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Unit 1

Organizational Change Management

Structure
1.1 Introduction
Objectives
1.2 Understanding Organizational Transformation
Transactional vs. Transformational Organization
Types of Transformation
Phases of Transformation

1.3 Transformation Strategies


1.4 Process of Organizational Transformation
1.5 Nature of Organizational Change
Factors Leading to Organizational Change

1.6
1.7
1.8
1.9
1.10
1.11

Perspectives of Organizational Change


Summary
Glossary
Terminal Questions
Answers
Case Study

Caselet
Training in Cross-cultural Understanding for Working with Indian Teams
A US-based Fortune 500 apparel manufacturing company was to begin
engagement with an IT service provider for its business operations in India.
The company has a long standing reputation of employee satisfaction, so it
was eager that the transition of its staff to India would be smooth. It needed
an orientation program to familiarize itself with the cross-cultural environment
and a close interaction with vendors in India. For this purpose, the company
got in touch with Change Management Consulting and Training (CMCT), a
business training and consulting firm. The brief to CMCT was to develop
and deliver an awareness program for its staff that was new to working in a
multicultural business setup.
CMCT counseled that the senior managers of the company take the Working
with India training first. They argued that by doing so they would be in a
better position to appreciate the cross cultural nuances and adaptive skills
of their direct reports engaged in India operations. The training session was
organized at the companys headquarters and was attended by senior
managers and also by the representative of the Indian IT service provider.

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Keeping in mind the impact the new outsourcing relationship would have on
various teams in different US cities, this training was extended to them as
well. The CMCT suggested some concrete points on how to integrate cross
cultural awareness into the operational management for the outsourcing
teams. As a result, by taking pre-emptive measures, this company was
able to avoid the usual bottlenecks and snares, which affect the US
companies at the very outset when doing business with their outsourcing
partners in India. Thus, they not only had a head start, but were able to
avoid transition stress for their staff.
Source: Adapted from http://www.cmct.net/case_18.html/9/11/12 (retrieved
on 22 November 2012)

1.1 Introduction
Change is a phenomenon that pushes us out of our comfort zone. It is for the
better or for the worse, depending on how it is viewed. Change has an adjustment
time line that varies from person to person. Change has a negative effect on
those who do not want to let go. Being flexible is the key. For instance, a roller
coaster ride can symbolically be indicative of changeit can be fun if you know
when to lean and create balance. Change is not related to the mantra just hang
in there, but the mantra you can make it. It is not associated with worrying.
Change spurs you to achieve your best. It will help you to learn. Change is
inevitable. It is the managements duty to see that change is managed properly.
Organizations must keep a watch on the environment and incorporate suitable
changes that the situation may demand. Change is a continuous phenomenon.
Organizations must be proactive in effecting change. Even in the most stable
organizations, change is necessary just to maintain a certain level of stability.
The major environmental forces that make change necessary are technology,
market forces and socio-economic factors. Resistance to change is counterproductive for growth and destructive in nature; it is, therefore, undesirable.
Hence, managers must evolve policies to effect change. According to Barney
and Griffin, the primary reason cited for organizational problems is the failure by
managers to properly anticipate or respond to forces for change.
Change management means implementing significant change in an
organized and systematic manner. The main objectives of change management
are:
to ensure that the people and culture are aligned with strategic shifts in
the organization.
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to reduce impediments to change and increase engagement so that the


transformation is more effective
The first step towards achieving sustainable change is to have a
comprehensive understanding of the current state of the organization. The
second, and equally important step, is the implementation of relevant and focused
strategies. Thirdly, the setup needs to be well understood by the people who
work in the organization.
An effective change management strategy gives desired outcomes, leads
to a sense of ownership among employees, enables sustained and measurable
improvement, and prepares everyone for possible future changes.

Objectives
After studying this unit, you should be able to:
explain how organizations manage transformation
discuss the strategies and the process of organizational transformation
describe the nature and perspectives of organizational change

1.2 Understanding Organizational Transformation


The term organizational transformation refers to such activities as reengineering,
redesigning and redefining business systems. The key enablers for transforming
organizations are information and technology.
In the rapidly changing financial environment, business models change
rapidly. Mergers and acquisitions change the very face of the organization.
Therefore, organizations need to continually:
(i) be flexible, effective and efficient
(ii) have a customer-centric approach to organizational activities
(iii) create a more productive environment by recognition of current strengths
(iv) understand and position themselves to reap the benefits of competitive
technology and business alignments
(v) promote an integrated business approach
A radical change which takes an organization to a new and different level
of structure and functioning is called organizational transformation. It occurs
when new business strategies are introduced and implemented.

