Download Management Benchmark Study-Book Summary Chapter 04-Literature and more Summaries Benchmarking in PDF only on Docsity! Ch 4 Change Management 06.10.02.doc 6.10.02 Chapter 4. Change Management1 By Kristi M. Branch Change management, which falls within the broader theoretical framework of social change (Lewin 1951, 1958), has been a perennially popular topic in the organizational effectiveness and management literature. Identifying the need for organization-wide change, and leading organizations through that change is widely recognized as one of the most critical and challenging responsibilities of organizational leadership. These responsibilities have become even more important in recent years as organizations are …living through a time of tremendous sea changes…. Globalization, the disruptive influence of new technologies, the emergence of e-business, and growing electronic connectivity among far-flung financial markets are all accelerating the pace of commerce throughout the world today – in virtually every industry. Add deregulation, political instability, emerging new economies in the Pacific Rim, and an exploding number of new scientific discoveries (many of which lead quickly to new products and commercial applications), and you have a recipe not only for market turbulence, but also for … “disruptive phase shifts” in how business is conducted. (Burke and Trahant 2000:xi). The need to deal with disruptive phase shifts is as true for public science organizations as it is for private sector business organizations. Familiarity with this literature can help managers of science organizations prepare themselves and their organizations to deal more effectively with the challenges of intentional organization-wide change by understanding the factors that stimulate organizational change, the types of changes initiatives that other organizations have used to respond to such stimuli, and the lessons learned about implementing those changes and about managing the behavioral, motivational, and performance dynamics that arise during the change process. Efforts to design and implement change across federal agencies have included, most recently, the “re-invention” strategies of the early and mid-1990s and current strategies resulting from the President’s Management Agenda. Such efforts usually focus on streamlining, achieving more with fewer resources, modernizing structures and processes, and aligning public-service goals (perhaps new goals) with outcomes. These kinds of changes fit the definition in the change management literature of intentional, organization-wide change that is undertaken to achieve some organizational goal. This focus on managing change in the organization as a whole, rather than change that pertains to small work groups or single departments, represents a significant departure from past managerial thinking (Greiner 1967:119) and highlights the relationship between strategy and change management. The need for intentional organization-wide change in science organizations can result from changing internal conditions (for example, transitions within the organizational life cycle or changing goals, budgets, or missions) or changing external conditions (for example, transformations due to new technologies, policies, regulations, economic conditions, or international events). Presidential directives and federal legislation such as the Government Performance and Results Act have the potential to provoke large-scale organizational changes in science-funding and science-performing organizations. 1 Related chapters include: Strategy, Leadership, Competencies, Organizational Communication, and Participative Management Ch 4 Change Management 06.10.02.doc 2 06.10.02 Over the past several decades, there has been an increasing interest in understanding how organizations evolve over time – adapting or failing to adapt, initiating change and responding to change – and in the cumulative, system-wide consequences of individual organization’s responses, both planned and unplanned. Mohrman and Mohrman (1993:87) echo many others in observing that “organizational environments have become less benign, more complex, more interconnected, and more dynamic”…producing conditions that “pose the need for change while making it difficult to learn and change by overloading the information-processing capabilities of organizational members.” Provoked by the challenges posed to American industry, first by the success of Japanese firms and the Asian economies and then by the “disruptive” technological innovations of the new economy, the recent literature on change management has tended to argue that organizations are facing an accelerating and pervasive need for continual, and increasingly rapid and dramatic, change (see for example Drucker 1980; Fradette and Michaud 1998; Miller and Morris 1999; Mohrman et al. 1989). This has led to greater attention to the tension between vision-led and problem-driven change strategies. Recent articles by Christensen and Overdorf (2000), Miller and Morris (1999), and Tushman et al. (1997) illustrate the imperative for, and the challenges of, managing organizations through periods of disruptive change in the external environment, such as that currently being experienced as a consequence of