CONTENTS

I. Introduction .................................................................................................................. 2

II. Organizational Change and its drivers ........................................................................ 3

III. Why change management initiatives fail? ................................................................. 5

IV. Successful Change or transformation ....................................................................... 11

V. Conclusion ................................................................................................................. 15

VI. References ................................................................................................................ 16

VII. Appendix ................................................................................................................... 19

FIGURES AND TABLES

Figure 1. Stages to transform organizations ........................................................... 12

Figure 2. A system of objectives and strategies ...................................................... 19

Figure 3. The Effectiveness Matrix .......................................................................... 19

Table 1. Comparison of the trends of change perceived and felt at grass-roots level

in private and public sector organizations in the UK .. 6

Table 2. Resistance Change .. 8

2

I. Introduction

Throughout history, we have been able to observe changes that have impacted the world.

Some of the most important are the industrial revolution, advances in technology and

communications, and globalization. All of these changes have increased the

competitiveness of business environments.

These changes have been increasing in complexity and frequency, affecting organizations

across all sectors, and producing pressure to change. Such changes also bring uncertainty

and have been generating new postures by the enterprises with the aim to adapt, survive,

prosper and maintain competitiveness.

For this reason organizations are in a constinuously researching improvements to their

internal and external processes, services and products and/or trying to penetrate new

markets. As a consequence, these organizations need to implement change initiatives.

However, according of some business researchers that have been widely investigating the

field, 70% of these programs fail, because management does not know how to handle the

challenges involved in implementing change

There are a considerable number of investigations that support this argument, but at the

same time some authors differ in the factors that affect the correct implementation of the

change process. However, their different point of views allow to analyse this issue from

different perspectives and have a better understanding of the situation.

The purpose of this paper is to review recent research into this area and present a general

overview of some of the common problems and mistakes that arise in companies during

the change process affecting successful implementation. The first section, begins with an

overview of the concept and its drivers. Subsequently, this paper attempts to answer the

main question: why do change management initiatives fail? Finally present an approach of

how to implement the change correctly to avoid failure.

3

II. Organizational Change and its drivers

The concept of organizational change have been defined as a transformation process that

occurs when some areas or the complete organization is altered, turnaround or

restructuring. March (1981) cited in Soparnot (2011:641), defines organizational change as

a solutions package from various parties within an organization, that responds to various

interconnected parties within the environment. In addition, Bolagun (2006) consider that

this process is dynamic, emergent and unpredictable and depends on the context of the

situation. However, change can also be a frustrating and daunting process because it can

produce unintended outcomes, in addition to the intended outcomes, that can redirect the

change program.

Moreover, it is important to consider three elements in the organizational change process:

the actual situation, the transition and the desired situation to understand what needs to be

changed, why, and how. However another important question that needs to be asked is:

when is it necessary to implement a change initiative? For managers it is difficult to answer

this question, even for those that are getting good results. In a rapidly changing world the

external factors affect all the organizations and lead them to take decisions and actions in

order to adapt to new circumstances. Carnall (2007), concludes that the effective

organization is the one that is efficient and able to modify its goals as circumstances

change.

There is not an exact moment to implement a new change initiative, nevertheless

enterprises need to be in a continuous adaptation process which will provide the

information needed to implement new changes internally.

On the other hand, extensive research has been carried out on some of the drivers that

generates organisational change such as partially, or totally, redesigning the

organizational structure, macroeconomic variables, creation of new products or services,

or the implementation of new processes.

Tichy (1983), discussed four triggers of change: environment, diversification into new

business, rapid technological shifts and people. In addition, Paton and McCalman (2008),

4

identified drivers such as product or process technology advances, change in consumer

trends, general economic and social pressure, government legislation, supply-chain

activities, acquisition and mergers. For Hussey (1996), the pressure to deliver shareholder

value, competition, accelerating pace of technological obsolesce and more demanding

costumers are the major long running drivers. Hamlin et al. (2001:14) presents in Table 1 a

comparison of the trends of change specifically in organizations in the UK.

5

As can be seen, there is a wide range or drivers mentioned by different authors, however

every organization needs to detect which are the factors that are impacting its industry with

the aim to identify the changes needed to implement.

