Public Service College of Oromia

Department of Human Resource Management

and Leadership

Notes on the Course

Change Management Tools and Initiatives

(HRML 412)

April, 2013

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Unit One: The Concept of Change and Change Management
Introduction
Executives of the most powerful companies in the world now tremble before their independent
and demanding customers. They know customers have the power and that they will use it. We
are in the customer economy. At the same time, customers have become more sophisticated and
informed buyers. In theory, customers have always had choices, but until recently those choices
were more theoretical than real. Consumers did not have time to run all over town comparison
shopping, while corporate purchasing agents could not plow through the spec sheets and price
books of every possible supplier. As a result, customers stayed with familiar vendors because
that was easier, and that gave these vendors the upper hand. But customers' servitude ended
when it became practical for them to take advantage of the alternatives that other vendors
offered. Information technology, (including, most recently, the Internet) enabled them to find and
analyze competing products and to make intelligent choices. Customers discovered they had
options and the power to exploit them. As both consumers and corporations increasingly came
under pressure to save money, the inertia of staying with old suppliers became a luxury few
could afford. As a result, customers now aggressively seek alternatives, compare offers, and hold
out for the best option.

Customer power surged even more as many products became virtual commodities. It used to be
that technology evolved slowly enough that products remained different from each other for long
periods of time. I sold my product, you sold yours; each had strengths and weaknesses that made
it the best choice for some customers and a poor choice for others. Now rapid changes in
technology have dramatically shortened product life cycles. No sooner do I introduce a new
product than either it becomes obsolete or you imitate it. The result is a lot of similar offerings
that make it very difficult for me to differentiate myself from you: this further empowers our
customers. In combination, these phenomena transformed supplier-dominated economies into
ones ruled by customers. This then is the real "new economy. It is the customer economy which
has been growing and gathering steam for the last twenty-five years. The circumstances that have
driven the customer economy are not yet played out; indeed, they are accelerating. There is no
foreseeable end to increases in global competition, overcapacity commoditization, or customer
knowledge, or to the customer power that flows from them.

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1.1Driving forces of Change (The 3C’s)

Customer: The dominant force in the seller-customer relationship has shifted from seller to
customer. A mass market no longer exists in real term as customers need customized products &
services. Customer has upper hand; because they have choices, the role of technology - access to
information has increased, customers (business customers and individual consumers) know what
they want and what they want to pay for, and how to get it as their needs and preferences.

Fierce Competition: The phenomenon of mass marketing has broken. The traditional
competitive strategies: lower price and highest quality, and best service become standard for
almost all competitors. The shift in customer-seller relationship and the technology changes the
nature of competition.

Change: Change is becoming constant. The pace and nature of the change is also changing. The
nature of change becomes fast, flexible. Today nothing is constant or predictable - the customer
demand, the technology, the competitions.

Therefore, in current world, three things become the drivers of change in every organization .The
customer, the competitors and the changing nature of competition (3cs). Due to the development
of information communication technology, customer and even competitors become well
informed. On one hand, customers become more powerful to see different options; on the other
hand competitors design different strategies to handle their customers against their rivalries to
get more market share. Such tough environment created very difficult competition which, if they
do not cope up with, could challenge their very existence. Managers did not sit still as the new
customer economy began to displace the old supplier economies in which they had been reared
and trained. Throughout the 1980s and early 1990s, they undertook an unprecedented program of
managerial innovation. Behind the scenes and largely out of public view, American managers
created and deployed dramatically new ways of operating their businesses. An arsenal of
management strategies was built to replace the assumptions and techniques that had prevailed at
least since the days of Henry Ford and Alfred Sloan.

Even a minimal list of the business innovations of the 1980s and 1990s would have to include
just-in-time inventory management; total quality management and its avatar, six sigma quality;
cross-functional teams; the use of portfolio management and stage gates in product development;
supply chain integration, including vendor-managed inventories and collaborative planning and
forecasting; performance linked compensation; competency profiling in human resources;
measurement systems based on EVA (economic value added) or balanced Scorecards: customer-
supplier partnerships; business process reengineering; and many more. It is difficult to overstate
the extent and impact of these changes. A Rip Van Winkle who had fallen asleep in the 1970s
and awoke today would not recognize the business world. The new management techniques
enabled these companies to develop better products quicker, and to manufacture them more
reliably and at lower cost. They allowed companies to get more out of their plants, operate with

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less inventory, reduce waste and errors, fill orders more quickly and respond with alacrity to
customer requests. Increased productivity, lowered costs, better quality, and improved service
were the immediate results of adopting these techniques, and they translated into payoffs for
every constituency: Customers got better products at lower prices, workers had secure
employment and shareholders earned higher profits.

It was these managerial innovations of the 1980s and early 1990s, rather than the US Federal
Reserve or the Internet or the budget surplus that actually created the boom economy of the late
1990s. Companies did not do well because times were good: rather times became good because
companies did well. The elixirs of economic performance are business productivity and
innovation. When companies reduce their costs without reducing value. when they create new
products, when they enhance their quality and service, then-and only then-do happy days reign.
Customers can get more value for the same money, which means they have more to spend on
other things: companies increase sales and profits which enables increases in wages and capital
spending: shareholders see rising equity values: and we are soon riding merrily along on the
virtuous cycle of economic growth.
1.2 Change Management &Organizational Change
Change management is not a distinct discipline with rigid and clearly defined boundaries.
Rather, the theory and practice of change management draws on a number of social science
disciplines and traditions. This makes the task of tracing its origins and defining its core concepts
of change management more difficult. Thus, without saying so far into its related disciplines, the
clarity and understanding of change management suffers. Many organizations today face a
dynamic and changing environment. This, in turn, requires those organizations to adapt change.
Every organization has to adjust to a multicultural environment. Human resource policies and
practices have to change in order to attract and keep this more diverse workforce. Many
companies have to spend large amounts of money on training to upgrade reading, maths,
computer, and other skills of employees. The substitution of computer control of direct
supervision, for instance, is resulting in wider spans of control for managers and flatter
organizations. Sophisticated information technology is also making organizations more
responsive. As organizations become more adaptable, so too their employees. Work teams whose
members can perform multiple tasks and actively participate in team decisions are replacing
many jobs.

We live in an age of discontinuity. The past was a pretty good prologue to the future. Tomorrow
will be essentially an extended trend line from yesterday. That is no longer true. Economic
shocks have continued to impose changes on organizations. The nature of competition is
changing. In a global economy, competitors are likely to come across the ocean as from across
towns. Heightened competition also means that established organizations need to defend
themselves against both traditional competitors that develop new products and services and
small, entrepreneurial firms with innovative offerings. Successful organizations will be the ones

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that can change in response to the competition. They will be fast on their feet, capable of
developing new products rapidly and getting them to market quickly. They will rely on short
production runs, short product cycles, and an ongoing stream of new products. In other words,
they will be flexible and require flexible and responsive workforce that can adapt to rapidly
changing conditions.

1.3 Concepts of Change Management

Change is must and unchangeable. It is also said that change is painful and yet needful. Change
originates from vitality and is a positive and necessary sign of growth and progress. People resist
change because it is easier to do what they are doing than to learn something new. We resist
change because it is difficult for us to understand one another. People resist change from highly
personal and unique reasons. Today, change seems to be faster than in the past. The change is
faster with higher levels of education, communication and greater human aspirations about what
we should have as an expected part of our life. In industry, change is related to automation,
obsolescence, competition, new technologies, computerization, information technology and
liberalization of economy.