globalization, advancements in communications and information technologies, changing international relationships, and breakthroughs in the biological sciences. This has been identified as particularly true for research and development organizations, which have a high need to be flexible, innovative, learning organizations (Sapienza 1995; Senge 1990; Hargadon and Sutton 2000). Adding to the challenge, the literature clearly demonstrates that the attributes that enable an organization to be successful at one stage in its lifecycle or in a particular historical context do not ensure success in another. Recent change management literature has focused primarily on the private sector, targeted to those trying to lead organizations through organization-wide change processes (Goodstein and Burke 1995; Mohrman, Jr. et al. 1989). The goal of the intentional organizational change typically addressed in this literature is to make rapid improvements in economic value while simultaneously creating an organization whose structure, processes, people, and culture are tailored appropriately for its current mission and environment and positioned to make the next round of needed change (Beer and Nohria 2000). Two levels of intentional change are typically discussed (Burke and Trahant 2000; Beckhard and Harris 1987; Bridges 1995): (1) fundamental or transformational (addressing “big picture” issues such as mission, strategy, culture, leadership, external environment); and (2) transitional or transactional (the everyday, how things get done issues such as structure, management practices, systems, motivation, needs, job fit, and work unit climate). The literature addresses four principal aspects of change management: theoretical models and frameworks that reveal and guide organization members’ and researchers’ thinking about organization change, approaches and tools, factors important to successful change management, and the outcomes and consequences of the change management process. A key point reflected throughout this literature is that planned change, and hence the skills and tools used, need to be tailored to meet the specific needs of the organization within its particular context (Goleman 2000; Greiner 1998; Adizes 1999; Christensen and Overdorf 2000; Enriquez and Goldberg 2000; Lawler et al. 2001). Ch 4 Change Management 06.10.02.doc 5 06.10.02 these two models and the basis for choosing one approach over another in a particular circumstance has been a key focus of change management literature and research. Although the debate continues, there is increasing recognition that a balanced approach that employs mutually reinforcing interventions, tailored to the particular circumstances and history of the organization, to change both attitudes and context is likely to be the most effective in creating the desired change (Sapienza 1995; Beer and Nohria 2000; Heifetz 1994; Senge 1990; Senge et al. 1999). Source: Adapted from Robertson, Peter J., and Sonal J. Seneviratne. 1995. Outcomes of Planned Organizational Change in the Public Sector. Public Administration Review 55(6):550. Figure 3. A Theoretical Model of the Dynamics of Intentional Organizational Change Intervention Activity Organization Arrangements Social Factors Organizational Work Setting Individual Behavior Technology Physical setting Organizational Performance Organizational Outcomes Individual Development Ch 4 Change Management 06.10.02.doc 6 06.10.02 Beer and Nohria (2000:133) illustrate how these two archetypes/models of change are reflected in the business world. They note that there are contradictions between the two models and the change strategies that follow from them. They argue that change managers can start with an approach based on changing the context (economic value theory, E) and then follow with changes based on changing attitudes (organizational capability theory, O), but not the reverse due to the loss of trust caused by the tough actions associated with aggressive change in context (Theory E). Because this sequential approach takes time, they advocate an integrated approach, emphasizing that success depends upon explicitly confronting the tension between the goals of creating organizational economic value and creating organizational capability, a point emphasized throughout this literature. A graphic representation of this theory is shown in Table 1. Table 1. Addressing the Tensions between Competing Change Management Strategies Dimensions of Change Economic Value Theory (E) Organizational Capability Theory (O) Theories E and O Combined Goals Maximize shareholder value Develop organizational capabilities Explicitly embrace the paradox between economic value and organizational capability Leadership Manage change from the top down Encourage participation from the bottom up Set direction from the top and engage the people below Focus Emphasize structure and systems Build up corporate culture: employees’ behavior and attitudes Focus simultaneously on the hard (structures and systems) and the soft (corporate culture) Process Plan and establish programs Experiment and evolve Plan for spontaneity Reward System Motivate through financial incentives Motivate through commitment—use pay as fair exchange Use incentives to reinforce change but not to drive it Use of Consultants Consultants analyze problems and shape solutions Consults support management in shaping their own solutions Consultants are expert resources who empower employees Source: Beer, Michael, and Nitin Nohria. 