Organisational change is defined as the adoption of a new idea or behaviours by an organisation (Daft, 2010).
The management of change has become a top priority for all managers irrespective of the organisation. Change is now occurring at a far greater pace than ever before.
Hussey (1995), argues that dealing with change is one of the most critical aspects of effective management and that the turbulent business environment in which most organisations operate means that not only is change becoming more frequent, but that the nature of change is becoming more complex and the impact of change is often more extensive.
NATURE OF CHANGE IN BUSINESS
Forces for Change
Forces for change exist in both the external and internal environment. External forces originate in all environmental sectors including customers, competitors, technology, demographic changes, economic and international events. Internal forces for change arise from internal activities and decisions such as demands by employees, labour unions, and production inefficiencies. These internal factors can all generate a force to which management must respond to with change. Rapidly increasing competition in all areas is driving the need for change and innovation (Daft, 2010). Some important drivers of change are now discussed:
Domestic markets are now open to foreign competitors, which provide intense competition. Businesses are forced to change in response to new, cheaper and/or higher quality products. The trend toward globalisation has resulted from the emergence and development of a number of important industrial economies which have provided intense competition in established markets, especially that of high technology:
- The emergence of newly industrialised countries including South Korea, Taiwan, Hong Kong and Singapore.
- The emergence of the single European Market.
- The move to more open-market-based economies in Eastern Europe, and the former Soviet Union.
- Development in the Asia Pacific region.
- The opening up of China to foreign investment.
Some of the most dramatic changes have occurred in the area of technology. New automated technology allows manufacturing to operate more efficiently with a reduced work force. Information technology allows companies to operate more effectively and efficiently. The emergence of e-business and the use of the Internet for business purposes has probably been the most significant change to the conduct of business in the last decade. Organisations now have electronic links to suppliers and customers, connecting manufacturing and inventory functions to aid re-ordering. Business-Business (B2B) transactions allow organisation to purchase supplies over the Internet. Business-Consumer (B2C) transactions allow organisations to deal directly with customers through online facilities. Customers wishing to purchase goods online simply login to the organisations website and can purchase goods with a credit card.
Changes in the Nature of the Labour Force
The world labour force is changing significantly both in terms of composition, values and expectation. Organisations in the developed world have an ageing workforce, which are more costly than organisations in developing countries with a young work force. Unless these costs are met with higher productivity, developed countries will become less competitive.
A Move Away from Labour Intensive Industry
In recent years there has been a move away from traditional labour intensive industries e.g. iron, steel, coal and mining, to knowledge-based industries and services.
Traditional industries required large numbers of people at cheap rates and were heavily supervised. The move towards knowledge-based industries and organisations means that different people and different forms of organisation are required. Organisations will contract or outsource work to agencies while retaining a core group of talented workers.
Rapidly Increasing Competition
Competition is increasing in all industries and sectors, which drives the need for companies to continually develop new improved quality products and services.
Organisations need to be able to adapt to changing customer expectations. Customers are becoming more demanding in terms of product quality, lower prices, product features and after sales services etc. This is in part driven by the greater availability of information facilitated by the internet. Customers can search for information regarding products and increasingly purchase products and services online.
Other drivers of change include; changes in law and regulation at both a national and international level, changing customer tastes, emerging social issues, increased focus on environmental issues, growth in outsourcing, economic downturns, organisations focus on increasing profits and increased efficiency etc.
IMPORTANCE OF MANAGING CHANGE
In today’s dynamic environment, managing change is critically important as organisations must embrace many different types of change. Organisational change requires companies to adopt new ideas and behaviours.
A change program that is poorly managed will at best not reach its goals, but is more likely to have a detrimental impact on the performance of the section being changed and at worst could impact the whole organisation.
A poorly managed change program can result in:
- Slow pace of change within the organisation.
- Employees reverting back to old behaviours if they don’t buy into the change.
- Individuals can become focused on their own interests and as a result teamwork and co-operation can suffer.
- The performance of the company in the marketplace suffers if it losses competitiveness.
- Employees may oppose change programs in the future if they feel that a previous change initiative was not a success.
A number of models and approaches have been proposed for managing change. Some of these are now discussed.
MODELS OF CHANGE MANAGEMENT
Kotter’s Eight Stage Change Process
In response to research which indicated the 70% of all major change efforts in organisations fail, Dr. John Kotter developed an 8-step process that can be used to bring about change in an organisation. Why do change efforts fail? Perhaps because organizations often do not take the holistic approach required to see the change through.