Change is an ever-present feature of organizational life. People believe that organizations are so
used to change that they take it in their stride. Organizations experience severe problems in
braining about change (Howarth, 1988). The reason for this is two-fold. Firstly, change comes in
many shapes and sizes. Secondly, change, even in a small way can be complex and difficult. A
lot of literatures provide examples of changes that have gone wrong and some disastrously
(Burnes and Weeks, 1989; Cummings and Huse, 1989; Kanter, 1989; Kelly, 1982). Therefore,
managing change is problematic though it is difficult to come to grips with the scale of the issue-
do only a few organizations experience problems, or is this a common occurrence? However,
there are two types of change which have been well documented in recent years and where
estimates of the scale of the problem have been made-the introduction of new (computerized)
technology and the adoption of total quality management.

Change agents can be managers or non-mangers, employees of the organization or outside

consultants. These are people who lead and support the change processes. They are individuals
and groups who take responsibility for changing the existing patterns of behavior of another
person or social system. Although change agents sometimes are hired as consultants from outside
the organization, managers, team leaders, and others working in today's dynamic times are also
expected to act in change agent capacities. Organizational change is defined as the alteration
and transformation of the form so as to survive better in the environment (Hage, 1980:262).

Organizational Forces and Targets for Change: The forces for change are present in and
around organizations. They are found in the relationship between an organization and its
environment. They are found in the life cycle of the organization as it passes from birth through
growth and toward maturity. Changes in culture and structures are examples of organizational

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attempts to adjust to these patterns of growth. They are found in the political nature of
organizations. Benefits and reward systems are examples of internal control structure that
organizations attempt to deal with shifting political trends. The task is complicated further by the
simple fact that the social sciences themselves are interwoven. As an example, theories of
management and important component of change management cannot be fully discussed without
reference to theories of child and adult psychology. Neither of these can be properly addressed
without touching the theories of knowledge (epistemology).

Forces for change Examples

Nature of the workforce More cultural diversity, Increase in professionals, Many new entrants with
inadequate skills
Technology Faster and cheaper computers, TQM programs, Reengineering programs

Economic shocks Asian real estate collapse, Russian devaluation of the ruble, Changes in oil prices

Competition Global competitors, Mergers and consolidations, Growth of e-commerce

Social trends Attitude toward smokers, Delayed marriages by young people, Popularity of
sport-utility vehicles, Collapse of Soviet Union
World politics Opening of markets in China, Black rule of South Africa

1.4 The Purpose of Change Management

Child and Kieser (1981) stated that organizations are constantly changing. They are in constant
motion. Movements in external conditions such as competition, innovation, public demand, and
governmental policy require that new strategies, methods of working, and outputs be devised for
an organization merely to continue at its present level of operation. Internal factors also promote
change in that managers and other members of the organization may seek not just its
maintenance but also its growth, in order to secure improved benefits and satisfaction for
themselves. Herbert Kaufman (1971) stated that organizational change is invariably good or bad,
progressive or conservative, beneficial or injurious. It may run either way in any given instance.
But it is always confronted by strong forces holding it and sharply circumscribing the capacity of
organizations to react to new conditions sometimes with grave results.

1.5 Factors influencing Change

The important factors which influence change are technological advances, habits and preference
and response needs of people based in internal and external factors. The word change produces
emotional reactions. To many people change is quite threatening. The process of changing
people is training orientation, guidance, indoctrination, etc. But these processes are more to
educate people to change rather than to change them. A change seeking management has to
overcome the stresses to which the system and the people have to be subjected. Leadership is,

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therefore, required to create necessary confidence to overcome the stresses and challenges. A
successful leadership has to keep open the channels of communications within the organization
and with the outside work. Leaders must recognize the Authority and Power system and the
change in the attitudes and behaviors and interpersonal relationship of people. As such,
organization problems can be overcome by factors, structural solution, technical solution, task
related solution and people solution. The capacity of individuals and groups in most
organizations are under-estimated and under-utilized. This is due to a variety of causes stemming
from the organization structure, procedures and the traditions of the group of people working
within the organization. Some dedicators have viewed change as imparting knowledge, others
mainly as providing skills from doing things, still others as producing healthy attitude and some
have thought as a way of life.

The changes in the industrial sector include the creation of new products, obsolescence of others,
changes in the techniques of production. Creation of new companies, the expansion of some and
disappearance of others, changes in marketing and distribution techniques, changes in
organizational structures, etc. There is always a tendency among the people to resist change.
Recognizing these, many efforts have been made by individuals and the organization to deal with
such resistance. P.R. Lawrence pointed out that people resist not only technical change but a
change in human relationships also. When resistance appears it should not be thought of as
something which should be immediately overcome. It can be thought of as symptoms that
something is going wrong. The consideration of leadership, participation, communication, etc. is
certain aspects which relate resistance to change. The participation has been extensively
promoted as a method for overcoming resistance to change. The change which need to be based
on technological consideration and the considerations of engineers, scientists, managers,
economists are required and once the personnel involved in the change perceive the participation
as manipulative then it is almost certain to fail.

1.6 Organizational Change

Change is part of life and provides opportunity for growth. It is conscious decision by
management of an organization. In any organization we have people engaged in production,
research, development and in managerial functions. The primary task of research and
development is to optimize production. The task of managerial input is to give a dynamic
leadership. The organizations in order to change should prepare a stock of the situation and
should effect changes in their attitude and style of functioning. There is a need for organization
to change and adapt themselves to changing conditions, corporate objectives and priorities.
Without this the organization would not be able to grow and survive. The process of continuous
change and development is likely to create problems within the organization but successful
management of change implies the will and ability to anticipate problems prepare for them and
deal with them realistically. Change is quite complex and a difficult problem. Management of
change involves four things: Attitudes, Individual, Effective learning and Cost achievement.

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Every member of an organization from top manager down to operator needs clearly spell out
objectives. These objectives should be derived from the goals of the business enterprise. Thus,
there is a need from every manager to spell out this contribution to the attainment of
organizational goals in all areas of the business. The managers must understand that business
results depend on balanced efforts and results of a number of business areas. The objectives of
all mangers at all levels and in all areas should be key to both short range and long range
considerations. Organizations like an organism adopt themselves to their environment if they are
to survive and grow. The pressure for such change comes from within the organizational
leadership or from some external force. A desirable from of change should be evolutionary rather
than revolutionary. Good managers, therefore, must conceive of and communicate explicitly to
their employees the need for a necessary change. Change is virtually the characteristic of an
industrial enterprise. The rate of change in industry has increased markedly as the consequences
of the scientific and technological revolution that is going on at an increasing rate.
Organizational change is the number one problem of modern managers. Change is inevitable.
Management of change certainly does not imply random and unplanned responses to a changing
environment. An organization consists of inter-related and interacting systems, to perform
complicated tasks. Principal among these are authority and power system or the system or work
flow and process, re-organization of the tools and techniques used in the system involving
provision of better equipments, change in the attitudes and behaviors and inter-personal
relationship of people working in the organization through systematic manpower planning.

