Implementing Organizational Change Theory into Practice Chapter 1

Implementing Organizational Change: Theory into Practice Chapter 1 Organizational Change Introduction to Managing Change 1 -1

Building a Vocabulary n n Change implementation: actions taken by organizational leaders in order to support strategic renewal and maintain outstanding performance in a dynamic environment. Strategic renewal: change in an organization’s strategy through a process of creating new products, services, capabilities, and knowledge bases. 1 -3

Examples of Strategic Responsiveness Company Altered Strategy Enron Move from energy production to energy trading GE Move from commodity business to high value-added products and services IBM Move from product to service/consulting company Marks and Spencer Move from a department store appealing to traditional, conservative adult British shoppers to a store appealing to young, trendy shoppers 1 -4

Examples of Strategic Responsiveness (continued) Company Altered Strategy Renault Move from French-based to internationally focused automobile company Walgreens Move from store-based chain in order to capture growing Internet business Facebook Move from restricted, college campus-only social network to become a “universal utility” open to everyone 1 -5

Strategic Renewal and Organizational Change Shifting Competitive Environment Strategic Renewal Organizational Change New Opportunities Altering Behavior Patterns of Employees 1 -6

Building a Vocabulary n n Organizational capabilities: the collective talents and skills of a firm’s employees. Business model: the way in which an organization generates profitable revenues. 1 -7

Examples of Novel Business Models n n n n Starbucks offered high-priced coffee specialty drinks in a relaxed environment Amazon sold books on-line Southwest Airlines provided an air service that competed with bus service and driving Dell built computers to customer specifications Zara placed low-cost, high-fashion items on shelves with incredible speed You. Tube revolutionized the creation and distribution of video Facebook integrated web-based interconnectivity with traditional school-based yearbooks 1 -8

Building a Vocabulary n n Behavioral change: alterations in employee behavior in order to enable the organization to meet the demands of its strategy while achieving and sustaining outstanding performance. Behavior: the enactment of roles, responsibilities, and relationships by employees within an organization. 1 -9

Building a Vocabulary n Organizational context: the setting and circumstances in which employees work. “Organizational culture and values, the behaviors of leaders, as well as rules and procedures to define a context that shapes how employees enact their roles, responsibilities, and relationships. ” 1 -10

Sources of Behavior Individual Organizational Characteristics Context Behavior Organizational change seeks to create long-term, sustainable alterations in employee behaviors. 1 -11

Building a Vocabulary n Resistance: efforts exerted by employees either overtly or covertly to maintain the status quo. “Employee response to change runs across a broad spectrum, ranging from commitment at one end to aggressive resistance” on the other. Each of these reactions to change helps shape the behavior of individuals and, ultimately, the success of a change effort. ” 1 -12

Underlying Causes of Resistance n n n Individuals may be satisfied with the status quo. Because their needs are being met, they may view any potential change as negative. Individuals may view change as a threat, fearing it will adversely affect them in some significant way. Individuals may understand that change brings both benefits and costs, but feel that the costs far outweigh the benefits. n n Individuals may view change as potentially positive, but may still resist because they believe that the organization’s management is mishandling the change process. Individuals may believe in the change effort, but still believe that the change is not likely to succeed. 1 -13

Management’s Role in Creating Resistance Text in this color Resistance Cause Satisfied with status quo Employees not included Change is perceived as threat Employees see little opportunity to get required skills Cost outweighs benefits Inadequate articulation of goals Belief that management is mishandling the process Employees’ voice and interest not being included Employees doubt success Past change efforts lack sustained success 1 -14

Building a Vocabulary n Participation: the process of allowing employees a voice in work-related decisions. “By diagnosing problems, understanding their importance, and being part of the process of formulating solutions, people develop a psychological sense of ownership over the outcome. That ownership now creates in employees the heightened motivation to implement change in order to achieve desired goals. ” 1 -15

Key Understandings about Resistance and Participation Imposing change from above can lead to employee resistance. and A participative process can help build support for change efforts. 1 -16

Building a Vocabulary n n Turnaround: an attempt to improve the immediate financial position of an organization by focusing on the income statement and the balance sheet. Techniques and tools: organizational processes, mechanics, and other interactions intended to produce a product or service. 1 -17

Three Faces of Change Type Target Rationale Turnaround Internal resources Improve short-term bottom-line performance Tools and techniques Processes Increase internal efficiency Transformation Behaviors Enhance human capabilities 1 -18

Building a Vocabulary n Outsourcing: a deliberate decision to farm out certain value chain activities to external specialists and/or strategic allies. “By moving low-value and routine technology jobs to overseas companies, companies can focus its core activities on ‘the higher-value portions of their industry. ’ ” 1 -19

Reasons Companies Outsource § § § Outsourcing saves money by shipping jobs to lower-paid workers. Outsourcing enables companies to concentrate on core competencies. Outsourcing offers a hedge against shifting technologies and customer preferences by lowering fixed costs and building flexibility. 1 -20

Caution about Outsourcing While outsourcing is a technique with important turnaround (i. e. , cost-savings) implications… Be careful! If not applied carefully, it can undermine motivation and disrupt important linkages and relationships. 1 -21

Building a Vocabulary n Trigger event: a shift in the environment that precipitates a need for organizational change. “Trigger events…are so named because their magnitude and potential for organizational as well as personal impact set into motion a series of mental shifts as individuals strive to understand redefine a situation. By their very nature, they unbalance established routines and evoke conscious thought on the part of organizational members. They stir up feelings and emotions that come to affect people’s reactions to the change. In short, trigger events bring people’s mindsets into the arena of change. ” 1 -22

Examples of Trigger Events Company Altered Strategy Trigger Events Enron Move from energy production to energy trading New leader (Jeff Skilling) Desire for new business model GE Move from commodity business to high value-added products and services Recession in 1990 s New leader (Jack Welch) IBM Move from product to service/consulting company Declining performance New competitors New Leader (L. Gerstner) Marks and Spencer Move from a department store appealing to traditional, conservative adult British shoppers to a store appealing to young, trendy shoppers New competitor (Zara) Fragmenting of retail business model 1 -23

Examples of Trigger Events (continued) Company Renault Altered Strategy Trigger Events Move from French-based Stagnant market to internationally focused New leader (Carlos Ghosn) automobile company Walgreens Move from store-based chain in order to capture growing Internet business New technology (Internet) Facebook Move from restricted, college campus-only social network to become a “universal utility” open to everyone Increase customer base Outmaneuver competitor (My. Space) 1 -24