Organizational Change Chapter 2 PDF

Chapter 2: The nature of organizational change Types of change Grundy considered three ‘varie$es of change’: - Smooth incremental change: evolves slowly in a systema$c and predictable way (developed economies); - - Bumpy incremental change: characterized by periods of rela$ve calm, punctuated b...

Chapter 2: The nature of organizational change Types of change Grundy considered three ‘varie$es of change’: - Smooth incremental change: evolves slowly in a systema$c and predictable way (developed economies); - - Bumpy incremental change: characterized by periods of rela$ve calm, punctuated by accelera$on in the pace of change.  Triggers: both the environment and internal ini$a$ves such as the periodic restructuring that organiza$ons go through to improve eJciency.  Associated with the means by which organiza$ons achieve their goals, rather than as a change in the goals themselves. Disconnuous change: change which is marked by rapid shi>s in strategy, structure, or culture or in all three (e.g.: priva$za$on of previously publicly owned u$li$es).  Triggers: response to sudden and unpredictable high levels of environmental turbulence. Models of change Leaders then deepen the impact of change by persis$ng in the changes, not moving on to other ini$a$ves but rather constantly reinforcing exis$ng e:orts. We will now consider four approaches to theorizing about how major changes can be implemented. These are: 1. Clinical approach: organiza$onal development (OD) is an integrated framework of theories and prac$ces capable of solving or helping to solve most of the important problems confron$ng the human side of organiza$ons. 2. Linear approach: the linear paradigm re8ects the in8uence of Lewin’s three-stage model of change, which encompasses the following points: unfreezing, moving and refreezing. 3. Systems approach: to op$mize the social and technical sub-systems in work seLngs. 4. Emergent change: 1. Build-up stage (within which you need to appoint, nurture and encourage leaders who combine leadership quali$es alongside a willingness to acknowledge personal limita$ons). 2: breakthrough stage (during which the organiza$on needs to build a passion for its business, (products/services/capabili$es/technologies/technologies and people. The pace and scope of change Balogun and Hope Hailey iden$=ed change ‘paths, they go further by sugges$ng four types of change mapped on two dimensions: scope (incremental or big-bang), and scale (realignment or transforma$on). Organiza$onal change can also be mapped in terms of its pace (con$nuous or episodic) and its scope (convergent or radical) (Plowman) Each of the four categories of change di:ers on the following dimensions: - The driver of change, namely instability or iner$a; The form of the change, namely adapta$on or replacement; The nature of the change, namely emergent or intended; Types of feedback: nega$ve feedback discourages devia$ons from the organiza$on’s current; posi$on whereas posi$ve feedback encourages devia$on; 8 - Types of connec$ons in the system which are loose or $ght. The four quadrants portray four types of change (Plowman): 1. Connuous and convergent change -> happens slowly and which is channelled into improving systems and prac$ces. Change happens within an organiza$ons template; the template itself is not altered. 2. Episodic and convergent change -> occurs more quickly and perhaps as a result of a speci=c shock or crisis. Nega$ve feedback pushes minor changes and keeps the template in shape. 3. Episodic and radical change -> happens quickly in response to a major shock or crisis. The template is altered through, for instance, a new top management team or new strategy. 4. Connuous and radical change -> arises out of an accumula$on of small changes that gather momentum and lead to a new template being formed. If successful the new template becomes established and is reinforced by new rules, values, and norms. Fine-tuning to corporate transformaon Dunphy and Stace’s scale types 1 and 2 (illustra$on 2.2, p. 36) are typical of Grundy’s concept of smooth incremental change, while their scale types 3 and 4 are reminiscent of Grundy’s bumpy incremental and discon$nuous types of change respec$vely. De'ning the scale of change Scale type 1: =ne-tuning Organiza$onal change is an ongoing process characterized by =ne-tuning of the ‘=t’ or match between the organiza$on’s strategy, structure, people and processes. Scale type 2: incremental adjustment Organiza$onal change is characterized by incremental adjustments to a changing environment. Such change involves dis$nct modi=ca$ons to corporate business strategies, structures and management processes. 