1.7 Organizational Entropy

1.7.1 . Organization Life Cycle

Organization is that they suffer from self-imposed blinds which limit the area of their vision.
They are, therefore, unable to see the ever changing situations in a stylish form. The outcome of
this is dependency, defensiveness and narrowness of perspective, sometimes leading to
rebelliousness which can be aptly called ‘Organizational Entropy’ reflected in lack of systems
energy to do the work of the organizations. Like other living things, organization have life cycle,
depicting change and these are conditioned by adequate and appropriate contact with the
environment. The organizational life cycles have got five stages from formation to maturity as
shown in future. The stages of flexibility, rigidity or deterioration have a long-term effect and
tend to become established.

A change seeking management has to overcome the stresses to which the system and the people
have to undergo. Leadership is, therefore, required to create necessary confidence to overcome
the stresses and challenges in the change process. A successful leadership has to keep open the
channels of communications within the organization and with the outside world. Leader must
recognize authority and power system changes in the attitudes, behaviors, and interpersonal
relationship of people. However, the capacity of individuals and groups in some organizations

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are underestimated. This is due to variety of causes emerging from the organization structure,
procedures and the traditions of group of people working within the organizations.

1.7.2. Organizational Change Cycle

There are multiple explanations for change in organizations. Kaufman (1971) concludes that
change takes place through personnel turnover. Despite careful selection and training, successive
generations of organizational personnel are not colonies of one. At other times change is literally
forced on an organization from the environment. Affirmative action personnel practices have
drastically altered many organizations. They are forced to incorporate policies and practices
which are a part of the prevailing ethos in the society in which they are embedded. The
environment has institutionalized concepts of how organizations should operate. An empirical
extension of this line of reasoning is the adoption of civil service reforms in governments. The
idea of organizational life cycle approach (birth, transformation, and death) gives a great deal of
organizational theory. The human species have a predictable life span. Their life expectancy can
be extended by our own actions. This is also true for organizations but they have the potential for
lasting long after the life span of individuals. But, organization cannot last indefinitely. Thus, we
use the life cycle terminology, without completely accepting the human life cycle analogy, to
explain the organizational change cycle.

i. Births and Founding: An organizational birth is the creation of an operating entity that
acquires inputs from suppliers and provides outputs to a given public. Births also take place
through legislative actions as government organizations are born. The term founding has now
replaced the term birth in literatures as a reaction to the biological analogy. The institutional
environment affects both organizational foundlings and failures. Existing organizations in an
environment provide important resources for similar new organizations. They serve as sources of
legitimating. The social environment of organizations affects their rates of founding. It also has
long-lasting effect into their futures. There is one more important step in understanding
organizational foundlings. The environment at the time of founding and characteristics of the
founder had important implications. Bringing the founder back into the equation is necessary for
a complete understanding of the process.

ii. Transformations: Once born, organizations change. The most likely change is
death/mortality. New organizations are usually small and suffer a liability of newness. They
come and go quickly. The ecological perspective believes that organizations are selected by the
environment for survival. Again, the analogy is to biological systems, with a heavy emphasis on
evolution and natural section. Mckelvey and Aldrich present four principles that operate in the
ecological process. These principles determine which organizations will survive and which will
not.

(1) The principle of variation. Any sort of change is variation. Variations can be purposeful or
blind. Purposeful variation occurs as an intentional response to environmental pressures. It

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selectively adapts to changes. Blind variation occurs independent of environmental selection
pressures. They are not the result of an intentional response to adaptation pressures rather occur
by accident or chance.

(2) The principle of natural section. Variations differ in the degree to which they enable
organizations to acquire resources from the environment. Resource acquisition involves financial
resources, personnel, power, political support, and legitimating. Harmful variations are likely to
bring fewer resources and reduce the chances of survival.

(3) The principle of retention and diffusion. This involves the passing of competencies
(Knowledge and skills) on to succeeding members of organizations over generations. The
competencies are those which enable organizations to survive in the first place. The
competencies are diffused to other organization as skilled and knowledgeable people change jobs
and work for new and different organizations. Competencies are retained by the information
flows within organizations and would involve formal and informal training. Knowledge and
skills can be highly valuable or obsolete on the basis of technological change.

(4) The principle of the struggle for existence. This involves competing with other
organizations for scarce resources. Some organizations are also provided with tax credit and
government subsidies to the extent that almost any organization could enter the field and survive.
When this privilege is cutback, the mortality rate among these firms greatly increases.

Another concept from the ecological perspective is the niche in which organizations survive. The
niche contains the resources for the organization and is likely to contain other organizations
fighting for the same resources. The organization that can survive is the one that can make
adaptations, which enable it to overcome or at least coexist with its competitors. These
adaptations are organizational change. The ecological perspective on change is a powerful
explanation of the change process. Few would argue that resource acquisition within a
competitive environment is not crucial for all organizations. Ecologists, thus, believe an
organization can take steps to safeguard or enhance its position in its environment. These steps
include the following: Securing the benefits of growth, Enhancing competitive power, public
approval through efficiency and rationalization, or through incorporation of technological
progress, Establishing a secure environment through negotiation for the organization to occupy
or through the finding of ecological niches (areas of activity that are relatively protected and
which suit an organization’s specific competences), and The creation of the capacity to respond
flexibly to external change through the improvement of management techniques.

This suggests that an organization can develop agreements with other organizations that lessen
competition. In addition to agreements with other organizations, organizations have constituents
who work for organizational survival. There is another component of organizational
transformation that the ecological perspective messes. This is the movement or transition into
new areas of activity. A transition is a major change in organizational strategy, structure, or

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process. Transitions can be precipitated by a variety of factors, such as declines in performance,
perceptions of new opportunities, changes in legislation, or the development of new
technologies. They may take a variety of forms such as increasing formalization of structure,
redefining operating units, broadening or narrowing market definitions, a shift in culture,
restricting the organization, repositioning the organization in its marketplace, and revitalizing an
organization. In summary, organizational transformation occurs because of environmental forces,
by accident, and rational choice. At the same time, we must not lose sight of the fact that change
also takes place because of decisions made within organizations. The role of decision makers
(managers) in monitoring and interpreting the environment is very crucial.

3. Deaths: What is an organizational death or mortality? What about mergers? Organizational

death occurs when an organization fails, closes down its operations, and disbands its constituent
elements. When two organizations combine (merger), at least one ceases to exist and this is
considered as death. If the merger involves a dominant partner that has absorbed the resources of
the other partner, then the subordinate organization dies and dominant organization experiences a
change in structure. If, however, neither merger partner assumes a dominant position, it is
difficult to assign death to one organization and a structural alteration to the other. Instead, it is
useful to consider the resulting organization as new and the two merger partners as dead.
Organizational death is the final and ultimate outcome of organizational decline, a process which
itself has received a great deal of attention. Cameron, Kim, and Whetten (1987:224) define
organizational decline as a condition in which a substantial, absolute decrease in an
organization’s resource base occurs over a specified period of time. Weitzel and Jonsson (1989)
suggest that there are five stages in the decline process; when the organization is blind to the
signs of decline, recognizing the problem of decline and plan actions, taking actions that are
inappropriate, the point of crisis and dissolution.

