Organisational Change

Chapter 2 The Nature of Change

Introduction
The chapter: Discusses a number of frameworks for categorising change. Explains why, in order to be effective, it is necessary to understand the differences between various types of change.
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Objectives
To:

Emphasise the complex nature of organisational change; Describe and discuss the multi-dimensional nature of organisational change; Analyse change situations in order to choose appropriate methods of managing and implementing change; Recognise that there are limitations to the common-sense approach to managing change that assumes that change can be planned as a logical. Step by step, sequence of activities. This because of cultural, political and leadership dynamics.
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Background: A definition of strategy

Strategy is:
the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfill stakeholder expectations.
Source: Johnson, G. & Scholes, K. (1993) Exploring Corporate Strategy, London, Prentice Hall, p. 10.

Environmental turbulence

Ansoff & McDonnel (1990) (recap) Level 1. Predictable Level 2. Forecastable by extrapolation Level 3. Predictable threats & opportunities Level 4. Partially predictable opportunities Level 5. Unpredictable surprises Strebel (1996) Weak forces Moderate forces Strong forces Stacey (1996) (recap) Close to certainty Far from certainty
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Varieties of change (overview)

Grundy (1993) Smooth incremental Bumpy incremental Discontinuous Tushman et al (1986) Converging (fine-tuning) Converging (incremental) Discontinuous or frame-breaking Dunphy & Stace (1993) Fine tuning Incremental adjustment Modular transformation Corporate transformation
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Varieties of change (Grundy)

Smooth incremental evolves slowly, in a systematic and predictable way. Bumpy incremental periods of relative quiet interrupted by sudden bursts in the rate of change (e.g. re-organisations). Discontinuous divergent breakpoint, changes involving crisis, breakthrough, response to high turbulence.

Major Types of Change (Grundy)

Discontinuous

Rate of change
Smooth incremental Bumpy incremental

Time

Source: Grundy, T. (1993) Implementing Strategic Change, Kogan Page, p. 25

Varieties of change (Tushman et al)

Converging (fine-tuning) - trying to do better what is already being done well. Converging (incremental adaptation) - small changes in response to small shifts in the environment. Discontinuous or frame-breaking major, rapid (spread over 18-24 months) and revolutionary changes in strategy, structure, people & processes in order to meet radically new or different circumstances. Also termed upheaval.
Most organisations follow a pattern of convergence/upheaval cycles. This pattern can apply at all levels (department, unit, corporation).
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Pressures for Frame-breaking Change

Industry discontinuities, e.g. sharp changes in the legal, political or technological conditions which shift the basis of competition Product life-cycle shifts, i.e. strategic change to fit the next stage of the cycle Internal dynamics, e.g. new management team, with different strategy preferences

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Examples of Frame-breaking Change

Change of mission or core values Power shifts, resource reallocation Total reorganization New workflow procedures New CEO coming from outside

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Scale of change (1) (Dunphy & Stace)

1.

1. Fine Tuning.
At departmental level. Making re-alignments to ensure that there is a match between strategy, structure, people and processes.

2.

2. Incremental Adjustment.
Bit by bit changes to match the changing environment. Minor modifications to strategies or structures..
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Scale of change (2) (Dunphy & Stace)

3. Modular Transformation.
Major realignment of one or more departments or divisions. Downsizing, re-engineering.

4. Corporate Transformation (frame-breaking effecting the whole organisation).

As described earlier as discontinuous or frame-breaking change.

A contemporary research study found that most organisations have been undergoing types 3 & 4 change.
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Environmental conditions and types of change

ENVIRONMENTAL FORCES FOR CHANGE
Ansoff and McDonnell (1990) Predictable Forecastable by extrapolation Moderate Close to certainty Predictable threats and opportunities Partially predictable opportunities Modular transformation Corporate transformation Converging (incremental) Incremental adjustment Bumpy incremental Strong Far from certainty Unpredictable surprises Contained Strebel (1996) Weak Stacey (1996) Tushman et al. (1988)

TYPES OF CHANGE

Dunphy & Stace (1993)

Grundy (1993)

Stacey (1996)

Close to certainty

Converging (fine-tuning)

Fine-tuning

Smooth incremental

Closed

Discontinuous or framebreaking

Discontinuous Open-ended

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Phases of Emergent Versus Planned Change (1) Fine tuning and incremental change are usually also seen as emergent, unfolding as it happens. The organisation, an open system, engages naturally in emergent change as it tries to maintain equilibrium with its changing environment.
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Phases of Emergent Versus Planned Change (2) However, organizations that rely only on making emergent change may ignore warning signs of the need for more radical forms of change, and the organisation will suffer strategic drift, i.e. the strategy and perceptions of the organisation will become less and less in tune with the environment.
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Phases of Emergent Versus Planned Change (3) Some theorists argue that PLANNED CHANGE that is also frame-breaking may then be necessary as a drastic remedy to bring the organization back to health.

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Logical Incrementalism (1)

Quinn does not agree that change is either emergent or planned. Quinn believes that although managers may have an idea of the destination, they do not really plan change in big chunks.

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Logical Incrementalism (2)

Quinn says that managers: Are flexible about how to get to the destination. Arrive at strategic change through negotiation with stakeholders. Allow strategic change to evolve incrementally, although this is not piece-meal or haphazard because it is based on agreed purposes and involves constant critical reassessment. The planned change process involves opportunist learning as it goes along. Logical instrumentalism is both emergent and planned.
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Predictable Change (1)

Some

theorists think that change might be neither wholly emergent nor wholly planned. Instead, change may reflect the organisations LIFE-CYCLE. Greiner identifies 4 stages or 5 phases through which organisations go as they grow and develop.

