Change Management

Change management

Anonymous code: Z0910138

MBA Full Time

Word Count: 3990

Date: 28th June 2010

Change management Z0910138

Sl. No. Contents Page No.

1. Abstract 3

2. Introduction 3

3. Factors with transformational influence 5

4. External environment 5

5. Culture 6

6. Leadership 8

7. Vision, Mission & Strategy 10

8. Factors with transactional influences 11

9. Communication 11

10. Motivation 13

11. Structure 14

12 Training & Development 15

13. Policy 16

14. Stakeholder management 17

15. State Bank of India- Case discussion 18

16. Conclusion 20

17. References 21

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Abstract:

“It's not that some people have willpower and some don't. It's that some people are ready to change and others are not.” - James Gordon

With the rapid development of world economy and globalisation, all kinds of organisations have conceded through various changes to adapt to the new environment and compete effectively. Either they have changed incrementally/transformational, else have died (Beer & Nohria 2000). For many successful organisations changes have been the only constant. Further the change process is very critical as multiple factors influence its outcome. This paper discusses various factors affecting change in an organisation using the Burke & Litwin causal model of organisational performance and change. And it concludes with the discussion of a case study how some of the discussed factors have influenced State Bank of India’s change project.

Introduction:

“Organisation change is a kind of chaos” (Gleick 1987, cited by Burke & Litwin 1992). Hayes (2010) expresses that the effective change processes are dynamic in nature and the factors affecting the change process are very much contextual or situational. In this paper, the Burke & Litwin (1992) causal model of organisational performance and change has been used to identify and categorise the factors that affect implementation of change in an organisation. This model is an integration of implementation and change process theories. So this model has been considered to be a very extensive framework to discuss the factors.

As per Lewin (1951), every organisation has some forces of inertia, which act as restraining forces in a change process. So in order to facilitate change some driving forces are required to overcome these restraining forces. The driving and restraining forces are very objective in nature and vary from an organisation to an organisation. A factor which is a supportive factor for change, if misaligned with the change process can become a restraining factor (Hayes 2010).

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CURRENT STATE DESIRED _STATE

Restrainers: Poor Leadership, Culture issues, Status quo , Lack of resources and skill set, Low employee morale & commitment, Organisational silence, Unsatisfied Stakeholders.

Drivers: Able leadership, Strong vision, good communication, effective reward system, proper training, good stakeholder management, supportive culture.

Change Process


The Burke & Litwin (1992) is a vertical model, i.e. the elements higher in the model have greater impact on the element in the lower part and the organisational change. The external environment, mission, leadership and organisational culture have transformational influence on an organisational change, whereas the rest elements have transactional influence.

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Role of external environment in change Process


Restrainers: Poor understanding of external environment & lack or poor risk mitigation plans

Drivers: Good understanding of external environment & proper risk mitigation plans.


Factors with transformational influence:

External environment:

External environment is any outside factor or situation or condition, which affects the organisational performance. The factors can be broadly categorised into four types: Political, Economic, Sociocultural and Technology.

Political factors include political stability and various laws & government regulations on environment, consumer protection, employment, market structure (oligopoly/monopoly/ monopolistic) and fiscal policies. Organisations need to be aware of the effect of these factors on their change project. E.g. If two oligopolies are merging then anti-trust regulations may affect their integration process.

Next, economic factors include economic growth, exchange rate, interest rate, cost of raw materials, purchasing power of consumers, competitors, business cycle and inflation rate. Sociocultural factors include cultural aspects, population growth and demographics. E.g. if a company in Japan, plans to reduce its workforce during a change process, it may face stiff resistance, as traditional Japanese culture believes in life time employment commitment. Technological factors include automation, new emerging technologies, R&D expenditure of competitors and rate of obsolescence of plants, etc.

The influence of external factors on an organisation and change will vary depending on the type of change, size and industry of the organisation. A proper assessment of the influencing factors and a good risk mitigation plan can support the change process. Failure to do so can endanger the change.

