CHANGE MANAGEMENT

Anonymous code: Z0910138

MBA Full Time

Word Count: 3990

Date: 28th June 2010

 CHANGE MANAGEMENT Z0910138

Sl. No. Contents Page No.

1. Abstract 3
2. Introduction 3
3. Factors with transformational influence 5
4. External environment 5
5. Culture 6
6. Leadership 8
7. Vision, Mission & Strategy 10
8. Factors with transactional influences 11
9. Communication 11
10. Motivation 13
11. Structure 14
12 Training & Development 15
13. Policy 16
14. Stakeholder management 17
15. State Bank of India- Case discussion 18
16. Conclusion 20
17. References 21

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Abstract:

“It's not that some people have willpower and some don't. It's that some
people are ready to change and others are not.” - James Gordon

With the rapid development of world economy and globalisation, all kinds of organisations have
conceded through various changes to adapt to the new environment and compete effectively.
Either they have changed incrementally/transformational, else have died (Beer & Nohria 2000). For
many successful organisations changes have been the only constant. Further the change process is
very critical as multiple factors influence its outcome. This paper discusses various factors affecting
change in an organisation using the Burke & Litwin causal model of organisational performance and
change. And it concludes with the discussion of a case study how some of the discussed factors
have influenced State Bank of India’s change project.

Introduction:

“Organisation change is a kind of chaos” (Gleick 1987, cited by Burke & Litwin 1992). Hayes (2010)
expresses that the effective change processes are dynamic in nature and the factors affecting the
change process are very much contextual or situational. In this paper, the Burke & Litwin (1992)
causal model of organisational performance and change has been used to identify and categorise
the factors that affect implementation of change in an organisation. This model is an integration of
implementation and change process theories. So this model has been considered to be a very
extensive framework to discuss the factors.

As per Lewin (1951), every organisation has some forces of inertia, which act as restraining forces in
a change process. So in order to facilitate change some driving forces are required to overcome
these restraining forces. The driving and restraining forces are very objective in nature and vary
from an organisation to an organisation. A factor which is a supportive factor for change, if
misaligned with the change process can become a restraining factor (Hayes 2010).

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ship, Strong vision, good communication, effective reward system, proper training, good stakeholder management, supportive culture

CURRENT STATE DESIRED _STATE

ners: Poor Leadership, Culture issues, Status quo , Lack of resources and skill set, Low employee morale & commitment, Organisational

Change Process

The Burke & Litwin (1992) is a vertical model, i.e. the elements higher in the model have greater
impact on the element in the lower part and the organisational change. The external environment,
mission, leadership and organisational culture have transformational influence on an organisational
change, whereas the rest elements have transactional influence.

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Factors with transformational influence:

External environment:

External environment is any outside factor or situation or condition, which affects the
organisational performance. The factors can be broadly categorised into four types: Political,
Economic, Sociocultural and Technology.

Political factors include political stability and various laws & government regulations on
environment, consumer protection, employment, market structure (oligopoly/monopoly/
monopolistic) and fiscal policies. Organisations need to be aware of the effect of these factors on
their change project. E.g. If two oligopolies are merging then anti-trust regulations may affect their
integration process.

Next, economic factors include economic growth, exchange rate, interest rate, cost of raw
materials, purchasing power of consumers, competitors, business cycle and inflation rate.
Sociocultural factors include cultural aspects, population growth and demographics. E.g. if a
company in Japan, plans to reduce its workforce during a change process, it may face stiff
resistance, as traditional Japanese culture believes in life time employment commitment.
Technological factors include automation, new emerging technologies, R&D expenditure of
competitors and rate of obsolescence of plants, etc.

The influence of external factors on an organisation and change will vary depending on the type of
change, size and industry of the organisation. A proper assessment of the influencing factors and a
good risk mitigation plan can support the change process. Failure to do so can endanger the
change.
Drivers: Good understanding of external environment & proper risk mitigation plans.

