Identification of Key Predictors of Rapid Change ...

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Identification of Key Predictors of Rapid Change Adaptation in a Identification of Key Predictors of Rapid Change Adaptation in a

Service Organization: An Exploratory Study that Also Examines Service Organization: An Exploratory Study that Also Examines

the Link Between Rapid Change Adaptation and Organizational the Link Between Rapid Change Adaptation and Organizational

Capability Capability

Carol D. Hansen Georgia State University, [email protected]

Constantine Kontoghiorghes

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Recommended Citation Recommended Citation Hansen, Carol D. and Kontoghiorghes, Constantine, "Identification of Key Predictors of Rapid Change Adaptation in a Service Organization: An Exploratory Study that Also Examines the Link Between Rapid Change Adaptation and Organizational Capability" (2004). Andrew Young School of Policy Studies Faculty Publications. 1. https://scholarworks.gsu.edu/aysps_facpub/1

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Constantine Kontoghiorghes,PhD

Cyprus International Institute ofManagement

Carol D. Hansen, PhDGeorgia State University

Constantine Kontoghiorghes is an AssistantProfessor of management and OrganizationalBehavior at the Cyprus International Instituteof Management. His current research andconsulting work focuses on the design of highperformance work systems with particularemphasis on change management, organiza-tion competitiveness, innovation, technologymanagement, quality and productivity im-provement, employee satisfaction, and creat-

Abstract

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Identificationof KeyPredictorsof RapidChangeAdaptation

Constantine Kontoghiorghes

This exploratory study attempted to identify keypredictors of rapid change adaptation in a serviceorganization. The results of this study suggested thatrapid change adaptation would be more likely to occurin an organizational setting within which there is anemphasis on process and quality improvement,innovation, rapid technology assimilation, and internalcustomer focus. Rapid change adaptation was in turnfound to be highly associated with the followingorganizational outcomes: quick product/serviceintroduction, quality performance, productivity, andcompetitiveness.

IntroductionWith the dawn of the 21st century, organizations areincreasingly being confronted with the prospect ofchange. As organizations transform the way theyproduce goods and modify the way services aredelivered, numerous social, economic, andtechnological pressures bombard them. To name a few,these include market fragmentation, shrinking productlifetimes, global production networks, workplacediversity and mobility, simultaneous inter-companycooperation and competition, and the business processreengineering movement (Oden, 1999). Given theintensity of these challenges to organizational survivaland competitiveness, it is not surprising that mostorganizations find themselves operating in morecomplex, unpredictable and dynamic environments(Lewin & Johnson, 2000). To cope, most organizationsconsider themselves to be in a state of continuousimprovement where they must accelerate the pace andeffectiveness of their change strategies (Oden, 1999).The contemporary significance of organizationalchange is indicated by the recent proliferation ofterminology such as organizational transitioning,organizational renewal, organizational effectiveness,and organizational improvement (Lundberg, 1999).

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Felkins, Chakiris, and Chakiris (1993) define themanagement of change as an interactive process thatlinks daily work practices with strategic, directed,change programs and performance goals. Pettigrew,Woodman, and Cameron (2000, p. 698) elaborate:“Change should refer to sequences of individual andcollective events, actions, and activities unfolding overtime in context.” French and Bell (1999) note thatinquiry about organizational change is founded inorganization development theory and practice. They jointhe two constructs by defining organizationaldevelopment as planned change in an organizationalcontext. These definitions call to mind issues of process,pace, people, and environmental context. The focus onprocess contrasts with earlier views that change is adiscreet movement from one state to another (Lewin,1951). The assumption that change is continuous ratherthan episodic suggests that change is ongoing, evolving,and cumulative in its attempt to yield a new pattern ofintentions (Orlikowski, 1996). The role of people inthese definitions suggests that an organization’smembers both shape and are shaped by change(Lundberg, 1999). Finally, the importance oforganizational context and its impact on change isreflective of socio-technical systems theory (Pasmore,1988).

While ways of thinking about change have evolved overtime, differences persist in how scholars view itsunfolding and management. Perspectives range from afairly mechanistic approach whose principles assumean objective reality, to a more dynamic and interrelatedview of organizational behavior based on participation,dialogue, and teamwork. These worldviews can becategorized into a typology of four perspectives:organizational behavior, critical humanism,organizational culture, and systems theory (Felkins,Chakiris, & Chakiris, 1993). Behaviorists see changeas a rational, measurable, and directed process withcausal relationships that are predictable and easilymanipulated. Critical humanism as a change perspectiveis centered on experience and encourages individualsand their organizations to question dominant ideologies.A cultural approach to change suggests an interpretive

Carol Hansen

Carol D. Hansen is an associate professorof human resource development at GeorgiaState University where she specializes in or-ganizational culture and the diagnosis ofHRD interventions. Dr. Hansen received aPhD from UNC-Chapel Hill. Her practitio-ner experience was gained as an HR branchchief at the US Department of State and as aconsultant for a major firm. Her internationalbackground includes academic andpractioner experience in Western Europe andNorth and West Africa.