The decline process is seen as weaknesses in organizational performance followed by extremes

and vacillating strategies, which lead to even further problems. Organizational deaths are usually
seen as the outcome of the decline process. Many merger partners are actually highly successful.
Death is thus not necessarily the outcome of failure rather it is the end of organizational change
cycle. Studies suggest that the presence of institutional linkages with powerful organizations for
day-care centers and a focus on outputs and customer needs in business firms contribute to
survival. Organization change must be viewed within a broad context (environment) which
consists of other organizations as well as economic, political, and social patterns and changes,
and the change efforts of organizations themselves. Organizations are subject to complex forces
that drive them towards change. It is not possible here to discuss all of the forces that push
organizations to change.

1.8 Key elements in the Process of Change

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 Motivation, team work, attitude, leadership, styles, etc., are all key elements in an overall
change. The human element in an organization is a dynamic concept and should be considered as
such. Changes come in individuals, groups and the organization. The factors responsible for
change in individuals’ behavior may not create a change in the organizations. The change is
normally resisted because of the following factors: economic reasons, inconvenience, treats to
inter-personal relationship, fear of uncertainties of new things, resentment due to increased
control, union Attitude and traditional customs, symbols and style of dealing. Thus the members
of the organization resist change because it hurts them economically, psychologically or socially.
The management often thinks resistances as something irrational and does not understand that
resistance is because of deep seated problems. In any organizational system the design features
such as too way communication, control and socio-psychological factors, internal and external
forces working within the system, try to counteract disturbance and maintain stabilized patterns
of behavior. In fact, two influential factors at the root of a change are the influence of democratic
pressures and increasing emphasis on the philosophy or industrial harmony. Some organizations
have instituted organizational planning department with an object to carry out systematic
formalized procedures to anticipate and implement changes in the structure, technology and
personnel of the organization. The management of change implies a systematic process which
can be broken down into six steps as shown below.

A B C D
INDENTIFICATION OF RECOGNITION OF
RECOGINTION OF DIAGNOSIS OF LIMITING CONDITION
THE NEEDS FOR THE PROBLEM ALTERNATIVES, GROUP NORMS.
CHANGE STRATEGIES AND
METHODS - ECONOMIC
CONDITION
- LEGAL
REQUIRMENTS

IMLEMENTATION OF
Evaluation
CHANGE
FEEDBACK of change

G F E
1.9 Organizational Change Models and Strategies
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1 Models of Change

A number of approaches to change management have been developed to meet the needs of
organizations. Despite the proliferation of such approaches, Kurt Lewin categorized them into
three basic models of the change process, namely: The Action Research Model, The 3-Step
Model, and the Planned Change Model.

A. Action Research Model

Action Research was designed by Kurt Lewin as a collective approach to solving social and
organizational problems. According to French and Bell (1984:98-9), action research is research
on action with the goal of making that action more effective. Action refers to programs and
interventions designed to solve a problem or improve a condition. Action research is the process
of: systematically collecting research data about an ongoing system relative to some objective,
goal, or need of that system; feeding these data back into the system; taking action by altering
selected variables within the system based both on the data and on hypotheses; and evaluating
the results of actions by collecting data.

Action research an approach to solving organizational problems must involve a rational,

systematic analysis of the issues in question. It must be an approach, which secures information,
hypotheses and action from all parties involved as well as evaluating the action taken towards the
solution of the problem. Action research project usually comprises three distinct groups: the
organization (in the form of one or more senior managers), the subject (the people who make up
the area where the change is to take place), and the change agent (a consultant who may or may
to be a member of the organization). The three entities must individually and collectively agree
to come together as a group under mutually acceptable and constructed terms of reference. This
is usually small face-to-face group constitutes the medium through which the problem situation
may be changed and provide a forum in which the interests of the various parties to this process
may be developed. The group analyses and solves the problem through successive discussion.
The change agent (consultant) links the different insights and activities within the group.

The method of data gathering, analysis and diagnosis is dependent on the nature of the problem.
The change agent provides the methods of investigation in accordance with their understanding
of the problem. The organization contributes its understanding of the specific situation. This data
is then presented to the subject for consideration. The knowledge and understanding gained from
this exchange of views and perceptions of the issues often result in a redefinition of the situation
and of the problem. This in turn demands new action plan. From this fact-finding process,
hypotheses are framed, the line of action decided upon, implemented and evaluated. All this
happens within the group and with the consent of every member.

Action research is a two-stage process. Firstly, change requires action and is directed at
achieving this. Secondly, it recognizes that successful action is based on analyzing the situation

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correctly, identifying all the possible alternative solutions (hypotheses), and choosing the one
most appropriate to the situation at hand. The theoretical foundations of this approach lie in
Gestalt-Field theory, which stresses that change can only successfully be achieved by helping
individuals to reflect on and gain new insights into their situation. One of the barriers to use
action research is the need to gain the commitment of both the organization and the subject of the
change. This becomes especially difficult when dealing with large organizations. A common
strategy is to use a top-down approach, establishing senior management agreement as a first step.
Co-operation as well as felt need is also very important. Felt-need is an individual's inner
realization that change is necessary. The need must be felt by all those involved if progress is to
be made. If felt-need is low in the organization, introducing change becomes problematic.

B. The 3-step Model of Change

Psychologist Kurt Lewin recommends that a successful change project involves three distinct
phases: Unfreezing, Changing, and Refreezing. In developing this model, Lewin noted that a
change towards a higher level of group performance is frequently short-lived. Group behavior
may soon revert back to its previous pattern. This indicates that it is not sufficient to define the
objective of change solely as the achievement of a higher level of group performance.
Permanence of the new level should also be included in the objective.

1. Unfreezing the present level

2. Moving or changing to the new level
3. Refreezing the new level

(1) Unfreezing: is the managerial responsibility of preparing a situation for change. This step
believes that before new behavior can be successfully adopted, the old has to be discarded. Only
then can the new behavior become accepted. Central to this approach is the change adopter (the
subject of the change) is important both in discarding the old (unfreezing) and moving to the
new. Disconfirming existing attitudes and behaviors to create a felt need for something new and
reduce those forces maintaining the organization's behavior at its present level is the central
theme of this step. Unfreezing is facilitated by environmental pressures, declining performance,
recognition of a problem, or awareness that someone else has found a better way, among other
things. Many changes are never tried or fail simply because situations are not properly unfrozen
at the outset. Unfreezing requires some form of confrontation meeting or re-education process
for those involved. This might be achieved through team-building or some other form of
management development, in which the problem to be solved (changed) is analyzed, or data
presented to show that a serious problem exists. The essence of these activities is to enable those
concerned to become convinced of the need for change. Unfreezing (create a felt need for
change) is done by:

 Establishing a good relationship with the people involved

 Helping others realize that present behaviors are not effective

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  Minimizing expressed resistance to change
(2) Moving or changing involves taking action to modify a situation or the results of the first
step by changing such things as the people, tasks, structure, and/or technology of the
organization. Having analyzed the present situation, identified alternatives and select the most
appropriate action is then necessary to move to the more desirable state of affairs. This requires
developing new behaviors, values, and attitudes through changes in organizational structures and
processes. The key task is to ensure that those involved do not, after a short period, revert back
to the old ways of doing things.