2000. Cracking the Code of Change. Harvard Business Review 78(2 March-April):136-137. Among the other organizational change theories that play a key role in the change management literature are lifecycle and growth stage theories (Adizes 1999; Greiner 1967, 1998), which emphasize the importance of the predictable life stages of an organization that drive change and create change management demands; and cultural change (Cameron and Quinn 1999; Burke and Trahant 2000), which incorporates both learning theory and action research (Argyris and Schön 1978; Argyris 1993; Heifetz 1994; Wheatley 1992) and participation/engagement theory (Strebel 1998; Heifetz 1994; Holman and Devane 1999). Christensen and Overdorf’s (1999) theory of disruptive change has had a widespread impact on change management thinking, as discussed below. Ch 4 Change Management 06.10.02.doc 7 06.10.02 Approaches and Tools of Change Management Much of the change management literature continues to reflect a mechanistic view of organization and management, with an expectation of relatively straightforward cause and effect relationships between the factors that stimulate change, the change initiatives or interventions undertaken in response to those stimuli, and outcomes that will result from those initiatives. Recently, particularly in discussions about the challenges posed by disruptive changes in technology and the external environment and organizations that diverge from the dominant hierarchical bureaucratic form, there is growing debate about the ability of logical, empirical analysis to provide the insight and creative response needed for successful transition or transformation. Critics have suggested that the change management literature has been subject to fads and hyperbole, reaching “evangelical proportions” of advocacy for change management strategies such as business process re-engineering and total quality management while failing to incorporate sound principles of organizational design (McNamara 1999; MacDonald 1998). Reflecting the sustained interest in organizational change and change management, a wide variety of tools have been developed to both initiate and manage organizational change and to control and direct change caused by unplanned disruptions. Many of the most popular tools are focused on achieving quality improvements; addressing worker concerns; and enhancing flexibility by changing organizational structure, processes, people, and/or culture. Nadler and Tushman (1997), Lawler et al. (1992, 1998, 2001) and others emphasize that the choice of approach or tool depends upon the organization’s nature, resources, and problems, and must be tailored to the specific contest and organization. McNamara (1999) compiled an overview of the tools and approaches for organizational change and improvement that are used in change management. Jacobs (1994), Mohrman and Mohrman, Jr. (1993), Miles (1997), and Nadler and Tushman (1997), identify the following as candidate tools and approaches, many of which are addressed in considerable detail in other chapters of this book: ♦ Backward Mapping (start with the end in mind, working backward from the desired end state to identify pathways to success) ♦ Balanced Scorecard (ensure well-rounded performance, especially from managers, by designing an evaluation that takes into account the perspective of clients/customers, manager, peer, and subordinate on four dimensions: customer service, internal business processes, learning and growth, and financials) ♦ Benchmarking (use standards or measures from high performing organizations as basis for comparison – results from benchmarking need to be used as part of an overall change process; just doing the benchmarking doesn’t lead to change) ♦ Business Process Reengineering (increase performance by radically redesigning the organization’s structures and processes, including starting over from the ground up) ♦ Continuous Improvement (improve performance and customer satisfaction through continuous and incremental improvements to processes, including removing unnecessary activities and variations – often represented as a quality initiative) ♦ Cultural Change (accomplish radical and fundamental change by changing the basic values, norms, beliefs, etc., among members of the organization) ♦ Employee Involvement (engaging personnel from throughout the organization to identify issues, propose solutions, and become partners in implementing the changes needed to succeed in present and future environments). Ch 4 Change Management 06.10.02.doc 10 06.10.02 confront resistors and deal proactively with conflict, the ability to provide vision and coherence (linkages that hold the organization together), and the ability to motivate and overcome resistance (Pasternack and Viscio 1998; Baldwin and Clark 1997; Marshall 2000). Bennis and O’Toole (2000) note that the right CEO can make or break a company, in part because of the CEO’s role in initiating and leading planned change. Leaders are needed to provide vision, inspiration, and conviction and to