Contact InformationDepartment of Public Administration andUrban StudiesGeorgie State UniversityAtlanta, GA [email protected]

ing the learning organization. Constantine re-ceived his PhD from Georgia State Univer-sity and his master’s and bachelor degreesfrom The Ohio State University.

Contact InformationCyprus International Institute of Manage-ment21 Akademias AvenuePO Box 20378, AglandjiaCY-2151 [email protected]

Organization Development Journal22


sense of reality where change occurs throughsocial interaction based on cultural norms thatare unique to a given group or organization.The systems approach places an emphasis onthe gestalt of interdependent processes thatrespects the complexity of organizationalrelationships and structures. It is the last twoperspectives that have most informed the studyreported in this paper.

French and Bell (1999) note that as the historyof organizational development has matured,certain change models advanced the practice.For example, Lewin (1951) introduced theidea that change is a three-stage process wherebehavior moves from one state to another andwhere change results from interplay withopposing forces. Kilman (1989) specified atotal change system that consisted of criticalleverage points within five sequential states.The notion of first (transactional) and second(transformational) order changes was the basisfor the Burke-Litwin model of organizationalchange (Burke, 1994). The thinking was thattransactional changes that impacted the workclimate were easier to effect than deepertransformational changes designed to impactthe deeper layer of the organization’s culture.Porras and Robertson’s model (1992)describes change as part of a system ininteraction with its environment. They offeredthe premise that organizational developmentinterventions alter features of the work settingthat impact an individual’s behavior and leadto individual and organizational improvement.This evolution in perspectives and practicesformed the foundation for a current breed ofchange models that emphasize the integrationof social and technical systems in supportingthe continuous process or change.

Socio-Technical SystemsThe socio-technical systems approach is basedon the notion that organizational survivalrequires systems that are open and able tointeract with their environment. Oden (1999)portrayed an open system as one that has

A dynamic relationship with itsenvironment, receiving variousinputs, transforming them insome way, and producingoutputs. Receiving inputs inthe form of material, energy,and information, along withfeedback regarding outputs,allows the open system tooffset the process of decline.Moreover, the open systemadapts its internal processesand structures to itsenvironment as the need arises.(p. 14)

The organizational system can be divided intotwo subsystems: the social and the technical.This perspective assumes that the two factorsof technology and people are essential to thechange process. Neither alone is the driver ofchange. Oden described the application ofsocial change without technology as merelyautomation, and the application of technicalreengineering without social change as merelyreorganization.

Lunberg (1999) offered an interesting view ofhow the social side of the socio-technicalsystems perspective works through his theoryof social rules. This theory views organizationsas social systems, comprising members whoare agents with varying degrees of influence.Rule systems govern the transactions amongmembers of the social system by sharing thenature, impact, content, and outcomes ofinteractions and relationships. As these rules



are created, learned, maintained, and modifiedby individuals within the organization, itsmembers also develop distinct identities andassociated capacities to influence social rulesin varying contexts. An additional assumptionis that rules can be both a positive and negativeforce. While rules are necessary to make socialtransactions easier and more predictable, theyalso serve as barriers to change. The notion ofsocial rules is reflective of culture theory ascultural norms are socially learned andreinforced (Spradley, 1979). Blumer (1969)noted that it is the social process that createsand upholds the rules and not the rules thatinvent group life.

The technical side of socio-technical systemstheory can be linked to an interest inreengineering, which emerged in the early1990s as a relatively new managementapproach. In general, the first step in areengineering effort is to rethink theorganizational system in terms of its keyprocesses and the technology available to carrythem out. After the necessary process andtechnology related changes are introduced, thefocus shifts to how the organization is managedand structured (Lawler & Mohrman, 1998).Lawler and Mohrman note that it is mostly a“top-down” process, which requires significantredistribution of power and authority andsignificant investment in informationtechnology. According to French and Bell(1999), reengineering “does not appear to paymuch attention to the social system oforganizations relative to change processes andthe redesign of work” (p. 231). As a result,reengineering has failed to produce the desiredoutcomes in terms of competitive advantage.“Recent reports, supported with the viewpointsexpressed by the founders of this movement,claim that more than 70 percent ofreengineering efforts have failed to achievetheir purposes” (Lawler & Mohrman, 1998, p.

205). High failure rates may be attributed tomany people defining reengineering asdownsizing, which according to numerousstudies rarely accomplishes its goals (Lindsay& Petrick, 1997). Such dismal outcomesappear to confirm the need for both a socialand a technical perspective in achievingeffective change through practice and research.