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Organizational transformation signifies a change that challenges the way


an individual thinks, perceives and feels about the organization; his deep-rooted
convictions and work ethic. This type of transformation goes beyond changing
the manner in which business is done. It is about changing the work culture and
value system of an organization. A well-led and well-orchestrated change strategy
and transition plan leads to organizational transformation. There has to be a
deep seated adoption of the changes and the associated values, principles and/
or processes. Restructuring and rearrangement changes the way business is
done and results in a marked change in organizational culture and reinforces a
process of continuous improvement. Unlike a turnaround (which implies
incremental progress on the same plane) transformation implies a basic change
of character and little or no resemblance with the past configuration or structure.
Deregulation and improvement in the licensing procedures, for instance,
have pushed organizations in the financial services, the telecommunications,
and the airline industry to rethink business strategies and reshape their
operations. Public demand for value for money and lowered deficits has forced
public sector companies to get their operations more streamlined so that they
deliver more for less. The rapid technological advancement has rendered several
organizational practices obsolete, forcing the firms to innovate or perish. The
change therefore, fundamentally alters the qualitative nature of the organization.

1.2.1 Transactional vs. Transformational Organization


There are two types of changes that occur in an organization transactional
and transformational. Transactional, which is also called the first order change,
is related with continuity in the organization. It is not related with the strategic
changes that takes place in the organization. Transformational change or the
second order change is discontinuous in nature and is related with altering the
organization from its core.
The first-order change may involve adjustments in systems, processes,
or structures, but it does not involve fundamental change in strategy, core values,
or corporate identity. First order changes do not amend the basic fibre of the
organization. The examples of first-order change could include creating new
report formats, new methods of collecting old data and refining the existing
processes and procedures.
The second-order change is of a bigger magnitude. It entails a change in
the system itself. This type of change is usually the result of a strategic overhaul
of the system or even a severe crisis, which may threaten the very survival of

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the system. Second-order change leads to a complete redefinition or


reconceptualization of the organization and the way business is to be conducted
in future.
In short, these two orders of change present contrasting features: the first
merely improves the existing module and the second completely alters the basic
module. Golembiewski, Billingsley, and Yeager subsequently introduced a third
level of change, defined as middle-order change lying between the extremes of
first- and second-order change. Middle-order change represents a compromise;
the magnitude of change is greater than first-order change, yet it neither affects
the critical success factors nor is it strategic in nature.
When these two orders are evaluated for their respective scales of change,
the first order change is seen as relatively small in scale, incremental, and
adaptive, while second order change is seen as large scale and disruptive at a
business or organization level.

1.2.2 Types of Transformation


There are three types of transformation:
(a) Improved operations: To achieve efficiency by reducing costs and
reducing development time and at the same time improving quality of
products and services.
(b) Strategic transformation: To regain or attain a sustainable competitive
edge over competition by redefining business objectives, establishing new
strengths and harnessing these capabilities to meet market opportunities.
(c) Corporate self-renewal: To anticipate and adapt to change such that a
strategic and operational gap does not develop.
Certain types of changes can be initiated to improve operations, and to affect
desirable behaviour of members. These are:
Strategic change: A change that changes the very mission of the organization
is called strategic change. It may also mean that multiple missions are integrated
into a single mission. For instance, if a British company acquires an American
company of considerable size, the culture of the British organization may need
to change in order to integrate the sensitivities of the American culture into a
British organizational setup.
Structural change: Of late, organizations are steadily moving towards more
decentralized decision-making and a more participative management style. A
direct outcome of this structural change is the shift in authority and responsibility

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to lower levels of management. This has a significant impact on the organizations


social climate wherein members across the board need to acquire skills to make
on-the-spot decisions.
Process-oriented change: These are changes that could lead to efficiencies
and are achieved through replacing or retraining personnel, reducing investment
in heavy capital equipment, and amending operational structure. These changes
can be achieved through improvement in technology, information processing,
automation and use of robotics in the manufacturing operations. These processoriented changes would affect the organizational culture and lead to changes in
the behaviour of staff.
People oriented change: While any organizational change has a direct impact
on the people, it is important that the behaviour and attitude of employees are
aligned with the organizations goals, mission and values. People-oriented
changes are focused on performance improvement, team work and
commitment to the organization. These traits can be developed through better
employee engagement as well as training and development sessions.

