Organizational Change

Steven E. Phelan, November 2008

Why change?

• Change is a risky activity– Many organizational changes fail or do not

realize their intended outcomes (50-70%). – This raises the question of why change is so

prevalent?

• Pressure to change comes from:– External, environmental pressures– Internal, organizational pressures

External, environmental pressures

Pressure Examples Description

Market decline pressures

Harley Davidson

When current markets that the organization operates in begin to decline there is pressure to find newer, more viable markets.

Hypercompetition pressures

Intel

This affects the way organizations respond to their consumers and their competitors to cater for the increasingly rapid pace of business.

Reputation and credibility pressures

Walt Disney Company

In light of recent corporate governance scandals in organizations, the pressure to maintain a good reputation and high level of credibility has increased.

External, environmental pressures

Pressure Examples Description

Fashionpressures

Boeing Co.This is based on mimetic isomorphism – imitating companies that are legitimate and successful

Mandated pressures

Chevron TexacoThis is based on coercive isomorphism – when change is demanded by outside sources.

Geopolitical pressures

3M

This is when global crises greatly impact an organization and change is necessary

for survival.

Internal organizational pressures

Pressure Examples Description

Growth pressures Microsoft

Existing systems and processes in a smaller organization may no longer be applicable when the size of the organization increases.

Integration and collaboration

pressuresEDS

Integration and creating economies of scale can lead to pressure for change in organizations.

Identity pressures Forte Hotel

A common organizational identity and the unified commitment of staff in different areas/departments of an organization can be difficult to manage and may encourage change.

Internal organizational pressures

Pressure Examples Description

New broom pressures

UNLVNew authority figures in an organization can herald a new era and often signal significant changes an organization in an organization.

Power and political

pressures

Morgan Stanley

Power relationships and politicking can change internal processes and decision making. This has significant flow on effects within the organization.

Interpretations of Change

• Take five minutes to personally answer these questions:– Have you (or someone you know) ever

experienced organizational change?– What was your view of the change?– What did others think of the change?– Who were the change champions? How

did they behave?

Group Exercise

• Perform the following activities in your group:– Share your stories with members of your

group– What are the common issues?– What are the differences?– Are there “lessons” embedded in these

stories?– What three conclusions do you draw from

these stories about managing change?

IMAGES OF CHANGE

Images of Managing Change

• Controlling…– Top-down view of management– Fayol’s theory of management: planning,

organizing, commanding, coordinating and controlling.

• Shaping…– Participative style of management– Improving the capabilities of people within

the organization

Image of Change Outcomes

• Intended Change:– Change is a result of planned action

• Partially Intended Change:– Change may need to be re-modified after it

is initially implemented

• Unintended Change:– Forces beyond the control of the change

manager

Images of Change Managers

Images of Managing

Controlling . . . (activities)

Shaping . . .(capabilities)

Images of Change

Outcomes

Intended DIRECTOR COACH

Partially Intended NAVIGATOR INTERPRETER

Unintended CARETAKER NURTURER

Images of Change Managers

Director• Based on an image of

management as control and of change outcomes as being achievable.

• Supported by the n-step models and contingency theory.

Coach• Relies upon building in

the right set of values, skills and “drills” that are deemed to be the best ones that organizational members will be able to draw on in order to achieve desired organizational outcomes.

• Related to organizational development approaches.

Images of Change Managers

Navigator• Control is still seen to be at the heart of management

action, although a variety of factors external to managers mean that while they may achieve some intended change outcomes, others will occur over which they have little control.

• Supported by the contextualist and processual theories of change.

Interpreter• The manager creates

meaning for other organizational members, helping them to make sense of various organizational events and actions.

• Supported by the sense-making theory of organizational change and concept of ‘enactment’

Images of Change Managers

Caretaker• The change manager’s ability to control is severely

impeded by a variety of internal and external forces beyond the scope of the manager. The caretaker is seen as shepherding their organizations along as best they can.

• Supported by life-cycle, population-ecology and institutional theories.

Nurturer• Even small changes may

have a large impact on organizations and managers are not able to control the outcome of these changes. However, they may nurture their organizations, facilitating organizational qualities that enable positive self-organizing to occur.

• Related to chaos and Confucian/Taoist theories.

Questions

• To what extent are you more comfortable with one or other of the six images?– Why is this the case?

• What are the strengths and limitations of the images that you have identified as most relevant to you?

• What skills do you think are associated with each image?– Are there areas of personal skill development that are

needed for you to feel more comfortable in using other images?

• Have you ever been in an organization that was dominated by particular images?– What barriers to alternative images existed in this

organization? What strategies could overcome these barriers?

Key Uses of Multiple Images

• Surfacing our assumptions about change– Images simplify & illuminate but also obscure

• Assessing dominant images of change– To what degree are some images seen as natural

and not open to negotiation in certain organizations• Using multiple images in change

– Image-in-use might depend on the type of change– Image-in-use might depend on the context– Image-in-use might depend on the phase of change– Multiple change images can also co-exist

• Skilled change managers are able to swap images or even manage multiple images simultaneously

Success• Typical questions about change:

– Was it managed well?– What went right?– What went wrong?– Did we get the outcome we were after?