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Role of power culture in change Process


Restrainers: Organisational silence, low motivation

Drivers: Charismatic or transformational leadership


Culture:

Organisational culture is an unwritten way of doing business and can be stated as beliefs, values and attitudes. Smith (1998) explains culture is “the way we do things around here”. De Long & Fahey (2000) define culture as a design for living, which will constitute a system of values, practices and norms, which are shared within a group of people. Values include ideas that are believed to be desirable, good and achievable by the group. Influencing employees to change from one organizational culture to another is a tedious task. In the last few decades, many change processes were but could not succeed because of cultural issues (Ogbonna 2003). Nevertheless, Smith (1998) argues that, if an organization intends to undergo any major changes, then a cultural change is useful in sustaining the change.

Harrison (1972, 1986) identified four types of culture: Role, Power, Task and Person Culture. In power culture organisations the decision making is centralised and high degree of constraints are imposed on employees. A transformational or charismatic leader can drive effective change in this culture. However, in this type of culture the low freedom for expression may lead to low employee motivation and organisational silence, which can restrain the change process.

The Role culture, while allows employees more freedom but within the defined parameter of their role and job description, has limited inter-functional communication, is a hierarchical and mostly method oriented rather than a result oriented. Lack of communication, hierarchy and method orientation makes role culture less supportive of the change process, as effective change requires continuous analysis of results and high flexibility.

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Role of Role culture in change Process

CURRENT STATE DESIRED _STATERestrainers: Limited communication, hierarchical, method predominated rather than result.

Drivers: Degree of freedom

Role of Task culture in change Process


Restrainers: Difficult to exercise day-to-day control

Drivers: High degree of freedom, project orientation, decentralised decision making, low status distinction, better team dynamics, adaptable workgroup

Role of Person culture in change Process

CURRENT STATEDESIRED _STATE

Restrainers: Lacks structure.

Drivers: Highest degree of freedom, high mutual trust, high commitment level, cooperative work culture


The Task culture allows more freedom to employees to act in the best ways that will lead to better result for their task. This culture is most favourable to the change process as its characteristics are project orientation, decentralised decision making, low status distinction, better team dynamics, adaptable workgroup, high degree of individual freedom.

The Person culture is also very supportive for the change process as it allows highest degree of individual freedom and existence of mutual trust between the individual and organisation. Further the commitment levels of employees are high as they feel that they are valued as human being and because of cooperative work culture and trust on top management support.

Interestingly, these four classifications not only focus on organization’s culture, but also its structure. An organisation while developing the strategy for change should analyse its culture and should take necessary actions to facilitate effective change.

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Leadership:

“Leadership is widely regarded as the key enabler of change process...” (Hayes 2010 p. 159). As per Kotter (1990), leaders set directions and develop necessary strategies to move in that direction, that is, creating a vision and achieving it. (Hayes 2010 p. 159) In his six-box model, Weisbord (1976) states that the role of leadership is to align the five elements: purpose, structure, rewards, helpful mechanism and relationship in an organisation. All these five elements can play a key role in driving of the change process. Leadership focuses on alignment of these elements by setting right vision & strategy and then effectively communicating the new direction to all.

By analysing Kotter (1995) eight- point checklist the role of leadership can be evaluated in the change process.

Leaders drive change by establishing a sense of urgency for the change. They alert the organisational members to the need for change and motivating them to overcome the status quo, and thus drive the unfreezing process.

Leaders make the coalition of the organisational members those who recognise the need for change, thus drives the change process.

Leaders develop vision & mission to communicate the change objectives, which are powerful driving forces for organisational change. Vision conveys an appealing picture how the future will look like. Further it provides a clear guideline to facilitate effective decision making. It is widely accepted that a strong organisational vision, can make valuable contribution and act as a driving force in the change process. However, if the leaders present a narrow vision which is unfeasible and inflexible can jeopardise the change program.