CURRENT STATE DESIRED _STATE

Restrainers: Poor understanding of external environment & lack or poor risk mitigation plans

Role of external environment in change Process

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Culture:

Organisational culture is an unwritten way of doing business and can be stated as beliefs, values
and attitudes. Smith (1998) explains culture is “the way we do things around here”. De Long &
Fahey (2000) define culture as a design for living, which will constitute a system of values, practices
and norms, which are shared within a group of people. Values include ideas that are believed to be
desirable, good and achievable by the group. Influencing employees to change from one
organizational culture to another is a tedious task. In the last few decades, many change processes
were but could not succeed because of cultural issues (Ogbonna 2003). Nevertheless, Smith (1998)
argues that, if an organization intends to undergo any major changes, then a cultural change is
useful in sustaining the change.

Harrison (1972, 1986) identified four types of culture: Role, Power, Task and Person Culture. In
power culture organisations the decision making is centralised and high degree of constraints are
imposed on employees. A transformational or charismatic leader can drive effective change in this
culture. However, in this type of culture the low freedom for expression may lead to low employee
motivation and organisational silence, which can restrain the change process.

Drivers: Charismatic or transformational leadership

CURRENT STATE DESIRED _STATE

Restrainers: Organisational silence, low motivation

Role of power culture in change Process

The Role culture, while allows employees more freedom but within the defined parameter of their
role and job description, has limited inter-functional communication, is a hierarchical and mostly
method oriented rather than a result oriented. Lack of communication, hierarchy and method
orientation makes role culture less supportive of the change process, as effective change requires
continuous analysis of results and high flexibility.

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Drivers: Degree of freedom

CURRENT STATE DESIRED _STATE

Restrainers: Limited communication, hierarchical, method predominated rather than result.

Role of Role culture in change Process

The Task culture allows more freedom to employees to act in the best ways that will lead to better
result for their task. This culture is most favourable to the change process as its characteristics are
project orientation, decentralised decision making, low status distinction, better team dynamics,
adaptable workgroup, high degree of individual freedom.
rs: High degree of freedom, project orientation, decentralised decision making, low status distinction, better team dynamics, adaptable

DESIRED _STATE
CURRENT STATE

Restrainers: Difficult to exercise day-to-day control

Role of Task culture in change Process

The Person culture is also very supportive for the change process as it allows highest degree of
individual freedom and existence of mutual trust between the individual and organisation. Further
the commitment levels of employees are high as they feel that they are valued as human being and
because of cooperative work culture and trust on top management support.
Drivers: Highest degree of freedom, high mutual trust, high commitment level, cooperative work culture

DESIRED _STATE
CURRENT STATE

Restrainers: Lacks structure.

Role of Person culture in change Process

Interestingly, these four classifications not only focus on organization’s culture, but also its
structure. An organisation while developing the strategy for change should analyse its culture and
should take necessary actions to facilitate effective change.

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Leadership:

“Leadership is widely regarded as the key enabler of change process...” (Hayes 2010 p. 159). As per
Kotter (1990), leaders set directions and develop necessary strategies to move in that direction,
that is, creating a vision and achieving it. (Hayes 2010 p. 159) In his six-box model, Weisbord (1976)
states that the role of leadership is to align the five elements: purpose, structure, rewards, helpful
mechanism and relationship in an organisation. All these five elements can play a key role in
driving of the change process. Leadership focuses on alignment of these elements by setting right
vision & strategy and then effectively communicating the new direction to all.

By analysing Kotter (1995) eight- point checklist the role of leadership can be evaluated in the
change process.

 Leaders drive change by establishing a sense of urgency for the change. They alert the
organisational members to the need for change and motivating them to overcome the
status quo, and thus drive the unfreezing process.
 Leaders make the coalition of the organisational members those who recognise the need for
change, thus drives the change process.
 Leaders develop vision & mission to communicate the change objectives, which are
powerful driving forces for organisational change. Vision conveys an appealing picture how
the future will look like. Further it provides a clear guideline to facilitate effective decision
making. It is widely accepted that a strong organisational vision, can make valuable
contribution and act as a driving force in the change process. However, if the leaders
present a narrow vision which is unfeasible and inflexible can jeopardise the change
program.

