Change Management Essay
Barack Obama started his election campaign with a plan to renew America’s promise with the words “Change we can believe in”. His Presidential campaign was marked by changes. He wanted to change a nation and its way of acting. Throughout the campaign, Obama’s changes were aimed towards bringing a rapid end to the war in Iraq, decreasing energy dependence, and providing universal health care. In his victory speech Obama said “change has come to America”. Up to now, not all his plans and ideas have proven successful and only the future will reveal their full potential. The U.S. election was a change of the governmental position which was decided by the nation. In an admittedly smaller world, every person in his or her life as well as every manager of an organisation is faced with changes or the requirement to make changes every day.
Let’s concentrate on the business world and have a look at what changes mean? Change is an alteration of a company’s strategy, organization or culture as a result of changes in its environment, structure, technology or people. A manager’s job would be very straightforward and simple (not to say boring) if changes were not occurring in these areas. Good managers have a competence to manage change in the company’s environment. These changes can be alterations in structure (design of jobs, span of control, authority relationships or coordinating mechanisms), in technology (equipment, work processes or work methods) as well as in people (behaviours, perceptions, expectations or attitudes).
1.2 Reasons for Change
A complex structure like an organization is driven by external and internal factors in regard to the need for change. There are a number of external forces that create the explicit need for change:
Market situation or market place Technology Government laws and regulations Economics
The global marketplace has created a huge need for change because of internationalization and the more dynamic situation. Some of this could not have occurred without the various and dramatic changes in technology. An example of the changing marketplace is the deregulation of the telecommunications industry in the domestic market. By deregulation, the competitive pressure was put on telephone companies such as the German Telecom which has minimised monopolistic emplacement. Regarding this point, advances in technology have had a big impact on the market. Also, the affordability of equipment and software allows greater competition in the IT-sector. Government laws and regulations can have a large impact on an organization such as with deregulation.
Organizations have to change because it is now prescribed. The new tobacco taxes and the legislation requiring tobacco manufacturers to disclose the harmful effects of tobacco smoking have created huge pressures on some large organizations. These organisations now have to change to ensure their economic viability. Finally, these economic ups and downs have a dramatic effect on organizations as well on domestic markets as the worldwide economic influence continues on organizations. This phenomenon could be seen during the last financial crisis. The effects were recognized in the USA first; then they hit Europe, Japan and finally the rest of the world. As a consequence, several automobile manufacturers have announced production cutbacks and reduced employment. Parallel to the external reasons there are different internal forces for change:
Corporate strategy Workforce Technology and equipment Employee attitudes
It is not unusual for an organization to change its strategy. It can lead e.g. to a large number of changes if the organization decides to adopt a new distribution methodology or a new logistic strategy. Also a merger will change an organisation’s way of acting. (For example, a company decides to enter the e-commerce business). The introduction of new equipment or new technology is another internal force for change which affects an organization. The implementation of new technology needs new processes or structures. Through this, employees will have to be trained for new work processes or new jobs. The composition of an organization’s workforce never stays static because it changes in terms of gender, age or education. New employees join the organization and other people leave. With these changes, managers may need to redesign work and work groups in order to ensure the job requirements match the skills of the people.
Lastly, employee attitudes such as the level of job satisfaction can lead to either negative or positive forces for change. If employees are dissatisfied, then there can be an increased level of employee absenteeism which can lead to changing practices or management of staff.
1.3 Origins of Change Management
Again, a distinction between change management as a result of changing technologies and change management based on different management styles has to be made (in practice however, one factor is certainly influencing the other). Change management has his origins in the 1950’s. In those days modern forms of management were introduced (e.g. teamwork, autonomous groups) and the “war” between followers of top-down (change) approaches and bottom-up (change) approaches began. Top-down organizations are characterizes by the relatively low influence of subsystems. With the exception of the top management, employees are placed in a given process pattern. The organisation’s units are co-ordinated within a system of regulations and the organisation’s development is steered from top down. Bottom-up organizations are characterized by the relatively high influence of subsystems. The organisation’s development is carried by involved employees.