Organizational CultureMany scholars have argued that sustainablechange cannot occur without a clearunderstanding of the culture (Ellis, 1998;Detert, Schroeder & Mauriel, 2000; Fiorelli& Feller, 1994). The foundation of socio-technical change must be that all culturesoperate from cognitive models by creatingbelief systems to filter expectations forappropriate and inappropriate behavior—atype of meaning-making. In this sense,causality (cause and effect expectations) is aform of socially constructed meaning(Spradley, 1979). A kind of code emerges thatdrives a culture’s sense of rules for what it willtolerate and how people will interact.Organizations contain a host of cultural beliefsthat prescribe work norms (Schein, 1985,1990; Trice & Beyer, 1993). Examples includeperceptual differences about ways to resolveconflict effectively, the information needed forsound decision-making, the criteria forpromotion (Hansen & Kahnweiler, 1997), andthe appropriate style of leadership (Schein,1985, 1990). As a construct, one of the mostwell-known definitions is by Hofstede (1980)who defined culture as “the collectiveprogramming of the mind (p. 13).” That is, amanifestation of the value systems of variousgroups that is able to sustain itself over longperiods of time. Beliefs about work tend to bemore powerful motivators of behavior thanformally stated organizational requirements,such as those found in employee handbooksor company policy and procedure manuals



Research suggests that organizations capableof innovation and rapid adaptation are thosethat are characterized by high trust cultures.Trust promotes cooperation (Mayer, Davis &Schoorman, 1995; McAllister, 1995), whichcan contribute to organizational effectivenessthrough extra-role behavior and bettercitizenship (Organ & Ryan, 1995; Van Dyne,Cummings & Parks, 1995). Many researchershave additionally argued, for example, thathigh-trust cultures support cooperation andteamwork (Jones & George, 1998), innovationand synergy (Fukuyama, 1995), strategicalliances (Das & Teng, 1998), and acompetitive advantage (Barney & Hansen,1994). For trust to transpire, certain conditionsare necessary, which include risk andinterdependence (Rousseau, Sitkin, Burt &Camerer, 1998) and vulnerability (Bigley &Pearce, 1998). In essence, for trust to occur,individuals must be open and willing to believein the goodness of others and depend on themfor help in times of perceived threat. Moreover,as situations become increasingly unfamiliar,the influence of one’s predisposition to trusthas more impact on one’s behavior. Thus, aliensituations, such as the modernization of anorganization’s practices, will enhance a naturalinclination to trust or distrust while greatlyinfluencing the willingness to depend, share,and cooperate.

The Context of Quality and ChangeAccording to Harvey and Brown (2001, p.366),

Today’s managers are beingchallenged to provideleadership in new and changingconditions. Customers,competitors, employees, andstockholders are all placingpressures on management forinnovation and change at arapid pace. One approach thathas emerged to meet thesechanging forces is termed totalquality management (TQM).

Although the popularity of TQM has somehowfaded in recent years, the tools and varioustechniques introduced as part of the TQMmovement have become important drivers ofchange in organizations. TQM can becharacterized as a people-focused managementsystem whose philosophy and guidingprinciples for continuous improvement arebased on teamwork and employeeempowerment (Harvey & Brown, 2001;Lindsay & Petric, 1997). “Through wellstructured processes, TQM aims to create anenvironment that encourages people to growas individuals and learn to bring about bothsmall but continuous (Kaizen) and drastic orbreakthrough improvements” (Dervitisiotis,1998, p. 112). What differentiates TQM fromreengineering is its focus on culturalempowerment and an attention to change insmall and continuous increments. TQMinterventions tend to fail when implemented,similar to reengineering, as top-downprograms that assume neither an upward flowof involvement nor consensus decision-making (Hammer & Champy, 1993).

The role of management is key tounderstanding TQM. According to the TQMphilosophy, most quality-related problems inthe organization are caused by badmanagement and the systems that managers

(Martin, 1982). Yet, organizational membersare often unaware and unable to articulate theirbeliefs until they have a problem that cannotbe answered or does not fit the mold. Theymust then reconsider their knowledge and thevalue of the “rule” they have created andmaintained (Felkins, Chakiris, & Chakiris,1993).



create and operate (Deming, 1986; Lawler &Mohrman, 1998). Likewise, the power ofmanagement in fostering quality-drivencultures is in consonance with theorganizational culture literature. This streamof study finds that management, in particularexecutive management, creates and maintainsthe cultural values of their organizationsthrough the work models that they reward(Hansen & Kahnweiler, 1997; Schein, 1985;1990).

Studies that have focused on the link betweenculture, work models, and TQM indicate that,in general, a participative, flexible, risk-taking,team-based, and quality driven organizationalculture positively supports TQM efforts(Detert, Schroeder & Mauriel, 2000; Fiorelli& Feller, 1994; Kontoghiorghes & Dembeck,2001). Thus, a company’s prevailing culturalcharacteristics can inhibit or defeat a changeeffort before it begins. “Companies with a top-down management style, a short-termorientation that keeps them exclusivelyfocused on quarterly results, and a bias againstconflict may be uncomfortable challenginglong-established rules” (Hammer & Champy,1993, p. 207). Detert, Schroeder, and Muriel(2000) identified a set of eight specific valuedimensions that appear to theoretically lead toquality cultures: Management should be basedon facts; long-term planning and goal settingare preferable to a short-term orientation; thesources of problems should be searched for inprocesses—not in people; a premium is placedon change (as opposed to stability); the purposeof the organization is to achieve results thatits stakeholders consider important;collaboration and cooperation are preferableto working alone; the vision, goals andresponsibilities of the organization should beshared; success ought to be judged againstexternal benchmarks.