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 The role of communication of vision to the organisation members is very crucial for the
success of change. Leaders play a key role in communicating the vision to the organisational
members and key stakeholders.
 Leaders do act on the five elements (Weisbord 1976): purpose, structure, rewards, helpful
mechanism and relationship, to identify and remove the obstacles in the change and exhibit
transformational qualities. Because sometimes the organisational structure or reward
system may not facilitate the change process. Leaders do act on them and clear the
obstacles. Leaders involve people in achieving the vision and delegating tasks to them,
thereby giving some sense of control. Further leaders support the member’s efforts by
providing feedback, coaching and role modelling.
 Leaders set realistic milestones and create short term wins to celebrate the success along
the way which maintains the motivation of the team. However, if the milestones set are
unrealistic or wins are long term only then people lose the initial sense of urgency for
change and their attentions shift to other operational affairs.
 Leaders celebrate short term wins and capitalise on them to introduce further changes that
are aligned with the vision to drives the change. However, Kotter advocates that declaring
victory soon can retard the momentum of the change.
 Leaders institutionalise the new approaches to ensure that the change happened is
sustained. They show others how the change has transformed the organisation performance
and thus ensure proper refreezing.

ship, Strong vision, charisma, good communication, good delegation of authority, enticing reward system, clearing obstacles, institutio

CURRENT STATE DESIRED _STATE

Restrainers: Poor Leadership, narrow, unclear & unfeasible vision, poor/miscommunication, un-motivating reward system, hubris

Role of leadership in change Process

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Restraining forces caused by ineffective leadership: Leader’s hubris can be an impediment in the
change process. Many a time leaders pursue flawed visions knowingly, in order to fulfil their past
commitments. Because they think the failure to doing so, would damage their reputation. Conger
(1990) explains it by cognitive dissonance. Further Conger (1990) points the miscommunications by
leaders can jeopardise the change process. Because sometimes leaders present information in a
way to make their vision more realistic and achievable, while in real case it may not be so. (Hayes
2010, p.160)

Vision, Mission & Strategy:

Mission represents what the employees and top management believe the purpose of the company
is. And strategy is how the organisation is planning to fulfil the mission over a period of time. From
the prospective of change, mission and strategy play an important role in influencing, guiding and
motivating the employees. If a proposed change is not aligned with the organisation’s mission, then
the probability of success of change will be very less. Because there will be widespread resistance
from various key stakeholders. For example, in 2002, eBay acquired Paypal. However, there was a
high resistance from the eBay’s key stakeholders. Their stand was that Paypal’s business mission is
different from that of eBay’s. So before embarking upon any change plan, the top management
needs to ensure that the change is aligned with the organisation mission.

As discussed earlier one of the roles of leadership is developing & communicating the vision. The
vision sets the direction of the change process. The vision will be supportive of the change, if it
follows the six guiding criteria suggested by Kotter (1996). The right vision should be imaginable,
desirable by key stakeholders, feasible, focused, flexible and communicable. Further while
developing the change strategy the leaders need to ensure proper planning and timeline for change
and assess whether they need a vehicle for change process such as an external consultant.
However, the management needs to reassure that the employees will be comfortable in working
with the external change agents; else it will imperil the change plan.

Drivers: Well aligned change plan, a feasible, focused, flexible & desirable change vision.

CURRENT STATE DESIRED _STATE

strainers: Change misaligned with mission, a narrow, low desirable & inflexible vision, lack of trust or confidence on external change ag

Role of vision, mission & strategy in change Process

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Factors with transactional influence:

Communication:

“The quality of communication can have an important impact on the success or the otherwise of a
change program”. (Hayes 2010, p. 174). Beer (2001) identifies poor communications as on the six
silent killers in the change (Hayes 2010, p. 174). The effect of communication network on change
can be analysed in four features.