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Role of leadership in change Process


Restrainers: Poor Leadership, narrow, unclear & unfeasible vision, poor/miscommunication, un-motivating reward system, hubris

Drivers: Able leadership, Strong vision, charisma, good communication, good delegation of authority, enticing reward system, clearing obstacles, institutionalise new approaches.


The role of communication of vision to the organisation members is very crucial for the success of change. Leaders play a key role in communicating the vision to the organisational members and key stakeholders.

Leaders do act on the five elements (Weisbord 1976): purpose, structure, rewards, helpful mechanism and relationship, to identify and remove the obstacles in the change and exhibit transformational qualities. Because sometimes the organisational structure or reward system may not facilitate the change process. Leaders do act on them and clear the obstacles. Leaders involve people in achieving the vision and delegating tasks to them, thereby giving some sense of control. Further leaders support the member’s efforts by providing feedback, coaching and role modelling.

Leaders set realistic milestones and create short term wins to celebrate the success along the way which maintains the motivation of the team. However, if the milestones set are unrealistic or wins are long term only then people lose the initial sense of urgency for change and their attentions shift to other operational affairs.

Leaders celebrate short term wins and capitalise on them to introduce further changes that are aligned with the vision to drives the change. However, Kotter advocates that declaring victory soon can retard the momentum of the change.

Leaders institutionalise the new approaches to ensure that the change happened is sustained. They show others how the change has transformed the organisation performance and thus ensure proper refreezing.

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Role of vision, mission & strategy in change Process


Restrainers: Change misaligned with mission, a narrow, low desirable & inflexible vision, lack of trust or confidence on external change agent.

Drivers: Well aligned change plan, a feasible, focused, flexible & desirable change vision.


Restraining forces caused by ineffective leadership: Leader’s hubris can be an impediment in the change process. Many a time leaders pursue flawed visions knowingly, in order to fulfil their past commitments. Because they think the failure to doing so, would damage their reputation. Conger (1990) explains it by cognitive dissonance. Further Conger (1990) points the miscommunications by leaders can jeopardise the change process. Because sometimes leaders present information in a way to make their vision more realistic and achievable, while in real case it may not be so. (Hayes 2010, p.160)

Vision, Mission & Strategy:

Mission represents what the employees and top management believe the purpose of the company is. And strategy is how the organisation is planning to fulfil the mission over a period of time. From the prospective of change, mission and strategy play an important role in influencing, guiding and motivating the employees. If a proposed change is not aligned with the organisation’s mission, then the probability of success of change will be very less. Because there will be widespread resistance from various key stakeholders. For example, in 2002, eBay acquired Paypal. However, there was a high resistance from the eBay’s key stakeholders. Their stand was that Paypal’s business mission is different from that of eBay’s. So before embarking upon any change plan, the top management needs to ensure that the change is aligned with the organisation mission.

As discussed earlier one of the roles of leadership is developing & communicating the vision. The vision sets the direction of the change process. The vision will be supportive of the change, if it follows the six guiding criteria suggested by Kotter (1996). The right vision should be imaginable, desirable by key stakeholders, feasible, focused, flexible and communicable. Further while developing the change strategy the leaders need to ensure proper planning and timeline for change and assess whether they need a vehicle for change process such as an external consultant. However, the management needs to reassure that the employees will be comfortable in working with the external change agents; else it will imperil the change plan.

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Role of communication in change Process


Restrainers: Organisational silence, one way communication, poor lateral communication, isolation of information, improper channels, misinterpretation.

Drivers: Clear and timely communication, bi-directional, feedback to check effectiveness, information sharing/lateral, recognising the content of information, use of effective channel.


Factors with transactional influence:

Communication:

“The quality of communication can have an important impact on the success or the otherwise of a change program”. (Hayes 2010, p. 174). Beer (2001) identifies poor communications as on the six silent killers in the change (Hayes 2010, p. 174). The effect of communication network on change can be analysed in four features.