Kotter’s model can be divided into three distinct stages:
Stage 1: Creating a climate for change:
- Increase urgency – explain the need to change – remove fear and complacency.
Establishing a sense of urgency is necessary to gain the cooperation required to drive a significant change effort.
- Create a guiding team – Assemble a group with enough power to lead the change effort and encourage the group to work as a team.
No one person, no matter how competent, is capable of single handedly developing and making the change happen on their own.
- Get the vision right – Create a vision for the future to help direct the change effort, and develop strategies for achieving that vision.
A clear vision serves three important purposes. It simplifies hundreds or thousands of more detailed decisions needed, it motivates people to take action in the right direction and it helps to coordinate the actions of the different people involved.
Step 2: Engaging and enabling the organisation (involve the stakeholders):
- Communications (vision) for buy-in – Use every vehicle possible to communicate the new vision and strategies, and teach new behaviours.
Gaining understanding and commitment to a new direction is a difficult task, especially in the case of complex organisations.
- Enable action – Remove obstacles to change, change systems or structures that seriously undermine the vision, and encourage risk-taking and non-traditional ideas, activities and actions.
- Generate short-term wins – Plan for visible performance improvements, create those improvements, recognise and reward employees involved in the improvements.
This demonstrates to everyone involved that progress is occurring.
Step 3: Implementing and sustaining the change (leading the change):
- Don’t let-up – You must persist with the change; monitoring & measuring progress and reinvigorating the process with new projects regularly.
The consequences of letting up can be very serious – critical momentum can be lost and regression may soon follow.
- Incorporating the Changes into the culture – leaders must recognise, reward and embed the change into the company culture.
New practices must grow deep roots in order to remain firmly planted in the culture. Adapted from http://www.kotterinternational.com/kotterprinciples/changesteps/step-8
The Three Step Model of Change
Lewin (1958), argued that change towards a higher level of group performance is often short lived – after an initial improvement; group behaviour soon reverts back to its previous level. According to Lewin a successful change program should involve three stages:
Unfreezing involves reducing the forces maintaining the organisation’s behaviour at its present level. Rubin (1967) argues that it requires some form of confrontation or re-education for those involved. This re-education could take the form of team building or management development training. This stage involves convincing the relevant parties of the need to change. This could involve presenting data to show that serious problems exist with the current situation.
Having analysed the current situation, identified alternatives and selected the most appropriate strategy, action is then needed to move to the new state. This requires developing new behaviours, values and attitudes through changes in organisational structure and processes so that those involved do not revert back to the old way of doing things.
Refreezing seeks to stabilise the organisation at the new state, in order to ensure that there is no regression from the new ways of working. Support mechanisms including organisation culture, policies and practices are used to reinforce the new way of working.
Force Field Analysis
Force Field Analysis is a technique based on the idea that change was a result of the competition between driving forces (forces in favour of change) and restraining forces (forces resisting change). When a change is introduced, some forces drive change and other forces resist it. To implement a change, management should analyse the change forces and by selectively removing forces that restrain change, the driving forces will be strong enough to enable implementation. Figure 8.1 shows some examples of driving and resisting forces.
Change is a difficult process for organisations to carry out. When considering change, it is often helpful to construct a force field. This is a diagrammatic representation showing the various forces acting for and against, the proposed change. The force field was originally developed by Lewin, who recognised that a stable social situation is the result of a balance of opposing forces. One set of forces will be attempting to implement the change; these are the driving or facilitating forces. The opposing forces act against change and wish for the status quo to remain; these are the resisting or restraining forces. Both sets of forces work to try and shift the equilibrium point. See Figure 10.1
DEALING WITH RESISTANCE TO CHANGE
Resistance to change can come from the individuals or from the organisation itself.
Individual Sources of Resistance
Nadler (1983) and Stanislao/Stanislao (1983) have identified several individual sources of resistance to change which include:
- Selective perception
- Economic factors
- Social factors
- Lack of understanding
As people do their jobs they develop habits in the way they work. They also develop routines that help get them through the week. They develop a sense of security in their job and also in their lives. If there are any changes in their work they can become insecure. Pressure to change habits and routines can lead to resistance particularly if the individual does not see any advantage in changing. One method of overcoming this resistance is to offer rewards linked to the change
Individuals tend to selectively perceive or view issues and events in a way that matches their understanding of their work environment and the world. In resisting change the individual will often filter and misunderstand things they do not agree with. Communication is one way of addressing this type of change.