First, the direction of communications, effective change communication includes both quality up-
ward and downward communication. In any organisation information passes through hierarchies
and there are possibilities of filtering out of essential information in the process, due to individual
perceptions. So it is important for the change managers to ensure that no important information is
filtered out. Further it is crucial that all departments share required information with others on
time. Hargie & Tourish (2000) have expressed concerns that poor information sharing & work in
isolation will retard the change motion (Hayes 2010, p. 175). Change managers should have clear
understanding of what information to withhold and what to uphold.

mely communication, bi-directional, feedback to check effectiveness, information sharing/lateral, recognising the content of informatio

CURRENT STATE DESIRED _STATE

ers: Organisational silence, one way communication, poor lateral communication, isolation of information, improper channels, misinte

Role of communication in change Process

Second, there should be a well defined protocol for communication of information between the
organisation members and the stakeholders of the change. Because certain crucial information, if
passed to the wrong members can risk the change process. Third, the change managers should be
able to assess the content of the information received from both external and internal sources.
Right interpretation of the information will support the change process, whereas misinterpretation
can retard the process.
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Finally, the communication channel used should be appropriate for the context of information
being shared. O’Reilly and Pondy (1979) have suggested various communication channels as per the
situation. For example, if the CEO of a company needs to deliver critical information such as layoff,
then just passing a written statement will be ineffective. An open speech stating the facts and
needs for layoff will be much more effective and will support the change. Failure to do so will
hinder the change process.

The withheld of opinions by key stakeholders can lead to organisational silence. Morrison and
Milliken (2000) have shown concern that organisation silence can be a major barrier to the
progression of change. Trust, effective communication, feedback system can help overcome the
problem. Change managers need to ensure a proper feedback channel to ensure that the recipients
have received the right information. So, a well structured communication strategy can be a major
driver of the change. Whereas, a poorly designed communication plan can increase the
organisational silence and hinder the change and organisational development.

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Motivation:

Vroom’s expectancy motivational theory proposes that the expectation or belief about the
relationship between effort, performance and valued outcome will determine the motivation of a
stakeholder in support or oppose of the change. The motivation again feeds back to the effort and
results to a new effort & performance. It is a closed loop chain. Right in the middle the valued
outcome controls the motivation level. The reward system in an organisation can drive the
motivation in the right direction. So leaders need to ensure an effective reward system. Burke &
Litwin (1992) has agreed that rewards should be used to promote the new behaviour that reflects
the values required for organisational change.

So high level of motivation will support change and at the same time will lead to an effective effort
to enhance the performance. Low level of motivation will lead to low effort, low performance and
further low motivation for change. Further parochial self-interest, misunderstanding & lack of trust
between organisational members, the difference in assessment and low tolerance will lead to low
motivation for change and will act as a restraining force in the change process.

Drivers: Positive motivation, higher effort, higher performance

CURRENT STATE DESIRED _STATE

Restrainers: Parochial self-interest, misunderstanding & lack of trust, different assessments, low tolerance for change

Role of motivation in change Process

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Structure:

“What could be more important to the effective functioning of our organizations. . . than the
design of their structures?” (Mintzberg 1993, cited by Cape 2002). As per three factor model of
Cape (2002) organisational structure, strategy, people & environment interact with each other. The
organisational structure influence's the strategy, people and its environment. Same time these
elements also influence the structure. As the change process is influenced or controlled by strategy,
people and environment, proper alignment of organisational structure with the change will drive
the process.

Burke & Litwin (1992) explain the structure as the arrangement of functions and people into
specific areas or levels of responsibility, decision making authority, communication and relationship
in an organisation. So well defined job responsibility, right locus of decision making and effective
communication can help executing the strategical change program with support of people and
environment. Poorly defined job/decision making responsibility and structure will hinder the
change process.

s:Agility, well-defined structure, right locus of decision making, proper job design, effective upward, downward & lateral communicati

CURRENT STATE DESIRED _STATE

Restrainers: Poorly defined structure, job & responsibilities, ineffective communication & decision making system

Role of structure in change Process

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Training & development:

Effective organisational change desires effective individual change of the employees. The change
programs bring changes in individual tasks and job roles. So there must be a change expected in
behaviour, attitude or job responsibility. For example, if a bank is looking to enhance its customer
care services, then it requires changing employee’s attitude towards customers and their ways of
communications. Effective training and development are required to develop the new knowledge,
skills, attitude and behaviours which will increase employee confidence and motivation level to
perform their existing or newly assigned tasks efficiently.

