Course Name: Managing Change in organizations

Faculty Name: KBL Srivastava

Department: Humanities and Social Sciences

Indian Institute of Technology Kharagpur

Topic: Need for Change

 Concepts Covered: Need and Scope of change

 identifying the need for organizational change

Internal change pressure

 External change pressure

Scope of change
The need for change
• Change is a risky activity – many organizational
changes fail or do not realize their intended
outcomes.
• This raises the question: why change is so prevalent?

• Pressure to change comes from:

– External, environmental pressures
– Internal, organizational pressures
Perspective of Organizational Change
The theoretical position
Why change occurs can be based on either the economic perspective or the organizational learning perspective

Economic perspective Organizational learning perspective

focuses on satisfying the shareholders of focuses on building the capabilities of an
the organization and maintaining their organization to give its members the
investments to ensure its survival. ability to deal with change.

Change to improve organizational recognizes the complexity of

performance in the form of better balance organizations and human systems which
sheet results. cannot be accurately represented through
a single linear objective
The process of change
Theories explaining change process
1. Teleological theories
Recurrent and discontinuous sequence of goal
setting, implementation and adaptation

Organizations are purposeful and adaptive

Present change as an unfolding cycle of goal
formulation, implementation, evaluation and learning.

Learning helps in the modification of goals or the

actions taken to achieve them.
The process of change
Theories explaining change process
2. Dialectical Theories

Focus on conflicting goals between different interest

groups and explain stability

Change in terms of confrontation and the balance of

power between the opposing entities
The process of change
Theories explaining change process
3. Life cycle Theories
Change is a process that progresses through a
necessary sequence of stages that are cumulative.

Organizations go through different stages: Birth, Youth,

midlife, Maturity…
After reaching maturity revitalization is needed.

Each stage contributes a piece to the final outcome.

Each stage is a necessary precursor for the next.

 The process of change
Theories explaining change process
4. Evolutionary theories

Change proceeds through a continuous cycle of variation, selection, and

retention.

Variations just happen and are not therefore purposeful, but selected on the
basis of best fit with available resources and environmental demands.

Retention is the perpetuation and maintenance of the organizational forms

that arise from these variations via forces of inertia and persistence.
Forces of Organizational Change
Organization as a system, depend on many
interdependent factors which influence it’s day to day
functioning
Strategic decisions and future action plans for facing the
competitive challenges successfully.

These factors can be both internal and external in nature

Determine an organization’s readiness for change as
well as it’s preparedness
External Forces of Organizational Change
The external forces of change stem up from the external environment
Competitive forces: Organization must make changes to attempt
to match or exceed its competitors on at least one of the
dimensions of efficiency, quality, innovation, and customer
responsiveness
organizations change their strategies to ensure their global
presence.
Example: Nissan, Toyota and Mitsubishi, continuously relocate
their manufacturing as well as their assembling operations to
South East Asian countries to achieve a competitive advantage in
the form of reduced cost of labor and economies of scale
Political Forces

Rapidly changing global political scenario and the upheavals in the

global politics

Challenges in the form of changes in regulations, policies

The political framework, ideologies

 Economic Forces
The economic forces influence organization’s change management strategy:
Globalization, deregulation and opening of national economies

They present opportunities or challenges in the form of economic uncertainties or

growing competitive pressures

Factors such as changes in the business cycle, inflation or deflation rate, fluctuation in
the interest rates, economic recession, changes in the economic policies or tax
structures, import/export duties, fluctuation in the oil prices globally, financial stability
of the country and also loss/increase in the consumer confidence towards the economic
conditions of the country are some of the crucial factors.