III. Why change management initiatives fail?

According with Kotter (1995), the failure in the change process affect all kind of

organizations regardless of size or industry. He mentioned that enterprises share a

common goal: cope with a new and more challenging market environment. For this reason

their efforts are on change initiatives that are focused on total of quality management,

reengineering, right sizing, restructuring, turnaround and cultural change. However, recent

evidence suggests that 70% of the change initiatives does not have success (Balogun,

2006; Beer, 2000).

In USA the evidence founded was presented by Schaffer and Thomson (1992), who

surveyed 300 electronic companies and the result were that 63% of the change initiatives

fail. On the other hand, a similar failure rate is also reported in Europe. Research by the

Industrial Relations Service suggest that 80% of change programs fail. In addition,

Wilkinson et al. (1993) cited in Hamlin et al. (2001), provides information that only 8% of

change initiatives implemented in 500 UK companies could succeed (or were successful).

This high percent of failure, is because organizations face important problems during the

change process. Some of the common explanations are poor business administration,

capacity limitations are overlooked, incorrect implementation, and most of the change

models are not complete at the start of implementing the change.

In addition, Hamlin et al. (2001), argues that failures follow a pattern: they start with

announcing the new initiative, followed by short training, and then a re-allocation and re-

arrangement of resources, but during this process the management lose the reasons and

focus of the change. The authors concluded that the causes of failure are: viewing change

as a destination rather than as a process, lack of clear vision and communication, legacy

of previous initiatives programs that failed, failure to provide necessary encouragement

and training and skills to help employees to adapt.

6

Furthermore, Marks (1994) argues that change in organisations has three psychological

consequences on employees that affect the success implementation. The first one is

wrenching experiences that are often badly handle by management. Second,

psychological reactions to the transitions which lead supervisors of the change program

lose confidence in management and feel less loyal, because for them the old

psychological contract has been broken. The third consequence is the behavioural

reactions in the post-transition organization. This is because in some cases people suffer a

lack of direction and working hours have been extended. Besides, Devine and Hirsh

(1998) consider that other human consequences during a merger that are not handled

correctly are dissatisfied employees, creating a legacy of bad feelings negatively impacting

their performance. All these psychological consequences can create resistance to change.

Besides, according to Bolagun (2006) during the change process people are required to

adopt new roles, new working practices and new technology tools, and move from a pre-

programmed behaviour to one with more awareness of the differences they are

experiencing. These situations can generate insecurity and fear of the unknown and thus

create an attitude of resistance.

Agocs (1997), explains that resistance include behaviours such as refusal to engage in

joint problem solving, the silencing of advocates for change, refusal to seek common

ground, sabotage and lack of cooperation. Table 2 present the most common resistance

types and some solutions suggested by Graetz (2006) to managers that face this

behaviours during the change process.

7

Another important problem that generates failure is that some managers try to implement

many initiatives at the same time and they cannot develop them with high quality, and

most of the time these initiatives are not planned efficiently. In addition attention is then

spread across all the initiatives at the same time and it is more difficult to coordinate each

change.

Moreover, Hamlin et al. (2001) identified six important mistakes that result in failure. The

first one is that managers that are responsible for the change initiatives, are not sufficiently

aware of the principles and best practices approaches. Second, it is common to see

managers that are aware of the theory and practice try to find a simple or quick solution.

The next mistake is that managers do not appreciate and give insufficient attention to the

importance of leadership and cultural aspects of change. The fourth mistake is that

managers do not pay sufficient attention to people issues. Hammer and Stanton (1995)

cited in Hamlin et al. (2001) consider that this is the top tem mistakes in re-engineering to

generates failure.

The fifth failing is that the human resource development function is not valued and

managers therefore fail to engage with it and miss out the significant contribution needed

during the change process. Finally the last mistake is managers do not give the trainers

and developers credibility and perceive with the trainers and developers with insufficient

Table 2 Resistance Change

8

status, overlooking that these specialist could contribute and influence in the business

strategy constructively.