Goldstein (1993) proposes three levels of training needs (Hayes 2010, p.351). First, system level
refers how the change will affect the job requirement. For example, if a company is migrating from
a manual process to automation, then the employees' tasks' change and a proper training program
on handling the machines can help them to adapt to the new system. Second, task level refers to
change in task or responsibility. In the change process, an employee’s task might change or
additional responsibilities may be added. So effective training needed to support the person to
handle the new task or responsibility efficiently. Third, person level refers identifying the right
person or group in the organisation who requires the training mentioned in system and task level.
Misidentification of a trainee will increase change implementation time, increase cost of project
and cause dissatisfaction among the employees.

Drivers: Increased participation, improved motivation and confidence, identification of right system, task and person.

CURRENT STATE DESIRED _STATE

Restrainers: Misaligned training, lack of knowledge of task, low motivation, low confidence, misidentification of trainees.

Role of training in change Process

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Policies:

Pfeffer’s (1998) suggests these seven practices in policies, which lead to high performance in
organisations – job security, hiring, decision making power, reward system, training, status
distinction and information sharing (Hayes 2010). The effect of policies on change can be described
using this framework.
Assurance of job security and hiring policies reduce employees’ fear of losing their jobs in the
change. This decreases their resistance for change. However, high job security such as in
government jobs can make employees complacent about accepting the change. Self-managed team
and decentralised decision making allow change managers to take quick decisions as required by
the system and thus maintaining or accelerating the change process. Good performance based
reward system motivates the task force to accept the changes and take up the additional job
responsibility if required.

Extensive training prepares the employees to execute the new job responsibilities effectively and
efficiently. Reduced status distinction or low power culture facilitates better team work and
knowledge sharing and hence improves organisational performance. Last, extensive information
sharing keeps all the change stakeholders on the same page and enhances the change process as
discussed earlier under communications. The effective policies increase the commitment level of
employees and act as a driving force for change.

On the contrary, a hiring and firing policy increases fear of losing job during the change and
increases the resistance for change. Highly centralised decision making delays the change process
and increases the cost associated. Poor reward system leads to reduced motivation for accepting
additional responsibilities or improve job performance. The high power culture or increased status
distinction restricts the flow of ideas and decreases team performance. Effect of limited
information sharing and training has been discussed earlier. So, wrong organisational policies can
ecurity, decentralised decision making, stewardship, performance based reward, extensive training, reduced status distinction, extens
retard and hinder the change process.

CURRENT STATE DESIRED _STATE

policy, highly centralised decision making, high power culture, poor reward system, prudent training, increased status distinction, limite

Role of policies in change Process 16

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Stakeholder management:

Nadler (1987) argues, during the change process the intensity of political behaviour in an
organisation intensifies because there will be a difference in the opinion on the perceived outcome
of the change process (Hayes 2010, p. 143). Where some individuals or groups will be motivated to
accept the change considering it as an opportunity for personal and organisational improvement,
others may perceive the change as a threat to their position or existence. Further trade unions,
lobbying and coalitions intensify the resistance for change. So, the degree of awareness of change
managers on the power, influence and attitude of key stakeholders towards the change and
necessary action to manage them will be beneficial in the change process.

Jawahar and McLaughlin (2001) stakeholder theory suggests that different stakeholders need
different level of attention in various stages of the change life cycle. Manager’s awareness of these
facts will help them allocate the recourses efficiently and effectively. (Hayes 2010, p. 149)

Drivers: Trust and coalition among stakeholders, good stakeholder management

CURRENT STATE DESIRED _STATE

Restrainers: Lack of trust among stakeholders, difference of interest & opinion, self-interests, Lobbying, trade unions & coalitions

Role of stakeholder management in change Process

Thus with this the paper concludes the factors having transactional influence on the change. The
next part discusses the different factors those have influenced State Bank of India’s change plan.