Changes in work practices that affect skills learned over a number of years could affect the income of the individual in the long term or the short-term while they learn the new skills.
Individuals like to feel comfortable and secure in completing things in the same way. In doing so, they gain a degree of security in their jobs and in their lives. When the status quo is threatened by change, employees feel their security is at risk, and consequently they resist such change. Confronting any form of the unknown makes the individual anxious and insecure. Insecurity arises not only from the change itself but also from the prospective outcomes of such change; for example, employees may turn down a promotion due to insecurity and fear of the unknown.
Individuals are affected by group pressure or group norms. An individual may wish to embrace change but could resist it because of group pressure. Conversely they may accept change because the group accept it even though as an individual they are inclined to resist it.
Lack of Understanding
If an individual does not fully understand the reason the change is necessary, he or she may resist the change. Therefore communication is an important element of any change program.
Organisational Sources of Resistance
Katz and Kahn (1978) identified the following organisational sources of resistance to change:
- Organisational structures
- Narrow focus of change
- Group inertia
- Threatened expertise
- Threatened power and influence
- Threatened resources
Organisational structures such as roles, policies, rules and procedures are designed to maintain stability and continuity. However, these same structures can by their nature act as a form of “structural inertia” (Hannon and Freeman, 1984) that will slow the progress of change.
Narrow Focus of Change
Change programs that have too narrow a focus may fail to take account of the interdependencies between elements in an organisation. In this situation segments of an organisation may resist the change.
Group inertia occurs when a group refuses to change its behaviour patterns because of a desire to maintain the status quo.
If the expertise of an individual or group is threatened by the introduction of new technology or job re-designs, resistance to change is likely. This is common in traditional industries such as manufacturing.
Threatened Power and Influence
The introduction of change within organisations often involves loss of power for some individual. The loss of power increases resistance to change.
The loss of power associated with change can often be accompanied with the loss of resources such as personnel, money and information. Individuals or groups who currently enjoy favourable allocations of resources will resist change to the status quo.
Overcoming Resistance to Change
Several methods can be employed to overcome resistance change. These include:
- Data collection: Identifying the source of the resistance.
- Coalition building: Providing advice and support from powerful individuals in the organisation to those who may pose resistance.
- Negotiation and agreement: Using bargaining and tradeoffs, including financial bargaining.
- Articulation of a shared vision: Communicating a vision of the future can overcome a fear of the unknown.
- Education, communication and training: Through effective communication, information and re-skilling, resistance can be lowered.
- Participation and involvement: Identifying potential resistors and involving them in the change process in positives roles.
- Rewards and incentives: Increasing motivation using money and other incentives.
IMPLEMENTING CHANGE MANAGEMENT PROGRAMMES
Radical and Incremental Change
There are two basic types of change projects:
- Radical change: Radical change operates at the organisational level and attempts to transform the entire organisation. This type of change is strategy driven and involves changing structures, practices and procedures, people and systems.
- Incremental change: This is small-scale change that is aimed at a small part of the organisation.
Peters and Waterman (1982) suggested that strategic change should be broken down into a series of small but interrelated chunks. In other words, radical change that is broken down into a number of related incremental changes.
Change Management Approach
There are numerous models available for implementing change management programs. Regardless of the model used the following factors need to be addressed:
- Strategy: Any change program must be considered in light of the organisation’s objectives and priorities.
- Phased approach: The majority of the approaches to change management suggest a phased approach. The following stages are important:
- Create recognition of the need to change
- Make the actual change o Evaluate and consolidate.
- Involvement: Those who are directly involved in the change should be involved in planning and executing the change. Involvement helps gain commitment and buy-in from workers.
- Communication: Communication helps reduce resistance to change.
- Behavioural change: The success of a change program depends on individuals and groups changing their behaviour.
- Culture change: Where the changes being undertaken are at odds with the current organisational culture, the change project may involve changing the culture of the organisation. This would be radical change rather than incremental change.
Management Styles and Change
Management styles are the techniques used by managers or Change Agents in introducing change. The change agent is the person responsible for managing the change effort. The various management styles are designed to overcome resistance to change, and the style used will depend on the extent and nature of resistance to change in any given situation. According to Kotter and Schlesinger (1979) there are six main styles of management associated with introducing change:
- Education and communication are appropriate where problems and resistance are caused by insufficient information or misinformation. Such a style requires an atmosphere of trust between the sides involved. Education and communication are generally more effective if they take place before the change is implemented. However, this style is costly and time-consuming as it involves mass briefings. Organisations dealing with large numbers of employees can use small group briefings to ensure effective communication.
