- - Organizational Change - -

Introduction : Today's business environment requires companies to undergo changes almost constantly if they are to remain competitive. Factors such as globalization of markets, Mergers, Acquisitions, Restructuring, Downsizing and rapidly evolving new Technologies force businesses to respond in order to survive. Such changes may be relatively minor as in the case of just installing a new software program or quite major as in the case of refocusing an overall marketing strategy.

Organizational change occurs when a company makes a transition from its current state to some desired future state.

Factors forcing towards organizational change are classified into two main classes :

Inside Pressure - Inside pressures come from top managers and lower level employees who push for change.

Outside Pressure - Outside pressures come from changes in the legal, competitive, technological, and economic environments.

Organizations are viewed as open systems with multiple levels and interrelated parts that exist in the context of a larger environment. Thus, change at one level of the organization i.e. individual member, work team, or total organization, can affect other levels. Change in one part or design feature of the organization, such as a reward system, work design, or organization structure, can require supporting changes in other parts. Change in the organization’s environment can necessitate change within the organization, and so on.

Organization change involves an ongoing series of diagnostic, action planning, implementation, and evaluation actions. These activities overlap and feedback on each other, so that initial diagnosis informs action planning and implementation while evaluation guides subsequent diagnosis and modification of the changes.

Areas of Organizational Change :

Bateman and Zeithaml identified four major areas of organizational change : Strategy, Technology, Structure, and People. All four areas are related, and companies often must institute changes in the other areas when they attempt to change one area.

Strategy Changes : It takes place on a large scale, for example, when a company shifts its resources to enter a new line of business, or on a small scale, for example, when a company makes productivity improvements in order to reduce costs.

There are three basic stages for a company making a strategic change :

Realizing that the current strategy is no longer suitable for the company's situation;

Establishing a vision for the company's future direction; and Implementing the change and setting up new systems to support it.

Technological Changes : These are often introduced as components of larger strategic changes, although they sometimes take place on their own. An important aspect of changing technology is determining who in the organization will be threatened by the change. To be successful, a technology change must be incorporated into company's overall systems, and a management structure must be created to support it.

Structural Changes : These changes can also occur due to strategic changes, as in the case where a company decides to acquire another business and must integrate it, as well as due to operational changes or changes in managerial style. For example, a company that wished to implement more participative decision making might need to change its hierarchical structure.

People Changes : These changes become necessary due to other changes, or sometimes companies simply seek to change workers' attitudes and behaviors in order to increase their effectiveness. "Attempting a strategic change, introducing a new technology, and other changes in the work environment may affect people's attitudes (sometimes in a negative way).

In any case, people changes can be the most difficult and important part of the overall change process. The science of organization development was created to deal with changing people on the job through techniques such as education and training, team building, and career planning.

General Approaches to Change :

The processes and activities used to initiate and carry out organization change are deeply embedded in values of openness, trust, and collaboration among organization members; they are grounded in beliefs that members should be treated maturely and actively involved in change. Based on these fundamentals, applications of Organizational Development have evolved to meet the emerging demands of organizations and their environments. These changes are reacted in how Organizational Development is carried out and practiced in organizations today. To

understand this evolution of Organizational Development practice requires knowledge of three general approaches to change:

(1) Lewin’s Three Steps(2) Action Research(3) Action Learning

Lewins Three Steps : This approach to organization change derives from the work of Lewin and his colleagues on how to overcome resistance to change and how to sustain change once it is made. It starts from the premise that targets of change and the social processes underlying the mare relatively stable when forces driving for change are roughly equal to forces resisting change. To change this status quo requires a three step process :

(1) Unfreezing the balance of forces that keep the change target stable

(2) Moving the change target to a new level or kind of behavior

(3) Refreezing the balance of forces to reinforce the new behaviors and to keep them stable. This simple yet profound framework has guided Organizational Development practice for over half a century. It has led to numerous techniques for leading and managing change.

