Lecture No 4 Organizational Change Discipline Social Theory

Lecture No 4 Organizational Change Discipline: Social Theory and HR Policy Almaty 2017

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Content of the Lecture . 1. The Change Process and Types of Change. 2. Factors which Resist Change and How to Overcome Resistance to Change. 3

Key Words Organizational change (organization change occurs when business strategies or major sections of an organization are altered) Change management (minimizing resistance to organizational change through involvement of key players and stakeholders) Reengineering (to reorganize the operations of an organization so as to improve efficiency) Stakeholder (a person such as an employee, customer, or citizen who is involved with an organization, society, etc. and therefore has responsibilities towards it and an interest in its success) Transformation (a process of profound and radical change that orients an organization in a new direction and takes it to an entirely different level of effectiveness) 4

1. The Change Process and Types of Change. 5

Change is the law of nature NOTHING IS PERMANENT EXCEPT CHANGE 6

• Why change happens? The change process starts with an awareness of the need for change. • Organizational change is the process by which organization move from their present state to some desired future state to increase effectiveness. • Change often results from the pressure of forces which are both outside (external factors) and inside (internal factors) the organization. 7

Mechanical or Engineering School Started in about the 1900 s from the Western industrial revolution. Was based on ideas from engineering and talked in terms of ‘reengineering’, efficiency, cost, service and speed. Biological School Started in the 1950 s and considered change to be evolutionary. Language used is ‘adapt’, ‘reposition’, and ‘congruent’. 8

Interpretative School Emerged in the 1980 s, at a time of political and cultural changes around the world. This school emphasized that change processes don’t happen quickly: you need time to build up momentum, and then to embed the change in the organization. Complexity School Emerged in the 1990 s. Change management academics started to talk about dynamic or complex adaptive systems, and chaos thinking. The words used were ‘participate’ and ‘renew’. 9

Strategic change Operational change 10

• Strategic change is concerned with organizational transformation. • Transformation is a process of radical change that orients an organization in a new direction and takes it to an entirely different level of effectiveness. • Change of Mission of organization. • When mission & strategy change the impact may reverberate throughout the organization. 11

• Operational change relates to ü new systems; ü procedures; ü structures; ü or technology which will have an immediate effect on working arrangements within a part of the organization. • But their impact on people can be more significant than broader strategic change and they have to be handled just as carefully. 12

DRIVERS Drivers of Organizational change: Ø External driving forces Ø Internal driving forces 13

External driving forces are those kinds of things, situations or events that occurred from outside of the company or organization. 14

• Government regulations also force businesses to adapt, as do changing consumer preferences. • Recessions usually lead to layoffs, which may require restructuring, and mergers and acquisitions lead to changes in organizational culture. • Changes in consumer demand • Information technologies have changed how businesses operate and interact with one another. New business models, such as outsourcing and virtual collaboration, would not be possible without highspeed communications and the Internet. 15

Internal driving forces, which are things, situations or events that are occurred inside the business and these generally under control of the company. 16

Technological Capacity. The new discoveries make the old one obsolete. Organizational Culture Financial Management. Without money, no business Employee Morale Poor Delivery Competition High wastage 17

Changes impacted by external and internal driving forces may have drastic effects on the profitability of organization, or even threaten its existence altogether. Organizations may need to change dramatically to survive. Organizational change needs to be managed. 18

Minimizing resistance to organizational change through involvement of key players and stakeholders. • Change management is the discipline that guides how to prepare, equip and support individuals to successfully adopt change in order to drive organizational success and outcomes. • Bridging the gap between what is happening and what is possible is what change management is all about. 19

2. Factors which Resist Change and How to Overcome Resistance to Change. 20

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Key Words Resistance (the act of Uncertainty (a situation fighting against something that is attacking you, or refusing to accept something) which involves unknown information, limited knowledge where it is impossible to exactly describe the existing state, a future outcome) Top-down (a situation in which decisions are made by a few people in authority rather than by the people who are affected by the decisions Inertia (lack of activity or interest, or unwillingness to make an effort to do anything) Bottom-up (considering the smaller or less important parts or details of a plan, organization) 22

Charles Darwin IT IS NOT THE STRONGEST OF THE SPECIES THAT SURVIVES, NOR THE MOST INTELLIGENT, BUT THE ONE MOST RESPONSIVE TO CHANGE. 23

• Organizational change is about reviewing and modifying management structures and business processes. • To stay a step ahead of the competition, companies need to look for ways to do things more efficiently and cost effectively. • To change is to move from the present to the future. 24

