Food for thought

Corporate revitalization often includes shifts in strategy or process or structure, but revitalization means a good deal more—it means a permanent rekindling of individual creativity and responsibility, a lasting transformation of the company’s internal and external relationships, an honest-to-God change in human behavior on the job…

Where We Are

EIS Simulation:The change process

Leadership & Initiation of change

Individual level:Change agent

Organization level: Culture & structure

Interpersonal level:Social capital

Introduction& overview

Strategies of change & conclusion

Session 5

Managing Change at the Organizational Level

Topics for Today

• Theme 1: Organizational change through empowerment– Strategic consideration: top-down vs. bottom-up– Empowerment as a strategy

• Theme 2: Organizational change through structural design– The role of structural designs in organizational change– Case study: Appex Corporation– Debate: structural change vs. cultural change – Summary and takeaways

Theme 1: Organizational change through the management of culture

• The need to get people involved– The key is to change the mental model

• Organizational culture– values and norms that are shared by

people/groups that control the way they act internally and externally.

– Values = beliefs about goals and appropriate standards for achievement (behaviors)

– Norms = expectations about behavior in specific situations and toward one another.

Organizational Culture

• Espoused Values– individual values (CEO, managers) that the

group adopts through validation (cognitive transformation to shared value)

– conscious and explicit - serve a normative or moral function to guide members in certain situations and in socializing members.

– Strategies - goals - philosophies

Organizational Culture• Basic underlying assumptions:

– a solution to a problem that works repeatedly & becomes taken for granted

– cannot be confronted or debated and are difficult (if not impossible) to change.

– can only be changed through re-examination and re-evaluation of the cognitive structure.

– individuals will distort or deny rather than adopt - thus culture at this level is a defense mechanism

– so…major change means managing at this level.

Organizational Culture

– Socialization - how people learn the culture– Consists of stories, myths, legends, etc.

• influence of the founder• organizational structure• composition of TMT

– Adaptive cultures - encourage and reward initiative/innovativeness - easiest to change…

– Inert cultures - cautious and conservative, does not value initiative & may discourage

Organizational Culture

• Strong Adaptive Cultures characterized by:– Bias for action - autonomy, risk-taking,

entrepreneurship– Coherent mission - sticks to knitting, close to

customers– Structured for flexibility

Changing organizational culture (Pascale et al. 2000)

• Incorporating employees in the process– Not communicating, motivating– It is resocialization—changes the way people think

• Leading from a different place– Out of the comfort zone– Generate a sense of urgency, maintain healthy levels of

stress, resist coming to the rescue with ready answers.

• Instilling mental disciplines– Let employees see the larger picture– Manage from the future– Cerate relentless discomfort with the status quo.

Empowerment (Quinn and Spreitzer 1997)

• Empowered people have a sense of– Self-determination– Meaning– Competence– Impact

“Because empowerment includes risk-taking, it opens the possibility of making mistakes. If those mistakes were punished, then individuals became disenchanted with their new ways of thinking, and regressed to past behaviors. If they received no support or reinforcement, then the cycle of empowerment was halted and individuals actually felt more disempowered than before.”

Quinn and Spreitzer (1997, p. 45)

Are you empowered? (Quinn and Spreitzer 1997)

• To what extent do I have a sense of meaning and task alignment, and what can I do to increase it?

• To what extent do I have a sense of impact, influence, and power, and what can I do to increase it?

• To what extent do I have a sense of competence and confidence to execute my work, and what can I do to increase it?

• To what extent do I have a sense of self-determination and choice, and what can I do to increase it?

Debate: Change from top-down or bottom-

up?

Theme 2: Organizational change through structural design

• Strategic design and organizational control

• The role of structure in organizational change– Structure and organizational alignment– Structure power, resources– Structure vested interests– Structure generates stability, predictability

• Types of organizational structures

Organizational Structure

• Functional structure - groups people on the basis of common expertise & resources

• Pro: learning (transfer of knowledge within function)

monitoring is easierprocesses become more efficientgreater managerial control

• Con: control becomes a problem as company grows

communication and coordination (between functions)

measurement (contribution of function)loss of strategic focus by TMT

Multi-Divisional Structure

– Product lines or business unit is self-contained - corporate HQ established for support & control• Divisional unit = operating authority• HQ = strategic authority

– Adv: Financial control - easier to monitorStrategic control - time for TMT to focus on

strategyGrowth - add businesses or productsInternal efficiency - allows clearer variance

identification

– Disadvantages:– Division/Corporate relationship– Interdivisional competition - resources, parent attention– Short-term focus– Bureaucratic costs

Multi-Divisional Structures

Matrix Organization– Based on two forms of horizontal

differentiation: functional and project/product

– Advantages:– Employees tend to be highly qualified, professional, &

perform best in autonomous, flexible working conditions

– Employees can be moved from project to project– leaves TMT to focus on strategy

– Disadvantages:– high bureaucratic costs– constant movement of employees means $– two boss role can create conflict

Matrix Structure

Team Structure

• Many companies use permanent cross-functional teams

• formed at the beginning of product development process and continued throughout implementation

• speeds innovation and customer responsiveness• stronger in highly dynamic industries

Team Structure

Network Organizations

• Core group of experts manages the outsourcing process closely

• This forms a hub & spoke type of organization consisting of many contracts

• Could create a control problem with contract organizations

• Example: Nike

Network Structure

.

Case study: Appex Corporation

Background

• Shikhar Ghosh – expertise in structural design• Appex before Shikhar:

– Small size: 20 employees, $2mil.– Entrepreneurial– Technology-driven, project-based– Loosely structured– Organizational culture: informal

• Challenges:– Growing pains: consider Greiner’s 5 stages of

growth– From innovation to sustainable growth

The Five Phases of Growth Larry Greiner

The search for structural fit

• Circular structure– What kinds of problems does it run into?

• Horizontal structure– Why does it not work for Appex at this stage?

• Hierarchical, functional structure– Does it address the challenges? Why?

• Divisional structure– What is the rationale? Does it work?

Questions for discussion

• Is “structure and control” the most important aspect for organizational change at this stage of Appex’s development?

• How do you evaluate the effectiveness of the different structures adopted at Appex over time?

• Would you do anything differently?

• What is the relationship between organizational structure and culture?

• The lessons from Citibank practice in Taiwan

Strategic choice in knowledge management

(Hansen, Nohria, and Tierney 1999)

• Two strategies: codification vs. personalization– Examples: IBM versus 3M– Codification: Provide high-quality, reliable and fast

information implementation.– Personalization: Provide creative, analytically rigorous

advice on high-level strategic problems.

• The trade-off between professionalization and bureaucratization

• Implications: – structure vs. culture as control device– Strategic design in culture, strategy, HRM

Summary and takeaways

• Strategic choices for change: Top-down versus bottom-up– Leadership and the initiation of change– Empowerment: Organizational changes need bottom-up

processes that involve employees and change their mindsets.

• Strategic choices for change: Cultural vs. structural changes– Complementality between the two– The need for a systematic change program– What is your priority?