Example: Change in the global market, economies create a ripple like effect and affect
the Indian markets in terms of fluctuations in the capital markets, employment
opportunities and rise or fall in the consumer demand.
Technological Forces
Technological advancements and innovations in communication and computer
technology, advances in manufacturing technology, shortening of product life cycle

Newer ways of working and added in newer range of products/services

Creating a framework for managing change effectively and proactively responding to

the challenges of technological changes

Advancements in the technology contribute to the organization’s success or failure in

the competitive environment

Example of Singapore: With the usage of Information Technology in the strategic

decision making and overall planning, today Singapore holds the status of being the
world’s first completely networked economy
Governmental Forces
Governmental regulations and also the extent of intervention may
influence the need for change
1. Deregulation: Deregulation is associated with decentralization of power or
economic interventions at the state level or lessening of the governmental
intervention in the economy. For example, due to deregulation in sectors like
insurance, banking, petroleum being handed over to the private players
2. Foreign Exchange: Foreign exchange rates directly affect the international trade, as
the variations in the exchange rates influence the currency payment structure.

Example: India pays more for oil imports with fluctuation in dollar value
Governmental Forces
3. Anti-Trust Laws: Anti-Trust laws are enforced by most of the governments for
restricting/curbing unfair trade practices. For example, these restrictions were enforced in
India by enacting an act called Monopolies and Restrictive Trade Practices (MRTP),
1971 now replaced with CCI (Competition commission of (India)
4 Suspension Agreements: Suspension agreements are the agreements which are
finalized between the governments to waive off anti-dumping duties.
5. Protectionism: Due to the growing competitive pressures, most of the governments
try to enforce certain regulations or intervene for safeguarding their threatened
industries.
Example: by enforcing certain trade barriers, the Indian government protects the local
industries such as Handicrafts and Textiles. These trade barriers may take the form of
either anti-dumping laws, levy of tariffs or import duties, quantity quotas, and various
government subsidies.
 Changes in the Needs and Preferences of
Customers
Compel the organizations to adapt and innovate their product
and services offerings constantly for meeting the changing
demands of the customers.

Ethical forces
• Important for an organization to take steps to promote ethical
behavior
– Creation of ethics officer position
– Encourage employees to report unethical behaviors
Sustainable development goals forces for
organizational change
Major Elements:
Social
1. Employee Well-Being
2. Quality of Life
3. Business Ethics
Economic
4. Shareholder Value Creation
5. Economic Development
Environmental
6. Environmental Impact Minimization
7. Natural Resource Protection
Course Name: Managing change in Organizations
Faculty Name: KBL Srivastava
Department: Humanities and Social Sciences

Indian Institute of Technology Kharagpur

Topic: Need for Change (2)

Internal Pressure for Change
Systemic Forces: change in any subsystem, result in a change in
the existing organizational processes and the complete alignment
as well as the relationship.

Inadequate Existing Administrative Processes: With the changing

times, an organization needs to change it’s rules and existing
administrative processes

individual/Group Speculations: desires and requirements keep

changing with the changing times, which result in differences in
individual as well as group expectations
Internal Pressure for Change
Structural Changes: Changes alter the existing organizational
structure as well as its overall design. May take the form of
downsizing, job redesign, decentralization
IBM reformed in its existing system and procedures to achieving
cost effectiveness and enforced downsizing strategy.

People Focused Change: the major focus is laid on people and

their existing competencies, human resource planning strategies,
structural changes and employee reorientation and replacement

Issues with the Profitability: due to a loss in revenue, low

productivity or a loss in the market share.
 Organizational Self-renewal

• Challenging old assumptions

• Understanding the new rules of competition
• Capturing the potential of new paradigms by rethinking
business processes
• Constant innovation
• Improving continually as part of normal functioning
• Transforming while keeping purpose and direction
 Organizational Pressure for Change
Growth Pressure

Integration and Collaboration pressure

Identity pressure

New broom pressure

Power and political pressure

 Growth Pressure
Change as outcome of company growth

Growth may not be always linear and sequential in

nature

Change may be non linear and fundamental at times

Younger and new organizations may not grow and change

due to inexperienced managers, lack of resources and
bad business decisions
Integration and collaboration pressure