Bianco, Nabors, and Roman (2002, p. 159)analyzed several sources of changemanagement and uncovered a series of changevariables that are cited as necessary fororganizational change. All authors emphasizethe need for a systems approach, utilizingmultiple levers. According to Lance Berger(1998, p. 61),

A “change ready” culture mustbe based on change responsivepeople, leadership, vision, risktaking, and optimism. PeterSenge (1999) claimed that youneed the following: time,support, relevancy, assessment,strategy, purpose, governance,true believers, and walking thetalk (p. 28). Bianco and Roman(1994) found that you needsix drivers: leadership,infrastructure, training andcommunication, techniquesand measurements, recognitionand rewards, and customer andsupplier focus (p. 29). Finally,Kotter (1995) outlined eightfactors: establishing a sense ofurgency, forming a powerfulcoalition, creating a vision,empowering others, creatingshort-term wins, consolidatingimprovements and producingstill more change, andinstitutionalizing new approaches.

Meanwhile, Detert et al. (2000) call for morestudies pertaining to organizational change andargue that this area has been inadequatelyexplored. For instance, Olson and Eoyang(2002) state that over fifteen group methodscan guide change in organizations. The authorsfurther state that “this variety produces a kindof cacophony that defies integration and doesnot allow any one voice to stand out as a logical



alternative to the traditional explanations” (p.6). Scholars and practitioners, on the whole,acknowledge the need for more research inorganizational change. However, a recentreview of the literature finds that the qualityof data has advanced little in the past 25 years(Pettigrew, Woodman & Cameron, 2001).Pettigrew et al. characterize current knowledgeas too anecdotal, containing few theoreticalpropositions and based on studies that arelacking in rigor. They call for a new pluralismbetween the social science and managementscholars that entails a new dedication to timeand history and a willingness to reveal therelationship between change processes andoutcomes by portraying changes as continuousprocesses and not just detached episodes. Theauthors suggest that the literature isunderdeveloped regarding these sixinterconnected analytical issues: multiplecontexts or levels of analysis; time, history,process, and action; process linked to outcome;international comparative research; receptivity,customization, sequencing, and pacing; andscholarship linked to practice.

Purpose of StudyThe main research questions for this studywere as follows:

1. Which organizational variablesincorporated in the study are highlyassociated with rapid changeadaptation?

2. Which organizational variablesincorporated in the study can serveas predictors of rapid changeadaptation?

3. To what extent is rapid changeadaptation associated withorganizational performance?

To explore these research questions, aninstrument was developed and administeredin a health insurance service organization toidentify, prioritize, and describe the mostimportant work environment variables relatedto rapid change adaptation. Further, this studyattempted to describe the association betweenrapid change adaptation and bottom-lineorganizational performance. The workenvironment was assessed by the followinglearning and organizational dimensions:learning climate; management practices;employee involvement; organizationalstructure; communication systems; rewardsystems; job design; job motivation;organization commitment; job satisfaction;innovation practices; technology management;teamwork climate; ethical work culture; andprocess improvement climate. Bottom-lineorganizational performance was defined byquality, productivity, innovation, andorganizational competitiveness indicators. Thedependent variable used for this studypertained to the extent to which therespondents believed their organization wasable to adapt rapidly to introduced changes.

Many of the dimensions and indicators wereassessed with scales that were described inprevious literature (Buckingham & Coffman;1999; Hackman & Oldham, 1980; Lindsay &Petrick, 1997; Macy & Izumi, 1993; Pasmore,1988; Whitney & Pavett, 1998) or validatedin previous studies (Kontoghiorghes, 2003a;Kontoghiorghes, 2003b; Kontoghiorghes,2002; Kontoghiorghes, 2001a;Kontoghiorghes, 2001b; Kontoghiorghes &Dembeck, 2001; Kontoghiorghes, 1997). Asfar as the productivity and quality indicatorsare concerned, these consisted of validateditems incorporated in previous studies(Kontoghiorghes, 2003a; Kontoghiorghes &Dembeck, 2001; Kontoghiorghes, 1997) aswell as items that were derived from the quality



and productivity definitions reported byLindsay and Petrick (1997) and Mohanty(1998). Organizational competitivenessreflected the extent to which the respondentsperceived the organization to be competitivewhen compared to others. In all, thequestionnaire attempted to determine theextent to which the organization wasfunctioning as a high performance system andaccording to learning organization, TQM andSTS theory and principles.

MethodologyInstrument. The instrument of this studyconsisted of a 108 Likert-item questionnaire,which was designed to assess theorganization’s earlier described dimensions.The instrument utilized a six-point scale thatranged from “strongly disagree” to “stronglyagree.” The first version of the questionnaire,which consisted of 99 Likert items, wasoriginally pilot-tested on a group of 15participants for clarity. Furthermore, a groupof seven experts in the organizationdevelopment, human resource development,or quality management areas reviewed theinstrument for content validity. Upon revision,the instrument was then administered to agroup of 129 members of five differentorganizations. Reliability tests were conductedand the instrument was further refined andexpanded. As stated earlier, in its final formatthe instrument consisted of 108 Likert items.The reliability of the instrument was measuredin terms of coefficient alpha and was found tobe 0.98.