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Predictable Change (2)

Each

of Greiners stages contains a crisis period.

Stage 1 is entrepreneurial - survival oriented. Stage 2 is collective - based on division of labour. Stage 3 is formalised- based on bureaucracy. Stage 4 is elaborated - based on problem oriented teams.
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Stages of organisational growth

Phase 1 Entrepreneurial Structure *Informal Phase 2 Direction *Functional *Centralized *Hierarchical *Top down Pahse 3 Delegation *Decentralized *Bottom up Phase 4 Co-ordination *Staff functions *SBUs *Decentralized *Units merged into product groups *Formal planning procedures *Investment centres *Tight expenditure controls *Watchdog Phase 5 Collaboration *Matrix-type structure

Systems

*Immediate response to customer feedback

*Standards *Cost centres *Budget *Salary systems

*Profit centres *Bonuses *Management by exception

*Simplified and integrated information systems

Styles/ people

*Individualistic *Creative *Entrepreneurial *Ownership *Fun *Market response

*Strong directive

*Full delegation and autonomy

Strengths

*Efficient

*High management motivation

Crisis Point

*Crisis of leadership

*Crisis of autonomy *Unsujited to diversity *Cumbersome *Hierarchical *Doesnt grow people

*Crisis of control

*More efficient allocation of corporate and local resources *Crisis of red tape

*Team-oriented *Interpersonal skills at a premium *Innovative *Educational bias *Greater spontaneity *Flexible and behaviourial approach ?

Weaknesses

*Founder often empermentally unsuited to managing *Boss overload

*Top managers lose control as freeom breeds parochial attitudes

*Bureaucratic divisions between line/ staff, headquarters/field , etc

*psychological saturation

Source: Clarke, L. (1994) The Essence of Change, Prentice Hall, p.12.

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Predictable Change (3)

Greiners model is potentially useful in identifying what stage an organization is at, and therefore what type of change situation it is in and will be in. The model may therefore help an organisation to plan change and predict the next crisis point.

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Diagnosing Change Situations

Diagnosis of change situations is not an exact science. Various diagnostic methods can be used in combination, e.g. SWOT, PETS, multicause diagrams. Some more methods are now discussed.

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Evolutionary Cycle of Competitive Behaviour - 1

Strebel has suggested a model that examines the industry within which the organisation is located, i.e. the organisations competitive environment. Two key concepts are:
the evolutionary cycle of competitive behaviour. breakpoints, when companies must change their strategies in response to changes in competitors behaviour.

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Evolutionary Cycle of Competitive Behaviour - 2

The cycle involves two main phases. 1. The DIVERGENT PHASE, based on innovation/variety: beginning when one organisation discovers a new business opportunity, the industry as a whole strives to create differentiated products and services that add customer value.

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Evolutionary Cycle of Competitive Behaviour - 3

2. Eventually a breakpoint occurs, as the emphasis shifts to the CONVERGENT PHASE, based on efficiency/survival, which begins with imitation of competitors best features, and then leads to an emphasis on reducing costs. Competitors converge on total quality management, continual improvement & re-engineering to cut costs and maintain market share. Only the fittest survive. 3. Then back to 1, as further savings are marginal.
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Evolutionary Cycle of Competitive Behaviour - 4

Progressively, with cycle after cycle, industries deliver both more customer value through various generations of differentiation (e.g. mobile phone technology) each followed by more cost reduction.
Industries vary according to the relative emphasis on divergent phases versus convergent phases

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Evolutionary Cycle of Competitive Behaviour - 5

High Customer Value
new generation of products

Concern for Innovation & customer value

differentiation phase

cost reduction phase

Low Customer Value

cost reduction phase

= breakpoints

pioneering/ novelty phase

High Costs

Delivery of efficiency & cost savings

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Low Costs

Evolutionary Cycle of Competitive Behaviour - 6

Spotting the breakpoints.

Formal Methods include:
Environmental scanning Benchmarking Monitoring, data collection and data interpretation
Detecting when a new divergent phase is about to begin is more difficult because the new wave of innovation cannot yet be seen.

Informal methods include:

Open-minded attitudes Cooperation across the organisation Culture supporting innovation and change

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Difficulties and Messes Difficulties.

Messes.

These are characterised by hard complexity. There are lots of factors and variables. But they can be meaningfully quantified. Optimal solutions can be developed.

These are characterised by soft complexity. Peoples description of events is ambiguous. There are multiple interpretations and reconstructions of what the problem is. Stakeholder groups will see things according to their stake in the problem. Thus there are many different ideas about what kind of solutions there might be.
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Difficult versus messy problems

DIFFICULTIES - Smaller scale, well-defined, hard complexity, multiple variables, cerebral
know what would be a solution know what the problem is

limited timescale

priorities clear

BOUNDED

limited applications

know what needs to be known

limited number of people involved

can be treated as a separate matter

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MESSY PROBLEMS - bigger, poorly defined, soft complexity, multiple perspectives, emotional
no solutions longer uncertain timescale priorities called into question

know what the problem is dont know what needs to be known

UNBOUNDED

uncertain but greater implications; worrying

more people involved

cant be disentangled from its context

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Concluding Remarks Diagnosing necessary change and managing subsequent change is usually not just a matter of objective calculation. Soft problems present various emotional and social dimensions which demand a broad range of managerial change competencies and approaches.

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