9 Scale type 3: modular transforma$on Organiza$onal change is characterized by major realignment of one or more departments/divisions where radical change is focused rather than on the organiza$on as a whole. Scale type 4: corporate transforma$on Organiza$onal change is corpora$onwide, characterized by radical shi>s in business strategy and revolu$onary changes throughout the whole organiza$on. Explaining types of change - - - - - Convergent -> this =ne-tuning of an exis$ng con=gura$on. The organiza$onal con=gura$on or template is not changed. Planned -> deliberate ac$ons designed to move an organiza$on or part of one from one state to another and having discrete beginning and end points. Change is seen as something that managers can control. Evolu$onary -> slow adapta$on of exis$ng systems or structures. Also termed con$nuous change. Although small in nature, changes are not trivial and are cumula$ve. They can trigger radical change. Revolu$onary -> fast-paced and a:ec$ng all or most of an organiza$on at the same $me. A planned move from one strategy and/or structure to another. It incorporates the idea of episodic change which is inten$onal but is infrequent, not con$nuous. Radical -> breaking away from a posi$on such that a very di:erent posi$on is reached. Organiza$ons or parts of them can be seen as being transformed from one template or blueprint to another. Also known as frame-bending or frame-breaking. Emergent -> if the organiza$on is seen as an evolving system then change arises out of experimenta$on and adapta$on. Change is seen as something that managers create the right climate for. Planned and emergent change Wilson (1992) cri$cises the idea that change can be planned logically and systema$cally. He argues that planned change is a management concept which relies heavily on a single view of the way change ought to be done. This view assumes that the environment is known and, therefore, that a logical process of environmental analysis can be harnesses in the service of planning any change. Quinn (1980) has also cri$cized the idea of planned change as something that is deliberately and carefully thought through and then implemented. His research into the decision-making processes of a number of organiza$ons demonstrated that most strategic decisions are made in spite of formal planning systems rather than because of them. Stacey (2011) summarizes the key points made by Quinn as follows: 1. E:ec$ve managers do not manage strategically in a piecemeal manner. They have a clear view of what they want to achieve and where they are trying to take the business. The des$na$on is thus intended. 2. But the route to that des$na$on, it strategy itself, is not intended from the start in any comprehensive way. E:ec$ve managers know that the environment they have to operate in is uncertain and ambiguous. They therefore sustain 8exibility by holding open the method of reaching the goal. 3. The strategy itself emerges from the interac$on between di:erent groupings of people in the organiza$on, di:erent groupings with di:erent amounts of power, di:erent requirements for and access to informa$on, di:erent $me spans and parochial interests. These di:erent 10 pressures are orchestrated by senior managers. The top is always reassessing, integra$ng and organizing. 4. The strategy emerges or evolves in small incremental, opportunis$c steps. But such evolu$on is not piecemeal or haphazard because of the agreed purpose and the role of top management in reassessing what is happening. It is this that provides the logic in the incremental ac$on. 5. The result is an organiza$on that is feeling its way towards a known goal, opportunis$cally learning as it goes. Quinn terms this process ‘logical incrementalism’ in that is based in a certain logic of thinking but is incremental in its ability in the light of new informa$on and the results of ongoing ac$on. Does change lead to more change? Beck and colleagues (2008) conceptualize change as ‘discrete modi=ca$on of structural organiza$onal elements’. A core assump$on is that experience of change leads to increased chances of further change; change today is more likely to lead to change tomorrow. Beck and colleagues iden$fy three common analysed change events: - Change of markets, e.g. =nding new groups of customers and/or new products/services Change of organiza$onal leadership Changes to rules and rou$nes that comprise the basic structure of organiza$ons The theory behind the ‘change leads to more change’ assump$on is that the more an organiza$on changes things the more it learns about how to do it successfully. People increase their competencies at making changes of par$cular type and raise their con=dence as well. Predictable change Greiner (The organiza$onal life cycle, 1972) maintains that, as organiza$ons mature and grow in size their ac$vi$es go through =ve phases, each of which is associated with a di:erent growth period in an organiza$on’s life. In addi$on, as each growth period moves into the next, the organiza$on goes through a shorterlived crisis period. Greiner’s model is useful for iden$fying an organiza$on’s situa$on and providing warning of the next crisis point it may have to face and helps in the planning of necessary change. It also helps to realize that change is, to some extent, inevitable; organiza$ons must of necessity change as they grow and mature. A typical life cycle pa*ern 1. The entrepreneurial stage -> the primary task is to provide a service or make a product. Survival is the key strategy. Organiza$onal culture is fashioned by the founding entrepreneur. 