A structural partial autonomy is conceded to the single subsystems. The organisation units are relatively independent in their execution of problems and could be basically capable of surviving on their own. Regulations are found primarily in the form of general behavioural instructions and the basis of “Common Sense“. The organisation’s development is therefore developing itself bottom-up. The best known concepts of top-down management are business process re-engineering and business reengineering. The concept of business process re-engineering is aimed at changes concerning quality, service, cost and processing time. The core idea is process orientation. The concept of business process re-engineering takes into consideration strategy creation as well as process creation without describing, however, methods and instruments in detail.
The documentation of the actual and the planned processes remain at a relatively coarse level and the main weight lies with few identified core processes. Business re-engineering is aimed at the radical redesign of enterprise strategies or essential enterprise processes. Its purpose is the improvement around scales in significant and measurable achievement dimensions in the areas of costs, quality, service and time. The implementation of this concept requires a “strong manager” who not only initiates the changes but also encourages the employees to make the necessary changes. Business re-engineering, therefore, is based on order and control, while the comprehensive knowledge of the organisation’s development and the participative system’s creation is maintained.
The best known concepts of bottom-up management are kaizen and lean management. Kaizen (Japanese for “improvement” or “change for the better”) focuses upon continuous improvement of processes in manufacturing, engineering, development, marketing etc. (main business processes), supporting business processes and management. Kaizen as a management approach is based on the idea that no actual status (of a process or an organisation) is good enough to be kept. Kaizen refers to a continuous improvement of all functions and involves all employees from the executive board to the assembly line workers. It also applies to processes, such as purchasing and logistics and always involves the entire organization. Kaizen was first implemented in several Japanese businesses after the Second World War, influenced in part by American business and quality management teachers who visited the country.
It has since spread throughout the world Lean Management explains how to link the advantages of batch-producing organizations (speed, low unit cost) with the benefits of a customer-oriented organisation (high flexibility, customizing, quality). “Lean” must be understood as “Lean Enterprise“, an enterprise with customer-oriented organisation which values customers, suppliers and employees. Principles of lean management are a gradual approach, group orientation, own responsibility, constant feedback in lower management levels and a long-term orientation. Other ideas of lean management are an enterprise-wide improvement of the quality, acceleration of the development, harmonious integration of the enterprise into the society as well as outsourcing and concentration on specific strengths of the organisation. The focus lies on the soft factors. Also in relation to a process-oriented thinking and strategy creation, lean management uses the Kaizen approach.
Nevertheless, the concentration on a few, significant core processes is strongly stressed here. Comparing the bottom-up and top-down approaches, the advantage of a bottom-up orientation lies with the possibility of adapting the rhythm of the development and the capacity of the organisation for development. Small changes can be achieved at short notice or immediately, while lasting changes run smoothly and could guarantee a constant improvement of the problem solution capacity of the enterprise. On the other hand, permanent change processes and the constant restlessness linked with such change processes can also affect negatively the organisation, as possibly no clear direction is recognizable any longer. Few enterprises are ready for a radical change in their orientation as demanded in a top-down approach.
No organisation is able to reorganize itself and the whole value-added chain ad hoc. Frequently the longevity of the soft factor “enterprise culture” is underestimated. Changes in the enterprise culture need time and, hence, are an object of evolutionary and participative approach and not a revolutionary and authoritarian process. The advantages of the top-down approach are the straight-forward attempt of comprehensive, department-covering thinking and action and the focus on the central processes. Nowadays, within modern change management approaches, top-down and bottom-up approaches are mixed. As shown in fig. 1, analysis and the strategy development is mainly done top-down whereas continuous process improvement is driven from the bottom-up. Constant dialogue between the involved parties guarantees a constant improvement and focusing on the core requirements.
Figure 1: Modern Change Management – Bottom-Up meets Top-Down
So change management is the: correct understanding of the organizations that want or need to be changed correct understanding of the people who are willing or forced to change the effectively realization of change understanding the dynamics of change
Changes should be facilitated by the organizational structure because this enhances adaptation and flexibility. A simple organizational structure will reach a simple dynamic environment or, on the other hand, a simple dynamic environment needs a simple structure only. For a complex dynamic environment an adhocracy will be needed. Adhocracy means more democracy and less bureaucracy. One of the most important points is the people, because they form the organization. The culture of organization includes their way of working, attitudes and norms. These facts are at the core of every change and they are difficult to handle. Personal modifications regarding attitudes or skills in leadership or communication are hard to identify but ineffectiveness can be indicated by problems and conflicts in the management of human resources.
