Organization Change

Learning outcomes
Learning outcome
 Factors initiating change
 The meaning of organization change
 The interaction between change and context
 Analyze the process managers should use in
evaluating the need for change
 Describe the process of organizational
change
 Understand the comprehensive
organizational change approaches
Learning outcome

 Understand the change problem and its

solution

 The eight-stage process

 Implication of organization for the future

Organization Change
Session 1

Initiating Change

The interaction of context and change

Organization Change: An
introduction
 Managers initiate or experience change so
regularly

 Many organizations see change as the

normal state of affairs

 They want people to see change as a norm

An introduction

 The external environment is the main source of

change such as:

 Political
 Economic These development lead to change
 Social
 Technical
An introduction
 Persuade managers to change the way they
operate to meet these new expectations

 Numerous research has found that the

major reasons for organization changes
were a need to create:
 Closer customer relations
 Significant financial pressure to improve
performance
 Intensified competition
Introduction

 Most accept the need for change but many

are critical of the way their organization
introduce it.

 Managers will still experience great difficulty

in implementing major organizational
changes
1 Initiating Change
Initiating change

External
context

Perceived
performance gap

Internal
context
1.1 The external context
 The external context (the forces for change) consists of
elements beyond the organization such as competitors,
or the wider PESTEL factors (we will look into details
later)

 This will place new demand for the organizations

 Eg- the spread of globalization

 Rapid development of information and communication
technologies
 Deregulation and privatization of former state
businesses
 Transforming the competitive landscape of the firms operate.
The external context
 They face competition from unexpected quarters
 Threatening their prosperity or even their survival
(eg-BA and KLM or MAS have to respond to the pressure of new
competition from low cost airlines)

 Legal/Political developments
 Economics conditions
 Societal and demographic shifts
 Technology developments
 Competitors actions
1.2 Perceived performance
gap
 A perceived performance gap arises when people

believe that the actual performance of a unit or

business is out of line with the level they desire.

 Fall below customers expectation is a performance

gap.
 Hence, cumulatively this will lead to other performance gap
emerging – such as revenue from sales being below the
level needed to secure further resources.
 If uncorrected this would eventually cause the business to
fail.
Perceived performance gap
 In a very uncertain business world the scope for log
term planning is seriously limited.

 Successful businesses are likely to be those

develop high degree of strategic and organizational
flexibility
 Maintaining efficiency and stable process.
 There’s a need for performance imperatives
(Prastacos 2002).
 Performance Imperatives are aspects of
performance which are especially important for an
organization to do well, such as flexibility and
innovation.
Perceived performance gap

 Other imperatives identified by Prastacos is:

 innovation – the ability to generate a variety of

successful new products or services (embedding
technological innovation)

 And to continuously innovate in all aspects of the

business.
1.3 The internal context (also
forces for change)
 Meeting performance expectations depend
on the organization – the internal context of
management.

 The internal context consists of elements

within the organization such as its
technology, structure or business processes.
The internal context

 The set of elements within an organization

that shape behavior.

 Change begins to happen when:

 Sufficient influential people believe, for example,

that outdated technology or a confusing structure
is causing a performance by inhibiting flexibility or
innovation.
The internal context

 They notice external or internal events and

interpret them as being a threat to the
performance that influential stakeholders
expect.

 This interpretation and their implicit theory of

change, encourages them to propose a
change to one or more aspects of the
organization.
Internal context
 They then persuade enough people that the matter
is serious enough to earn a place on the
management agenda.

 The need for change is a subjective matter – what

some see as urgent and others will leave until later.

 People can affect that process by managing

external information – magnifying customer
complaints to make the case for change or
minimizing them if they wish to avoid change.
Internal context
 Whatever the underlying motivations, organization change is a
deliberate attempt to improve organizational performance by
changing one or more aspects of the organization, such as its
technology, structure or business processes.

 A change means that there will be also to have an implications in

other areas.

 Once they perceived a need for change, those promoting it set

up a formal or informal change process and then implement in
relevant organization units.

 How well people manage the steps in this process determines

the effect on the performance gap which in turn feeds back to the
context of the organization.
Internal context
 The two most important internal forces for change are there:
 Managerial decisions
 Have certain authority to make changes the higher up in an

organization, the more power they have in making changes.

 Most critical leadership issues facing managers is accurately

evaluating change.
 Decision can affect status quo in major ways.

 Employee preferences and suggestions

 Are excellent sources of innovative suggestion for change.

 Some companies consider best methods for discovering new

ways to cut costs and improved procedures.

 Employees cab be a stimulus for change that frequently cannot

or should not ignored.

2. The interaction of context and
change
2.1 People introduce change to alter
 Management attempts to change elements of
the context
its context to encourage behaviors that
support its objectives (this is to close the
performance gap)

eg, when tesco introduced online shopping,

management needed to change technology,
structure, people and business processes to
enabled staff to deliver the new service.
People introduce change to alter the
context
People do not necessarily accept the new
arrangement without questions.

 They may themselves make further changes to

the context.

 As people begin to work on new changes or

circumstances with new technology or new structure,
they may make small adjustments to the original plan.

 As they use a new information system, they decide

which aspect to ignore, use or adapt.
People introduce change to alter the
context
 As people become used to working with the
new system their behaviors become routine
and taken for granted.

 They become part of the context that created

informally.
 These new contextual elements may add to, or
replace, the context that those formally
responsible for planning the change created

 The interaction between people and context

continues into the future.
The interaction of context and change
2.2 The context affects the ability to
change
 The culture – shares values, ideals and
beliefs that hold a unit together, has strong
influence on how people view a change.

 Cultures develop as members work together to

deal with problems and in so doing shared
assumptions about external world and their
internal processes.
 Likely to resist one that conflicts with or challenges the
culture.
The context affects the ability to
change
 The prevailing culture is a powerful influence
on the success or failure of change.

 Some may support and encourage change and

some may resist
The context affects the ability to
change
 Some companies’ culture encourage change.
 Some encourage people to resist change or
least cautious towards.

 These values and beliefs are hard to change

 They are crucial factor in determining the
organization’s respond to change.
The context affects the ability to
change
 The distribution of power also affects
receptiveness to change.

 Change threatens the status quo and is likely

to be resisted by stakeholders who benefits
from the prevailing arrangement.
2.3 The context has a history and
several levels
 The present context is the result of past
decision and is usually focused on one of
several ‘levels’ of context.

 Both features influence the process of

change.

 Management seeks to implement change

against a background of past decisions.
 Past decisions shaped the organization context as
it is today and its ability to change.
The context has a history and several
levels
 Beliefs about the future also affects how
people react to change.

 Optimists are more receptive and open to

change than those who feel threatened and
vulnerable.
End of lecture