Managing Organizational Change Achieving Sustained Competitive Advantage 1

Managing Organizational Change

Achieving Sustained Competitive Advantage 1. Adapting to change in external trends, internal capabilities and resources 2. Effectively formulating, implementing & evaluating strategies

Adapting to Change – Key Strategic Management Questions What kind of business should we become? Are we in the right fields Are there new competitors What strategies should we pursue? How are our customers changing?

Contingency Approaches Huy’s Contingency Approach categorizes change into 4 ideal types: 1. 2. 3. 4. • • • The commanding intervention Short-term and rapid senior executives Downsizing, outsourcing, divesting The engineering intervention Medium-term and relatively fast Analysts Changing work design and operational systems The teaching intervention Long-term and gradual Consultants Work practices and behaviours The socializing intervention Long-term and gradual Participative experiential learning, self-monitoring Democratic organizational practices 8 -6

Contingency Approaches Contingency approaches remain less common than change management approaches. Suggested reasons include: • • • Achieving “fit” may be difficult due to differing perceptions of the conditions in which the fit is sought Contingency approaches require greater analysis and decisions by managers; the prescriptiveness of change management models may be attractive to managers Contingency approaches focus on leadership style rather than a specific set of actions The use of different change styles at different times may raises questions in the minds of staff as to the credibility of senior management. There is a question about “what” is contingent to managing change 8 -7

Why Organizations Change External forces for change o e. g. new technology o e. g. geopolitical environment Internal Forces for o e. g. a new CEO o e. g. growth cycle change Forces for stability o Think: Do we really need this change? what are the likely returns (economic, other) of this change? 1 -8

What Changes in Organizations Common types of changes: ◦ Mergers and acquisitions ◦ Downsizing ◦ Technological changes Proactive Vs. reactive changes Scale of change ◦ Incremental ◦ transformational 1 -9

Diagnosis for Change Organization models to assess where changes are needed in an organization o o o Strategy Structure Operations Culture Management behaviours and mindsets Employee behaviours and mindsets o o o Communication Reward mechanisms Modes of interaction Component analysis tools to assess the changes needed in each part of the organization ◦ E. g. force-field (strategy), PESTEL (environment), cultural web (culture) Assessing readiness to change 1 -10

Resistance to Change 1. 2. ◦ ◦ ◦ ◦ Why do people resist to change Experiences with past change Discomfort with uncertainty Lack of conviction that change is needed Perceived negative effect on interests Lack of clarity as to what is expected Belief that the timing is wrong Managing resistance The resistance cycle The power of resistance 1 -11

Implementing Change Implementation method is important: A good idea for change may be badly managed and fail. ◦ ◦ How much do we involve people When things will be done Two main approaches: Organization development (OD) Appreciative Inquiry Change Management Contingency approaches 1 -12

Linking Vision and Change 1. 2. Content of meaningful visions Process by which visions are emerged Three dilemmas: 1. Does vision drive change or emerge during change? 2. Visions help or hinder change? 3. Vision belongs to organizations or to leaders? 1 -13

Sustaining Change Actions to sustain change: • • Redesign roles and reward systems Measure progress Celebrate Fine-tune 1 -14

the things we need to do to sustain change Why we think the organization needs to change How change unfolds and what change looks like How we go about diagnosing what we think needs to be changed The strategy and skills we use and to communicate change Images we have of ourselves as managers of change influence The approach we take to handling people’s reaction to change The importance we place on the role of vision in change The underlying theory we use to implement change 1 -15

MCKINSEY’S 7 S FRAMEWORK

Mc. Kinsey 7 -S Model Strategy Structure Systems Style Staff Skills Superordinate goals

Mc. Kinsey 7 -S Model Strategy Structure The Hard S’s Systems Style Staff Skills Superordinate The hard elements are factual and easy to identify. They can be found in strategy statements, corporate plans, organization charts, and other documentation goals

Mc. Kinsey 7 -S Model Strategy Structure Systems The Soft S’s Style Staff Skills Superordinate goals The soft elements are difficult to describe since they are continuously developing and changing. They are highly determined by the people at work in the organization.

n n 7 -S Model – The Hard S’s n n n Strategy Structure Systems Style Staff Skills Superordinate goals Strategy ◦ Actions a company plans in response to or in anticipation of changes in its external environment Structure ◦ Basis for specialization and coordination, influenced primarily by strategy and by organization size and diversity Systems ◦ Formal and informal procedures that support the strategy and structure (Systems are more powerful than they are given credit)

Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

n n n Strategy Structure Systems Style Staff Skills Superordinate goals Organizational Structure n n Organization Chart ◦ formal reporting relationships ◦ levels in hierarchy ◦ spans of control ◦ departmentalization Systems to facilitate: ◦ coordination ◦ communication ◦ integration

Structural Designs Functional Structure ◦ Can adapt functional structure with horizontal linkages Divisional Structure Geographical Structure Matrix Structure Horizontal Structure / Product Line Structure Hybrid Structure n n n n Strategy Structure Systems Style Staff Skills Superordinate goals

n n Strategy Structure Systems Style Staff Skills Superordinate goals Other Organizational Forms n n n Joint Ventures Licensing agreements Strategic Alliances Consortia Virtual organizations Global (transnational) Work Teams n n

Virtual Teams n n n Strategy Structure Systems Style Staff Skills Superordinate goals Virtual Teams are characterized by: ◦ Distributed locations of team members ◦ Use of information technology to accomplish tasks ◦ Effective when: Communication & collaboration skills are high. Trust among team members is high Organizations are increasing their use n of virtual teams Potential for improvement in virtual team management is huge