1.2.3 Phases of Transformation


The transformation process goes through essentially five phases:
1. Dilemma: This phase is the turning point and the motivating factor for
change. One arrives at this phase either because they have an internal
motivation for change, or external circumstances force them into a serious
dilemma. Knowing this factor is very important because each will have a
different probability for achieving a successful outcome.
2. Clarity: This is the phase where most individuals will stay for extended
periods feeling very frustrated and confused. However, with proper help,
the time that one spends in this phase will be minimized.
3. Discovery: This is the focus of the success formula with relevance to
organizational requirement, its principles and business requirements.
4. Solution: This is the phase where most people rush to first in their attempt
to achieve more. That is precisely why most attempts at change fail.
Individuals and organizations will have to participate in some form of
learning to make the transformation sustainable.
5. Success: The individual or organization has achieved a successful
transformation.

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Self Assessment Questions


1. Transactional or the first-order change do not affect the basic fibre of the
organization. (True/False)
2. Choose the best option:
Golembiewski, Billingsley, and Yeager introduced the ___________.
(a) first order change.
(b) second order change.
(c) middle-order change.
3. __________ change is also called the second order change.
4. The first order change completely alters the basic module. (True/False)
5. Strategic change alters the very ___________ of the organization.
6. People-oriented changes are focused on performance improvement, team
work and commitment to the organization. (True/False)

1.3 Transformation Strategies


There are various strategies to manage transformation in organizations. These
are:
Transformation through values
As the business environment changes, values provide the guiding force for
organizations. Values are a collection of ethics or ideals. Just as for an individual
values provide a purpose and meaning to life, similarly for an organization, values
form the basis for work ethic. Organizations must define values that are:
(i) aligned with societal values
(ii) are not driven by basic human urges
(iii) in line with their main purpose and operating context
(iv) open to the changing world order
Transformation through organization development
Neither individuals nor organizations are prepared for the rapid pace of change.
Organization Development, therefore, is a way to stay prepared. It rests on 3
basic propositions:

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(i) Organizational change is driven by the era in which it is taking place. So


organizations need to adapt, revitalize and rebuild based on the changing
environment.
(ii) The climate within the organization must change for overall change to
take place.
(iii) Individuals within the organization must be aware of the societal and
environmental changes happening around them.
Hence, the key message of Organization Development is that the world is
changing rapidly and organizations need to adapt accordingly.
Transformation through reengineering
Reengineering is the process of reinventing which challenges the very core of
the operations. It seeks to improve the way of doing business by establishing a
new and better way of functioning.
Transformation through McKinseys plan
The McKinsey plan is a ten-point guideline:
(i) Organize primarily around processes, not tasks.
(ii) Flatten the hierarchy by minimizing subdivisions.
(iii) Make senior management responsible for processes and process
performance.
(iv) Align key performance indicators and their evaluation to customer
satisfaction.
(v) The organizations performance and design should focus on teams, not
individuals.
(vi) Frequently combine managerial and non-managerial activities.
(vii) Work towards developing multiple competencies in individuals.
(viii) Communicate and train staff on a just-in-time, and need-to-perform basis.
(ix) Enhance contact across the organization with suppliers and customers.
(x) Dont just reward individual performance. Extend the reward process to
cover individual skill development and team performance as well.
Transformation through competitive benchmarking
Competitive benchmarking is an ongoing process wherein the organizations
products, services and practices are measured against industry leaders and
key competitors.
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Transformation through Six Sigma