Unfreezing : This step underscores the need to assess the present situation before change is contemplated. Referred to as a ‘force field analysis’, this diagnosis examines the driving and restraining forces in the change situation that maintain the status quo. It can reveal which forces are strongest (or weakest) and which are easiest (or hardest) to modify. Such information is essential for unfreezing the current situation and creating a readiness for change among organization members. For example, a force field analysis might discover that the key forces restraining change are members’ lack of understanding about the need for change and strong group norms about task performance. Techniques to overcome these resistances, and thus to unfreeze the status quo, might include clearer and more direct communication about the rationale underlying the proposed changes and member participation in the change process itself.

Moving : This stage involves intervening in the situation to change it. Organizational Development includes a variety of interventions for improving organizations. These change programs address organization issues having to do with human processes, strategic choices, human resource management, and

work designs and structures. To implement these changes effectively, Organizational Development has devised methods for creating a compelling vision of the desired changes, developing political support for them, and managing the transition from the current to the desired situation.

Refreezing : This final step involves making changes a permanent part of the organization’s functioning. When this stage is ignored, organization changes rarely persist but regress to their previous stable state. Thus, refreezing calls for re-balancing the driving and restraining forces in the changed situation so it remains relatively stable. Organizational Development has discovered a variety of practices that can contribute to such permanence. Generally referred to as ‘institutionalizing’ change, these methods include : reinforcing organization changes by making rewards contingent on them, socializing existing members and newcomers in to the beliefs, norms, and values underlying the changes, diffusing changes throughout the organization to provide a wider base of support for them, and sensing and calibrating the changes to detect deviations from desired changes and to take corrective actions.

Action Research : This approach to organization change shows that research can be practical; it can serve as an instrument for action and change. Action research applies scientific methods to help organizations identify problems, discover their underlying causes, and implement appropriate changes. It can also produce new knowledge about organizations and change that can be applied elsewhere. In addition to its problem solving focus, action research is highly collaborative, involving both Organizational Development practitioners and organization members in the research and action process. Such participation gains members’ input and commitment to the changes, thus increasing the chances that they will be implemented. It can also result in higher quality, more situation relevant changes. Although several variants of action research have been developed, applications to Organizational Development generally involve the following cyclical activities :

(1) Preliminary data gathering and diagnosis(2) Action planning(3) Implementation(4) Assessment.

In practice, these activities result in an iterative process where initial research informs action, and additional research informs further action, and so on.

Preliminary data gathering and diagnosis - Action research typically starts with a pressing problem that organization members are motivated to resolve. Based on this presenting issue, preliminary data are gathered to determine whether the problem has been correctly identified and to diagnose its underlying causes. This initial research is generally informed by diagnostic models that show what features of the organization to examine and what data to collect to discover the source of organizational problems. Organizational Development practitioners use diagnostic models to assess various aspects of organizations, from members’ individual motivation to relationships between the organization and other organizations in its environment. They use a variety of methods to collect diagnostic data, from informal interviews with a few people to formal surveys of the total organization. When these data are collected and analyzed appropriately, they provide valid information about causes of organization problems.

Action planning – Based on this preliminary research, participants develop action plans specifying what organization changes will be made and how they will be implemented. The choice and design of change interventions depend on a variety of factors having to do with the target of change and the change situation itself. In selecting a change target, participants can draw on a large diversity of Organizational Development interventions to improve various aspects and problems of organizations. Indeed, Organizational Development is known primarily for its interventions, such as team building, self-managed teams, and high involvement organizations. The preliminary diagnosis guides which of those interventions are most relevant for the organization. Moreover, it helps participants choose interventions that are likely to succeed in their specific change situation. Researchers have identified key situational contingencies that can affect intervention success, such as individual differences among members and the nature of the organization’s technology and competitive situation. Knowledge of these contingencies can help to assure that action plans fit well with the change situation.

