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Implementing Organizational Change: Theory into Practice 2/eBert Spector

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Organizational Change

Copyright © 2010 Prentice Hall

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Learning Objectives

Identify the role of strategic renewal in propelling change.

Focus on the behavioral aspect of organizational change.

Analyze the dynamics of motivating employees to alter their behaviors.

Differentiate the three faces of change. Understand the source of both

employee resistance to and support for change.


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Building a Vocabulary

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.


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Examples of Strategic Responsiveness

Company Altered Strategy

EnronMove from energy production

to energy trading

GEMove from commodity business to high

value-added products and services

IBMMove 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


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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


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Strategic Renewal and Organizational Change

Shifting CompetitiveEnvironment

NewOpportunities

Strategic Renewal

OrganizationalChange

Altering BehaviorPatterns ofEmployees


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Organizational capabilities: the collective talents and skills of a firm’s employees.

Business model: the way in which an organization generates profitable revenues.


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Examples of Novel Business Models

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 YouTube revolutionized the creation and

distribution of video Facebook integrated web-based

interconnectivity with traditional school-based yearbooks


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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.


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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.”


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Sources of Behavior

Individual

Characteristics

Organizational

Context

Behavior

Organizational change seeks to create long-term,

sustainable alterations in employee behaviors.


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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.”Copyright © 2010 Prentice Hall

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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.

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.

Underlying Causes of Resistance


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Management’s Role in Creating Resistance

Text in this colorResistance CauseSatisfied with status quo Employees not included

Change is perceived as threat

Employees see little opportunity to get required

skills

Cost outweighs benefitsInadequate articulation of

goals

Belief that management is mishandling the

process

Employees’ voice and interest not being included

Employees doubt successPast change efforts lack

sustained success


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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.”


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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.


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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.


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Three Faces of Change

Type Target Rationale

Turnaround Internal resources Improve short-

term bottom-line performance

Tools and techniques

ProcessesIncrease internal

efficiency

Transformation BehaviorsEnhance human

capabilities


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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.’ ” Copyright © 2010 Prentice Hall

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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.


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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.


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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 and 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.”


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Examples of Trigger Events

CompanyAltered

StrategyTrigger Events

EnronMove from energy

productionto energy trading

New leader (Jeff Skilling) Desire for new business model

GEMove from commodity

business to high value-added products and

services

Recession in 1990s New leader (Jack Welch)

IBMMove from product to

service/consulting company

Declining performanceNew competitorsNew 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


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Examples of Trigger Events (continued)

CompanyAltered

StrategyTrigger Events

Renault Move from French-

based to internationally focused automobile company

Stagnant marketNew leader (Carlos Ghosn)

WalgreensMove 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 baseOutmaneuver

competitor (MySpace)


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted,

in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United

States of America.

Copyright ©2010 Pearson Education, Inc. publishing as Prentice Hall

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