2. Concepts of Change Management
A number of models are available to facilitate one’s understanding of transitioning of individuals through the phases of change management and strengthening organizational development initiatives in both government and corporate sectors.
2.1 Lewin´s Change Theory
Kurt Lewin theorized a three-stage model of change that has come to be known as the unfreezing-changerefreeze model which requires prior learning to be rejected and replaced. Edgar Schein provided further detail for a more comprehensive model of change, calling this approach “cognitive redefinition.” Lewin´s model will be discussed later in this book in more detail..
2.2 Chin & Benne´s “Effecting Changes in Human System” Chin and Benne (1969) and Havelock (1971) each articulated different approaches but shared some overlapping concepts. Some of the models had a primary focus on innovation and organization, while others focus on the individual: Empirical-rational approach The basic assumption underlying the empirical-rational model is that individuals are rational and will follow their rational self-interest. Thus, if a “good” change is suggested, people of good intention will adopt the change. This approach “posits that change is created by the dissemination of innovative techniques”. A primary strategy of this model is the dissemination of knowledge gained from research. One example of agencies and systems used for the development and diffusion of such research results are agricultural extension systems and the county agents who disseminate the results of agricultural research.
In education, these activities are the domain of educational research and development centers,,regional educational laboratories, state departments of education, colleges and universities, national diffusion networks, intermediate service agencies, and staff development personnel within school districts. The rational view generally ignores the fact that school systems are already crowded with existing passive recipients, who may not have the necessary time or expertise to adopt or apply the new knowledge or program. Power-coercive approach The power-coercive approach relies on influencing individuals and systems to change through legislation and external leverage where the power of various types is the dominant factor. Power-coercive strategies emphasize political, economic, and moral sanctions, with the focus on using power of some kind to “force” individuals to adopt the change. One strategy is non-violent protest and demonstrations.
A second strategy is the use of political institutions to achieve change – for example, changing educational policies through state-level legislation. Judicial decisions also impact educational policy. A third power-coercive strategy is recomposing or manipulating the power elite – electing people to public office, for instance, to support an intended change. History is replete with mandates, and other power- coercive strategies, which resulted in little change. Normative-re-educative approach In the normative-re-educative approach, the individual is seen as being actively in search of satisfying needs and interests. The individual does not passively accept what comes, but takes action to advance his/her goals.
Further, changes are not just rational responses to new information but occur at the more personal level of values and habits. Additionally, the individual is guided by social and institutional norms. The overarching principle of this model is that the individual must take part in his/her own change if it is to occur. This model includes direct intervention by change agents, who focus on the client system and who work collaboratively with the clients to identify and solve their problems.
The normative-re-educative approach employs the help of change agents to assist clients in the change process by identifying needs; suggesting solutions, examining alternatives, and planning actions; transforming intention into adoption; stabilizing the change. The use of an agent to support clients and facilitate change was present in the early models. The concept of the change agent evolved further and has been reported in studies of educational and other organizational change.
2.3 Bullock and Batten’s Phases of Planned Change
R.J. Bullock and D. Batten derived their ideas from project management and they recommend using exploration, planning, action, and integration for planned change. Exploration occurs when managers confirm the need for change and secure resources required to achieve it. These resources may be physical or they may be mental, such as a managers’ expertise. The next step, planning, occurs when key decisionmakers and experts create a change plan that they then review and approve. Next, action occurs with enactment of the plan. There should be opportunities for feedback during the action phase. Finally, integration begins when all actions in the change plan have taken place. Integration occurs when the changes have been aligned with the organization and there is some degree of formalization, such as through policies and procedures in the organization.