Implementation : Implementing action plans involves making changes that move the organization towards its desired future. Such change does not occur instantly but requires a transition period during which members learn how to enact the changes and make them work. Organizational Development has identified activities and structures that can facilitate this transition phase. These include specifying the change tasks that need to occur, temporally ordering them, and monitoring their progress. It also involves identifying key stake holders whose commitment is needed for change to occur and gaining their support. In cases where change is large

scale and involves several features and levels of the organization, special structures for managing the change process may need to be created. These structures mobilizer sources for change, coordinate the changes, and account for progress. Members who have both the power to make change happen and the respect of key stake holders lead them.

Assessment - This final phase of action research involves gathering and analyzing data to determine the effects of the changes. Such information is used to decide whether the changes are having their intended results, and, if not, how they can be modified to be more effective. Assessment tends to occur at different stages of the change process both during implementation and after it is completed. During implementation, evaluation provides timely feedback about whether the changes are being implemented as intended. Because organization change generally involves considerable learning and experimentation, such information is vital to members learning new behaviors and procedures needed to implement change. Assessment that occurs after implementation provides feedback about the overall impact of the organization changes. It helps members determine whether the changes should continue to be supported or whether other possible interventions should be tried.

Action Learning : Action learning has been variously referred to as ‘participatory action research’, ‘action inquiry’, and ‘self-designing organizations’. It is a relatively new and still evolving form of planned change. Action learning moves beyond the problem solving focus inherent in traditional applications of Organizational Development, and treats change as a continuous learning and transformation process. It responds to the enormous pressures for change facing organizations today. They are experiencing competitive demands to perform more quickly and efficiently at lower cost and higher quality. They are being forced to adapt to turbulent environments where technological, economic, and cultural forces are changing rapidly and unpredictably. To respond to these forces, organizations are radically transforming themselves into leaner, more flexible structures capable of continuous adaptation and change. Such change involves considerable learning and innovation as members try new behaviors, structures, and processes, assess the results, make necessary adjustments, and so on. It also requires significant support and commitment from key stake holders including managers, employees, and staff experts. Action learning addresses these issues. It helps members acquire the skills and expertise to design their own innovations, to manage their own change processes, and, perhaps most important, to learn how to do these things more effectively and efficiently. It identifies key stake holders and gets them actively involved in analyzing the organization and its environment, designing appropriate changes, and implementing them. It builds the capacity to change and to improve continually in to the organization so it becomes part of normal functioning. Action learning involves a

number of interrelated actions that comprise an iterative learning process. As members move through these activities, they learn how to change and improve the organization, including their own work behaviors and interactions. This learning feeds in to the next cycle of action learning and so on, thus enhancing members’ capacity to change both the organization and themselves. Action learning generally includes the following steps :

(1) Valuing

(2) Diagnosing

(3) Designing

(4) Implementing and assessing.

Valuing – Action learning generally starts with clarifying the values that will guide the change process. Organization values influence members’ behaviors and decision making; they affect which innovations and changes are seen as good or bad. Because organization values are rarely questioned, they tend to perpetuate the status quo. Thus, valuing seeks to make explicit the organization’s values and to judge their relevance to competitive conditions. This may result in modifying or replacing certain values, or considering entirely new ones. Moreover, because stake holders often have diverse interests, valuing attempts to uncover underlying value conflicts and to resolve them so they do not adversely affect subsequent design and implementation activities. Unless organization changes take in to account the interests of different stakeholders, there is likely to be differential support and commitment for them. Organizational Development practitioners have developed various methods for resolving value conflicts, including collaborating, compromising, and negotiating. The key objective is to achieve sufficient value agreement among stakeholders so they can proceed with changing the organization in a shared and committed direction. A common outcome of valuing is a ‘vision statement’ that explains the values that will guide organization change, including valued human and performance outcomes and valued organizational conditions for achieving them. Although valuing occurs early in action learning, members may periodically reassess and modify the values as they continually move through the cycle of learning activities.