demonstrate integrity, provide meaning, generate trust, and communicate values. They must also know how to pace and sequence change efforts to avoid change fatigue and cynicism (Abrahamson 2000). Goleman’s (2000:81) extensive study (random sample of 3,871 executives) found that a key aspect of leaders’ effectiveness during change was their ability to apply different styles of leadership to different circumstances, even within short time periods. This was because different leadership styles (coercive, authoritative, affiliative, democratic, pacesetting, coaching) have different effects on aspects of organizational climate (flexibility, responsibility, standards, rewards, clarity, commitment) that affect the success of planned change in different circumstances. This finding is also consistent with Fiedler’s (1996) study on the contingent leadership. Nystrom and Starbuck (1984) emphasize the importance of top managers’ ideas on organizational learning, and the potential need to replace top managers en masse in order to enable the organization to unlearn dysfunctional approaches and respond effectively to crisis situations. Pascale et al. (1997:127) reflect much of the literature in the three interventions they recommend to leaders for restoring companies to “vital agility” and keeping them in good health: ♦ Incorporate employees fully into the principal business challenges facing the company ♦ Lead the organization in a different way to sharpen and maintain employee involvement and create constructive stress by raising issues and generating urgency ♦ Instill mental disciplines that encourage people behave differently and then help them sustain their new behavior. Recognition of and Attention to the Personal Aspects of Change Managing the social psychology of the workplace is critical for successful organizational change. Consequently, a substantial segment of the change management literature focuses on describing how managers and employees respond to change and advising managers and staff about how to handle the stress, conflicts, and emotional issues that accompany change, gain support for and participation in the change effort, and generally, make organization-wide change less traumatic. (See Adizes 1991, 1999; Argyris 1993; Heifetz 1994; Holman and Devane 1999; Kotter 1998; Marquardt 1999; Marshall 2000; Woodward and Buchholz 1987). Throughout this literature managers are advised to recognize that change is implemented by and has consequences for people, and that change can be made significantly less traumatic and more successful if these human aspects are anticipated and handled effectively. An entire literature has developed emphasizing the importance and impact of involving employees effectively in organizational decision making and change initiatives. Widespread involvement, use of tools such as future search, real-time strategic change, and open space processes can enable a critical mass of organizational members participate in understanding the need for change and the ability to coalesce around the future vision. A key message is that during times of change, communication and employee engagement are more important than usual and can substantially affect the cost and outcome of change efforts. Trust is identified as particularly important in obtaining support for and participation in change Ch 4 Change Management 06.10.02.doc 11 06.10.02 efforts (Adizes 1991; Duck 1998; Marshall 2000). Strebel (1998 [1996]:139) emphasizes that executives and employees see change differently, with senior managers typically seeing change as opportunity, for both the business and themselves, and employees typically seeing change as disruptive, intrusive, and likely to involve loss. These aspects of change are very personal and need to be addressed in personal terms. It is important for those managing change to identify the key issues that may range from loss of turf, attachment, meaning, future, competency-based identity, and/or control. It is in the discussions of the human aspects of change that Lewin’s three-stage model of unfreezing, move or change, and refreezing is most frequently applied. In designing change initiatives, cautions are made concerning the difficulty of and time required to create new values within an organization. In-Depth Understanding of the Existing Organization, Its Lifecycle or Developmental Stage, and Its Environment The literature consistently emphasizes the danger of embarking on organizational change without conducting an organizational assessment to ensure an understanding of the key elements of the organization’s performance. This information is then combined with information about the external environment and the future vision to develop the change strategy. The organizational assessment needs to take into consideration where the organization is in the growth and evolution/development (lifecycle) process so that the change process can work “with the flow of the tide rather than against it.” (Greiner 1998:8). There is a substantial component of the literature that describes the attributes of the different lifecycle stages and how to conduct such an assessment (Adizes 1999; Greiner 1968; Pascale et al. 1997; Sull 1999). The point is frequently made that the solutions to the problems experienced