Organizational Change

Organizational Change is a process in which a large company or organization changes its working methods or aims, for example in order to develop and deal with new situations or markets: Sometimes deep organizational change is necessary in order to maintain a competitive edge.

Organizational change is both the process in which an organization changes its structure, strategies, operational methods, technologies, or organizational culture to affect change within the organization and the effects of these changes on the organization. Organizational change can be continuous or occur for distinct periods of time.

Forces for Organizational Change

In practice, numerous factors affect an organisation and most of these are continuously changing. These forces leading to or causing change originate both within or outside the organisation, as shown in the figure below.

source: Business Management Ideas

*External Change Forces: External forces for change derive from the organisation’s general and task environments. External forces causing changes may include technology, competition, govern­ment actions, economic variables and social values. Government regulations on health, safety, and the conduct of business affect an organisation. Labour laws influence hiring, pay, training and promotion decisions. Tax laws change. Economic conditions- such as recession, money supplies, inflation, and interest rates — are sources of change.

As Griffin has rightly put it:
“Changes in any of the elements of the general environment (that is, the economic, international, political, technological and socio-cultural environments) or in the task environment (customers, competitors, associates, unions, regula­tory and suppliers) may necessitate a change in the organisation itself. Change may also be brought about internally by a new manager or by the new philosophy of an existing manager.”

In the international element of the general environment, a foreign competitor (such as Canon) might introduce a new product, increase prices, reduce prices, change standards or enter new markets, thus forcing domestic organisations to react.In the political element, new laws, court decisions and regulations all affect organisations. The technological element may yield new produc­tion techniques that the organisation needs to explore.

Largely due to its proximity to the organisation, the task environment usually is an even more powerful force for change. Competitors obviously influence organisation via their price structures and product lines. Customers determine what products can be sold at what prices. The organisation must constantly be concerned with consumer tastes and preferences.

In a like manner, suppliers affect organisations by raising or lowering prices, changing product lines, or even snapping trade relations with a company. Regulators can have dramatic effects on an organisation. Trade (labour) unions are a force for change when they demand and succeed in getting higher wages or go out on strike. Finally, subsidiaries can spur change as they add to or drain from the resource base of the holding company.

Finally, cultural changes in such areas as modes of dress, reasons for people working, composition of the labour force, and changes in traditional female and male roles can affect the organisational environment. The socio-cultural element, reflecting societal values, determines what kinds of product or services will find a ready market.

It appears that external change forces have a greater effect on organisational change than internal stimuli, as they are diverse and numerous and management has hardly any control over them.

*Internal Change Forces: Pressures for change may also originate from within the organisation. In other words various forces inside the organisation may cause change. These forces might include managerial policies or styles, systems, and procedures; technology and employee attitudes. For example, top management’s decision to shift its goal from long-term growth to short-term profit is likely to affect the goals of various departments and may even lead to re-organisation. In short, if top management revises the organisation’s goals, organisational change is likely to result.

A decision by Philips India Ltd. to enter the home computer market or a decision to increase a ten-year product sales goal by 3% would occasion many organisation changes.

Other internal forces may actually be indirect reflections of external forces. As socio-cultural values shift, for example, workers’ attitudes toward their jobs may also shift and they may demand a change in working hours or working conditions. In such a case, even though the force is rooted in the external environment, the organisation must respond directly to the internal pressure it generates. For example, the development of a new set of expectations for job performance will influence the values and behaviours of the employees affected. The employees could adapt to these expectations to resist them.

Types of Organizational Change

With organizational change strategies, companies can avoid stagnation while minimizing disruption as much as possible. Preparation is integral for success, especially during a change effort. However, one can’t prepare without knowing what type of change is occurring. Here is a list of 5 types of organizational change companies may undergo.

• Organization-Wide Change: Organization-wide change is a large-scale transformation that affects the whole company. This could include restructuring the leadership, adding a new policy, or introducing enterprise technology, for example. Such a large-scale change will be felt by every single employee. However, as the dust settles, you can begin to see improvements. Sometimes change is required to see how a long-held policy has become outdated or that the company outgrew its shell. Like a hermit crab, leaders might identify the need to find a bigger shell for a better fit. However, poorly planned change can be highly disruptive and result in broad consequences across the company. Enterprise-wide change is quite extensive and needs to be planned with precision to protect all of those affected. Whether the results of the change are negative or positive depends on your organizational change strategies and their execution.
• Transformational Change: Transformational change specifically targets a company’s organizational strategy. Companies that are best suited to withstand rapid change in their industry are nimble, adaptable, and prepared to transform their strategies when the need arises. Strategies to guide transformational change must account for the current situation and the direction a company plans on taking. Cultural trends, social climate, and technological progress are some of many factors leaders must consider when devising organizational change strategies to support a transformation. According to a study from MIT Sloan Management Review and Deloitte, maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, into their transformation strategies. Meanwhile, less-mature digital businesses are focused on solving discrete business problems with individual technologies. However, given the rapid pace at which digital technology evolves, companies will be better positioned to succeed if they incorporate scalable and adaptable technology into their transformation strategies.
• Personnel Change: Personnel change is when a company implements mass hiring or layoffs. Each of these types of organizational change can cause a significant shift in employee morale and engagement, for better or worse. The threat of layoffs evokes fear and anxiety among staff members. Although certain circumstances necessitate such a decision, leaders should expect that employee morale will suffer. Nevertheless, the company must move forward. It is important to display genuine compassion and motivate employees to continue to work hard through the difficult time. While mass hiring has better implications for a company, it is not without difficulty. Mass hiring is a sign of major growth, during which a company is susceptible to cultural changes and disorganization. Hiring new staff means training them, and providing ongoing support. Welcoming an influx of employees is great, but the work is cut out for those in management. If the transition is not handled correctly, it can cause chaos, inefficiency, and ultimately deter further growth.
• Unplanned Change: Unplanned change is typically defined as necessary action following unexpected events. While unplanned change cannot be predicted — it can be dealt with in an organized manner. For example, the hurricanes that battered the U.S. early in the fall of 2017 caused thousands of residents to evacuate and seek temporary shelter far away from home. Following the emergency, they began the long process of restoring normalcy to their lives. Companies also experienced unplanned change in the aftermath of the storms. New government regulations, over which individual companies have no control, can also spur unplanned change. Although the circumstances that lead to unplanned change may be chaotic, it’s important for organizations to be resilient and adaptable. Companies can also benefit from setting basic organizational change strategies in place to minimize chaos and disruption.
• Remedial Change: Leaders implement remedial changes when they identify a need to address deficiencies or poor company performance.