Six Sigma is a statistical parameter that is used to describe variation from set
standards. It could be expressed, for example, as 35,000 defects per million
operations or not more than 3 defects per million. It is sharply focused on
achieving tangible results within aspects that are relevant to the business. It is
usually driven by trained employees from various sectors within the organization.
Transformation through Kaizen principle
Kaizen principle involves change through continuous improvement by taking
small, comfortable steps. It focuses on overcoming fear and resistance to change
and taking action. This principle can be further explained through the following
points:
(i) Small improvement
(ii) Conventional knowledge
(iii) Personal involvement
(iv) Many people
(v) Improve the process
(vi) Standardise- Do-Check-Act to Plan-Do-Check-Act

Self Assessment Questions


7. The key technological enablers for transforming organizations are
_______and __________.
8. Corporate self-renewal is the ability of an organization to anticipate and
adapt to change so that a strategic and operational gap does not develop.
(True/False)
9. __________ principle involves change through continuous improvement
by taking small, comfortable steps.

1.4 Process of Organizational Transformation


Organizational transformation should start from the top management level, i.e.
from those who are in charge of leading the business. The process provides a
roadmap for mobilizing the entire organization in support of the transformation.
It is important to realize that business transformation is a continuous process,
and does not provide a miraculous cure to problems. It involves a step-by-step
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approach. There is no one end point, yet every step taken is a lifesaver for the
organization:
Step 1
Mobilize Executive Leadership

Step 2
Translate Strategy into Tangible Terms

Step 3
Align Business and Support Units
Step 4
Motivate
Rewarding Performance
Strive forby
Perfectionrepeat
the 5 step strategic process
Step 5
Strive for Perfectionrepeat the 5-step strategic process

Figure 1.1 Stepswise Process of Organization Transformation

Step 1: Mobilize executive leadership


Organizational change begins with the change at the top. Once the new
management team is in place, its first task is to redefine the organizations
priorities and strategy in the context of the current business environment. Often,
the strategy revolves around financial objectives, such as return on equity or
capital. However, a financial goal alone may not suffice. This requires an
understanding of the trade dynamics, improvement in the infrastructure and
simplifying the processes so that business becomes more agile. It also means
that everyone is encouraged to think out of the box and give creative inputs to
drive the company ahead.
Step 2: Translate strategy into tangible terms
The next step is to devise a strategy a plan of action. The plan of action is to
be then communicated to employees who will be involved in its implementation.
This may be done through a balanced scorecard that highlights the four key
perspectives of the strategy:
Financial perspective: Key financial objectives that will satisfy the
shareholders
Customer perspective: Customer expectations required to achieve the
financial objectives
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Internal process perspective: Processes crucial in achieving shareholder


and customer satisfaction
Infrastructure perspective: Infrastructure additions required to improve and
enhance the critical processes
Typically, the financial and customer perspectives are established by the
senior management whereas the internal process and infrastructure perspectives
are carried out at middle and junior management levels.
Step 3: Align business and support units
After identifying the systems and processes that are crucial for business growth,
the next step is to assign metrics, or Performance Indicators (PIs), to measure
the output of each core process. For instance, in a manufacturing operation, the
main activities include research and development, marketing and sales,
manufacturing, and purchasing. Each of these activities needs to generate a
certain output which can be measured by appropriate PIs (e.g. number of units
produced, within a particular time period).
The same approach can be applied to service companies, such as
hospitals, banks, hotels, etc. Although the service outputs of these companies
will be less tangible, they must be measured in order to assess if the organization
is achieving optimal service levels.
In any case, it is critical that the infrastructure and processes are aligned
with the strategy. This can be done by identifying and monitoring the metrics
(PIs), which support the organizations strategic goals.
Step 4: Motivate teams for effective implementation: link and reward
performance
The people component is the most important step. The entire senior
managementfrom the CEO and the executive team, to mid-managers and
project driversshould convey the overall strategy of the company and its key
objectives in a manner that is understood and empowers the workforce. This
goes beyond merely managing others performances. It requires them to guide
the team members through the activities and projects that will help meet the
goals of the organization effectively, while carrying on with day-to-day operations.
This tests the full range of leadership skills, including the ability to take action,
provide direction, identifying weaknesses, eliminating bottlenecks and motivating
others to achieve individual and collective success. Appropriate resources should
be used for training and developing work-related skills. It will not be enough to

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train a few employees and then expect them to make a bottom-up change. The
training for development should get support from the top management so that it
flows throughout the organization.
Step 5: Strive for perfectionrepeat the 5-step strategic process
The final stage of this transformation is to establish a mindset of striving for
perfection in every section of the organization. The employees should see this
as a continuous process of perfection rather than a one-time activity. The most
important and perhaps also the most difficult thing to do is to get started to
take the first step towards perfection. A strong momentum will motivate change.
The employees would realize how their contributions can make a difference.
The management too would begin to see the positive effect of this significant
contribution. At the end of each of these five-steps, the organization will become
healthier and more stable.