First, the direction of communications, effective change communication includes both quality up-ward and downward communication. In any organisation information passes through hierarchies and there are possibilities of filtering out of essential information in the process, due to individual perceptions. So it is important for the change managers to ensure that no important information is filtered out. Further it is crucial that all departments share required information with others on time. Hargie & Tourish (2000) have expressed concerns that poor information sharing & work in isolation will retard the change motion (Hayes 2010, p. 175). Change managers should have clear understanding of what information to withhold and what to uphold.

Second, there should be a well defined protocol for communication of information between the organisation members and the stakeholders of the change. Because certain crucial information, if passed to the wrong members can risk the change process. Third, the change managers should be able to assess the content of the information received from both external and internal sources. Right interpretation of the information will support the change process, whereas misinterpretation can retard the process.

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Finally, the communication channel used should be appropriate for the context of information being shared. O’Reilly and Pondy (1979) have suggested various communication channels as per the situation. For example, if the CEO of a company needs to deliver critical information such as layoff, then just passing a written statement will be ineffective. An open speech stating the facts and needs for layoff will be much more effective and will support the change. Failure to do so will hinder the change process.

The withheld of opinions by key stakeholders can lead to organisational silence. Morrison and Milliken (2000) have shown concern that organisation silence can be a major barrier to the progression of change. Trust, effective communication, feedback system can help overcome the problem. Change managers need to ensure a proper feedback channel to ensure that the recipients have received the right information. So, a well structured communication strategy can be a major driver of the change. Whereas, a poorly designed communication plan can increase the organisational silence and hinder the change and organisational development.

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Role of motivation in change Process


Restrainers: Parochial self-interest, misunderstanding & lack of trust, different assessments, low tolerance for change

Drivers: Positive motivation, higher effort, higher performance


Motivation:

Vroom’s expectancy motivational theory proposes that the expectation or belief about the relationship between effort, performance and valued outcome will determine the motivation of a stakeholder in support or oppose of the change. The motivation again feeds back to the effort and results to a new effort & performance. It is a closed loop chain. Right in the middle the valued outcome controls the motivation level. The reward system in an organisation can drive the motivation in the right direction. So leaders need to ensure an effective reward system. Burke & Litwin (1992) has agreed that rewards should be used to promote the new behaviour that reflects the values required for organisational change.

So high level of motivation will support change and at the same time will lead to an effective effort to enhance the performance. Low level of motivation will lead to low effort, low performance and further low motivation for change. Further parochial self-interest, misunderstanding & lack of trust between organisational members, the difference in assessment and low tolerance will lead to low motivation for change and will act as a restraining force in the change process.

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Role of structure in change Process


Restrainers: Poorly defined structure, job & responsibilities, ineffective communication & decision making system

Drivers:Agility, well-defined structure, right locus of decision making, proper job design, effective upward, downward & lateral communication.


Structure:

“What could be more important to the effective functioning of our organizations. . . than the design of their structures?” (Mintzberg 1993, cited by Cape 2002). As per three factor model of Cape (2002) organisational structure, strategy, people & environment interact with each other. The organisational structure influence's the strategy, people and its environment. Same time these elements also influence the structure. As the change process is influenced or controlled by strategy, people and environment, proper alignment of organisational structure with the change will drive the process.

Burke & Litwin (1992) explain the structure as the arrangement of functions and people into specific areas or levels of responsibility, decision making authority, communication and relationship in an organisation. So well defined job responsibility, right locus of decision making and effective communication can help executing the strategical change program with support of people and environment. Poorly defined job/decision making responsibility and structure will hinder the change process.

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Role of training in change Process


Restrainers: Misaligned training, lack of knowledge of task, low motivation, low confidence, misidentification of trainees.