On the other hand, Kotter (1995) also identified eight important mistakes that can occur in

every stage of the change process, and can lead to devastating outcomes. The first error

is not establishing a great enough sense of urgency. It is possible to rate an urgency when

75% of the companys management consider that the business is unacceptable. Over 50%

of companies fail in this first stage. Some of reasons are because managers presented

lack of patience and underestimate how difficult is to convince people that change is

necessary and drive them out of their comfort zones.

Moreover, managers can be under stress that some unexpected situations can occur such

as people acting defensively, moral will drop, events out of control and they will be blamed

for creating crisis. In some cases, executives do not share unwanted information, but the

use of independent analysts and consultants can be a good alternative.

The second mistake is not creating a powerful enough guiding coalition. This is a team that

will guide the change. The problem here is that some renewal programs start with a team

that often does not include senior executives and other lower levels. In the end, they will

not have a better overview of the company and complete information that could be helpful

to analyse the situation correctly. Other problems at this stage are that the managers

underestimate how difficult is produce change, and undervalue the importance of an

effective guiding coalition.

The next mistake is lacking a vision. In my opinion the vision is the most important part in

the process because will give the correct direction, and it will provide a guide to develop

the specific objectives that are required. Johnson et al (1999) cited in Princely (2008:555),

argue that the vision is the general expression of the overall purpose of the organization,

and it reflects the expectations of the business organization.

Without a vision, it is difficult to define the correct renewal program. For this reason, one of

the responsibilities of the guiding team is to create a picture of the companys future with a

clear direction. Unfortunately in many cases this not clear and is limited to lots of plans and

incompatible projects without vision and proper direction. Moreover, the team creates

9

notebooks that describe the procedures, goals, deadlines and methods but without a clear

guide where the companies needs to move and these situations can confuse people.

The fourth mistake is under communicating the vision by a factor of ten. In this case, the

author found three patterns. In the first one, the guiding team developed a good

transformation vision followed by holding a single meeting to communicate it, however just

a few people understood the approach. Second, the head of the company spends an

important amount of time making speeches, but most of the people did not understand the

speeches. The last pattern, the companies used newsletters and speeches, however

some senior executives showed hostile behaviour to the vision and as a result the belief in

the communication goes down.

The ineffective communication such as boring newsletters, tedious meetings and generic

management education, will be a waste of time leading to negative outcomes. Also, Kotter

(1995) argued that people will not be convinced, if credible and continuous communication

does not exist. It is vital that people believe and support the idea, otherwise the change is

impossible. However, to get this help is challenging especially when downsizing is part of

the vision.

However, it is important to mention that is not easy to achieve an effective communication,

and even when managers believe that they already transmit the message correctly,

according with Hamish (2008) the real challenge is translation and this can affect the

process of goal setting and performance management. Managers that translate correctly

can get good results and it is necessary that they answer the questions how? and why?.

Hamish defines translation as the act of working out what the big goals mean for the

smaller goals, and what smaller goals mean for investments and action (2008:9).

A similar perspective is presented by Julia Balogun (2006) who considers that the process

of change and the behaviours of the people involved, will be affected by the interpretations

of the intended and unintended messages. She also mentions that is important not

consider only the formal communication, since exists a social process of interaction where

people share their experience in discussions, negotiations, stories and rumours. Through

these interactions people will make sense of the event and then act according with their

interpretations.

10

The fifth error is not removing obstacles to the new vision. The most significant obstacles

that the change program can face are: bosses who refuse to change, a bad organization

structure that will block increasing the productivity, compensations programs that will make

people choose between the new vision or their own benefits and finally individuals

behaviour and the challenge here is to try to convince the person that their behaviour is

the problem and not an external factor.

The sixth error is not systematically planning for and creating short-term wins. When the

major changes will appear in a long term, people can stop to believe in the renewal

program, even when the can notice result in periods of one or two years. Without short

terms wins people can change their positive attitude and start to be resistance to the

change again.

Some managers declare victory with the first positives outcomes it is considered the

seventh mistake. It is fine to celebrate and motivate people with the idea that the new

renewal program is working, but managers cannot declare victory with only some signals

of progress and they need to understand that some processes can take years and the new

approaches are fragile.

