APPRECIATING CHANGE: MENTAL AND BUSINESS

MODEL
Describes four types of changes.
Identifying two strategic errors that can arise while
appreciating change.
Type 1 error: little change
Type 2 error: launching too much change
Identify the root cause for the two strategic errors.
This chapter includes the key ideas about reactive change,
anticipatory change, type 1 and type 2 errors, cognition,
mental models, organizational learning, defensive routines,
value proposition and business models.

APPRECIATING CHANGE A FRAMEWORK

-Organizational change is largely an adaptive response to pressures and forces
in the environment.
-Organizations engages in two types of changes.
-Reactive change is fairly straightforward when organization experiences a drop
in performance as a result of changes in environment.
-Anticipatory change is a little more complex and initiates changes in
anticipation of changes in the environment.
-Anticipatory changes is relatively more risky as the anticipated shifts in the
environment may not take place or the environment may shift in the
direction different from what the managers anticipated.
-Reactive and anticipatory changes are distinguished by the level of uncertainty
in an environment.
-Reactive changes are usually low on uncertainty, the performance drop is
visible and the cause is clear and concrete.
-Anticipatory changes the cause for failure disruption are uncertain and unclear.
-Firm that engage in reactive change tend to follow rather than lead their

-competition.
-On the other side managing anticipatory change is vital for an organization
survival and growth.
-The other dimension of change management relates to the content and
process of change that the organization is planning to introduce.
-Organizational change researchers distinguish between two types of change
1. incremental change and 2. radical change.
-Incremental change refers to small, continuous changes introduce over a
longer time frame.
-Radical change stands for large discontinuous changes implemented rapidly
over shorter time frame.
-Radical changes unlike incremental changes they do not build on existing
structures and processes.
-Radical changes tend to replace existing structures, processes and people with
newer one. They also occur infrequently.
-Change management effort can be mapped into a grid so as to enable us to
look at change as an opportunity as well as a challenge.

-The core task of appreciating change exposes managers to two errors that can
seriously affect their organization performance, survival and growth.
-First they may not launch any changes or introduce changes that are too little
relative to what is required in their environment or alternatively introduce
the right quantum of changes but the same may be initiated too late.
-This is type 1 error: either there is no change or too little change is initiated too
late.
-Second managers may initiate too many changes relative to what is required in
their context or they may introduce changes too quickly.
-This is type 2 error: organizational change that is too much or too soon.
-Type 1 and type 2 error both have the potential to jeopardize the performance
and growth of an organization.
-Key to effective change management is striking the right balance of change,
initiated at the right time.
-Both type 1 and type 2 errors flow from managers faulty perceptions of their
environment.
-Managers underestimate or fail to see shifts in the environment they commit
type 1 error.

-Managers overestimate or miscalculate the extent of these environmental

shifts they commit type 2 error.

COGNITION AND ORGANIZATIONAL CHANGE

-In change management, cognition implies knowing when to launch change in
an organization.
-It is defined as the way in which a manager collects and interprets
information about the world outside the organization shapes her knowledge
about change.
-Managerial cognition in the context of change is the recognition and
interpretation of signals from an organizations environment that denote
impending shifts in the environment.
-Manager by recognizing and interpreting the signals accurately, she is
unlikely to commit type 1 and type 2 errors.
-There are number of factors that can cause flawed cognitions, broadly
classified into two categories:
1. Organizational factors that can lead to defective cognition.
2. Personal and human factors that can cause errors in cognition.
-Sometimes managers do not recognize and notice strong signals from the
environment and these signals do not capture their attention.

MENTAL MODELS AND CHANGE

-Kenneth Craik first proposed the notion of mental model in 1943.
-Management theorists use words like belief, assumptions, rules, regulations,
habits, mindsets and managerial frames to refer to mental models.
-Mental model represents the picture managers have of assumptions and
beliefs about their organizations, competitors, customers and suppliers and
is like a formula for dealing with the outside world.
-We tend to act in accordance with our mental models and if we succeed we
tend to reinforce our mental models and become confident of our ability to
deal with similar situations.
-This confidence also prevents managers from noticing signals from the
environment that disconfirm our mental models.
-A Harvard university Psychologist, Ellen Langer proposes that we tend to
react to situations unthinkingly, that our behavior mindless.
-Langer strongly support the notion of automatic, mindless behavior. She
suggests three manifestation of mindlessness:
1. We tend to get trapped by categories we create.
2. Automatic behavior is another reflection of mindlessness.

-Acting from a single perspective is a reflection of mindlessness. That we act as

though their were one set of rules.
-According to Langer there are six causes of mindlessness:
1. Subsequent task performance becomes an automatic, mindless behavior.
2. We tend to form mind set when we first encounter something premature
cognitive commitment mindset that are formed on the basis of first impression
are quite difficult to change.
3. We believe that resources we require are limited.
4. We believe that time is a step by step sequential approach to change
management, which may be inappropriate in complex dynamic environment.
5. We believe in outcome, focus on results rather than process for achieving the
results.
6. Our context can powerfully influence our mind sets and behavior.
-Langers research has significant implications for change management.
-Inappropriate mental models of managers can lead to both type 1 and type 2 errors.
-Langer suggests that becoming aware of our mental models is mindfulness and can
be cultivated by:

a. Continually creating new categories to enrich our mental models.

b. Opening ourselves to new information.
c. Considering different point of views before acting on change.
d. Pay attention to process before outcome.
-Langer suggest that we must adopt learning in order to act mindfully in
change situation.