Information Linkages n n n Vertical Information Linkages n Strategy Structure Systems Style Staff Skills Superordinate goals ◦ Hierarchy ◦ Rules and plans (i. e. budget) Horizontal Information Linkages ◦ Information systems ◦ Liaison role ◦ Task force ◦ Integrator role (i. e. Project manager) ◦ Cross-functional teams

n n Strategy Structure Systems Style Staff Skills Superordinate goals Systems – various elements n n Communications practice and n system Management reporting system Approval process Planning/budgeting system Rewards system including appraisal “Rules”

n Strategy Structure Systems Style Staff Skills Superordinate goals From Tasks to Structure n n n Tasks define jobs Jobs define skills required Skills (and other considerations) define staff n ◦ Over time skills change as staff gains knowledge and experience, and as technology and corporate infrastructure mature Collection structure of jobs basis for

Job design considerations Do they have the necessary skills and knowledge to fulfill proposed / expanded job requirements? What are the needs of the incumbent or the rest of your workforce in general? ◦ Monetary ◦ Growth ◦ Socialization n n n Strategy Structure Systems Style Staff Skills Superordinate goals

THE SOFT S’s Skills: the capabilities and competencies that exist within the company. What it does best. Shared values: the values and beliefs of the company. Ultimately they guide employees towards 'valued' behavior. Staff: the company's people resources and how the are developed, trained and motivated. Style: the leadership approach of top management and the company's overall operating approach.

n n 7 -S Model – The Soft S’s - 1 n n Style / Culture n n n Strategy Structure Systems Style Staff Skills Superordinate goals The culture of the organization, consisting of ◦ Organizational culture: the dominant values, beliefs and norms which develop over time and become relatively enduring features of organization life ◦ Management style: what managers do rather than what they say (where they spend their time and attention, what they allow, what they reward, etc) Staff Skills Shared values / Superordinate goals

7 -S Model – The Soft S’s 2 n n n Strategy Structure Systems Style Staff Skills Superordinate goals Style / Culture Staff ◦ The people/human resource management – ways of n shaping basic management values, processes used to develop managers, ways of introducing new employees and managing careers, socialization processes Skills ◦ Distinctive competencies – what the company does best, ways of developing or shifting competencies Shared values / Superordinate goals ◦ Guiding concepts, fundamental ideas around which a business is built – simple, usually stated at abstract level, have great meaning inside the organization, although outsiders may not see or understand them

Organizational Culture n n n Culture is to organizations what personality is to individuals n All companies have cultures n n Strategy Structure Systems Style Staff Skills Superordinate goals ¨ Culture by default ¨ Culture by design – thoughtful choices based on values and core beliefs n How does a company consciously create its culture?

From Gray & Larson “Project Management: The Managerial Process”

Types of Organizational Cultures n Control cultures – Drive for predictability and order n Collaboration cultures – n n n n Strategy Structure Systems Style Staff Skills Superordinate goals Pursue close relationship with customers n Competence cultures – Pursue excellence and innovation n Cultivation cultures – Pursue life enrichment for customers and employees

Organizational Culture n n n Observable Evidence: n n Strategy Structure Systems Style Staff Skills Superordinate goals ¨ Symbols ¨ Ceremonies ¨ Stories ¨ Behaviors ¨ Language ¨ Dress n Underlying Roots: ¨ Values, Assumptions, Beliefs, Attitudes, Feelings

n Culture in practice Conflict management ◦ Relationship or interpersonal conflict ◦ Task / process conflict ◦ Functional vs. dysfunctional conflict ◦ Factors: goal incompatibility, limited resources, differences n n n Strategy Structure Systems Style Staff Skills Superordinate goals Power – the capacity to influence behavior ◦ Positional power: rewards/consequences, control of resources, information and decision control ◦ Personal power: expert, referent (based on identification and admiration) Politics – the use of power to influence decisions

Management vs. Leadership Planning & budgeting vs. Setting the direction Organizing & staffing vs. Aligning people Controlling & problem solving vs. Motivating people Management is about coping with complexity Leadership is about coping with change

Mc. Kinsey 7 -S Model Strategy Effective Structure organizations Systems achieve a harmony Style between these seven Staff elements; if one element changes, Skills Superordinate goals then this will affect all the others

Mc. Kinsey 7 -S Model The 7 -S Model can be a valuable tool to Structure initiate change Systems processes and to Style give them direction; Staff i. e. determine current state and Skills Superordinate goals ideal state of each element, and develop action plans to close the gaps Strategy

Mc. Kinsey 7 -S Model Strategy Structure Systems Style Staff Skills Superordinate goals In change processes, many organizations focus their efforts on the hard S’s; however, the soft factors can make or break a successful change process. All factors must be accounted for.

Mc. Kinsey 7 -S Model Strategy Interrelated Structure Equilibrium Systems Foundation Style Staff Skills Superordinate goals of corporate culture Levers available to management

Executing Change – Seven Key Considerations Strategic Intent Substance Scale Scope/Breadth Speed Sequence Style Scope Substance Strategic Intent Speed Scale Sequence

Strategic Intent Precise Style Broad Strategic Intent Substance Soft S’s Speed Hard S’s Scale Small Large Scope/Breadth Isolated Organization-wide Speed Slow Sequence Fast Hard – Soft – Hard Top Down Bottom Up Style Substance Scope Scale Sequence