The last mistake is not anchoring changes in the corporations culture. People can forget

the new approaches, behaviours and attitudes as soon as the pressure for change is

removed. In addition they can confuse the real connection between the new approaches

with the better performance of the organization and create incorrect ideas.

All these problems and mistakes mentioned above can produce negative results such as

duplicated efforts, high costs, fixation on complex and unattainable objectives, adverse

effects on the climate of the organization, returning to the old practice which involves loss

of credibility and confidence in the organization when it comes to addressing future

processes of change. In addition, Marks (1994) argues that other consequences are

increasing loss of wrong people, cost in retraining the remaining workforce, contracting out

of entire functions and increase use of use of temporary consultants.

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IV. Successful Change or transformation

One question that has been asked of enterprises is how can a change process succeed?

In recent years, this issue has received significant attention form consultants, academics

and enterprises, and today there are a number of approaches to the design of change with

the aim to show how companies can achieve successful transformation processes.

According with Bolagun (2006), the key is to have a change plan that take some practices

such a good communication; clear assignment of responsibility; management of change

resistance and programs to train people with the new working.

In 2010, Keller and Meany realized a survey with the aim to analyse the approaches that

were used for companies most correlated with success transformations. They found that

these companies used some common tactics such as cutting cost, turning around a crisis

and going from good to great performance. In addition, these tactics included: setting clear

targets, creating clear structure, maintaining energy and involvement throughout the

organization and exercising strong leadership (Keller and Meany, 2010).

Furthermore, to create a change plan the companies evaluated the current capabilities and

problems, identified the mind-sets that must change and they broke down the process into

a specific initiatives. In addition, the survey shows evidence that engaging employees

during the change process; building capabilities; and focus in strengths and achievements

more than problems, were key factor for transformation success.

On the other hand, Kotter (1995:59), argue that small percentage of companies that had

success in the implementation of initiatives, had a change process with a series of phases

which required considerable length of time. But he suggest no lose any step, otherwise the

result will be unsatisfactory. To support this argument, Kotter analysed some companies

that got positive results applying this process that consist in eight stages (see figure 1).

12

The first is establish a sense of urgency. Here the enterprise will analyse in detail the

market position, technological trends, companys competitive situation and financial

performance. In addition, it will monitor the environment getting information about crises,

potential crises or opportunities with the aim to share it effectively with the whole

organization. The reason to share it, is because when people is involved in the

transformation program they will be motivated and disposed to cooperate and achieve the

business goals.

It is also transcendental have a good leader (in the head position), with a clear vision for

the necessary changes; and the knowledge and skills to combine the correct approaches

and apply them during the renewal program.

Second stage: forming a powerful guiding coalition. The head of the company needs to

identify the key people from different levels that will lead the renewal program according

with the needs of change, to finally create a guiding team with powerful coalition in terms

of expertise, information and relationships. This team will operate outside of the hierarchy

since the current system is not working correctly. It is important to highlight that is it

necessary that this team has strong line leadership to achieve the power that is require

with the aim to empowers others communicating the new direction.

Figure 1 Stages to transform organizations

13

Some of the approaches that Keller and Meany (2010) found in successful companies,

suggest the importance of involving employees during the change process, especially

once the implementation of the change begins.

The next stage is create a vision. The guiding coalition team will create a picture of the

company including the direction that the company needs to go. In some cases will take

between 3 to 12 months for the team to get this vision clear, and in some cases can result

dreaming. After create it, they need to communicate the vision that is the fourth stage. This

require that executives have a continuous communication in their hour-by-hour activities,

using all possible channels to produce lively articles, effective and exciting discussions

and courses focused on the new vision and how to solve problems during this process. In

successful cases the executives become a living symbol of the new corporate culture

walk the talk. The effectiveness of this behaviour lies in to be consistent with their words.

Franken (2009:25) is also agree with this argument and he mention the words and actions

of leaders influence the decisions and behaviours of their subordinators.