Changing (implement change) is done by:

 Identifying new more effective ways of behaving

 Choosing appropriate changes in tasks, people, culture, technology, and/or structure
 Taking action to put these changes into place.
(3) Refreezing represents, depending on the viewpoint, either a break with action research or its
logical extension. Refreezing seeks to stabilize the organization at a new state of equilibrium in
order to ensure that the new ways of working are relatively safe from regression. It is designed to
maintain the momentum of a change and eventually institutionalize it as part of the normal
routine. Refreezing ensures the full benefits of long-lasting change. It involves positively
reinforcing desired outcomes and providing extra support when difficulties are encountered. It
involves evaluating progress and results, and assessing the costs and benefits of the change.
Refreezing (Stabilize change) is done by:

 Creating acceptance and continuity for the new behaviors

 Providing any necessary resource support using performance-contingent rewards
 Positive reinforcement

Unfreezing Movement Refreezing

Lewin's three-step change Model

The 3-step model provides a general framework for understanding the process of organizational
change. Lewin believes that each of these phases must be handled effectively for a change to be
successful. However, the steps are relatively broad and require further development in order to
enhance the practical value of this approach. The organization seeks the assistance of a change
agent-a person or a group that will manage the change process. The change agent may be a
member of the organization or an external consultant. According to Michael Beer (1980), the
power of the change agent to implement change comes from five sources:

1. High status ascribed by members of the client organization, based on their perception that
the change agent is similar to them in behaviors, language, values, and dress.

15
 2. Trust in the change agent based on his or her consistent handling of information and
maintaining a proper role in the organization
3. Expertise in the practice of organizational change.
4. Dissatisfied constituencies within the client organization who perceive the change agent to
be the best opportunity to change the organization to suit their needs.
5. Established credibility based on Experiences with previous projects with the clients
organizations.
The change agent generally has the responsibility for implementing the change process, which
normally follows Lewin’s three-stage model.

C. The Planned Change Model

In attempting to elaborate Lewin's 3-Step model, writers have expended the number of steps.
However, the concept of planned change implies that an organization exists in different states at
different times and that planned movement can occur from one state to another. Therefore, in
order to understand planned change, it is not sufficient to understand the processes which bring
about change. There must also be an appreciation of the states that an organization must pass
through in order to move from unsatisfactory present state to a more desired future state. Bullock
and batten (1985) developed an integrated, four-phase model of planned change. The, model
describes planned change in terms of two major dimensions: Change phases which are distinct
states an organization moves through and Change processors which are the methods used to
move an organization from one state to another.

The four change phases and their attendant change processes are as follows:

1. Exploration Phase: In this state an organization has to explore and decide whether it wants
to make specific changes in its operations and, if so commit resources to planning the
changes. The change processes involved into his phase are: becoming aware of the need for
change; searching for outside assistance (a consultant/facilitator) to assist with planning and
implementing the changes; and establishing a contract with the consultant which defines each
party's responsibilities.

2. Planning Phase: Once the consultant and the organization have established a contract, then
the next state, which involves understanding the organization's problem or concern, begins.
The change processes involved in this are: collecting information in order to establish a
correct diagnosis of the problem; establishing change goals and designing the appropriate
actions to achieve the signals; and getting key decision makers to approve and support the
proposed changes.
3. Action Phase: In this state, and organization implements the changes derived from the
planning. The change processes involved are designed to move an organization from its
current state to a desired future state, and include: establishing appropriate arrangements to
manage the change process and gaining support for the actions to be taken; evaluating the

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 implementation activities and feeding back the results so that any necessary adjustments or
refinements can be made.

4. Integration Phase: This state commences once the changes have been successfully
implemented. It is concerned with consolidating and stabilizing the changes so that they
become part of an organization's normal, everyday operation and do not require special
arrangements or encouragement to maintain them. The change processes involved are:
reinforcing new behaviors through feedback and reward system and gradually decreasing
reliance on the consultant; diffusing the successful aspects of the change process throughout
the organization; and training managers and employees to monitor the changes constantly
and seek to improve upon them.
This model has broad applicability to most change situations. It clearly incorporates key aspects
of many other change models and especially it overcomes any confusion between the processes
(methods) of change and the phases of change-the sequential states which organizations must go
through to achieve successful change.

1.10. Change Strategies

Managers and other change agents use various means for mobilizing power, exerting influence
over others, and getting support for planned change efforts. There are three types of change
strategies that managers use and the table below provides the powers of managers, their change
strategies, and the expected outcomes of their actions.

Power base Change strategy Change agent behavior Predicted outcomes

Rewards/Punishments
Legitimacy Force-coercion Unilateral action; Temporary
command compliance
Expertise Rational Presentation of facts, data, Internalization
persuasion and expert testimony
Reference Shared powers Empowerment, participative Internalization
action, and involved long
term decisions
Figure: Power bases, change strategies, and predicted change outcomes.
(a) Force-Coercion: A force-coercion strategy uses legitimacy, rewards, and/or punishments as
primary inducements to create planned change. The change agent acts unilaterally to try to
command others to change based on the formal authority of his or her position. Given the
prerogatives of the position, the change agent may attempt to further induce change via an offer
of special rewards or threats of punishment. People respond to this strategy mainly from the
desire to gain a reward if they comply with a change directive or from the fear of being punished
17
if they do not. The compliance, however, is usually temporary and continues only as long as the
change agent's legitimate authority persists or as long as the opportunities for rewards and
punishments remain obvious.

b) Rational Persuasion: Change agents using a rational persuasion strategy attempt to bring about
change through the use of special knowledge, empirical supports, or rational arguments. This
strategy sometimes called an empirical-rational strategy. This strategy assumes that people are
rational and they will be guided by reason and self-interest in deciding whether or not to support
a change. Expert power is mobilized to convince others that the change will leave them better off
than before. This strategy results in a long-lasting, more internalized change than force-coercion.
People are inherently guided by reason in their actions and decision-making. Once a specific
course of action is demonstrated to be in a person's self-interest, we assume that reason and
rationality will cause to person to depot it. Thus, the objective of communicating through
information and facts are essential for change. If this logic is effectively communicated, we are
sure of the person is adopting the proposed change.

(c) Shared power: A shared-power strategy allows the people who will be affected by a change
to be actively and sincerely involved in planning and making key decisions in respect to it.
Sometimes it is called a normative-reductive approach. This strategy is an attempt to develop
ideas and support for change through involvement and empowerment. It builds upon essential
foundations such as personal values, group norms, and shared goals so that commitment to
change emerges naturally. Managers using normative-reductive approaches draw upon the power
of personal reference and also share power by allowing others to participate in setting change
goals and adjusting implementation as needed.

1.11. Management of Change

Management should concentrate on reducing resistance rather overcoming resistance. Following

are certain techniques of reducing resistance to change:

Financial Incentives-an individual resists change because of fear of being out of job, fear of
losing special privileges and fear of reduced promotion chances. Now if the management is able
to convince the members of the organization that their fears are groundless and his earning will
not be reduced, the management can expect a whole-hearted co-operation from his members.
a) Two Way Communication-Two way communication process calls for feed-back provision
and provides opportunity for suggestion and criticism. It avoids likely errors in
transmissions and encourages effective participation of subordinates in the work. In case of
face to face communication immediate feed-back from the emotions and expression of the
individual can help the sender in transmitting his information.