Changes made to better integrate to achieve economies

of scale across business units

Better coordination and collaboration across multiple

business units

Creation a culture of coordination and collaboration

 Identity Pressures
Pressure to establish organizational identity through
branding

Establishing cultural identity of the organization

Aim of change to enhance identity and commitment of

the staff

Establishing identity through promotion, marketing,

products and innovations
 New Broom pressure
A new CEO acts as a signal to bring about new change in the old ways of
working

New managers infuse new ideas for improvements in performance and

customer satisfaction

Create new energy for change in the organization

Not burdened by past organizational practices

 Power and political pressure

Internal political pressure related with change

Changes made to alter internal power relationship to

speed up decision making and better engagement

Power pressure leading to change related to internal

conflict
External Environmental Pressure: Some Examples

Pressure Examples Description

Neo-institutionalism: mimetic isomorphism.

Fashion
Boeing Co. Managers imitate practices associated with
pressures
successful organizations

Neo-institutionalism: coercive isomorphism. An

Mandated Chevron
organization changes through formally or
pressures Texaco
informally mandated requirements.

Macroeconomic changes (or crises) place

Geopolitical pressure on organizations to change the way
3M
pressures
they operate.
External Environmental Pressure: Some examples
Pressure Examples Description

AOL Time Warner When current markets begin to decline

Market decline
there is pressure to find newer, more
pressures
viable markets.
The highly intensified rate of business –
Hyper- including shortened product life cycles
Apple
competition and rapid responses by competitors –
Samsung
pressures produces pressure for change at the
organizational level.

Walt Disney In light of recent corporate governance

Reputation and
Company scandals, the pressure to maintain a
credibility
good reputation and high level of
pressures
Satyam credibility has increased.
Internal Environmental Pressures: Some examples
Pressure Examples Description
Existing systems and processes in
an organization may no longer be
Growth pressures Microsoft
applicable when the size of the
organization increases.
Integration and creating economies
Integration and collaboration EDS
of scale can lead to pressure for
pressures
change in organizations.
A common organizational identity
and the unified commitment of staff
Forte
in different areas/departments of
Identity pressures Hotel
an organization can be difficult to
manage and may encourage
change.
Internal Environmental Pressures: Some examples

Pressure Examples Description

Change at the senior management level –

New broom ICICI Bank
particularly of CEO - can often be a catalyst
pressures RBI
for significant changes in an organization.

Power and Power relationships and politicking can

Morgan
political change internal processes and decision
Stanley
pressures making.
Course Name: Managing change in Organizations
Faculty Name: KBL Srivastava
Department: Humanities and Social Sciences

Indian Institute of Technology Kharagpur

Topic: Need for Change (3)

 Forces Driving the Need for Major Organizational Change
International economic Maturation of markets in Fall of communist and
Technological Change
integration developed countries socialist regimes
Faster and better Fewer tariffs (GATT)
communication More countries linked to
Currencies linked via floating
Faster and better Exchange rates
Slower domestic growth the capitalist system
transportation More global capital flows More aggressive More privatization
Information networks exporters
connecting people globally More deregulation

Global changes, competition, and markets

More Threats More Opportunities

More domestic competition Bigger Markets
Increased speed Fewer Barriers
International competition More international markets

More Large Scale Change in Organizations

Reengineering Mergers, joint ventures, consortia
Horizontal organizing, teams, networks Global teams
Quality programs Strategic change
New technologies and products Cultural change
 Why Organizations don’t change in Face of Environmental
Pressure Organizational Learning Vs. threat Rigidity
Some organizations are less adaptive to change from outside pressure

Slow in responding to the changes

Managers need to go for innovative adaptation to manage the gap

between performance and aspirations

Pressure may inhibit managers due to cognitive and decision making

process and restrict their vision
Being tapped by the success syndrome
 Prolonged
period of
The Trap of Success
success
Outcomes Environmental
Decreased Disturbance
Success customer focus Declining
Syndrome Learning
Increased Cost Poor external performance
Complacency disabled alignment
Less innovation
Arrogance

Codification

Internal focus Death spiral

Do
Denial
more of &
the rationalisation
same
Why Organizations don’t change in Face of Environmental
Pressure
Environment as an objective entity vs. environment as a cognitive
construction
Treating the environment as an objective entity to which managers must
respond

centrality of managers’ interpretations of environmental conditions as the

key determinant of behavior.