- Participation is appropriate where the commitment and participation of employees is vital to the success of the change programme. It is an effective way of overcoming resistance based on lack of awareness or a narrow focus of change. Employees who are involved in the change process are also more likely to accept changes. Participation usually involves project teams or task forces who generate ideas and give advice on implementing change. Once again, this style is time-consuming and costly.
- Support and facilitation are appropriate management styles when employees are experiencing difficulty in coming to terms with the new changes. Support and facilitation help to overcome resistance arising from a fear of the unknown and the need for security. Schneider et al. (1996) have argued that creating the correct climate and culture for change determines whether change will be successful. This style of management involves providing support mechanisms for employees to help them cope with change. Most frequently organisations provide additional training or extra emotional support while employees get used to the changes. A problem associated with this style is that while it may help people through the change process, it does not necessarily win their commitment and support. It is also time-consuming and can fail.
- Negotiation and agreement is a useful management style when groups or key individuals are negatively affected by the change, and have sufficient power to resist and interrupt the introduction of change. A good example is a Trade Union whose primary concern is to protect the welfare of its members. Trade unions resist any change that negatively affects their members. By engaging in negotiation before implementation, the organisation may find the change process runs more smoothly. If any other problems arise during the course of implementation, then both sides can refer to the written agreement to sort out these problems. This method is most appropriate for overcoming resistance to change arising from threatened expertise, power, resources and group factors. The possibility of rewards, such as increased wages or perks, can also be examined to reinforce the direction of change (Nadler, 1981).
- Manipulation of the situation by the agent can make it easier to introduce change. For example, it has been established that crisis situations are more likely to motivate people to change. So organisations can attempt to exaggerate the extent of the situation facing the organisation, to make it appear as if the organisation is in a crisis. This style is often used when resistance is caused by habit, re allocation, economic and group factors.
- Coercion involves the explicit use of power by issuing directives to employees about the changes being implemented. Managers or the change agent resort to coercion if all other methods have failed to reduce resistance to change. It is generally recognised as the least successful method of introducing change. Even when coercion is applied, and employees accept change, it can have long-term negative effects on employee attitudes and behaviour.
Each of the management styles described above is appropriate for particular situations. Education and communication are most effective for incremental change or where transformational change is being introduced over a long period of time. Manipulation and coercion are effective if there is a crisis or a need for rapid transformational change. Participation and negotiation are intermediate styles whereby transformational change can be achieved with less risk, but they are also effective in incremental change (Nutt, 1989).
Successful Change Programs
Following a clearly defined model of change is not sufficient to ensure success. Research by the Harvard Business School, which investigated the effect on performance of change initiatives, found that only 30% of these change initiatives produced an improvement in bottom line results. However, some organisations introduced change programmes that were very successful. So what factors contributed to the success of a change program? Pettigrew and Whipp (1991) conducted research in the UK in a number of industries from publishing to automobiles. They identified organisations, which had introduced strategic change programmes and pinpointed aspects of their successful programmes. Based on their research, they argue that successful strategic change depends on five interrelated elements:
- Environmental assessment: Organisations, which introduce successful change programmes, assessed their external environment very carefully, went beyond acquiring and processing data and became open learning systems. External developments within the business environment were effectively communicated to employees and championed by a change agent.
- Leading change: Pettigrew and Whipp (1991) found that success depended on the ability of the change agent to establish and develop a context for change both in cultural terms and in the capabilities of the organisation. Styles of management were used which were tailored to the context, and the change agent altered the approach where necessary.
- Strategic human resource management: Successful organisations integrated their human resource management (HRM) policies with their strategic changes. Training and development, employee relations and rewards were all designed to facilitate the introduction of the desired changes.
- Linking strategic and operational change: Organisations, which have successfully managed strategic change, have effectively linked strategic change with operational change. In other words, there has been a clear connection and consistency between strategic, tactical and operations plan.
- Coherence: The most complex factor arises from the demands of the previous four. Pettigrew and Whipp (1991) found that success depended on coherence across all aspects of the organisation as follows:
− Consistency between intended strategy, strategic objectives, operational plans and the behaviour of the change agent.
− Consistency between the direction of strategic change and the environmental changes.
− A feasible strategy in terms of the resources required, organisational structure and the changes required to the organisational culture.
− A strategic direction that is clearly related to achieving competitive advantage.