Self Assessment Questions


10. Organizational change begins with the change at the__________.
11. The third step is translate strategy into tangible terms. (True/False)

1.5 Nature of Organizational Change


The only thing constant is change. Change is inevitable and imperative. This
fact governs business as it does other aspects of life. Organizations have to
constantly change or they would become unstable and inefficient, putting a
question mark on their long-term survival. Certain events or situations cause
organizations to change, either in a negative or a positive way. In this context,
therefore, it is important to note the following points:
(i) Organizational change takes place because of internal and external forces.
The internal forces may create instant change, whereas the external forces
may result in a gradual change.
(ii) The effect of change in any one part of the organization creates fundamental
changes in rest of the organization, steadily and eventually.
(iii) The effect of change in various sections of the organization takes place in
varying degrees and rate.

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1.5.1 Factors Leading to Organizational Change


Organizations have to respond to changes in order to grow, to remain competitive,
and be profitable. The process of change is always initiated from the top level
management. It pervades and integrates with the entire organization. For change
process to be successful, the whole plan of change should be tailored to the
current situation in terms of people and processes and the expectations from
them.
There can be many reasons for organizational change, such as
introduction of new technology; restructuring and reengineering; mergers,
acquisitions and alliances; diversification of the business, etc.
Although it is difficult to compile a list of factors that lead to organizational
change, the following internal and external environmental factors can encourage
these changes:
The external environment is affected by political, social, technological,
economic, legal, international and labour market environment
The internal environment is affected by the organizations management
policies and styles, systems, and procedures, as well as employee
attitudes.
External forces
External environment affects the organizations both directly and indirectly. The
organizations have no control over the variables in such an environment.
Therefore they must change themselves to align with the environment.
The external forces that impact change arise from either the general
environment or from the task environment. The key factors in the general
environment are economic, political, legal, socio-cultural and technological.
Organizations need to remain alert to any changes in the direction and momentum
of these forces. For example, when due to the oil crisis, people started buying
small fuel-efficient cars from Japan, the American automobile manufacturers
who were accustomed to producing large luxury cars, spent billions of dollars in
the mid 1970s in retooling the new machinery to build smaller cars. Similarly,
changes in laws pertaining to management of air pollution or chemical waste
dumping, rate of inflation, disposable money supply and rate of unemployment
set off change in organizations. Social changes such as changes in the trends
of clothing, or introduction of laptop or notebook computers made many
companies large and successful while at the same time destroyed several others
who were slow or unwilling to adapt to the change.
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Task related environmentcustomers, competitors, suppliers, labour, and


stockholders tend to directly influence the health of the organization. For
instance, it is common for organizations to change pricing strategies and product
lines as a result of competition. Intense competition in commercial aviation
regarding pricing has lead to many companies going out of business. Similarly,
stockholders can influence organizations because they can take action against
the board of directors if they feel that the board is not acting in their best interests.
It is well-known that customers change loyalties often for better quality and service.
Accordingly, organizations cannot rest on their laurels and have to evolve
constantly and make quick changes to adapt to their changed environment.
Internal forces
It is not just external factors which effect change but also certain internal factors
that may cause changes in an organization. Primarily, such changes are often
caused by a change in the management personnel and inadequacy in the existing
organizational practices. But sometimes the shareholders, board of directors
or employees can become agents for change and affect the philosophy, strategy,
decisions and other organizational activities.
Internal forces for change could be reactive as well as proactive. Reactive
because it could be in response to outside forces and proactive because it
could be induced by the management in anticipation of a different and beneficial
internal environment. Shifts in socio-cultural values in the workforce may therefore
require changes in the corporate culture and structure. A company may introduce
flexitime for its employees or provide day care facilities for the children of working
mothers as workers are becoming more educated, less conservative and more
women are joining the workforce. Corporations previously dominated by men
with a strict code of dress, and code of conduct must make the necessary
changes to accommodate these demographic shifts.
When change is brought about as a result of internal forces in order to
effectively match the imagined and possible organizational environment, it is
referred to as planned change. This change is purposely planned and
implemented to meet the anticipated threats and opportunities, so that there are
fewer surprises and companies can remain competitive in the environmental
dynamics. In 1987, the top management of Manufacturer Hanover Trust, a large
bank, made some basic policy changes in anticipation of the banking practices
of the future. The power structure was decentralized and the compensation
system for managers was altered so that it was more closely tied to performance.