Drivers: Increased participation, improved motivation and confidence, identification of right system, task and person.


Training & development:

Effective organisational change desires effective individual change of the employees. The change programs bring changes in individual tasks and job roles. So there must be a change expected in behaviour, attitude or job responsibility. For example, if a bank is looking to enhance its customer care services, then it requires changing employee’s attitude towards customers and their ways of communications. Effective training and development are required to develop the new knowledge, skills, attitude and behaviours which will increase employee confidence and motivation level to perform their existing or newly assigned tasks efficiently.

Goldstein (1993) proposes three levels of training needs (Hayes 2010, p.351). First, system level refers how the change will affect the job requirement. For example, if a company is migrating from a manual process to automation, then the employees' tasks' change and a proper training program on handling the machines can help them to adapt to the new system. Second, task level refers to change in task or responsibility. In the change process, an employee’s task might change or additional responsibilities may be added. So effective training needed to support the person to handle the new task or responsibility efficiently. Third, person level refers identifying the right person or group in the organisation who requires the training mentioned in system and task level. Misidentification of a trainee will increase change implementation time, increase cost of project and cause dissatisfaction among the employees.

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Role of policies in change Process


Restrainers: Hire & fire policy, highly centralised decision making, high power culture, poor reward system, prudent training, increased status distinction, limited information sharing.

Drivers: Employment security, decentralised decision making, stewardship, performance based reward, extensive training, reduced status distinction, extensive information sharing.


Policies:

Pfeffer’s (1998) suggests these seven practices in policies, which lead to high performance in organisations – job security, hiring, decision making power, reward system, training, status distinction and information sharing (Hayes 2010). The effect of policies on change can be described using this framework. Assurance of job security and hiring policies reduce employees’ fear of losing their jobs in the change. This decreases their resistance for change. However, high job security such as in government jobs can make employees complacent about accepting the change. Self-managed team and decentralised decision making allow change managers to take quick decisions as required by the system and thus maintaining or accelerating the change process. Good performance based reward system motivates the task force to accept the changes and take up the additional job responsibility if required.

Extensive training prepares the employees to execute the new job responsibilities effectively and efficiently. Reduced status distinction or low power culture facilitates better team work and knowledge sharing and hence improves organisational performance. Last, extensive information sharing keeps all the change stakeholders on the same page and enhances the change process as discussed earlier under communications. The effective policies increase the commitment level of employees and act as a driving force for change.

On the contrary, a hiring and firing policy increases fear of losing job during the change and increases the resistance for change. Highly centralised decision making delays the change process and increases the cost associated. Poor reward system leads to reduced motivation for accepting additional responsibilities or improve job performance. The high power culture or increased status distinction restricts the flow of ideas and decreases team performance. Effect of limited information sharing and training has been discussed earlier. So, wrong organisational policies can retard and hinder the change process.

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Role of stakeholder management in change Process


Restrainers: Lack of trust among stakeholders, difference of interest & opinion, self-interests, Lobbying, trade unions & coalitions

Drivers: Trust and coalition among stakeholders, good stakeholder management


Stakeholder management:

Nadler (1987) argues, during the change process the intensity of political behaviour in an organisation intensifies because there will be a difference in the opinion on the perceived outcome of the change process (Hayes 2010, p. 143). Where some individuals or groups will be motivated to accept the change considering it as an opportunity for personal and organisational improvement, others may perceive the change as a threat to their position or existence. Further trade unions, lobbying and coalitions intensify the resistance for change. So, the degree of awareness of change managers on the power, influence and attitude of key stakeholders towards the change and necessary action to manage them will be beneficial in the change process.

Jawahar and McLaughlin (2001) stakeholder theory suggests that different stakeholders need different level of attention in various stages of the change life cycle. Manager’s awareness of these facts will help them allocate the recourses efficiently and effectively. (Hayes 2010, p. 149)

Thus with this the paper concludes the factors having transactional influence on the change. The next part discusses the different factors those have influenced State Bank of India’s change plan.