Bullock and Batten analyzed over 30 models of change management and arrived at their own 4-phase model of programmed change management which can be applied to almost any circumstance. The model is useful in that it distinguishes between the ‘phases’ of change which the organization passes through as it implements change, and the ‘processes’ of change, i.e. the methods applied to get the organization to the desired state. The model progresses as follows: Exploration phase – The organization has to make decision on the need for change: Explore and decide on the need for change Identify what changes are required Identify resources required
Planning phase – Understanding the problem: Diagnosis of the problem Clarify goals and objectives Identify specific activities required to undertake change Agree changes with stakeholders Identify supports required to enable change to occur
Action phase – Changes identified are agreed and implemented: Support for change is explicit Changes are monitored and evaluated Results are communicated and acted upon Adjustments and refinements are made where necessary
Integration phase – Stabilising and embedding change: Changes supported and reinforced Results and outcomes from change communicated throughout the organization Continuous development of employees through training, education Ongoing monitoring and evaluation
2.4 Beckhard and Harris change formula
The change formula is a mathematical representation of the change process. The basic notion is that, for change to occur, the costs of change must be outweighed by dissatisfaction with the status quo, the desirability of the proposed change, and the practicality of the change. There will be resistance to change if people are not dissatisfied with the current state of the organization, or if the changes are not seen as an improvement, if the change cannot be done in a feasible way, or the cost is far too high. This formula can also be conceptualized as (D × V × F) > R. D = Dissatisfaction V = Vision F = First Steps R = Resistance to Change The multiplicative nature of this formula indicates that if any variable is zero or near zero, resistance to change will not be overcome. In other words, the variables of D, V, and F do not compensate for one another, and when one is very low, the cost of change is likely to be too high.
2.5 7-S Model
Consultants at McKinsey & Company developed the 7S model in the late 1970s to help managers address the difficulties of organizational change. The model shows that organizational immune systems and the many interconnected variables involved make change complex, and that an effective change effort must address many of these issues simultaneously. The 7-S Model is a framework for analyzing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful, or not: strategy; structure; systems; style; skills; staff; and shared values. The 7-S model is a tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organization’s problems may be diagnosed and a strategy may be developed and implemented.
The 7-S diagram illustrates the multiplicity interconnectedness of elements that define an organization’s ability to change. This theory helped to change managers’ thinking about how companies could be improved. It says that it is not just a matter of devising a new strategy and following it through. Nor is it a matter of setting up new systems and letting them generate improvements. To be effective, your organization must have a high degree of fit or internal alignment among all the seven Ss. Each S must be consistent with and reinforce the other Ss. All Ss are interrelated, so a change in one has a ripple effect on all the others. It is impossible to make progress on one without making progress on all. Thus, to improve your organization, you have to master systems thinking and pay attention to all of the seven elements at the same time.
There is no starting point or implied hierarchy – different factors may drive the business in any one organization. The 7-S Model is a valuable tool to initiate change processes and to give them direction. A helpful application is to determine the current state of each element and to compare this with the ideal state. Based on this it is possible to develop action plans to achieve the intended state.
3. The Change Process
3.1 Initiating a Top-Down Change
Accelerated by global competition, the pressure to change business strategy is a worldwide phenomenon. Industrial activities are shifting from manufacturing to service, globalization of markets, political realignments, technical advances in management information systems, corporate alliances and downsizing of organizations are changing the structures of corporations and projects. In parallel, organizations are faced with global competition. This competition is becoming more and more obvious in automobile manufacturing, consumer electronics, computers and communications and household manufacturing. Increasingly, the global heavyweight players of the world economy are large corporations involved in international or multinational projects. There is a global market and competition for most products and services. In order to effectively compete in it, organizations must use creativity and transform their cultures, structures and operations. The emergence of these global organizations creates pressure on domestic organizations and projects to restructure and internationalize their outlook and operations.
Because of these powerful forces for globalization, organizations must explore project opportunities all over the world. Technology is changing at a rate greater than at any time in history. One of the most dramatic technological changes affecting the work environment is the rapid expansion of information system technology. This technological revolution is having a profound impact on project structures, power relationships and the management of complex project interfaces. Artificial intelligence, computerintegrated manufacturing and virtual reality are creating new project opportunities in terms of their development and applications. Technology eliminates the problems of physical distance.