For example, financial distress, usually due to poor performance, requires remedial change. The most common examples of such change could be introducing a new employee training program, rolling out a new software, or creating a new role to remedy a pain point. Other types of corrective action could include reviewing strategies that may have been in place for years but are no longer profitable. Issues stemming from leadership, such as a newly appointed CEO who turns out to be a poor fit for the company, might also call for remedial change. Although remedial change efforts must be tailored to the specific problem on hand, they still require effective organizational change strategies to be successful.

A Model for Organizational Change

A large global retailer uses the model illustrated below to increase the speed and impact of change initiatives while reducing the downturn of performance, thereby achieving desired outcomes quicker. This model for organizational change includes a four-phase change management process:

• Define—Align expectations regarding the scope of the change as well as timing and business impact.
• Plan—Understand how the change will impact stakeholders and design a strategy to help them navigate it.
• Implement—Engage with leaders and associates to execute the change.
• Sustain—Work with leaders and employees to track adoption and drive lasting change.

source: SHRM

Process and Phases of Organizational Change

Understanding the process of change requires careful consideration of the steps in the change process, employee resistance to change and how this resistance can be overcome. The management of change requires the use of some systematic process that can be divided into a few stages or sub-processes. This is the essence of the most representative model of managing change. It emphasises the role of the change agent who is an outsider, taking a leadership role in initiating and introducing the process of change. The process of change must involve the following so as to lead to organisational effectiveness. Firstly, there is a re-distribution of power within the organisational structure. Secondly, this redistribution emanates from a developmental change process.

The figure below indicates that the process of change has to pass through six different phases

source: Business Management Ideas

• Internal pressure: The process of change begins as soon as top management starts feeling a need of pressure for change from within the enterprise. This is usually caused by some significant problem(s) such as sharp drop in sales (profits), serious labour trouble, and/or high labour turnover.
• Intervention and reorientation: An external agent is often invited to suggest a definition of the problem and start the process of getting organisation people to focus on it. If internal staff people are competent enough and can be trusted they can also manage the process of change equally well.
• Diagnosis and recognition of problem(s): The change agent and manager start gathering necessary information and analyse it so as to recognise the more important problems and give attention to these.
• Invention of and commitment to solutions: It is important for the agent to stimulate thought and try to avoid using the ‘same old methods’. Solutions are searched out by creatively developing new and plausible alternatives. If subordinates are encouraged to participate in the process, they will develop a sense of involvement and are likely to be more committed to the course of action finally chosen.
• Experimentation and search for results: The solutions developed in phase 4 are normally put to tests on a small-scale (e.g., in pilot programmes) and the results, analysed. If the solution is successful in one unit, or a certain part of a unit, it may be tried in the organisation as a whole.
• Reinforcement and acceptance: If the course of action is found desirable (after being properly tested), it should be accepted voluntarily by organisation members. Improved performance should be the source of reinforcement and thus should lead to a commitment to the change.

Techniques for Effectively Managing Organizational Change

Managing change effectively requires moving the organization from its current state to a future desired state at minimal cost to the organization. Key steps in that process are:

• Understanding the current state of the organization. This involves identifying problems the company faces, assigning a level of importance to each one, and assessing the kinds of changes needed to solve the problems.
• Competently envisioning and laying out the desired future state of the organization. This involves picturing the ideal situation for the company after the change is implemented, conveying this vision clearly to everyone involved in the change effort, and designing a means of transition to the new state. An important part of the transition should be maintaining some sort of stability; some things—such as the company's overall mission or key personnel—should remain constant in the midst of turmoil to help reduce people's anxiety.
• Implementing the change in an orderly manner. This involves managing the transition effectively. It might be helpful to draw up a plan, allocate resources, and appoint a key person to take charge of the change process. The company's leaders should try to generate enthusiasm for the change by sharing their goals and vision and acting as role models. In some cases, it may be useful to try for small victories first in order to pave the way for later successes.

Change is natural, of course. Proactive management of change to optimize future adaptability is invariably a more creative way of dealing with the dynamisms of industrial transformation than letting them happen willy-nilly. That process will succeed better with the help of the the company's human resources than without.

See Also

Organization
Organizational Commitment
Organizational Commitment Questionnaire (OCQ)
Organization Design
Organizational Agility
Organizational Capability
Organizational Architecture
Organizational Change Management (OCM)
Organizational Culture
Organizational DNA
Organization Chart
Organizational Absorption
Organizational Configurations
Organizational Development
Three- Component Model Questionnaire (TCM)