• Do these questions assume a certain image of change?

• How does each image assess success?– Which images have “non-traditional” success

measures?– “Judgments of success are conditional on who is

doing the assessment and when the judgments are made” Is this true?

Group Exercise

• Take your group’s stories from earlier in the day– Which images of change did you come

across?– How did these images affect the way the

various actors approached change?– Do the images used vary by the type,

context, or phase of change?– What broad conclusions can you form?

Green Mountain Case

• Questions:– Which of the six change images were held by:

• Gunter?• The hospitality literature?• The consultant?

– How did these assumptions influence prescriptions for dealing with “the turnover problem”

– What does it mean to say the problem was ‘dis-solved’?

– Choose another change image and apply it to “the turnover problem” What new insights arise?

– Does considering different images of change help us (I hesitate to add ‘solve the problem’)?

MANAGING RESISTANCE

Dilbert

• The goal of change management is to dupe slow-witted employees into thinking change is good for them by appealing to their sense of adventure and love of challenge

• This is like convincing a trout to leap out of a stream to experience the adventure of getting deboned

Signs of Resistance to ChangeActive signs of resistance• Being critical• Finding fault• Ridiculing• Appealing to fear• Using facts selectively• Blaming or accusing• Sabotaging• Intimidating or

threatening• Manipulating• Distorting facts• Blocking• Undermining.• Starting rumors• Arguing

Passive signs of resistance• Agreeing verbally but not

following through (“malicious compliance”)

• Failing to implement change• Procrastinating or dragging

one’s feet• Feigning ignorance• Withholding information,

suggestions, help, or support• Standing by and allowing

change to fail

• Which of the various ways of resisting change are the most common?

• Which are the most difficult to deal with?

Why Do People Resist Change?

• Dislike of change• People don’t resist change, they resist pain!• Boredom can be pain, too.

• Discomfort with uncertainty• Low tolerance for ambiguity

• Perceived negative effects of interests• Authority, status, rewards, salary, social ties

• Attachment to the established culture/ways of doing things

• Perceived breach of psychological contract

Why Do People Resist Change?

• Lack of conviction that change is needed• Lack of clarity as to what is needed• Belief that the specific change being proposed is

inappropriate• Belief that the timing is wrong• Excessive change• Cumulative effects of other changes in one’s life • Perceived clash with ethics• Reaction to the experience of previous changes• Disagreement with the way the change is being

managed

Why do people support change?

• Security• Money• Authority• Status/prestige• Responsibility• Better working conditions• Self-satisfaction• Better personal contacts• Less time and effort

Managing Resistance

• The classic steps:• Education and communication• Participation and involvement• Facilitation and support

• Beyond the classic steps:• Negotiation and agreement• Manipulation and cooptation• Explicit and implicit coercion

• The Paula Story• Does a successful change manager needs skills in

all six areas? • Where do you need development?

The Resistance Cycle

• Resistance is a natural (even necessary) psychological stage in any change:• Denial / Shock• Resistance / Anger• Exploration / Mourning• Commitment / Acceptance

• Do we just ‘let nature take its course’ then?• Can people get stuck in a stage?

The “Power of Resistance”(Maurer)

• Use the power of resistance to build support• Showing respect towards resistors creates stronger

relationships and thereby improves the prospects of success

• Fundamental touchstones• Maintain clear focus• Embrace resistance• Respect those who resist (assume good faith)• Relax• Join with the resistance

• Look for points of commonality

Maurer’s Default Options

• Use power• Manipulate those who oppose• Apply force of reason• Ignore resistance• Play off relationships• Make deals• Kill the messenger• Give in

Contingency Approach

• Contingency approaches challenge the view that there is “one best way” • The style of change will vary, depending upon the

scale of the change and the receptivity of organizational members for engaging in the change.

• Kotter and Schlesinger recommend changing tactics according to the:• Amount and kind of resistance anticipated• The position and power of the change agent• The personality of the person designing and implementing the

change• The time available and the consequences of failure

Question

• Which approach to the management of resistance attracts you? Why?

The Merger Plan Simulation

• Task• Develop a formal integration plan (with

decisions on branch closures, systems conversion, product alignment, layoffs, and communication strategy) that will maximize shareholder value while keeping as much support as possible from the stakeholders at the two banks and external organizations.

• 10 minutes = 1 news cycle = 1 day

Merger Plan

N O R T H E R N B A N K

C IOH e n ry

V P -H RS e th

V P -R eta il B a n k ingE d

C E OH e ath er

Merger Plan

S O U T H E R N B A N K

C IOM a ure en

V P -H RP a u l

V P -R eta il B a n k ingK im

C E OA lliso n

Merger Plan

• Other Roles• Change Manager: Tod• Journalist: Lorri• Union Organizer: Anita• State Regulator: Keith• Admin Assistant: Scott• EastWest Bank: Brian• Largest Customer: Kris• Branch Employee: Jocylene

@ APPLEDonna Dubinsky