Organisational change

Leavers in today’s most successful organizations recognize that internal changes must
keep pace with what is happening in the external environment. As Jack Welch, the
former long-time chairman and CEO of General Electric, put it, “When the rate of
change outside exceeds the rate of change inside, the end is in sight.” Organizational
change refers to any transformation in the design or functioning of an organization. For
this reason it is important to focus on the various types of organizational change will be
discussed next.

Types of organizational change

Massive changes in the way organizations operate occur occasionally, but more often
change occurs in small steps. The desire to improve performance continuously in order
to stay ahead of competitors is a common reason for smaller organizational changes.
Successful organizations are equally adept at making both radical and incremental
changes, which can further be categorized as reactive or anticipatory.2

Radical. Radical change occurs when organizations make major innovations in the way
they do business. Adopting a new organizational design, merging with another
organization, or changing from a privately held to a public traded company are all
examples of radical change, Radical change is relatively infrequent and generally takes a
long time environment, by president performance declines, by significant personnel
changes, or by a combination of all three factors.

Incremental. Radical change suggests that one “big bang” can transform an
organization into something new. In contrast, incremental change is an ongoing process
of evolution over time, during which many small adjustments occur routinely. After
enough time has passed, the cumulative effect of the adjustments may be to transform the
organization totally. Yet, while they are occurring, the adjustments seem to be just as a
normal aspect of revising and improving the way in which work gets done. Employees
routinely look for ways to improve products and services, and they make suggestions for
changes day in and day out.
In addition to the difference in the magnitude of change are differences in the timing of
change.
Organizations may make radical changes in response to a crisis or because leaders have a
bold new organizations may make incremental changes as a reaction to past events or in
anticipation of trends that have just begun to develop.

Reactive. Reactive change occurs when an organization is forced to change in response

to some event in the external or internal environment. New strategic moves made by
competitor and new scientific or technological discoveries are common reasons for
reactive change, as is declining organizational performance. When business is in severe
decline, a new top management team is often hired to develop and implement a
turnaround plan.
Anticipatory. Anticipatory change occurs when managers make organizational
modifications based of forecasts of upcoming events or early in the cycle of a new trend.
The best-run organizations always look for better ways to do things in order to stay ahead
of the competition. They constantly fine-tune their policies and practices, introduce
technological improvements, and set new standards for customer satisfaction.
Figure 10.1 illustrates how the degree and timing of change combine to form four
different types of organizational change.
If an organization adapts to a change in the environment without undergoing a substantial
reorientation in its strategy or values, the change is reactive and incremental. Sometimes,
reactive change takes the form of a new organizational design. Shaking up a
conservative and staid culture in an organization in an effort to turn it into a more
entrepreneurial organization is a good example of a radical and reactive change. Often,
anticipatoryIncremental
change is incremental and results fromIncremental
constant tinkering and improvements.
Occasionally, anticipatory change is radical, when visionary leaders within an
Anticipatory
organization, for instance, become convinced that majorreactive
changes are needed even
Change change

Radical Radical

Anticipatory reactive

change change

Before major shifts

In the environment

Though there is no apparent crisis. Because there is no crisis, the change can be planned
carefully and implemented gradually. Effective managers understand when change is
needed and are able to guide their organizations through the change process, as will be
discussed next.
Planning for organizational change

As we have already noted, organizational change can be unplanned and somewhat

chaotic, or planned and relatively smooth. By its very nature, chaotic change is difficult
to manage. Nevertheless, large-scale organizational changes seldom occur without some
chaos. Organizations usually strive to minimize chaos by imposing some order on the
change process. Change is most likely to be orderly when it has been panned. The
planning process itself can help unfreeze the organization by convincing people of the
need for change and involving them in decisions about how to change.
The change process can roughly be divided into three stages, which requires unfreezing
the status quo, changing to a new state, and refreezing the new change to make it
permanent. In stage 1 - unfreezing – management plans and prepares the members of the
organization for a major transformation. A primary objective in the stage is to convince
members of the organization of the need for change and to reduce their tendency to resist
it. In stage 2 – transitioning – most of the actual change occurs. Often this stage is
described as the implementation process. Finally, in stage 3 – refreezing – the change is
solidified. Ideally, changes remain in place once they have been made. During the
refreezing stage, it is important to monitor the intended outcomes and to provide support
for new behaviours, which are essential to minimize relapses to the old way of doing
things. The process of planned organizational change comprises the eight steps shown in
Figure 10.2.
Although planned changes do not always proceed exactly as shown, remember that these
steps constitute the basic components of a change process, regardless of the sequence
followed.3