Subjects. The sampling frame of this studyconsisted of 256 employees of a largeorganization in the health care insuranceindustry. The instrument was administered inone division of the organization to determinethe extent to which the division wasfunctioning as a high-performance unit. Giventhat the division underwent numerous changes

The Results and FindingsCorrelational analysis. In total, changeadaptation was found to be positively and

in recent years, such as restructuring,leadership changes, team development efforts,and introduction of new technologies, it wasfurther determined that it could provide usefuldata on rapid change adaptation research. Theemployees were given the survey instrumentat scheduled staff meetings over a period oftwo weeks. Of the 256 employees, 192returned the survey yielding a response rate of75%. Overall, 86.4% of the respondents werefemales and 13.6% males. Regarding positionsheld in the organization, 4.1% of therespondents were identified as either a vice-president or director of the unit, 4.1% asmanagers, 11.6% as supervisors, 65.7% assalaried professionals, 12.8% as administrativepersonnel, and 1.7% as hourly employees.

Data analysis. Based on the gathered data, acorrelational analysis was used to describe theextent to which the organizational variablesincorporated in the study are associated withrapid change adaptation. Further, through astepwise regression analysis, the mostimportant predictors of rapid changeadaptation variable were identified. Thegenerated regression model was cross-validated by calculating Herzberg’s adjustedR2 value and comparing it to R2 in order todetermine shrinkage and the predictive powerof the regression model. A small amount ofshrinkage, 12% or below (Stevens, 1986), willreflect a cross-validated predictive equation,capable of predicting well on an independentsample and thus having predictive power andgeneral application. Given, however, that thedata was gathered from a single source with apredominantly salaried female population, oneshould view the results of this study withcaution.



As shown in Table 1, rapid change adaptationwas found to be moderately to highlyassociated with 29 organizational variables,which in turn represented the socio-technical,quality management, and learningenvironment dimensions. A closer look atTable 1 will reveal that most organizationalvariables represent the socio-technical andquality management dimensions and rangefrom 0.400 to 0.63. It is worth noting that noneof the training transfer climate variables werefound to be highly associated with rapidchange adaptation. This finding suggests thatsuccessful change interventions depend moreon the design, operational, and culturalcharacteristics of the organization rather thanthe skill level and expertise of the workforce.

Regarding the socio-technical variables, thecorrelational data in Table 1 reveal that changeadaptation will be more likely to occur on arapid basis if introduced in a participative andnon-bureaucratic work environment withinwhich there is constant communication and noboundary interference between departments.Other work environment variables that were

significantly correlated with 99 of the other107 variables incorporated in thequestionnaire. These significant correlationsranged from 0.152 to 0.664 and reflected alllearning, socio-technical, and qualitymanagement dimensions assessed by theinstrument. This finding in essence validatesthe systemic nature of rapid change adaptationand thus its reliance on multiple organizationaldimensions for successful implementation.Given the large number of significantcorrelations and the fact that the main purposeof this study was to identify the strongerpredictors of change adaptation, only those thatwere found to be 0.4 or higher are listed inTable 1.

found to be moderately to highly associatedwith change adaptation were strongorganizational commitment toward theemployees (r = 0.46; p < 0.01); encouragementby the organization to have a healthy balancebetween work and life obligations (r = 0.45, p< 0.01); and the extent to which theorganization is characterized by high ethicalstandards (r = 0.44, p < 0.001). Collectively,these work environment variables describe anon-bureaucratic and ethically driven system,which promotes employee involvement andwell-being.

With regard to the job and team environment,change adaptation was found to be more highlyassociated with a high performance teamenvironment within which team members aredeeply committed to one another’s personalgrowth and success (r = 0.48, p < 0.01); arewilling to put in effort above the minimumrequired in order to help the organizationsucceed (r = 0.44, p < 0.01); and have personalinfluence over their own work (r = 0.42, p <0.001). In other words, rapid change adaptationis more likely to occur in a true teamenvironment within which employees aredeeply committed to the success of theorganization and each other and enjoyautonomy on how to perform their jobs. Theseresults demonstrate the importance ofdesigning organizations that promoteemployee commitment and teamwork. Hence,paying close attention to the needs of the socialsystem is still very important when rapidchange adaptation is a desired outcome.

As far as the dimensions dealing withinnovation, technology, and rewards areconcerned, the correlations in Table 1 make itapparent that rapid change adaptation is morelikely to occur in an innovation-driven systemwithin which risk-taking not only is not


punished, but is indeed expected. Moreover,within such an environment new ideas areconstantly sought and rewarded. This kind ofwork environment is in direct contrast to thebureaucratic model of management, whichadvocates strict adherence to rules andregulations, and the punishment, or expulsionof those who challenge them. It is not byaccident then that bureaucratic organizationshave such a hard time coping with today’srapidly changing times and often rely ondrastic reengineering efforts in order to addresstheir numerous stagnation-related problems.