11 2. The collec$ve stage -> the organiza$on begins to take ‘shape’. Departments and func$ons begin to be de=ned and the division of labour is the dominant theme. The organiza$on has begun to establish its posi$on; internal tasks are allocated along with responsibility and autonomy to carry them out. 3. The formaliza$on stage -> systems of communica$on and control become more formal. There is a need to di:eren$ate between the tasks of management and the those of lowerlevel managers. Bureaucra$za$on occurs as systems of coordina$on and control emerge. 4. The elabora$on stage -> strategic change. The organiza$on may have reached a plateau in its growth curve and may even show the =rst stages of decline in performance. Managers have to learn new skills to achieve change. This stage may also include the rapid turnover and replacement of senior managers. Complexity theory Complexity theory is a set of ideas stemming from the study of natural systems such as weather paCerns and animal behaviour and which draws on mathema$cal principles to help explain how organiza$ons behave. The concepts of complexity and complicated are frequently thought to be iden$cal. Complicated systems, although o>en diJcult to understand, are ordered systems. By contrast, a complex system is disordered in the sense that it is unpredictable. Stacey iden$=ed three cornerstones of complexity theory: 1. Chaos theory -> chao$c systems are characterized by constant transforma$on analogous to the ways that species evolve. 12 2. Dissipa$ve structures -> these need energy and impetus from outside otherwise they reduce to next to nothing (dissipate). They can withstand large forces ac$ng on them or undergo radical self-reorganiza$on in response to small events. 3. Complex adap$ve structures -> these are made up of agents each of which conforms to its own principles that shape its behaviour in rela$on to other agents. Burnes proposes three implica$ons of applying complexity theory to organiza$ons: 1. There is a need to move beyond ‘narrow employee par$cipa$on in change’ towards much more democracy and equaliza$on of power. This gives employees the scope to act. 2. The extremes of incremental change and large-scale transforma$on are not realis$c and rarely work. Between the two extremes lies a con$nuous approach based on selforganiza$on to improving products and processes. 3. To fuel the con$nuous change ideal, self-organiza$on needs the presence of ‘order genera$ng rules’. These rules evolve and are part of the processes of self-organiza$on. Complexity theory is a set of ideas that acts as a metaphor for understanding how change happens and how it is sustained (Haynes, 2008, Murray, 2003). The metaphor gives managers new insights into how their organiza$ons work and how they can conceive change, and those who act to e:ect it, in a new way. Shadow system is the old network that employees had before the new organiza$on was formed s$ll existed, meaning that employees could, to a point, con$nue with their established working ways. The concept of a shadow system, which works to destabilize the legi$mate system and establish a di:erent organiza$onal equilibrium, is crucial to understanding organiza$onal change. This is par$cularly the case with transforma$onal or frame-breaking change including management’s aCempts to change organiza$onal strategies, structures and processes. The pping point of change Another complexity theory concept that helps us to understand the nature of change is the idea of a pping point (Boyatzis, 2006). Here events occur and are contained within a system which lead up to and culminate in a $pping point. Examples: the =nancial crisis and poli$cians, press and police were in a cozy rela$onship to the point that criminality was being overlooked. Diagnosing change situations The ability to diagnose change situa$ons is important if organiza$ons are going to have any chance of responding to and managing change successfully. However, diagnosing an organiza$onal situa$on is far from being an exact science, there are some tools and techniques that can help: - Greiner’s model of the organiza$onal life cycle -> useful for drawing aCen$on to periods when organiza$onal change is likely to be needed. Stakeholder, SWOT and PEST analysis -> can lead to planned change and can increase awareness of the need for con$nuous incremental change. Mul$ple-cause diagrams -> help understand the rela$onships among events leading to outcomes can lead to a beCer understanding of the interac$ons between the many di:erent and o>en simultaneous causes of change. Looking for breakpoints Strebel (1996a) uses the concept of the ‘evolu$onary cycle of compe$$ve behaviour’ (=gure 2.5, p. 53) to introduce the idea of ‘breakpoints’, that is those $mes when organiza$ons must change their 13 strategies in response to changes in compe$tor behaviour. The cycle of compe$$ve behaviour involves two main phases: 1. The innova$on phase when a new business opportunity is discovered. This triggers a breakpoint to introduce a phase in the evolu$onary cycle that causes a divergence in compe$tor behaviour as they aCempt to exploit new opportuni$es with innova$ve new o:erings. This phase corresponds to variety crea$on in the evolu$onary cycle. 