during one lifecycle change are exactly what breeds new problems as the organization continues to grow and mature, and that organizations frequently have difficulty letting go of previously successful strategies, even when they are no longer useful (Greiner 1998; Skarke et al. 1995). In fact, there is a significant literature on the importance of ‘unlearning” as part of the change process. Tools such as change-boards have been identified as effective tool to assess current versus desired stance of stakeholders and in maintaining focus on the gaps between existing and future needs and the areas that require greater attention and effort. Ackoff (1999), Hedberg et al. (1976) and Wheatley (1992) emphasize the importance of action learning and a learning and experimental approach to change, particularly in the complex, highly interconnected systems typical of knowledge-based organizations. Balance and Organizational Learning to Make Strategic and Effective Use of Change Mechanisms Dooley (1997:92) and others emphasize that the convergent and divergent forces at play during a change process must be balanced, not in a linear, additive way, but in an organic fashion. Kotter (1998), Abrahamson (2000), Christensen and Overdorf (2000) and others emphasize the importance of a systematic and comprehensive approach, and the importance of recognizing the amount of time and effort required to fully implement a transformational change (on the order of ten years). While acknowledging the non-linear aspects of the change process, it is still useful for organizational leaders to analyze available information to identify what needs to be changed in order to prepare the organization to be successful in its current and future environment. Mohrman, Jr. et al. (1989), Ackoff (1999), Hedberg et al. (1976). This leads to general guidelines for an effective change management process: ♦ Create a shared purpose Ch 4 Change Management 06.10.02.doc 12 06.10.02 ♦ Cultivate inquiry, learning, experimentation, and divergent thinking ♦ Enhance external and internal interconnections via communication and technology ♦ Instill rapid feedback loops for self-reference and self-control ♦ Cultivate diversity, specialization, differentiation, and integration ♦ Create shared values and principles of action ♦ Make explicit a few but essential structural and behavioral boundaries ♦ Plan to implement change over the long term, following periods of intense change with periods of consolidation. Strategies for effecting cultural change drawn from the organizational culture literature include (Schein 1999): ♦ Unfreezing the old culture and creating motivation to change ♦ Capitalizing on propitious moments—problems, opportunities, changed circumstances, and/or accumulated excesses or deficiencies of the past ♦ Making the change target concrete and clear ♦ Maintaining some continuity with the past ♦ Creating psychological safety through a compelling positive vision, formal training, informal training of relevant groups and teams, providing coaches and positive role models, employee involvement and opportunities for input and feedback, support groups, and addressing fears and losses head on ♦ Selecting, modifying, and creating appropriate cultural forms, behaviors, artifacts, and socialization tactics ♦ Cultivating charismatic leaders ♦ Having a realistic and solid transition plan ♦ Exercising risk management, and understanding and addressing the risks and benefits. Outcomes and Consequences of Change Initiatives: The Risk of Failure Change management proponents have also been criticized for failing to conduct the evaluations necessary to document and clarify the results of change management initiatives, examine their cost effectiveness, and acknowledge the difficulty, costs, and complexity of managing organization-wide change (MacDonald 1998; Kotter 1998; Abrahamson 2000). Indeed, the value of planned change has been challenged, with some studies indicating that most change management initiatives fail while exerting heavy economic and human tolls on the organization (Beer and Nohria 2000:133). Although the change management literature generally recognizes the need for change initiatives, the potential for failure is great. The Harvard Business School tracked the impact of change efforts among the Fortune 100 and found that all companies had implemented at least one change program between 1980 and 1995, but only 30 percent produced an improvement in bottom-line results that exceeded the company’s cost of capital (Pascale et al. 1997:139). Beer and Nohria (2000:133) found that about 70 percent of change initiatives fail. Ch 4 Change Management 06.10.02.doc 15 06.10.02 Burke, W. Warner, and William Trahant. 2000. Business Climate Shifts: Profiles of Change Makers. Boston, MA: Butterworth Heinemann. Cameron, Kim S., and Robert E. Quinn. 1999. Diagnosing and Changing Organizational Culture: Based on the Competing Values Framework. Reading, MA: Addison-Wesley Publishing Co. Christensen, Clayton M. 1997. The Innovator’s Dilemma. Boston: Harvard Business School Press. Christensen, Clayton M., and Michael Overdorf. 2000. Meeting the Challenge of Disruptive Change. Harvard Business Review 78(2 March-April):66-78. 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