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When a change is brought about as a reaction to particular problems that


emerge, the change is known as reactive change. Some problems may be so
serious that it may not give the management enough time to analyse the situation
correctly and respond in an effective manner. For example, the Indian
governments recent decision to introduce Foreign Direct Investment (FDI) in
the multi brand retail sector took many companies off guard. They are revising
their strategy in order to survive in the business. But it was welcomed by those
who long anticipated it and were already prepared for it.
Activity 1
Find out about any one organization which has been recently acquired by
another. What internal changes took place as a result of the change in
management of the acquired company?

Self Assessment Questions


12. The four key perspectives of strategy are financial, customer, internal
process and motivational. (True/False)
13. The changes in the internal environment can come from _______________,
board of directors or employees.

1.6 Perspectives of Organizational Change


Organizational change has been studied from multiple perspectives at micro
and macro levels. It is one of the many perennial issues in organization and
management theory. We can broadly study them under seven main perspectives.
These are:
1. Environment
2. Contingency
3. Resource-dependency
4. Population-ecology
5. Institutional
6. Evolutionary
7. Adaptive

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1. Environment-dependent perspectives
According to this perspective, organizational change is a function of external
environment and acts as a link between an organizations internal practice and
procedures with the external world.
2. Contingency perspective
The contingency perspective focuses on the changes related to the structure of
the organization. The structure has two main dimensions specialization and
integration. The structure breaks down the complex tasks in the organization
into individual activities and integrates these separate activities to achieve its
purpose. Specialization is division of labour. In organizations, there are usually
horizontal and vertical divisions of labour. Specialization brings efficiency in the
organization.
Integration refers to the various ways and means of coordinating the work
of individuals in the organization. It can be achieved through direct supervision,
systems, and goals, plans and targets, rules and procedures. Such coordination
brings uniformity and standardization in organizational activities. Coordination
helps in enhancing quality and productivity of the organization and makes it more
effective.
Contingency perspective has been criticized on the lines that it takes into
consideration one or two variables at a time, such as environment and structure,
size and structure etc. In recent years, configurational approach has been
advanced in order to deal with such criticism, wherein the contingency variables
are clustered together. These clusters, known as configurations, are jointly dealt
with, when deciding upon an appropriate structure.
3. Resource-dependent perspective
As per this perspective, external stakeholders have control over the organization.
The external stakeholders prominence in controlling the organization can be
revealed by looking into the power structure at the highest level. The evidence of
resource dependence is reflected in management control, resource allocation,
regulation, fund raising and so on. The groups and organizations in the
environment that have control over its resources take control and the dependency
on these is high. This, in return, increases the vulnerability as well as the
uncertainty within the organization.
4. Population-ecology perspective
The population perspective advocates studying the population of a multitude of
organizations instead of focusing on only one.
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Population refers to organizations in a particular sector that occupies an