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b) Group Decision Making – it involves subordinate’s active participation in decision-making
helps in introducing a change and enhances their sense of control over the environment.
Group decision-making is an urge to unfreeze the fixed and formed attitude. The group
develops certain standards and norms of conduct and those individuals who fail to live up to
these standards are subjected to pressure to conform.
c) Collective Bargaining – bargaining is implicit in nature. It refers to willingness to talk,
discuss and to make a compromise in an effort to get the proposed change accepted. It is
technique of regulating management and labour relations. It is usually defined as negotiating
about working and employment conditions between employers on the one hand and
representatives of workers on the other hand. Collective bargaining is quite difficult with
unorganized group as there is no established system to rely on. Management does not lose
anything when it informs the union well advance of the changes and shows a willingness to
negotiate.
d) Forces for Change – the forces for change can be classified into external forces and internal
forces
External Forces – it includes changes in environment and there is no control of management
over these forces.

Internal Forces – these forces are within the control of the management in an organization.
These forces can be traced ether to the process or to the people in the organization. Process
forces include break-down in decision – making communication and inter-personnel relations.
The low morale, high absenteeism, higher accidental rate and turnover are the symptoms of
people problems.

Recognition of the Need for change

In many organizations need for changes goes unrecognized until there is a serious problem. The
feed-back is immense importance in recognizing the need for change and the process of change
can be viewed as a part of control functions. The control data, budget standard, cost information,
etc., are the important information through which both external and internal forces are revealed.

1.12. Techniques to Introduce change

To bring about an organizational change, following are two possibilities: To bring about an
immediate change known as earthquake approach and to make change on a continuing basis. The
earthquake approach is quite common but it should not be brought about with a new manger
because it away lead to destroying harmonious relationships, curtail employee participation and
damage morale. However, it minimizes the uncertainties of employees. Organizational changes

19
can be brought about over extended period of time. If permits ample consultation about the
changes. It has been seen that most of the mangers favour the change over a period of time.

Factors introducing Change

Major factors introducing change in an organization are growth of enterprise, market and product
characteristics, internal market and production characteristics

Dynamics of Organizations

The dynamics of an organization supply opportunities for improvement. Following are the
factors conductive to improvement:

i) Maintain an environment in which uncomfortable question can be asked

An individual with too much authority may fall in self deception. He may refuse to see the
problem and may be adequately self critical. The dynamics of organization offers tremendous
opportunities but these must be utilized.

ii) Utilize the dynamics to motivate

Motivation of personnel is essential in effective organizing. Each individual must believe that
what he does contributes to the organizations. High motivation is required to accept the change
and to determine the rigidities.

iii) Combat vested interests and procedural delays

Dynamics of organization provides opportunities to break away and eliminate the procedures and
customary ways of doing things.

iv) Concentrate on what organization can become

This is the way to develop and maintain a way of looking forward and practice position thinking.
Looking forward with optimism is important in improving an organization and finally it leads to
organizational change with profit maximization.

1.13 Overcoming Barriers to Change

When an individual becomes threatened he develops a behavior that serves as barriers to the
change. In addition to individual’s concept about change, the behavior of an individual is
affected by the group members. No individual functions in social isolation. Often changes have a
very important impact on established was of doing things within a group. One of the factors
which needs to be emphasized is the relationship that exists between the person trying to
introduce the change and the individuals who are subject to the change. If there is a feeling of
distrust between the one introducing the change and the individuals need to be changed, then the
strength of the barriers will be greatly increased. Following are the three approaches to overcome
barriers to change:

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 a) Individual introducing change must work out the plans and should sell them. Selling
approach is aimed at intellectual level.
b) Here individual should initially formulate the new ideas or develop a new method before
approaching the individual. Consult the individual and the group of which the individual is
the member before introducing change.
c) It involves participation on the part of the individual subject to the change. It involves
group decision.
Overcoming resistance to change thus involves understanding of the people whose feelings and
attitude deserve respect.

Culture and Planned Change

Cultural patterns are the vital factors in resistance to technical changes and there are established
ways for the technical experts to deal successfully with these patterns. The existence of the
unified culture requires a study before the change is made. Failing this, there is a danger that the
members of the same culture may sabotage the programme of change. “Culture” is a body of
learned behavior, a collection of beliefs, habits, practices and traditions shared by a group of
people and successively learned by new members who enter the society. A culture thus can be
found in a factory or in an organization. The older the institution, the more certain it is to have
developed culture. Culture is not a box full of loose pieces, rather it is a unified whole, no
element of which can be disturbed easily. Following are the examples which emphasize the
importance of cultural patterns. The superintendent offers the job of a Foreman to a qualified
workman and is shocked when the promotion is declined. A scientist may prefer the laboratory to
the Directorship. Similarly, a Professor may prefer the classroom to the Deanship. It is not
correct to label such men as non-ambitious because they elect to follow a way of life which is
preferable to them. A change may make old, valued habits obsolete and may deny what man is
saying for years. Thus, tension and frustrations brought about by change may lead to following
consequences:

i) Return to former practices.

ii) Immature and childish behavior.
iii) State of verbal attacks, anger, etc.
iv) Substitute energy outlet for alcohol, gambling, prostitution, etc.
v) Running away from reality in the form of blaming others.

Accepting change involves two activities for the learners unlearning old habits, attitudes, beliefs,
etc. and learning the new. Unlearning the old is a painful process and it is made easier by
clothing the new learning in familiar and attractive dress. Encouraging people to learn new
concepts requires consistent, prompt attachment of satisfaction, thorough praise, approval,
increased status, sense of participation, material reward, etc. learning a new skill involves actual
doing, experiencing and living through a long series of situations in which the new behavior is

21
made highly satisfying by pointing out that old is not satisfying. The analysis of traditional
behavior is very essential to estimate where the changes are going to fall, which habits need to be
changed, which beliefs and attitudes have to be altered. The analysis of traditional behavior
requires a study and an understanding of the customary pattern of life. The study should be long
and wide enough in scope to embrace activities of the job as well as those on the job. It should
disclose not only the activities of individuals in isolation but also the activities of individuals in
groups. As the pattern of behavior becomes known each change under consideration can then be
examined in the light of the behavior pattern. Following are the factors which help in introducing
a change.

a) Secure the active participation of all those who are affected by this change both at the
planning, directing and at the control stage.
b) Introduce the change by putting the desired change on the back of some acceptable change.
c) Put yourself in the other fellow’s place.

There are various methods available for dealing with resistance to change. Following are the
ways of overcoming resistance to change:

i) Try persuasion to secure change.

ii) Change the environment in a way which makes it easy for the individual to change
his point of view.
iii) Provide sufficient time for mental change to take place.
iv) Change should be introduced slowly and gradually.
v) Create a social climate which favors the new habits
vi) Provide a measure of effectiveness.
vii) Treat people with dignity.

Group as a Medium of Change

There is a need to investigate process of communication, influence social pressure, cohesiveness

group norms, etc., in order to understand the medium of change in a group. It is believed that an
important element of a healthy personality is that the individual’s self esteem should not be
undermined. But on what does self-esteem depend? Repeated experiences of failure on matters
of central importance act to undermine one’s self-esteem. We also know that whether a person
experiences success or a failure as a result of some undertaking depends upon the level of
aspiration which he has set for himself. We are immediately involved in the person’s relationship
to groups. Groups to which individual belongs set standards for his behavior which he must
accept if the is to remain in the group. If his capacities do not allow him to reach these standards
he experiences failure, he loses respect in the group and his self esteem suffers a shock.