ORGANIZATIONAL LEARNING AND CHANGE

-Organizational learning leads to mental model change in an individual.
-There are three perspectives on organizational learning:
1. We discuss organizational learning from systems perspectives.
2. The ideas of Chris Argyris, who views organizational learning in terms of
barriers such as defensive routines.
3. The Behavioral perspectives of James March and his associates.
SYSTEMS APPROACH:CONTRIBUTION OF PETER SENGE:
-Gave the concept of organizational learning.
-In 1990, published the fifth discipline: the art and practice of learning
organization.
-There are five disciplines and components that can promote learning in an
organization these are systems thinking, mental models, personal mastery,
building shared vision and team learning.
-The idea of systems thinking is based on the notion of dynamic complexity.
-The major cause of dynamic complexity is feed back loop.
-It arises whenever a action leads to reaction.
-A common instance of feedback loop in large organizations is when a

-a department or a division launches change on its own.

-Feed back loop can make it difficult to predict and control change.
-This includes Lag effects and non linearity.
-Lag effect arises when there is a time lag between a cause and its effect.
-Non linearity arise when small causes have disproportionately large effects.
Thus incremental changes in the cause will lead to varying effects.
-The non linearity and time lags coupled with feed back loops can render a
situation dynamically complex making it hard for mangers to
comprehend the situation and take appropriate decisions.
-Senge suggests that awareness of mental models requires two kinds of skills,
reflection and inquiry.
-Skills of reflection involves becoming aware of our mental models.
-Skills of inquiry involves working with others on face to face basis for
solving complex problems.
-Senge acknowledges that their may be routines and codes that we have
adopted, which can act as barriers to learning.

ORGANIZATIONAL LEARNING: CONTRIBUTION OF JAMES

MARCH AND ASSOCIATES
-James March another productive contributor to our understanding of
organizational learning.
-March is more interested in explaining the reality of organizations.
-March has built his theory of organizational learning on three basic properties
of organizations:
a. In any organization behavior is driven by routines.
b. Actions in an organizations are history dependent i.e. our actions are more
strongly influenced by our past than our perceptions of the future.
c. Organizations are goal driven i.e. they are oriented to targets.
-Learning occurs when there is a shift in mental models i.e. there is a change in
routines and beliefs.
-According to march there are two ways in which organizations change their
mental models:
1. Organizations learn by doing. They modify their behavior based on the gap
between their performance and their targets.
2. Organizations engage in search behavior i.e they look for new routines

-that will enhance their performance.

-The basis for learning is experience but under dynamic conditions experience
is often a poor teacher.
-If our experience is positive that performance and targets are matched then
we tend to stay with the same routines and it is also a trap that inhibits
learning about other routines and which is useful for future performance.
-The other problem with learning is related to search.
-In terms of search behavior, organizations face dilemma should they
completely develop new knowledge or should they incrementally improve
current knowledge.
-These are competing goals and balance the conflicting goals of developing
new knowledge exploration, with the improving current competencies
exploitation.
- Exploitation ensures current organizational performance, exploration is
necessary for future organizational performance.

UNDERSTANDING THE PERCEPTION OF CHANGE

CHANGE FORMULA
-Organizations go for a change only when following equation holds true for
them. (Richard Beckhard & Harris, 1987)
C = (D x V x A x FS) > R
-Where:
C = change that will occur
D = dissatisfaction with the current state/ status quo
V = vision; what next is possible/ desirability of proposed change.
A = ability to change
FS = first step/plan
R = cost of the change (that brings resistance to change)
-The basic premise is that in equation the factors such as D,V,A and FS must
be greater than the resistance or cost of the change for progress to occur.
-Individuals will adopt or accept change only when they think that their
perceived personal benefits are greater than the perceived costs of change.
-Perceived benefits of change > Perceived cost of change.

WHY PLANNED CHANGED IS NEEDED

-Planned Change: The systematic attempt to redesign an organization in a way
that will help it adapt to changes in the external environment or to achieve
new goals.
-Types of planned change:
-An organization can be changed by altering its structure, its technology, its
people or some combination of these features.

MANAGING RESISTANCE TO CHANGE

-Change can be a threat to people in organizations.
-Organizations resist changing their status quo, even though change might be
beneficial.
-Why People Resist Change:
-An individual is likely to resist change for the following reasons: uncertainty,
habit, concern over personal loss and the belief that change is not in the
organizations best interest.
-Change replaces the known with ambiguity and uncertainty. For when quality
control methods based on sophisticated statistical models are introduced
into manufacturing plants, many quality control inspectors have to learn the
new methods. There is a fear they will be unable to do so and develop
negative attitude towards the change.
-As human beings we are creatures of habit. Life is complex enough- we dont
want to consider full range of options for hundreds of decisions we make
every day. To cope with this complexity we rely on habits and programmed
responses.
-The third cause of resistance is fear of loosing something already possessed.

-Change threatens the investment you have already made in the status quo.
The fear of loss of status, money, authority, friendship, personal
convenience, or other benefits. Older employees have generally invested
more in the current system and thus have more to lose by changing.
-The other cause of resistance to change is the persons belief that change is
incompatible with the goals and interests of the organization. For example
an employee who believes that a proposed new job procedure will reduce
product quality or productivity can be expected to resist the change. This
resistance is positive than it is beneficial for the organization.
-One reason is self interest. How will this affect me. How much will depend
on how strongly they feel their self interests are affected.
-Misunderstanding and lack of trust. People are against change when they
dont understand it. Managers mistrusting employees and fearing power
loss often oppose efforts to involve employees in work decisions.
-Individuals have low tolerance for change to adjust to new situations. They
have a fear of not learning new skills and behaviors entailed.
-