ecological niche in the environment where there are multiple niches. These
multiple niches provide resources for the organization. In order to survive in
their niches, organizations keep developing distinctive capabilities, skills, patterns
of behaviour and management systems suited only for their specific niches. In
case they fail to develop their distinctive capabilities, they do not get the required
resources from the population and, therefore, fail to survive. Correspondingly,
certain new organizations are born, creating their niche, thereby, affecting the
population.
Population-ecology perspective has been criticized on the grounds that it
does not deal with the role of managers in organizational change or in adaptation
to environment. Too many players in the same niche can lead to fierce
competition and low margins thereby depleting the resources of an organization
in a niche and making its survival difficult.
5. Institutional perspective
The institutional perspective focuses on the social norms, values and culture of
the environment in which the organizations operate rather than on the markets
and the competitors.
These are also called symbolic elements that often affect the strategies
and the structure of an organization to attain conformity. Since legitimacy is
always sought after, organizations often work on their strategies and structure
so as to conform to the lawful norms and standards constituting the institutional
environment. Such conformity allows access and availability of the necessary
resources.
6. Evolutionary perspective
Organizational theorists and researchers view evolution as a process of
successive differentiation and integration. Broadly, there exist three different
organizational evolution frameworks:
(i) Ecological model, which emphasize change across populations of
organizations as the result of net mortality driven by processes of
environmental selection.
(ii) Adaptation models, which emphasises incremental change and moving
equilibrium, since more effective organizations adapt to environmental
threats and opportunities.

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(iii) Transformational models, which emphasize metamorphic changes in


organizations.
7. Adaptation perspective
In the recent organizational change literature, adaptation perspective has held a
dominant position. This perspective emphasizes voluntarism and views the
phenomenon of organizational change as occurring in the following way:
Scan for the relevant organizational environment
Formulate strategic responses to environmental change
Attempt to adapt to changing environmental contexts in order to ensure
organizational survival
Adaptation perspective implicitly assumes that the organization is a learning
organizationit learns what its environment is, and which organizational design
feature would work best in it.
The adaptation perspective includes variations of contingency, resource
dependence, organizational strategy, institutionalization and organizational
learning theory. Theorists believe that organizational effectiveness and survival
depends on how adaptive and flexible the structural arrangements are. Park
and Krishnan say, an efficient adaption often results from an innovative change
or transformation of intra-and inter-organizational structure.
Activity 2
Visit two different organizations of the same trade. Study the dominant
perspectives which shape them and draw a comparison.

Self Assessment Questions


14. An organization which applies the contingency perspective is known as a
__________ perspective.
15. __________ refers to the various ways and means of coordinating the
work of individuals in the organization.
16. The _________ perspective emphasizes voluntarism.

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1.7 Summary
Let us recapitulate the important concepts discussed in this unit:
Change management means implementing change in an organized and
systematic manner.
There are two types of organizational changetransactional or the first
order change is related with continuity in the organization and
transformational change or the second order change, which is
discontinuous in nature, alters the organization from its core.
A well-led and well-orchestrated change strategy and transition plan leads
to organizational transformation.
Organizational transformation challenges the way an individual thinks,
perceives and feels about the organization.
It changes the work culture and value system of an organization.
There is a deep seated adoption of the changes and the associated values,
principles and/or processes.
The three types of organizational transformations are: improved operations,
strategic transformation and corporate self-renewal.
Transformation strategies in organizations can take place through:
o values
o organizational values
o reengineering
o McKinseys plan
o competitive benchmarking
o Six Sigma
o Kaizen principle
Business transformation is an ongoing journey and a continuous process.
Reasons for organizational change may mean introduction of new
technology; restructuring and reengineering; mergers, acquisitions and
alliances; diversification of the business, etc.
Internal and external environmental factors encourage organizational change.
Organizational change has been studied from multiple perspectives at
micro and macro levels.
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1.8 Glossary
Organizational transformation: A collection of activities such as
reengineering, redesigning and redefining of business systems.
Six Sigma: A statistical parameter that is used to describe variation from
set standards.
Kaizen: Kaizen principle involves change through continuous
improvement by taking small, comfortable steps.

1.9 Terminal Questions


1. How would you define change management?
2. Differentiate between transactional and transformational organization.
3. Write a detailed note on transformation strategies.
4. Discuss the external forces of organizational change.
5. What are the different perspectives of transformational change?
6. Write a short note on the following:
(i) Process-oriented change
(ii) People-oriented change

1.10 Answers
Self Assessment Questions
1. True
2. (c) Middle-order change
3. Transformational
4. False
5. Mission
6. True
7. Information, technology
8. True
9. Kaizen
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10. Top
11. False
12. False
13. Shareholders
14. Organic
15. Integration
16. Adaptation