Top-down approach Bottom-up approach 25

Ø Imposed change as the initiative comes from the top. Ø Decision-making is centralized at higher levels of the organization, Ø Naturally, people who are forced to adapt to change have the initial reaction to resist. Ø Under critical situations, a Top-Down approach is appropriate. Crisis calls for immediate and fast solutions, which is exactly what a Top-Down approach offers. 26

Ø This approach is based on collective decision -making and seeks to avoid the pitfalls of imposed change by allowing individuals within their working groups to come to terms with change. Ø Where innovation is needed, the Bottom-Up approach is more appropriate in change management. Innovation is essentially participative and relies on a variety of ideas by involving everyone in the organization. 27

Individual resistance Organizational resistance 28

Ø People resist change because it is seen as a threat to familiar patterns of behavior as well as to status and financial rewards. Ø Economic fears – loss of money, threats to job security. Ø Uncertainty – change can be worrying because of uncertainty about its likely impact. Ø Threat to interpersonal relationships. Ø Threat to status or skill. Ø Competence fears – concern about the ability to cope with new demands or to acquire new skills. 29

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Survivor Saboteur Intent is on ignoring the process of change, and may even be hurt at the suggestion of non-cooperation. Knows what they’re doing, but doesn’t want others to know. Is unlikely to infect others directly, because they’re not being open about what they’re doing, but their behavior may influence others. Zombie Lacks the will to carry out change, and is always likely to revert to their original behavior. Protester Like the saboteur, knows exactly what they’re doing but is much louder about it, making this the easiest type of resistance to spot. This is also the resistance most likely to spread to others. 31

Ø Can arise from a mismatch between organizational mission, objectives, or culture and the change plan, or from lack of resources to implement change, or even from nostalgia for ‘the way things were’. Ø It can also result from individual resistance among senior people within the organization who use their organizational power to block change. 32

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Ø Change is often necessary but can be frightening for the employees. Ø Common reactions to change include anger, denial, opposition and depression. 34

Change management is the discipline that guides how to prepare, equip and support individuals to successfully adopt change in order to drive organizational success and outcomes. The aim of change management is to minimize resistance to organizational change through involvement of key players and stakeholders. 35

Education and Communication Focus on communicating constantly: ü Why Change ü What is Expected ü What the Change is Not The Three Common Elements of All Change ü Identifying what you expect people to stop doing. ü Specifying what you expect people to start doing. ü Confirming what you want people to continue doing. 36

Facilitation and Support Providing positive support for people in new situations to allow them to fulfill their roles or job requirements. This may include counseling and training. Participation and Involvement of stakeholders Negotiation and Agreement with stakeholders 37

3. Organizational Life Cycle 38

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Key Words Start-up Growth Maturity (a very advanced Life cycle (the series of or developed form or state) changes that a living thing goes through from the beginning of its life until death) Decline (to gradually Termination (end in time become less, worse, or lower) or existence ) Revival (the process of becoming more active or popular again) 40

The life cycle of an organization, much like that of a human being, goes through many stages. Just as a person is born, grows to maturity and dies, business organizations pass through the same stages. 41

Ø The organizational life cycle is the life cycle of an organization from its creation to its termination. Ø The relevance of a biological life cycle relating to the growth of an organization, was discovered by organizational researchers many years ago. Ø Organizational life cycle theories include the various stages in an organization's life cycle, phases of growth experienced by an organization during expansion and implications for these phases of growth. 42

MATURITY GROWTH BIRTH TIME DECLINE REVIVAL DEATH 43

Commonly known as the birth, start-up or entrepreneurial stage. The entrepreneurs like parents devote time, money and emotional investment in launching the new venture. At this early stage, the owners use much of their energy to establish a sizable customer base, purchase inventory, open bank accounts and hire employees. 44

At this stage, organizations look to pursue growth, establish a framework and develop their capabilities. The organization builds up its reputation, develops product and services. There is a focus on regularly setting targets for the organization, with the main aim being to generate sufficient revenue for survival and expansion. Some organizations enjoy adequate growth to be able to enter the next stage, whilst others are unsuccessful in achieving this and consequently fail to survive. 45

This stage signifies the organization entering a more formal hierarchy of management (hierarchical organization). Organizations look to safeguard their growth as opposed to focusing on expansion. Top and middle level management specialize in different tasks, such as planning and routine work respectively. 46

This stage initiates the death of an organization. The decline is identified by the focus on political agenda and authority within an organization, whereby individuals start to become preoccupied with personal objectives, instead of focusing on the objectives of the organization itself. This slowly destroys the functionality and feasibility of the entire organization. When in decline, an organization will either undergo: • Renewal or • Death 47

Organizations experience a renewal in their structure of management if choose the way of organizational development and transformational leadership. Without the right type of leadership, the organization will likely spiral down to bankruptcy and closure. As many as 80% of business failures occur due to factors within the leadership’s control. 48

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