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State Bank of India (SBI) - Parivartan

SBI is one of India’s largest and oldest banks. Following the deregulation of banking sector in late
nineties, SBI faced stiff competition from private sectors rivals such as ICICI Bank, Axis Bank & HDFC
Bank and SBI’s market share started eroding continuously. In order to stabilise its position SBI took
many change initiatives such as merger of its seven associate banks with it, computerisation of all of
its branches (14,000), connecting all the operations through core banking, downsizing workforce
and improve customer service. To facilitate implementation of these changes, SBI initiated a change
program “Parivartan”, the Hindi equivalent of “transformation” or “change”. The various factors
discussed earlier that has influenced SBI have been identifies and presented in Lewin’s force field
model.

DRIVING FORCES RESTRAINING FORCES

tive Leadership by Mr. O.P.Bhatt, & the urgency to regain market share.
Culture and employee complacency as previously it was government owned

Merger of seven associate banks with varying work culture

Clear vision & aligned mission

ctive communication about the change strategy and urgency of change

Newly implemented automation

process & lack of computer literacy.

Extensive training and reward system

Ageing employees mostly between age 40 & 50

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Restraining forces:

The major restraining forces were culture of the SBI, ageing employees, lack of computer literacy
and merger of seven associates. Before the change, SBI lacked the performance driven approach.
For a long period SBI was a government undertaking organisation. This developed complacency in
the work culture. Additionally, the majority of the workforce were ageing and lacked computer
literacy. Further as the new organisation was a merger of seven associates the structure and culture
of the organisations were misaligned. All these were great obstacles in the change process.

Driving forces:

The transformational driving forces in the SBI change were the leadership by O.P.Bhatt, external
industry pressure & the strong vision. And the transactional forces were extensive communication,
well developed training program and an enticing reward system.

Leadership: O.P.Bhatt, the chairman of SBI led the change and played a transformational role. He
developed the change strategy along with the top management. It was a top-down approach
targeting all the levels of organisation. Through his clear vision and effective communication, he
conveyed the urgency of the change to the whole organisation. He set up a massive communication
exercise and training program aiming cultural and attitudinal change of the workforce.

Internal communication: As per industry analyst, it was one of the massive communication
exercises in an Indian organisation, connecting 300 deputy general managers, 2000 assistant
general managers, 14,000 branch managers and 1,75,000 clerical staffs. The purpose was to
communicate the change agenda and urgency to the all the organisational members.

Training & Culture change: For a period of 100days, in regular interval, two day multi-level training
programs were conducted. Around 1,75,000+ employees were trained for 3,300 work days
conducted by specially trained 360+ trainers. The training was consisted of customer service
behaviour and attitude, motivational workshops and computer literacy. Multimedia based
interactive training systems were made available on the internal portal.

Reward system: The reward system also went to a transformational change and became a
performance driven system. Active and motivated employee’s were promoted and were given
more responsibilities & monetary rewards.

All these driving forces helped SBI overcoming the inertia of complacency, low motivation, low
organisational commitment and lack of skills. A research by an independent body has found that
customer satisfaction level has increased by 20% in 2yrs (2006-2008). Following that SBI has
received many performance awards. In The Bankers list of top 1000 banks, SBI’s position improved
steadily #107 in 2006, #70 in 2007 and #57 in 2008. Further the bank made a leap frog jump in
Fortune Global 500 lists, #495 in 2006 to # 380 in 2008. (Purkayastha 2009)

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Conclusion:

Practically, no model can accommodate all the elements affecting organisational change.
Depending on circumstance and purposes models can be chosen. (Hayes 2010, p.117) However,
this paper presents a comprehensive discussion on various factors affecting change. Various driving
and restraining forces have been identified and discussed. Factors affecting change in organisations
will vary depending on the change type and organisation. Successful identification of the driving
and restraining forces by the leaders and change managers will be very beneficial to the change
process.

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