Type 1 Error: Environment is stable, but perceived as turbulent and take

unnecessary action

Type 2 Error: Environment is stable but mangers perception is different- no

action
Why Organizations don’t change in Face of Environmental
Pressure
Forces for change vs. forces for stability

The extent to organizational mission is institutionalized in stakeholders and

an external environment

The extent of diffusion of power and resources throughout the organization

The rationale managers employ to explain decline: the more controllable or

stable the cause, managers introduce innovative changes
 Forces for change Vs. Forces for Stability
Forces for change Forces for stability

Adaptability of organizations to the Institutionalization of current practices due

environment to solid past practice and power structure

Cost commitment (making HR variable then Transaction costs

fixed cost)

Impatient capital markets demanding more Sustained advantage gained through stable
investment returns organizational relationships

Control less hierarchy but greater power Organizational social capital

through performance measures

Competitive advantage through responding Predictability and uncertainty reduction

to market conditions
Why Organizations don’t change in Face of Environmental
Pressure
Bridging (adapting) vs Buffering
Strategies to maintain effectiveness by adapting parts of
the organization to changes happening in the outside
environment (bridging)

focusing on efficiency by avoiding change through

shielding parts of it from the effects of the environment
(buffering)
 Incremental versus Radical Change
INCREMENTAL CHANGE RADICAL CHANGE

Continuous progression Frame-breaking burst

Maintain equilibrium Reach new equilibrium

Affect organizational part Transform entire

organization
Through normal structure and Create new structure and
management processes
management

Breakthrough technology
New technology

New products create new

Product improvement
markets
Scale of Change
• First-order change:
– Incremental
– Maintains and develops the organization
– E.g. continuous and smaller changes to the
structure of an organisation
• Second-order change:
– Transformational
– Fundamentally changes the way an organization
functions
– E.g. downsizing
Between 1st & 2nd Order Change
• Mid-range changes
– Overcomes inertia but is not revolutionary
– Avoids the alarming implications of large scale
change
• Punctuated equilibrium
– Long periods of stability followed by short bursts of
change and instability
• Robust transformation
– Considers environmental conditions as being
temporary and requiring robust responses including
the enactment of new capabilities.
 Types of Change

Leadership Vision

Products and services Strategy and structure

People and culture Technology

International
The Market
Environment
Course Name: Managing change in Organizations
Faculty Name: KBL Srivastava
Department: Humanities and Social Sciences

Indian Institute of Technology Kharagpur

Topic: Scope for Change (1)

Change capability framework
The Importance of Context
 Targets of Change
Four different levels:

Human resources

Functional resources

Technological capabilities

Organizational capabilities
Human Resources

Typical kinds of change efforts directed at human resources

include:

Investment in training and development

Socializing employees into the company culture
Changing culture in response to diversity
Reward systems
Changing top management team
 Functional and Technological, and Organizational
Capabilities
Functional resources – as the environment changes, organizations
often transfer resources to the functions where the most value can be
created.