The data in Table 1 also suggest that rapidchange adaptation is highly associated withrapid technology assimilation (r = 0.56, p <0.01), frequent technology introduction (r =0.47, p < 0.01), and the use of technology as aprimary support in the organization’s qualityefforts (r = 0.43, p < 0.01). This finding is notsurprising, given that the more rapidly theorganization introduces and assimilatestechnologies the more rapidly it adapts to therelated changes. Another implication of thisfinding pertains to the validation of theimportance of socio-technical systems theory.More specifically, the findings described in this



technology-related section in conjunction withthose pertaining to the need for a highlyparticipative, committed, and team-orientedsocial system, demonstrate that organizationalrenewal and success do indeed depend on theoptimization of both subsystems, the social andthe technical. This finding is important in thesense that it reinforces the fundamentalpremise of STS theory, which is “jointoptimization” of both subsystems. It alsohighlights the importance of systemic solutionswhen it comes to creating flexible and adaptivesystems.

Regarding rewards, rewarding new ideas (r =0.50, p < 0.01), profit sharing (r = 0.48, p <0.01) as well as rewards for learning (r = 0.40,p < 0.01) were found to be positively andsignificantly correlated with rapid changeadaptation. This finding suggests that when theemployees believe that positive organizationaloutcomes will result in personal gains, thenthe employees will be more motivated to adoptthe introduced changes. The positiveassociation between rewards for learning andrapid change adaptation indicates that a rewardsystem that is also based on pay for skills andknowledge does indeed offer the organizationan advantage when it comes to changeadaptation.

However, given the high correlation betweenrewards for new ideas and change adaptation,special attention should be paid to rewards forthe new ideas component. This is a verypowerful mechanism that has been extensivelyand very successfully used by the ToyotaMotor Corporation, a benchmark company inthe manufacturing industry. Such a rewardsystem does not only result in rapid changeadaptation but in quality and cost reductionimprovements as well.

The effectiveness of a system that rewardsemployees for new ideas is exemplified by thefact that in the year of 2000 employees at theToyota plant in Georgetown, Kentucky,provided the organization with more than70,000 new ideas. The payout for these ideaswas about $3 million. The payoff was that theinstituted changes saved the organization $28million (Toyota Information Seminar, 2001).It is important to note that aside from the gainsstemming from improvements, rewarding newideas assists the organization in creating a moreparticipative system, which, as was found bythis study, is also highly associated with rapidchange adaptation (r = 0.60, p < 0.01). Lastly,another very important outcome of such arewards system is that the change process itselfis owned by those who actually implement thechanges. This ownership is critical to thesuccessful introduction of changeinterventions.

With regard to quality management (QM), thecorrelations in Table 1 indicate that rapidchange adaptation is highly associated with aquality-driven culture. As shown, thecorrelation between change adaptation and theextent to which the structure of theorganization facilitates focus on processimprovement (r = 0.63, p < 0.01) was by farthe highest in the table. Other QM variablesthat were found to exhibit a Pearson correlationof 0.40 or higher were internal customer focus(r = 0.55, p < 0.01); quality measurement (r =0.52, p < 0.01); excellence commitment (r =0.52, p < 0.01); emphasis on doing things rightthe first time (r = 0.45, p < 0.01); the extent towhich quality improvement is a primary focusfor the organization (r = 0.41, p < 0.01); andthe extent to which quality improvement is ahigh strategic priority (r = 0.41, p < 0.01).




The last variables to be discussed under thecorrelational analysis are those associated withthe learning environment. A close look at thelearning-related variables in Table 1 will revealthat rapid change adaptation will be morelikely to occur in an environment within whichemployees are committed to continuouslearning (r = 0.50, p < 0.01), are rewarded fortheir learning (r = 0.40, p < 0.01), and sharetheir knowledge and expertise with others (r= 0.40, p < 0.01). Collectively, these threevariables demonstrate that a continuouslearning culture can indeed act as a catalyst toorganizational change and renewal.

Stepwise regression analysis. The results ofthe stepwise regression analysis of the changeadaptation variable are summarized in Tables2 and 3. As shown in Table 2, the producedregression model accounted for 59.5% of thetotal variance of the dependent variable andincorporated 11 independent variables in itsdesign. At 4.0%, shrinkage of the R2 value canbe considered very small and thus reflecting across-validated regression model withpredictive power.

Accounting for 38.9% of the total variance,the strongest predictor of change adaptationwas the variable pertaining to the extent towhich the structure of the organizationfacilitates focus on process improvement. Thesecond and third predictors selected by theregression model, which accounted for 6.2%and 3.7% of the total variance respectively,were rapid technology assimilation andinternal customer focus. The remainingpredictors selected by the regression modelwere (a) profit sharing; (b) awareness of howwork unit processes fit with those of the otherwork units; (c) few restrictions to innovation;(d) product/service quality that is measured atevery step of the way; (e) supervisory feedback

on performance; (f) personal influence overone’s work; (g) decisions on quality improvementthat are based on objective data; and, (h) thewillingness of people in the organization to put ineffort above the minimum required.