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DRIVING FORCES RESTRAINING FORCES

Culture and employee complacency as previously it was government owned

Extensive training and reward system

Effective communication about the change strategy and urgency of change

Clear vision & aligned mission

Effective Leadership by Mr. O.P.Bhatt, & the urgency to regain market share.

Ageing employees mostly between age 40 & 50

Merger of seven associate banks with varying work culture

Newly implemented automation process & lack of computer literacy.


State Bank of India (SBI) - Parivartan

SBI is one of India’s largest and oldest banks. Following the deregulation of banking sector in late nineties, SBI faced stiff competition from private sectors rivals such as ICICI Bank, Axis Bank & HDFC Bank and SBI’s market share started eroding continuously. In order to stabilise its position SBI took many change initiatives such as merger of its seven associate banks with it, computerisation of all of its branches (14,000), connecting all the operations through core banking, downsizing workforce and improve customer service. To facilitate implementation of these changes, SBI initiated a change program “Parivartan”, the Hindi equivalent of “transformation” or “change”. The various factors discussed earlier that has influenced SBI have been identifies and presented in Lewin’s force field model.

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Restraining forces:

The major restraining forces were culture of the SBI, ageing employees, lack of computer literacy and merger of seven associates. Before the change, SBI lacked the performance driven approach. For a long period SBI was a government undertaking organisation. This developed complacency in the work culture. Additionally, the majority of the workforce were ageing and lacked computer literacy. Further as the new organisation was a merger of seven associates the structure and culture of the organisations were misaligned. All these were great obstacles in the change process.

Driving forces:

The transformational driving forces in the SBI change were the leadership by O.P.Bhatt, external industry pressure & the strong vision. And the transactional forces were extensive communication, well developed training program and an enticing reward system.

Leadership: O.P.Bhatt, the chairman of SBI led the change and played a transformational role. He developed the change strategy along with the top management. It was a top-down approach targeting all the levels of organisation. Through his clear vision and effective communication, he conveyed the urgency of the change to the whole organisation. He set up a massive communication exercise and training program aiming cultural and attitudinal change of the workforce.

Internal communication: As per industry analyst, it was one of the massive communication exercises in an Indian organisation, connecting 300 deputy general managers, 2000 assistant general managers, 14,000 branch managers and 1,75,000 clerical staffs. The purpose was to communicate the change agenda and urgency to the all the organisational members.

Training & Culture change: For a period of 100days, in regular interval, two day multi-level training programs were conducted. Around 1,75,000+ employees were trained for 3,300 work days conducted by specially trained 360+ trainers. The training was consisted of customer service behaviour and attitude, motivational workshops and computer literacy. Multimedia based interactive training systems were made available on the internal portal.

Reward system: The reward system also went to a transformational change and became a performance driven system. Active and motivated employee’s were promoted and were given more responsibilities & monetary rewards.

All these driving forces helped SBI overcoming the inertia of complacency, low motivation, low organisational commitment and lack of skills. A research by an independent body has found that customer satisfaction level has increased by 20% in 2yrs (2006-2008). Following that SBI has received many performance awards. In The Bankers list of top 1000 banks, SBI’s position improved steadily #107 in 2006, #70 in 2007 and #57 in 2008. Further the bank made a leap frog jump in Fortune Global 500 lists, #495 in 2006 to # 380 in 2008. (Purkayastha 2009)

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Conclusion:

Practically, no model can accommodate all the elements affecting organisational change. Depending on circumstance and purposes models can be chosen. (Hayes 2010, p.117) However, this paper presents a comprehensive discussion on various factors affecting change. Various driving and restraining forces have been identified and discussed. Factors affecting change in organisations will vary depending on the change type and organisation. Successful identification of the driving and restraining forces by the leaders and change managers will be very beneficial to the change process.

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Change Management

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