2. Convergence phase. During this phase, the least eJcient leave the scene and only the =Cest survive. This is a phase of cost-cuLng and consolida$on un$l the returns from cost reduc$on decline and people see the advantage of looking for new business opportunity – bringing a new breakpoint with the cycle star$ng all over again. In summary, the compe$$ve cycle suggests that there are two basic types of breakpoint: - Divergent breakpoints associated with sharply increasing variety in the compe$$ve o:erings, resul$ng in more value for the customer. Convergent breakpoints associated with sharp improvements in the systems and processes used to deliver the o:erings, resul$ng in lower delivered cost. There are a number of issues associated with the iden$=ca$on of breakpoints. First, organiza$on need to have both formal (environmental scanning, benchmarking, data collec$on) and informal (open aLtudes on the part of managers and personnel, a degree of coopera$on between departments and divisions, culture suppor$ve of change and innova$on) systems turned in to searching for indicators in the environment. The Burke-Litwin model usefully draws together the array of variables that come into pay when a change is triggered. The model highlights how things 14 G are interconnected and illustrates the ‘ripple e+ect’, that is how change in one factor or variable extends throughout the organiza$on. Looking for breakpoints with leading indicators Convergence is usually easier to an$cipate because it is built on a situa$on that already exists. Typical indicators are shown below. When several of these are in place, all that is needed is a player or event to trigger a breakpoint: - Compe$tors -> when convergence is visible in increasingly similar products, service and image (no di:eren$a$on). Customers -> when the di:eren$a$on between o:erings looks increasingly ar$=cial to customers and the segmenta$on in the market starts breaking down. Distributors -> when the bargaining power in an industry shi>s downstream to distributors who play compe$tors against each other. Suppliers: when they cannot provide a source of compe$$ve advantage because everyone knows how to use their inputs. Divergence is more diJcult to an$cipate because it is based on a new o:ering that does not yet exist. However, if the following are in place the industry is ready for a new o:ering that breaks with the past: - Customers -> when an increasingly saturated market is accompanied by declining growth rates and restless customers. New entrants -> when restless customers are aCrac$ng new entrants. Compe$tors -> when declining returns may force them to experiment with new o:erings or look elsewhere for pro=ts. Suppliers -> when new resources and, especially, new technology are frequently the source of a divergent breakpoint. Distributors -> when they lag behind because they have to adapt to the new o:ering. Hard (di.cult) and so (messy) problems Some$mes, the signals that managers get are not clearly categorized as breakpoints; neither can they always be separated easily into issues concerned with compe$tors, customers, suppliers and distributors. These signals are frequently confused and di:use and it is not easy to see clearly just what type of situa$on prevails – the only thing manager perceive are ‘problems’. Paton and McCalman (2000) use the terms ‘hard’ and ‘so>’ to describe, respec$vely, these two types of problems. Another way of seeing situa$ons is as diJcul$es and messes (Acko:, 1993). Di.cules and messes DiJcul$es are bounded in that they: - Tend to be smaller-scale and are less serious in their implica$ons. Have clear priori$es as to what might need to be done. Generally, have quan$=able objec$ves and performance indicators. Have a systems/technical orienta$on. Generally, involve few people. Have facts that are known and which can contribute to the solu$on. Have agreement by the people involved on what cons$tutes the problem. Tend to have solu$ons of which the type at least is known. - Have known $mescales. Are ‘bounded’ in that they can be considered separately from the wider organiza$onal. context and have minimal interac$ons with the environment. Messes are unbounded in that they: - Tend to be larger-scale and have serious and worrying implica$ons for all concerned. Are an interrelated complex of problems that cannot be separated from their context. Have many people of di:erent persuasions and aLtudes involved in the problem. Have subjec$ve and at best semi-quan$=able objec$ves. Have an absence of knowledge of factors and uncertainty as to what needs to be known. Have liCle agreement on what cons$tutes the problem, let alone the solu$on. Have usually been around for some $me and will not be solved quickly. Have fuzzy $mescales. Are ‘unbounded’ in that they spread throughout the organiza$on and, some$mes, beyond. The change spectrum Asking a number of ques$ons about a change situa$on may help to iden$fy whether it is characterized by hard or so> complexity and whether it is more of a diJculty or more of a mess. Paton and McCalman (2000) have devised what they call the ‘TROPICS’ test to help locate a change situa$on on a con$nuum from hard to so>. The TROPICS test, as with any analysis of the problems according to the lists illustra$on 2.13, can only be a guide to the nature of the problem. 16