Audio/Video conferences create the personal and direct interaction that is needed to work as a team. Engineering and manufacturing industries are assisted by robotics and computer-based design and manufacturing techniques like CAD. Fast-changing consumer preferences caused by rapid and frequent technological changes and innovations have shortened the life cycle of several goods and services. The effects of rapid product obsolescence can be dramatic for organizations which cannot adapt and quickly handle this situation.
In the pharmaceutical and electronics industries, some products become obsolete in as little six months. Projects aimed at developing products and services in such industries must adapt to this rate of change in a cost-effective manner to be successful. Fig. 1 about a modern change management process showed that change management starts with a (re-)definition of the current enterprise strategy. Deciding upon the right business strategy stands therefore at the beginning of every change process. The process of finding the right strategy is illustrated in fig. 2.
Figure 2: Finding the right Strategy
Countless approaches for strategy definitions are available (e.g. Porter 5-Forces-Model, 7S) and are not topic of this book. Fig. 2 only shows a general approach for the strategic approach during the change process. One step in this approach might differ from a general strategy rehearsal. During a change project, it is necessary to involve an external expert for a strategy audit! A strategy-audit is an important cornerstone for a common image about the general and strategic position of the enterprise. Beside the management or departmental management in particular, the persons who are involved in marketing and sales and therefore have a direct customer contact and should be involved at this stage. The second step in the “top-down” part has been process analysis. The process analysis reflects the modelling of the existing processes.
Participative reconstruction of the processes and the visualisation of the expectations, strengths and weaknesses for the initialization of a lasting change is required. A review process (iterative vote process with the employees questioned) is mandatory. The following stage of process (re-)design cannot be separated with regard to the method and the modelling tools from the process analysis. It is only to be distinguished as an “incremental” process optimisation and a “radical” reorganisation of the enterprise processes. The target of the top-down process analysis is firstly the elimination of all non value-increasing activities and secondly the optimisation of all remaining activities.
3.2 Initiating a Bottom-Up Change
Managing organizational change from the bottom-up will be more successful if some simple principles are applied. Change management entails thoughtful planning and sensitive implementation and, above all, consultation and involvement of the people affected by those changes. If change is forced, problems will arise. Change must be realistic, achievable and measurable. These aspects are especially relevant to managing personal change. Before starting organizational change, the question of strategic change has to be answered: What do we want to achieve with this change, why, and how will we know that the change has been achieved? Who is affected by this change, and how will they react to it? How much of this change can we achieve ourselves, and what parts of the change do we need help with? These aspects relate strongly to the management of personal as well as organizational change. Change needs to be understood and managed in a way that people can cope effectively with it.
Change can be unsettling, so the manager logically needs to be a settling influence. Whenever an organization imposes new things on people there will be difficulties. Participation, involvement and open, early, full communication are the important factors. Workshops are very useful processes to develop collective understanding, approaches, policies, methods, systems, ideas, etc. Staff surveys are a helpful way to repair damage and mistrust among staff – provided you allow people to complete them anonymously, and provided you publish and act on the findings. Management training, empathy and facilitative capability are priority areas – managers are crucial to the change process – they must enable and facilitate, not merely convey and implement policy from above, which does not work – Change must involve the people change must not be imposed upon the people.
One has to be wary of expressions like ‘mindset change’, and ‘changing people’s mindsets’ or ‘changing attitudes’, because this language often indicates a tendency towards imposed or enforced change and it implies strongly that the organization believes that its people currently have the ‘wrong’ mindset, which is never, ever, the case. If people are not approaching their tasks or the organization effectively, then the organization has the wrong mindset, not the people. Change such as new structures, policies, targets, acquisitions, disposals, re-locations, etc., all create new systems and environments, which need to be explained to people as early as possible, so that people’s involvement in validating and refining the changes themselves can be obtained.
The following change management principles should be adopted]: At all times involve and agree support from people within the system (system = environment, processes, culture, relationships, behaviours, etc., whether personal or organizational). Understand where you/the organization is at the moment. Understand where you want to be, when, why, and what the measures will be for getting there. Plan development towards No.3 above in appropriate, achievable measurable stages. Communicate, involve, enable and facilitate involvement from people, as early, openly and as fully as is possible.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 2 October 2016
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