Terminal Questions
1. Change management means implementing significant change in an
organised and systematic manner. For more details, refer to Section 1.1.
2. Transactional or the first order change is related with continuity in the
organization while transformational change or the second order change
is discontinuous in nature and is related with altering the organization from
its core. For more details, refer section 1.2.1.
3. There are various strategies to deal with transformation in organizations.
For further details, refer section 1.3.
4. The change process is always initiated from the top level, affects the lower
levels and finally integrates into the entire organization. There are internal
and external environmental factors which contribute to organizational
transformation. For more details, refer section 1.5.1.
5. Organizational change has been studied from multiple perspectives at
micro and macro level. For more details, refer section 1.6.
6. Process-oriented changes are changes that could lead to efficiencies and
are achieved through replacing or retraining personnel, reducing investment
in heavy capital equipment etc. People-oriented changes are focused on
performance improvement, team work and commitment to the
organization. For more details, refer section 1.2.2.

1.11 Case Study


Jack Welch took over as Chief Executive Officer (CEO) of General Electric
(GE) in 1981. When he joined GE, he realized that the company was
organized on highly bureaucratic lines and that there were so many layers
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of management that it was not capable of making quick decisions and thus
letting many opportunities pass by. He made sweeping changes in almost
every aspect of the company. He eliminated several layers of management
and decreased the corporate staff from 1700 to less than 1000 and reduced
the workforce to 100,000 workers nearly 25 percent of the total workforce.
The productivity per man hour of the company is one of the highest in the
industry.
For years, GE sat at the top of the marketplace as the worlds most valuable
and most admirable company. When Jack Welch retired, Jeffrey Immelt
took over as CEO. An economic downturn and corporate scandals affected
GE as well. In the latest report, the revenues for GE were flat and the CEO
gave a cautious outlook. The shares of GE plunged by 10 percent, on that
statement. Since October 2000, GE stock has been slashed by almost
half. Jeffrey Immelt faced a lot of criticism and even though he tried his best
to calm fears among employees and investors, he admitted that he did not
expect such intense criticism and especially when comparisons were made
with management style of Jack Welch. It did not matter to the investors that
the economy was down in the late 1990s and early 2000s.
Immelt is determined to reshape GE for the next generation. Since the year
2000, he has already launched several initiatives. He makes sure that
customer satisfaction is considered the top priority. He measures managers
mostly by how much they improve their customers bottom line. He wants
GE to take the Six Sigma quality programme and other innovations deep
into a clients operations. He wants more globalization, more business via
the Web, more diverse senior staff and more extensive research and
development. Due to policy of change, more than 50 per cent of new
executives have been hired from the ranks of women, minorities and persons
from other countries. Immelt has devoted himself completely to making GE
one of the top companies again.
Discussion Questions
1. How did Jack Welch make GE the most valuable company in the market
after he joined?
2. What steps did Jeffrey Immelt take in order to ensure that GE retains its
position as the most admirable company in the world?
Source: Compiled by author

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References
Barney, J.B. and Griffin, Ricky W. (1992). The Management of Organizations:
Structure, Strategy and Behaviour. Houghton Miffling Publishing, p. 753.
Bechard, Richard (1969). Organizational Development: Strategies and
Models. Addison Wesley, 1969.
Bennis, Warren (1969). Organization Development: Its Nature, Origin and
Prospects. Addison Wesley.
Coch, Lester and French Jr.,John R.P. (1968). Overcoming Resistance
to Change, Human Relations, Vol. 1, No. 4, p. 512.
French, Wendell, Organization Development: Objectives, Assumptions
and Strategies, California Management Review, Vol. 12, pp. 2324.
French, Wendell, L. and Bell, Cecil H. (1973). Organization Development,
Prentice Hall, pp. 6572.
Greiner, Larry E. Patterns of Organizational Change, Harvard Business
Review, MayJune 1967, pp. 119130.
Havelock, R.G. and M. Shaskin (1983). Help Scores: A Guide to Promoting
Change in Groups and Organizations, in H.H. Blumerg et al. (eds), Small
Groups and Social Interactions, Wiley (UK), Vol. 2.
E-References
http://www.cmct.net/case_18.html/9/11/12 (retrieved on 22 November
2012)

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