Diagnosing – This phase of action learning involves assessing the organization against the values. This can reveal value gaps where the organization is not functioning or performing consistent with the values. Such inconsistencies direct the subsequent design of organization changes to close

the gaps. Thus, action learning is aimed at continually assessing and improving the organization in a valued direction.

Designing – This step involves developing specific organization changes to reduce value gaps and to move the organization in a valued direction. Depending on the diagnosis, members may determine that limited change is necessary and existing conditions only need to be finetuned; or that more extensive change is needed requiring innovations that either imitate what other organizations are doing or that are entirely new and original. Thus, designing is not deterministic but involves considerable creativity and choice. Members explore new ways for organizing that are consistent with the values. They iterate back and forth between the values which serve as design guides and the designs themselves. Designing typically results in organization changes that are minimally specified and flexible. This enables members to adjust the changes to fit situational contingencies during implementation. It provides members with sufficient freedom to modify the changes as they learn how to enact them behaviorally and how to modify and improve them as the circumstances demand.

Implementing and assessing – In this phase, members implement and assess organization changes. This involves learning by doing. Members take action to implement or modify the changes. They periodically assess whether the changes and implementation process are progressing as intended, and, if not, make plans to modify them. This feed back adjustment process enables members to learn how to change the organization and themselves. It continues indefinitely as members learn how to improve the organization continuously.

Implementing and assessing can involve three levels of learning. At the most basic level, which is referred to as ‘single loop learning’, members concentrate on getting the changes implemented in accordance with the values. They seek to reduce deviations from the changes’ underlying values. This learning occurs continuously and involves considerable problem solving and trial and error as members learn to move the organization closer to its values. Single loop learning is involved in all approaches to organization change, including Lewin’s three steps and action research. It enables members to implement planned changes as intended.

Action learning goes beyond these other approaches, however, to also include higher levels of learning called ‘double loop learning’, the next level involves changing the values themselves. Members learn how to confront value inconsistencies and conflicts and modify values accordingly; they learn how to change values that may no longer support the organization’s strategy

and competitive situation. This level of learning occurs periodically and generally requires members to return to the valuing and designing phases. They may learn that the values set initially need to be modified and that renewed designing, implementing, and assessing activities need to occur. At the highest level, action learning involves ‘deutero learning’, or learning how to learn. This is the most difficult yet important level of action learning. Because organization learning processes tend to be tacit and taken for granted, members are not accustomed to examining or questioning them. This can lead to repetition of learning mistakes and disorders. Thus, deuteron learning is aimed at the learning process itself. Members examine values, organizational conditions, and behaviors that inhibit single and double loop learning; they design more effective learning processes. Members then engage in implementing and assessing the new learning behaviors. Overtime, deuteron learning enables members to enhance their capacity to learn, and thus become better at implementing changes and improving the organization.

Emotional Phases of Change - Organizational change has an element of loss inherent in the process, and it is a loss that is often deeply felt by employees. The Kubler - Ross Grief Model addresses the emotional issues associated with change. The four emotional states experienced throughout the change process may be expressed by employees in behaviors that are obstacles to the process of change. By understanding the emotions employees often encounter during change, you will be better prepared to facilitate the change process.

Stage 1 - Denial

Stage 2 - Resistance

Stage 3 - Exploration

Stage 4 - Commitment

The first emotional state experienced during change is denial. For example, employees encountering a change initiative might be saying to themselves, “I can’t believe this is happening to us.” Unresolved fears about the change initiative need to be addressed during this phase. Fear and mistrust need to be replaced by acceptance. To be an effective change agent, you should encourage acceptance to change by initiating trust-building activities

.The second emotional state is resistance to the change process. It is common for employees to begin to resist the change initiative. During this phase, employees attempt to slow down or derail the change initiative. You must be able to spot resistance when it occurs and formulate sound strategies for overcoming it. Resistance is a natural reaction to change, and it can take many forms. The easiest form of resistance to recognize is those who loudly indicate their dissatisfaction with the changes taking place in the organization. Soliciting feedback from these individuals lets you know where they stand, so that you can overcome their objectives. Employees often resist change through denial. These individuals refuse to acknowledge that a problem exists. For example, competition might force a business to organize workaround processes to improve operating efficiencies. Functional departments involved in these processes would be combined. Employees might not see a need for this change. The reasons for change must be fully explained so that employees understand why it is necessary to embrace the change.