Assess the environment

Learning organizations are keenly aware of the need to scan the environment for
information that may signal the need for change. As described in Chapter 5, both degree
and rate of change in the environment have implications for organizations. The four
environment have implications for organizational change are (1) customers; (2)
technology; (3) competitors; and (4) the workforce. Other factors that may pressure
organizations to change include globalization and the actions of important stakeholders,
such as shareholders, government regulators, unions and political action groups.4 Toyota
(SA) and Standard Bank Limited, among other organizations use customer-satisfaction
surveys and other forms of market research to assess customers’ changing preferences.
Organizational change is often a response to the external environment, but not always.
Sometimes the internal environment creates a need for change as well.
Determine the performance gap

With information about the environment in hand, the next step in the change process is to
determine the performance gap. A performance gap is the difference between what the
organization wants to do and what it actually does. By determining the performance gap,
managers provide clear answers to the question: “What is wrong?”

Diagnose organizational problems

The aim of diagnosis is to identify the nature and extent of problems before taking action.
The idea that diagnosis should precede action may seem obvious, but its importance is
often underestimated.5 All too often, results-oriented managers begin the change process
prematurely, and impatiently push for solutions before the nature of the problem itself is
clear. Most organizational problems have multiple causes, which are seldom simple and
obvious. In most cases it seldom happens that it is necessary to consider only one
perspective. Using a variety of information-gathering techniques is the best approach.
Attitude surveys, conferences, informal interviews, and team meetings can all be used to
gain insights from people with varying perspectives. Organizations often hire outside
consultants to assist with problem diagnosis. Interpersonal problems often require
gathering sensitive information from employees. Outside consultants may be better able
to conduct interviews and interpret data in an unbiased manner. In addition, consultants
often have the expertise that the organization lacks to conduct and analyze attitude
surveys properly.

Identify sources of resistance

Few planned organizational change efforts go as smoothly as managers would like. Most
run into some amount of resistance. Experienced managers are all too aware of the
various forms that resistance can take: immediate criticism, malicious compliance,
sabotage, insincere agreement, silence, deflection, and in-your-face defiance are just a
few examples.6 Some managers do not even initiate needed changes because they feel
incapable of overcoming expected resistance. Successful managers understand why
people resist change and what can be done to overcome such resistance.
In general, people, and sometimes when entire organizations, tend to resist change for
five reasons, namely (1) fear; (2) vested interests; (3) misunderstandings; (4) different
assessments of the situation; and (5) inter-organizational agreements.7

Fear. Many people resist change because they fear that they will be unable to develop
the competencies required to be effective in the new situation. A common obstacle to
organizational change is the reluctance of managers and non-managers alike to change
their attitude and learn the new behaviours that their organizations require. Even when
employees understand and accept that they need to change, doing so is often difficult
because they fear the consequences. When Mercedes-Benz Credit Corporation set out to
restructure its operations in the US, employees seemed to have good reason to be fearful
of the future. Restructuring usually involves layoffs.
The company’s president, George Bauer knew that fear would be a problem and would
make getting the necessary help from employees difficult. “It was absolutely essential to
establish a no-fear element in this whole change process,” he said.
Rather than resist change, he wanted employees to help create a new, more efficient
organization by expressing their ideas about where to cut and how to do work differently.
Besides empowering employees to make decisions about how to change their work, he
offered an incentive to convince them that even cutting their own jobs would not harm
them financially. The incentive was to offer the security of a new and probably better job
to anyone bold enough to eliminate his or her current position. The approach worked.
Four entire layers of management vanished at the suggestion of the employees
themselves.8

Vested interests. Fear often goes hand in hand with vested interests. People who have
vested interests in maintaining things often resist changes.9
Downsizing, cost cutting, and restructuring began by many organizations in the 1980s to
improve performance and continued throughout the 1990s. At times, downsizing has hurt
product quality, alienated customers and actually cut productivity.

Misunderstanding. People resist change when the do not understand its implications.
Unlesss quickly addressed, misunderstandings and lack of trust build resistance. Top
managers must be visible during the change process to spell out clearly the new direction
for the organization and what it will mean for everyone involved. Getting employees to
discuss their problems openly is crucial to overcoming resistance to change.

Different assessments. Employees may also resist change if they assess the situation
differently from