Technological capabilities – these give an organization the capacity to

change itself in order to exploit market opportunities

Organizational Capabilities: through its design of organizational

culture and structure,
An organization can harness its human and functional resources to
exploit technological opportunities
 Strategic types of change
Technical Change

Changes in an organization’s production process, including its knowledge and skill

base, that enable distinctive competence

Designed to make production more efficient or to produce greater volume

Include work methods, equipment, and workflow

Example: GlaxoSmithKline :Developed software to help researchers screen potential

drugs for possible adverse medical reactions at early stage
 Strategic types of change
Types of Technical Change
• There are a variety of new technologies being used, for
example:
– Customer relationship management (CRM) systems
– Enterprise resource planning (ERP)
– Wireless technology
– Business process reengineering (BPR)
– Six Sigma
– CAD, CAM, CIM, Flexible manufacturing system
– ICT
 Strategic types of change
Product and service changes

Pertain to the product or service outputs of an organization

New products include small adaptations of existing products or entirely

new product lines

Designed to increase the market share or to develop new markets,

customers, or clients

Toyota’s Hilux truck was a new product designed to increase market share
Apple’s iPod was a new product that created a new market for the company

Tata Consultancy Services mKrishi service delivers weather information

and crop advice to farmers in rural India via cell phone.
Strategic types of change
Strategy and structure changes

Pertain to the administrative domain in an organization

Structure and system changes are usually top-down

Include changes in organization structure, strategic management,

policies, reward systems etc.

3M: A system change instituted by top management implementing a

Six Sigma program

A shift to self-directed teams at ICU Medical Inc.

Structural changes
Hierarchy: Number of levels

Span of control: Broad or Narrow

Chain of command: centralized or decentralized decision making

Degree of formalization

Departmentation

Management systems

Taller vs. flatter or Mechanistic vs. organic

 Strategic types of change
Type of strategic changes
MERGERS AND ACQUISITIONS
• Enable organizational growth at an accelerated rate
• Types of mergers and acquisitions:
– Excessive capacity
– Neighbouring market expansion
– New product or market investment
– Research and development
– Leveraging to create industries
Key issues in managing strategic change
Strategic leadership roles

Leadership is the process of influencing an organization (or

group within an organization) in its efforts towards
achieving an aim or goal.
Three key roles in leading strategic change:
 Envisioning future strategy.
 Aligning the organization to deliver that strategy.
 Embodying change.

N.B. Middle managers have a key role in leading change as well

as senior managers
Styles of strategic leadership
Situational leadership – successful strategic leaders are able to adjust their
style of leadership to the context they face.
Two approaches:
Theory E: the pursuit of economic value; top-down; ‘hard’ levers of change;
emphasis on changes of structures and systems, financial incentives, portfolio
changes, downsizing.
Theory O: the development of organizational capability; emphasis on culture
change, learning, participation in change programs and experimentation.

A combination of the two approaches may be required and can be beneficial

Strategic types of change
Culture Change

Changes in the values, attitudes, expectations, beliefs,

abilities, and behavior of employees

pertain to changes in how employees think; these are changes in mind-

set rather than technology, structure, or products
 Types of Change

DOWNSIZING
• .Approaches to downsizing:
– Retrenchment
– Downscaling
– Downscoping
• Does not necessarily lead to increased productivity
• Can be an excessively costly exercise
Key Change Challenges
Downsizing New Technologies Mergers & Acquisitions

Employee retention. Goal synthesis. Cost savings.

Avoiding “hard landings”. Choice of technology Cultural adjustment.

Minimizing political Identifying political Balancing change and

behavior and loss of barriers. continuity.
teamwork.
Survivor syndrome The IT team. Due diligence.
Communication Communication Employee retention
Due diligence Time frame. Contingency planning.
Cultural adjustment. Contingency planning Power structure.
Choice of restructuring Communication
technique
Course Name: Managing change in Organizations
Faculty Name: KBL Srivastava
Department: Humanities and Social Sciences

Indian Institute of Technology Kharagpur

Topic: Scope for Change (2)

Strategies for planned change
Incremental change strategies Transformational change
strategies
Collaborative Participative evaluation Charismatic transformation
mode When organization is fit but needs When organization is out of fit
minor adjustment no time for active participation
not fit but have time to make but can go for radical change
changes