There are many causes of aggressiveness in people but one aspect of the problem has become
increasingly clear in group dynamics. If we observe carefully the amount o aggressive behavior

22
and the number of troublemakers in a large group, we find that these characteristics vary
tremendously form group to group even when the different groups are composed essentially of
the same kind of people. In the new classical experiments of Lewin, Lippit, and White on the
effects of different styles of leadership, it was found that the same group of children displayed
markedly different levels of leadership. Moreover when individual children were transferred
from one group to another, their level of aggressiveness shifted to conform to the atmosphere to
the new group. Effort to account for one child’s aggressiveness on style of leadership merely in
terms of his personality traits could hardly succeed under these conditions. This is not to say that
a person’s behavior is entirely to be accounted for by the atmosphere and structure of the
immediate group, but the extent to which a strong cohesive group can control the various aspects
of his members behavior which traditionally though to be expressive in his personality traits is
remarkable.

Re-education to influence change

The normal gap between teacher and student, doctor and patient, social worker and people can be
real obstacle to the acceptance of the advocated conduct. In other words, in spite of whatever
status difference, there might be between them, the teacher and the student have to feel as
members of one group in matters involving their sense of values. The changes for re-education
seem to be increased whenever a strong feeling is created. The more attractive the group is to its
members, the greater is the influence that the group can exert on its members to change. More
cohesive the group, greater is the readiness of its members to attempt or influence others and a
greater readiness to be influenced by others and stronger pressures towards conformity when
conformity is a relevant master for the group. How does it happen that a group, like a labor
union, seems to be able to exert such strong discipline over its members in some matters, while
unable to exert nearly the same influence in other matters. Group differs tremendously in the
range of matters that are relevant to them and hence over which they have influence. The grater
the prestige of a group member in the eyes of the other members the greater the influence he can
exert. This principle is the basis for the common observation that the official leaders of a group
are often not the same as the informal leaders.

These principles’ concerning the group as a medium of change would appear to have an
immediate application to groups created for the purpose of producing changes in people. In order
to achieve changes in people, therefore, it is necessary to deal with the groups as a target of
change. Strong pressure for changes in the groups can be established by creating a shared
perception by members of the need for change. Information relating to the need for change, plans
for change and consequences of change must be shared by all relevant people in the group.
Changes in one part of group produce strain in other related parts which can be overcome by
undertaking improvements in group functioning by providing sensitivity training and role
playing exercises.

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1.14 Managing Environmental Changes

‘Managing’ is the key word. It means taking control of shaping the direction, and then
influencing in some way the outcome of changes. We can see environmental changes in three
distinct but interrelated aspects of our environment the social, the economic, and the
technological.

Social Aspects – in the work in the social sphere, we have widespread starvation with northern
hemisphere bureaucracy seemingly unable to help and yet massive aid being mobilized. At the
national level we have increasing disputes between employed and unemployed, rich and poor,
whilst at eh same we continue to fuel the differences by fiscal and legislative actions.

Economic Aspects – in the economic area we see unprecedented instability in world currencies,
massive defaults and rescheduling of major national debts of Third world countries.

Technological Aspects – linked to all this is the enormous pace of technological innovation.
This is creating major opportunities which were previously inconceivable, but at the same time it
is creating massive unemployment and forcing major realignment of jog skills and availability of
talent. The key factor in both situations has become the way in which the people involved feel
they have been treated. It is how the influencing has been carried out that is driving the pattern of
events now, not the principle at stake or the substance of rational argument. This is mirrored at
many levels in our society in large –scale acquisitions and mergers, company reorganizations,
departmental restructuring and so on.

1.15 Management of Resistance

Why Resistance – resistance is usually a complex mix of historic, factual and emotional issues,
which are not always easy to handle. However, to mention the most frequent source of resistance
to change and unwillingness to engage in new behavior are fear of the unknown, lack of
information, misinformation, historical factors, threat to core skills and competence, threat to
status, threat to power base, no perceived benefits, low trust organizational climate, poor
relationships, fear of failure, and fear of looking stupid.

Low trust may be a key issue but it a considerably longer term proposition to rectify than
correcting misinformation or reassuring staff about training in new skills. Resistance comes
essentially in two forms systemic and behavioral. Systemic resistance arises from lack of
appropriate knowledge, information, skills and managerial capacity. Behavioral resistance
describes resistance deriving from the reactions, perceptions and assumptions of individuals or
groups in the organization. So one is cognitive and the other emotional. Levels of resistance will
inevitably be higher if the levels of involvement and information are low. This is the essence of
parallel implementation. The management of resistance demands attention to the systemic
aspects such as information and communication flow, which need to be considerably increased

24
during the uncertainty of the change process. It also demands attention to the individual and
group processes of prejudice, assumption, perception and conclusion formation because these
processes will take place with or without ‘facts’. There is a need to pay attention to those signals
which indicate bigger problems to come. It is at this early stage in the change process that a
change manger has a golden opportunity to turn feelings of threat and hence resistance into
perceptions of opportunity and benefit.

How to Make Change Happen

A very simple but powerful technique is time budgeting. Simply work out roughly the amount of
time, based on salaries, spent on each phase of the change process viz. time in meeting,
interviewing, designing questionnaires, etc.

Influencing Process

The influencing process is our major concern here since, if we are to change anything, it involves
persuading people to behave differently to the way they have done in the past. How can they be
influenced to do this? We know what has to change, at least in broad terms; what we need to do
now is decide how. This brings us right back to parallel implementation again. One of the most
important motive forces in altering behavior is the process of involvement in the organizational
change and the development of the reasons for it.

Senior Executives’ Role to bring change

To bring about change, the support of the senior executives of the organization is required. There
is a need to identify exposed executives viz, executives who need to be neutralized rather than
an attempt is made to convert them. There is a need to provide some training objectives to bring
about change. The training will act as lever and will ensure bringing of change. There is a need
to sort out well in advance the areas of which executives initiating changes are likely to be
criticized for not bringing about change. The change agent should caution the executives of the
problems and thereby organize changed programmes appropriately. Mangers that are normally to
be friendly are necessarily supporting the change process. In order to bring about change the
following points may the taken care of:

a) Clarify own personal convictions for change

b) Carry out personal analysis
c) Testing other people (check yourself who are supporting your ideas).
d) Be ready for good surprise
e) Beside identify who is centered to development in the management.
f) Listen to oddies (awkward people, difficult people) who have survived in the
organization.