Association of rapid change adaptation andorganizational performance. As shown inTable 4, rapid change adaptation was found tobe highly associated with indicators of allperformance dimensions assessed by theinstrument. More specifically, the 13 Pearsoncorrelations in Table 4 range from 0.420 to0.664 and reflect the productivity, quality,innovation, and competitiveness dimensions.Special attention should be given to the highcorrelations pertaining to quick product/service introduction (r = 0.664, p < 0.001); costeffective production (r = 0.574, p < 0.001);internal process satisfaction (r = 0.562, p <0.001); and competitiveness (r = 0.488, p <0.001). In essence, these correlationsexemplify the importance of this study anddemonstrate how critical rapid changeadaptation is in today’s very competitiveenvironments. Simply put, the organizationthat is able to adapt to changes very rapidlywill be the one that will be able to bring newproducts and/or services to market quicker, bemore competitive, and outperform itscompetitors in productivity and quality.

Summary and ConclusionsIn short, the correlational analysis of this studyfound rapid change adaptation to exhibit acorrelation of 0.5 or higher with the followingorganizational variables: participativeorganization; the extent to which there is noboundary interference between departments tosolve joint problems; few restrictions toinnovation; the extent to which risk-taking isexpected; the extent to which risk-taking is notpunished; the extent to which new ideas are



Table 2. Stepwise Regression Model of Rapid Change Adaptationa,b,c

Model R R Square Adjusted R

Square Std. Error of the Estimate

1 Structure of organization facilitates focus on process improvement

.626 .392 .389 1.09

2 Rapid technology assimilation .674 .454 .447 1.03 3 Internal customer focus .700 .491 .482 1.00 4 Profit sharing .714 .510 .499 0.98 5 Awareness of how work unit processes fit with those of

other work units .730 .533 .519 0.96

6 Few restrictions to innovation .744 .554 .538 0.94 7 Quality is measured at every step of the process .755 .571 .553 0.93 8 Receive supervisory feedback on performance .764 .583 .564 0.92 9 Personal influence over my work .773 .597 .575 0.91 10 Quality improvement is based on objective data .781 .610 .587 0.89 11 People willing to put in effort above minimum required .787 .620 .595 0.88

a. Dependent Variable:Rapid change adaptation; N = 176

b. Method: Stepwise (Criteria: Probability-of-F-to-enter <= .050, Probability-of-F-to-remove >= .100).

c. F = 24.46, p < 0.001

Table 3. Beta Coefficients for Rapid Change Adaptation Regression Model

Unstandardized

Coefficients Standardized Coefficients t Sig.

B Std. Error Beta (Constant) -.076 .306 -.248 .804 1 Structure of organization facilitates focus on

process improvement .202 .079 .191 2.550 .012

2 Rapid technology assimilation .166 .066 .169 2.493 .014 3 Internal customer focus .144 .066 .143 2.181 .031 4 Profit sharing .215 .062 .209 3.498 .001 5 Awareness of how work unit processes fit with

those of other work units .182 .061 -.171 -2.981 .003

6 Few restrictions to innovation .261 .071 .238 3.606 .000 7 Quality is measured at every step of the

process .182 .069 .175 2.637 .009

8 Receive supervisory feedback on performance .131 .050 .149 2.634 .009 9 Personal influence over my work .135 .054 .140 2.482 .014 10 Quality improvement is based on objective

data .147 .060 .143 2.445 .016

11 People willing to put in effort above minimum required .127 .061 .116 2.071 .040



Overall, the findings of this study highlightthe importance of STS theory and demonstratethat rapid change adaptation is more likely tooccur in an optimized socio-technical systemfor which employee involvement,commitment, and empowerment are of greatimportance. Given the high correlationsbetween several TQM variables and rapidchange adaptation, one can further concludethat rapid change adaptation is significantlyfacilitated by an environment for whichquality, excellence, and continuousimprovement are strategic priorities. This canbe considered an important finding because,as of late, some have questioned the

rewarded; quality measurement; the extent towhich the organization is committed toexcellence; and, the extent to which theemployees of the organization are committedto continuous learning. At the same time, thestepwise regression model identified thefollowing variables to be the most importantpredictors of rapid change adaptation: theextent to which the structure of theorganization facilitates focus on processimprovement; rapid technology assimilation;internal customer focus; and profit sharing.

Collectively the correlational data and theindependent variables in the regression modelsuggest that rapid change adaptation may bemore likely to occur in an organizationalsetting within which there is an emphasis onprocess and quality improvement, employeeparticipation, rapid technology assimilation,innovation, and internal customer focus.Within such a participative system, quality ismeasured at every step of the process, thereare few restrictions to innovation, and theorganization shares its profits with the

employees. Furthermore, within such a system,risk-taking is not punished—it is expected.New ideas are constantly sought and rewardedwhile employees enjoy task autonomy, put ineffort above the minimum required, aregenuinely committed to each other’s successand growth, and receive supervisory feedbackon their performance.


changes. Finally, as the data in Table 4 indicate,organizations that are successful in creatingsuch a culture will be able to introduce andadapt to change rapidly and will most likelyenjoy a competitive advantage through newproduct/service introduction, qualityperformance, and productivity.