Afterwards, the process continues with empowering others to act on the vision. It is

necessary remove obstacles to the new vision. First, managers need to involve a large

amount people, encouraging them to develop new ideas, try new approaches and provide

leadership. This will give generate positives outcomes. However, it is important to treat

the blocker fairly in a consistent way with the new vision. This stage is related with some of

the outcomes of Keller and Meany (2010) that argue that strong leadership and

maintaining the energy for change are keys to success. They found that companies that

apply both principles presented 79% of success.

The six stage is planning for a creating short-term wins, with the aim to maintain the

collaborators motivated. This will result in new products introduction, excellent productivity

and higher customer-satisfaction. During this stage, managers will look for ways to obtain

clear performance improvements, establish goals, achieve the objectives and reward

people with recognition, promotions or money.

At this stage is important to mention that is necessary to have a strategy with the aim to

achieve every goal effectively. Hamish (2008:9), present a system of objectives and

strategies that can be very useful during this process. He states that a strategy exists at

14

every level in the organization, and they become objectives for the next level down. One

persons strategy is the next persons objectives and they must fit together (See figure 2 in

the appendix).

However, for an effective translations it is necessary to create a hierarchy of objectives

and ensure that people will participate and collaborate productively though meetings and

workshops. This will encourage people to find their own solutions and good interpersonal

relations. Nonetheless, only the correct execution of the strategy will enable organizations

to adapt and survive (Franken, 2009)

The penultimate stage is consolidating improvements and producing still more change.

This stage is a great opportunity for managers to take advantages of the credibility

afforded by short-term wins to encourage people to go further and analysis more problems

that were not consider since the beginning and include new reengineering projects. In

addition they pay attention to who is promoted, how is developed and who is hired.

Finally, there are two factor in the last stage. The first one is institutionalizing new

approaches with the aim to help people to link how the new approaches, attitudes and

behaviours impact in a positive way the performance. The second factor is taking sufficient

time to secure that future management does personify the new approach.

According to Kotter (1995) if the company doesnt follow every step of the process

correctly, they can get apparent progress for a while but not a sustainable change. For this

reason is transcendental apply every step and be patient to see the final results.

On the other hand, it is important to highlight that a key to implement the complete process

is monitor all the activities periodically with the aim to measure the progress using tools

such as Balance Scorecard, surveys, Gantt charts, discussions with the team and so on.

In addition, Carnall (2007) suggests to make a quantitative and qualitative measure using

a set of factors in four quadrants. These are represented in the Effectiveness Matrix

(Figure three in the appendix). However, is not possible to assess everything, but every

organization needs to decide what they need to monitor according to its needs.

15

V. Conclusion

Today, change is a process which companies have to go through periodically in order to

be at the forefront of the trends that occur in the business world. However the evidence

shown in this paper shows that several researchers agree that a high percentage of the

change initiatives implemented by companies fail. This as a result of various factors such

as the lack of knowledge of change approaches and its correct implementation.

This paper explains that companies tend to follow a very stark process to implement

changes. In addition, the managers often do not understand or give relevance to each of

the basic principles of change. Furthermore, their vision is not clear and they tend to

confuse what has to be achieved. In such circumstances failure is likely.

One of the main errors detected is that companies do not analyse in depth their needs and

so incorrectly determine the changes that they are required to implement. Companies

need to understand that even with changes to their business environment, it does not

necessarily mean that the business needs to implement many changes. Companies

should evaluate which changes fit with the needs and goals of the business and be

realistic regarding the necessary resources to implement it. Otherwise, they will discover

they lack required capacity and the staff with the skills to manage the process after the

change process has started, creating a vicious circle with negative outcomes.

It is important to highlight that the development of the vision and the correct strategy are

not enough by themselves to achieve effective change. During the implementation of the

initiatives administrative and human aspects should be considered comprehensively, since

without the ability to manage both, the acceptance and adoption of the new approach will

fail. Finally this paper concludes with a famous quote of Charles Darwin, cited my

Kotrschal and Taborsky (2010) that support the importance of adapting to change:

It is not the strongest of the species that survives, nor the most intelligent,

but the one most responsive to change

Charles Darwin, 1809

16

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VII. Appendix

Figure 2. A system of objectives and strategies

Figure 3. The Effectiveness Matrix