Another common resistance is exhibited by individuals who willingly embrace the change, but when they realize that it takes additional time and effort, they begin to undermine the change process. It is best to slow down and allow people to absorb change gradually before forging ahead.

Sometimes employees use confusion to postpone change. After explaining the changes repeatedly, employees ask the same questions over and over again. They may truly be confused or they may be using confusion as a form of resistance to avoid accepting change.

The most dangerous form of resistance is referred to as malicious compliance. Employees enthusiastically support change, but covertly undermine the effort. For example, during presentations, the questions are polite and employees seem accepting. As you move forward they act as though they are implementing the new program. Months later you find out nothing has changed.

How we respond to resistance is very important. Forcing compliance may increase resistance. Those affected by the change probably know a lot about what is required to implement something new, and their input is important to the change process. The degree to which employees will support your new initiatives depends on how many of their recommendations are used. Compromise can accelerate the change process.

The third emotional state encountered is exploration. If employees are unable to stop the changes from occurring, they begin to explore their new roles. Both individual roles as well as the overall role of the group are specifically defined in this stage. During the exploring stage, it is important that unresolved issues that continue to surface be

addressed. Be alert for employees who remain angry about the change initiative. Those individuals should be counseled at the first sign of falling back to old behaviors. If trust has been created among the group, then peer influence can be used to encourage behavioral change.

The final emotional state is commitment to the change initiative. Mutual commitment is established for the change effort. Obstacles have been removed and the focus is on successful implementation of the changes.

Reasons for Failure : Research indicates that two-thirds of all organizational changes fail. This represents a tremendous cost to companies in money, resources, and time. Several of the most common reasons for failed change programs include a lack of commitment from the top, change overload, lack of incentives tied to the change initiative and a lack of training.

Commitment from senior management is required if the change program is to succeed. People reveal their values through their actions, not their words. Employees infer what is important from management’s behavior.

Trying to do too much at once is often an obstacle because trying to accomplish too many activities can create confusion. Helping the group to on well-defined steps that carry them from one initiative to another will instill a sense of order and confidence in the process.

Often change programs are initiated without changing incentives to reinforce the desired new behavior. Change is expected, but the old behavior is still being rewarded. The organization must publicly recognize and reward employees who change by linking promotion and pay rewards to the desired behaviors. Rewards that reinforce old methods must be eliminated.

Another cause of failure is that too little attention is given to developing the skills people require to make a new technology work. The organization must develop experiential training that provides real time hands-on experience with new processes and procedures. The physical environment must also reinforce these changes.

Conclusion : Employees view the change process differently. They often view change as disruptive. A successful change program requires that employees understand why the need for change is necessary. Employees must buy into the change program. Employees’ commitments must be linked to the company’s change outcomes. During transitions, employees speculate about how change will benefit or possibly harm them.

People require more information during the change process. They want to know how changes will affect them and how to prepare. By providing specific information to everyone at the same time, rumors can be minimized. Communicate only the facts. Not communicating to employees when implementing change programs is the worst mistake a company can make. During times of uncertainty communication voids are filled with rumors. Communication lowers stress and anxiety. When restructuring jobs or refocusing the organization’s direction, it is very important to clarify roles and how they support each other. Role clarification helps raise issues in a neutral manner and avoids confusion when change is in process.

Change must be continually managed to yield sustained results. Measurement provides a way to track progress. An effective measurement system would be specific, simple to understand, creative and involve both managers and employees. The results should be visually displayed so that employees can track their progress. A consistent process of measuring the results of the change initiative combined with a rewards program that reinforces the desired behavior is the backbone of an effective change program.