Implications for PracticeThis study has significance for ODpractitioners who serve as change agents. Inthis capacity, they must foster a philosophy ofopen systems where transformation considersboth the social as well as the technical side ofchange. By helping organizations embrace thesocio-technical doctrine, they enhance theirability to foster the predictors of rapid changeadaptation identified in this study. Key to an


effectiveness of total quality management intoday’s rapidly changing world. The newargument is that organizations need large anddrastic changes in order to cope with today’sfast changing external environments. Thus,advocates of the reengineering approach claimthat TQM, which relies on small butcontinuous changes, cannot be an effectiveapproach to drastic changes. The results of thisstudy suggest otherwise. In general, companiesthat function under a continuous improvementmode do not need to make drastic changes tocope with the demands of the externalenvironment. In fact, it is frequently thecontinuously improving companies that makeit necessary for the competition to implementdrastic changes in order to bridge thecorresponding performance gap. Hence, theresults of this study further suggest that unlessreengineering efforts are accompanied bycultural changes that transform theorganization into an innovative, participative,and quality-driven entity, the organization willstill find itself having difficulty adapting tochanges in a rapid manner and thus beingsubjected to periodic and unproductive drastic

organization’s readiness and willingness toaccept the quality of this perspective is theirorganizational culture.

Cultural norms are deep, difficult to see andfor most, impossible to articulate. It is the roleof OD, given the field’s philosophicalcommitment to people and people-focusedmanagement, to uncover and provide guidancein interpreting these belief systems. Inparticular, help is needed to understand howan organization’s culture supports or hindersthe principles of total quality management andcontinuous improvement. Given serioussupport from top management, ODpractitioners can work with individuals toreshape inappropriate reward structures,managerial practices, and work models. Bytransforming these factors, a culture ofexcellence, synergy, and innovation canemerge through new systems designed to favoremployee empowerment, teamwork, andopenness to continuous learning. In short, thesocial rules can and must change. Without asupportive culture, the potential for effectiveand rapid adaptation declines dramatically, asthe organization becomes a candidate for yetanother failed reengineering attempt wherethere is little or no sustainable impact tobottom-line performance.

A change-ready culture is one that encouragesemployees’ psychological ownership in theoutcome of change. A growing body ofliterature characterizes the psychologicalaspect of ownership as different and perhapseven more powerful than financial ownership(Pierce, Rubenfeld & Morgan, 1991). This areaof study suggests that financial ownershipalone cannot influence the kind of behaviorneeded to break the cycle of compliance andapathy that often provokes the need fororganizational change. Pierce et al. describe



psychological ownership as occurring whenemployees possess meaningful equity in theirorganization, have access to pertinentinformation about the company’s strategicplans, and participate in decision-making andmanagement. We believe that the principlesof psychological ownership complement thelearning, socio-technical and qualitymanagement dimensions that emerged in thisstudy as key to rapid change adaptation.

Meaningful equity. Compensation,promotion, and hiring practices must be linkedto objective performance criteria. This linkageshould decrease unproductive labor byreducing the ambiguity in present reward andfeedback systems. Meanwhile, the issue ofnepotism or political connections cannot beignored, as it is a natural extension of thoseorganizational cultures that require thenurturing and care of favored members.Perhaps the initial focus should not be itselimination, but on control of the process in away that limits opportunity and equity to thosewho are not competent performers.Shareholding also should be democratized.The use of stock ownership plans and profitsharing would give the majority of people, inall social ranks and ethnic backgrounds, thechance to share the benefits of greaterproductivity and accumulation, therebyenlarging the circle of those in a position toprofit directly.

Transparency and access to information.Most employees have a thirst to know, to bekept current. However, transparency andaccess to communication can often beconstrained by layers of bureaucracy. An “opendoor” policy should be practiced and topmanagement should meet often withemployees to explain strategic policy and theneed for change. This point will support the

Supple and participative management.Decentralization and flatter managerialstructures will additionally permit employeeparticipation and greater flexibility inmanagement styles. A supple environment isneeded to respond not only to external personalobligations but also to promote innovationthrough a greater permission to learn fromone’s mistakes. A culture that promotes alearning environment might place greateremphasis on improved processes than onoutcomes while advocating a staged approachto change that is less risky for the individual.Such cultures encourage and expectinnovation. Likewise, an innovation-drivensystem promotes an environment in whichissues can be settled by arbitration rather thanrules and is consonant with empowermentgovernance and teamwork.

Future ResearchAs stated earlier, the main limitation of thisstudy is that the data was collected from asingle source with a predominantly salariedfemale population in the health care insuranceindustry. Hence, replicating this study in otherindustries and organizations will helpdetermine the extent to which the presentedresults can be generalized to other settings andpopulations. In particular, gathering moreempirical data from several organizations,some of which could be undergoing changeor constantly remaining in a static stage, couldhelp further explain the change adaptationphenomenon.

socio-technical variables in this study that callfor a participative and non-bureaucratic workenvironment where communication canflourish between levels and departments.



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