigeria

Boycott of Shell petrol

Execution of Ogoni leader

Clashes between the government and the Ogoni people

Shell looks for alternative offshore possibilities in Nigeria

Shell’s failure to keep up new discoveries

Importance of oil industry to Nigeria

Nigerian government’s wish to exploit its natural resources

Little benefit from oil money in nearby communities

Resentment and direct confrontation with Shell

Shell as largest foreign oil producer in Nigeria (mostly onshore production)

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Organisations operate in multiple environments

The key tasks for organisations is to achieve external adaptation and internal integration

Organisations need to be ‘quick on their feet’ to anticipate opportunities ands threats and respond wisely to unpredictable surprises

This requires understanding how the formal organisational subsystem responds to the external, internal and temporal environments

It also requires understanding the informal subsystem

Conclusions