Coercive modes Forced distribution Dictatorial transformation

When organization is fit but needs When organization is out of fit
minor adjustment no time for active participation
Out of fit but have time to make but can go for radical change
changes For survival
Four Change Strategies
1. Participative evolution.
 Incremental and anticipates change.
 Support of culture through collaborative means.
2. Charismatic transformation.
 Radical change in short time with support of culture.
3. Forced evolution.
 Incremental adjustments over longer period without support of
culture.
4. Dictatorial transformation.
 Used in times of crisis.
 Major restructuring running counter to internal culture.
Integrated Strategic Change (ISC): Key Features

A deliberate coordinated process that leads to gradually or radically systemic

realignments between the environment and a firm’s strategic orientation
resulting in improvement in performance and effectiveness

Strategic Orientation
Creating the Strategic Plan
Integrating Individuals and Groups into the Process
The Integrated Strategic Change Process

Strategy Strategy
S1 Strategic S2
Change
Plan

Organization Organization
O1 Implementation
O2

Strategic Analysis Strategic Choice

Integrated Strategic Change: Application Stages
 Strategic Analysis
 Assess the readiness for change and top management’s
ability to carry out change
 Diagnose the Current Strategic Orientation
 Strategic Choice
 Top management determines the content of the strategic
change
 Designing the Strategic Change Plan
 Development of a comprehensive agenda to achieve the
change
 Implementing the Strategic Change Plan
Influences on structure
Organization Design Model
Organization Strategy

Strategic Fit

Organization Design

Management
and Information Structure
Systems

DesignFit
Design Fit
Human Resource Work
Practices Design
 Aligning structure with strategy, work design, HR and MIS
Mechanistic organic
Strategy Cost minimization Innovation
Structure Formal/hierarchical Flat, lean, flexible
Functional Matrix structure, process , network
Work design Traditional jobs, Enriched jobs
traditional work groups Self managed teams
HR System Person job fit, training Person organization fit. Regular
Standard reward, pay for training, choice based reward, pay
performance and merit for performance and business
success
MIS Command and control Employee involvement
Closed centralized Open, inclusive and distributed
information information
Organization Design: Application Stages
 Clarifying the Design Focus
 Create the overall framework, begins with examining strategy and
objectives and determining organization capabilities needed
 Designing the Organization
 Results in an overall design for the organization, detailed designs for
the components, and preliminary plans for how to implement
 Implementing the Design
 Puts the new structures, practices and systems into place, draws
heavily leading and managing change methods
Strategy-Culture Fit

 Strategy:
 Course of action used to achieve objectives.
 Relates resources of organization to opportunities
in environment.
 Culture:
 Set of values for setting priorities.
 Critical factor in implementation of strategy.
 Strategy-Culture Matrix
Four basic alternatives in determining strategy changes:
1. Manage change (manageable risk).
 Change important and compatible with culture.
 Use cultural reinforcement as strategies.
2. Reinforce culture (negligible risk).
 Forge vision that emphasizes shared values.
 Reinforce existing culture
3. Manage around culture (manageable risk).
 Change important and incompatible with present culture.
 Reinforce value system, reshuffle power, use leverage in the organization.
4. Change strategy to fit culture (unacceptable risk).
 Change important but incompatible with culture.
 Changing culture is explosive, long-term process that may be impossible.
Strategy-Culture Matrix
Diagnosing Organization Culture
 Behavioral Approach
 Pattern of behaviors (artifacts) most related to
performance
 Competing Values Approach
 Pattern of values emphasis characterizing the
organization- how it resolves a set of value dilemmas
 Deep Assumptions Approach
 Pattern of unexamined assumptions that solve internal
integration and external adaptation problems well
enough to be taught to others
 Competing Values Approach
Internal Focus & Integration Flexibility & Discretion

Clan Adhocracy

Hierarchy Market

Stability & Control

Culture Change Application Stages

 Establish a clear strategic vision

 Get top-management commitment
 Model culture change at the highest level
 Modify the organization to support change
 Select and socialize newcomers; downsize deviants
 Develop ethical and legal sensitivity
Example of culture change: Organizational rituals and change