7
Change theory
As we have considered considered earlier in this book, unless organizations organizations continue continue to adapt to changes changes in their environment, environment, they are likely likely to enter a phase phase of ‘strategicc drift’ ‘strategi drift’ (Johnson, 1988), characteriz characterized ed by lack lack of clarity clarity,, confusion and deteriorating deterioratin g performance. Indeed, Indeed, it is often only when the organization organization is in freefall, and the paradigm paradigm of the organizat organization ion becomes becomes less fixed, fixed, that change change is recognized as necessary. Strategic choice inevitably produces organizational change. One set of changes can lead to more fundamental changes. Mergers, Buy this file from http://www.download-it.org/learni http://www.download-it.org/learning-resources.php?promoCode=&partnerID= ng-resources.php?promoCode=&partnerID=&content=story&storyID=1382 &content=story&storyID=1382 for example, often become ideal springboards springboards for major organizational organizational change once the initial integration of the merging organizations is under way. The question remains: remains: how can organizations organizations change successfully successfully without destroying the psychological contract with their employees and potentially undercutting the basis of their future success? In this chapter I will examine a selection of theories about change, together with their implications implications for both the way change is enacted and the potential consequences of change on the organization.
Philosophies of change For me, the art of successful successful change is to ensure ensure that change is managed managed in the short term term in a way that reinforce reinforcess the ongoing ongoing longer-term longer-term pursuit pursuit of sustainable sustainable high performanc performance. e. However However,, in many cases, cases, short-t short-term erm and long-term needs are seen as mutually irreconcilable. One set of ideas that explain why thinking may be polarized into one or other view is proposed by Beer and Nohria (2000).
Theories E and O Michael Beer and Nitin Nohria have identified two broad archetypes or change theories, theorie s, togethe togetherr with their leadership leadership implications, implications, which they believe believe underunderpin most change initiatives. Theory E is change based on economic value while Theory O is change based on organizational capability. Theory E change strategies are the more common. They are driven by shareholder value and usually involve heavy lay-offs, downsizing and restructuring and are considered the ‘hard’ change strategies. strategies.
Buy this file from http://www.download-it.org/learni http://www.download-it.org/learning-resources.php?promoCode=&partnerID= ng-resources.php?promoCode=&partnerID=&content=story&storyID=1382 &content=story&storyID=1382
152 Understanding Change Both models have their benefits and costs. While Theory E lends itself to more visible activity levels, the danger of maintaining this approach to change is that the organization will become depleted and short-term focused. In Theory O the goal is to develop corporate culture and human capability through individual and organizational learning. This ‘soft’ approach to change is evident in companies like Hewlett–Packard which typically have long-standing commitment-based relationships with employees. While this approach is likely to engage employees’ hearts and minds, it may make rapid change when needed hard to achieve. Reconciling these different change philosophies is not simply a case of combining them. Theories E and O are so different in their approach and impact on employees that it is difficult to use them simultaneously. Employees learn to distrust leaders whose styles alternate between making draconian decisions and nurturing employees. Yet companies that can reconcile these approaches effectively can gain both improved profitability and productivity, as well as enabling employees to develop their adaptability to change. For http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1382 Beer and Nohria, reconciling these two philosophies is achieved Buy this file from by carefully embracing the two along each of the key dimensions of change – goals, leadership, focus, process, reward system and use of consultants. In goal setting, for instance, rather than choosing either to maximize shareholder value (Theory E) or develop organizational capabilities (Theory O), the organization should explicitly embrace the paradox between economic value and organizational capability (Theories E and O combined). In leadership, rather than managing change from the top down or encouraging participation from the bottom up, direction should be set from the top and the people below engaged. In terms of focus, rather than emphasizing structure and systems or building up corporate culture, there should be simultaneous focus on the hard (structures and systems) and the soft (corporate culture). Rather than having to choose between planning and establishing programmes or experimenting and evolving, the process should involve planning for spontaneity. With regard to motivating people, rather than relying on financial incentives or commitment, using pay as fair exchange, incentives should be used to reinforce change but not to drive it. Rather than letting consultants analyse problems and shape solutions or hiring consultants to support management in shaping their own solutions, consultants who are expert resources are used to empower employees. Beer and Nohria suggest that both of these approaches may be required separately at different times, such as focusing on Theory E to achieve a business turnaround. Sequencing these approaches, such as developing new cultural initiatives following a spate of redundancies, takes time but is the most effective way even though the same business leader may not be credible using both approaches. They identify leaders such as Jack Welch, former head of
Buy this file from http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1382
Change theory 153 GE, and Archie Norman, former CEO of ASDA, as exceptional leaders who have been able to achieve this combination of approaches successfully to the benefit of their businesses.
Protecting and building capabilities through change Whatever the short-term goal of a change effort, the underpinning aim should be to build the organization’s capability to be high performing over time. Therefore, change efforts should in some way support, or at least not undermine, the organization’s ability to encourage innovation, knowledge-sharing and knowledge-creation, develop teamworking; to be values-based, motivate organizational members and stimulate them to higher levels of performance and learning. They should be geared as much to enabling high performance behaviours, as introducing new processes. The most important organizational capabilities are likely to reside in resources, processes and values. Resources, whether tangible ones like people, equipment, technologies, cash, or intangible ones like relationships with and suppliers, information and brands, are only part of the picture. Buy this customers file from http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1382 A typical resource-based analysis would consider tangible assets (on the balance sheet: facilities, finance, equipment etc.) and intangible assets: (brand, reputation, morale, knowledge, patents, experience etc.) and capabilities (skills, the ability and ways of combining assets, people and processes). Values are defined as the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important (Christensen and Overdorf, 2000). Values also define what an organization will not do. Prioritization decisions are made by employees at every level and in a complex organization it is important that senior managers train employees to make independent decisions about priorities that are consistent with the company’s mission, vision and values. Processes, such as patterns of communication, coordination and decisionmaking as well as recurrent operations including logistics, development, manufacturing and customer service, are intended to be specific and unchanging, so that employees can apply a process and achieve consistent efficiencies. However, changing circumstances and products require updated and tailored processes otherwise tasks will gradually be carried out less efficiently. Christensen and Overdorf argue that it is the less visible processes – those that define for example how market research is done – that can most seriously disable an organization needing to change. As employees begin to follow processes and prioritize according to internalized values, the processes and values come to constitute the company’s culture. When an organization’s capabilities are to be found mainly in resources, such as people, changing capabilities to address problems appears relatively simple. A harder task is to bring about change when the organization’s capabilities reside in the organization’s culture. According to Christensen and Overdorf,
Buy this file from http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1382
Chapter extract
To buy the full chapter, and for copyright information, click here http://www.download-it.org/learning-resources.php?promoCode=&partnerID=&content=story&storyID=1382
The publisher detailed in the title page holds the copyright for this document All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recorded or otherwise, without the written permission of Spenford IT Ltd who are licensed to reproduce this document by the publisher All requests should by sent in the first instance to
[email protected] Please ensure you have book-marked our website. www.download-it.org