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There is a saying that power corrupts but so does powerlessness. Moss Kauter cites the following
reasons why people resist change:

i) Loss of control – The obvious answer to involve people in decision-making or even

to get them to take the decisions themselves. One must build coalitions and anticipate
who are opponents and going to be and decide how to win them over.
ii) Excessive personal uncertainty – people often feel (like walking on a clean blind
folded). One should not only explain what is happening but why it is happening. One
should create creditability by being honest.
iii) Avoid surprises – even when the change is positive, printing bright new ideas on
people creates skepticism. If it not downright negative. One way to overcome this
hurdle is to make information plans. Another is to hold a series of one-to-one meeting
before an announcement is made.
iv) The difference effect – people build identities round certain aspects of a business,
round corporate names, even round buildings.
v) Loss of face – one of the biggest sources of resistance, this can be at least partly
overcome by acknowledging people’s competence under the old regime, and again by
letting them participate in deciding the change.
vi) Concerns about competence – people worry that “all I know is the old style of
management”. Or “I don’t know how to type and how they’ve taken away may
secretary”. The solution is to train, coach and rehearse people.
vii) More work – change always means more work. One should be open about this, and
challenge people to do it: “acknowledge that it’s a reality, and reward it”.
viii) Past resentments – people will resist change if its source is a person or an
organization about whom they have a grievance,. However, well hidden the
resentments may be one should discover them, and remove or repair them.
ix) Real threats – sometimes people are right to resist change, because it will threaten
them. The response? “Don’t hide it. Be honest. Make it short do it first and fast”.
And, yet again, involve people.
People avoid change because it involves little amount of risk such as employees criticism,
surplus, uncertainties, extra effort needed. Status quo is always stronger than something. Some of
the organizations have collapsed because of the bureaucratic set up with water tight
compartments. There is a tendency among employees to lien for their professional water tight
compartment talking about departments and functions only. Factors that are responsible for
resistance to change habit of avoiding discomfort, more emphasis on procedures rather than
solving the problem, being right but powerless and personal are more concerned about control
rather than change

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Effective Change

Effective change in any field should be a basis of adequate information about the existing
situation and its properties. It is essential to recognize that in the field of management and
organization, any consideration of the management of change begins with an analysis of the
situation that is starting point for the change process. Change means weakening existing links in
order to build up new ones, and there is always a critical phase. Therefore in the process of
change, where old links have wakened but need ones have not yet gained the status borne of the
experience of their adequacy. In an effective organization the structure and policies and
procedures enable people to do their work effectively, rather than inhibit them, support them
rather than confine them.

Effective organizational change means the development of effective relationships between

people, sometimes new people and new work, in new settings. For a better organizational design,
it is desirable to develop better “design for work” or better designs for people. But the problem is
that people and work are different issues and have different properties. This effective
organization will always be a compromise between what is desirable from the work point of
view and what is at least tolerable and preferably acceptable to the people doing that work an
organization to remain coherent in the instability phase then the personal aspects must be strong
enough to be the basis of the temporary coherency when the relationships in the organization
have settled down, the organizational aspects should be reestablished in order that they shall be
the source of coherence freeing the personal aspects for their proper role.

Lastly resistance to change is usually based on a real or potential sense of insecurity or on the
view that the exponents of the change will gain from it, whilst others may well long. In order to
overcome surmount emotional barriers, long terms resistance, anxiety and conflict the
organizational change process should develop security and honest exposure of the gains and
losses in a change for all concerned. To conclude it is obvious that if organizations are to remain
effective they must change and their changes must be by design as much as possible, and not by
default three things are needed if this is to be achieved. One is that the basic features of
organization and human behavior must be identified and understood, since these determine what
can and what cannot be deliberately designed. There is no point in organization design or re-
organization, in the absence of an awareness of what must exist, what facts must be accepted as
always present in practice. Therefore, organization must be studied as a process, evolving or
degenerating in a quasi-biological way in relationship with its environment and in its internal
relationship. It means that organization must be deliberately designed for change, not just to
respond to change but to take the initiative in meeting or steering change.

An Open Systems View of Organizations for Change Process

Open systems theory is useful for the understanding of change because it helps us determine
where to put our limited energy to work when all hell is let loose. Every supervisor or manager at

27
whatever level, manages an open system. There are some important features to bear in mind
about open systems:

 Inputs are obtained from outside the system. For an individual human being, the inputs are
food, air, heat, and information; for an organization they are information, energy, raw
materials, people, knowledge etc.
 Outputs are delivered to the environment. For an individual human being, the outputs are
motion, heat, waste, ideas and information; for an organization they are added value
information, energy and/or some physical product, profit.
 The ‘creative transformation’ which the system performs on inputs to produce outputs. The
creative transformation for an individual include converting food to energy, information into
ideas or new kinds of information; for an organization they include the processes by which
its products or services are created from raw materials.
 Feed-back from the environment on the effects created by the outputs. For organizations,
feed-back may be the volume of sales which indicates how desire gel the product is, the
number of applicants for a job opening, the media or public view of the organization.
 Maintenance envelops which protects the system from unwanted inputs from the
environment. For a human being the envelope includes one’s skin and the selective
perception which protects us from too many, or unwanted, stimuli; for organizations, the
envelope consists of barriers such as reception areas and security checks concerning
recruitment or company secrets, policies and procedures and many other aspects of the
organization.
 Tendency to maintain the status quo is a feature of all open systems since they are essentially
conservative in nature and therefore resisting change of any significance will be a natural and
expected response.
Open Systems and Change

There are, then, a number of key factors which quickly become apparent about changing any
system if one looks at such a model. Changing the people, or their behavior, is not necessarily
enough even at the top. Altering the technology alone is not enough. Modifying structures,
decision-making or reward processes along is not enough. Resistance will naturally occur. For
example, let me take the common example of training courses. By sending a manager for a
training course, his awareness, skill and enthusiasm for trying out new behavior increases. If he
returns to organization with the same basic technologies and the same structure, problem-
handling, decision making and reward processes, this new piece of input into the people system
will wither away very quickly. The biological analogy is also useful here. Social as well as
biological systems are conservative evolutionary and prefer not to move too far from the status
quo. So any attempt to change direction by influencing one small part of that system will come
under great pressure from the status quo.

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System Approach to Change Process

Contingency Approach-the organizational analysis rests on the following assumption. First, that
the organization, as a system, can be identified by some sort of boundary that differentiates it
from its environment. Secondly, that organization is an open system, services by interacting with
its environment through a series of basic input, convention, output and feed-back processes.
Thirdly, that it comprise a series of mutually interactive subsystems whose “purpose’ is to
contribute to the satisfaction of overall system needs. Change, in the light of these assumptions,
is essentially a process of adaptation to the environment and adjustment of sub-systems in order
to maintain the organization’s dynamic equilibrium. Finally, that the operation of the
organization can be observed in terms of the behavior of its constituent sub-systems (Buckley,
1967; Katz and Khan, 1966; Miller and Rice, 1967). These assumptions give rise to what has
been termed as “contingency approach”. Since the organization is dependent on the environment,
organizational analysis, at the macro level, should be centrally concerned with identifying and
explaining the key associations which characterize relationships between the organization and its
environment. (e.g., Lawrence and Lorsch, 1967); Child (1972), opposing environmental
determinism, argues that managers can and do, through the exercise of “strategic choice”
influence how their organizations adapt and mould the environment. Pfeffer and Salancik (1978)
developing a “resource dependence” perspective suggest that managers can influence that must
be adapted to theorists have looked for explanations in the key subsystems technology, task and
structure and have developed a central tenet that an organization’s effectiveness in coping with
the demands of its environment is contingent upon the elements of the various sub-systems being
designed in accordance with the demands of the environment with which they interact. In
practice this means securing a degree of sub-system differentiation appropriate to the nature of
the environment, characterized by a congruency between sub-system elements, and the
achievement of an appropriate state of integration. Organizational analysis focuses on defining
what is appropriate in the light of environmental characteristics.

Socio Technical System – a tool operationalizing this basic approach at micro level, is socio-
technical systems analysis. This identified two sub-systems; the technical and the social as
central to the organization’s conversion processes and hence in determining organizational
effectiveness. Because these sub-systems are interactive and interdependent; the nature of their
interrelationships is examined in order to analyze how their joint optimization might be achieved
and hence the contribution of the socio-technical systems to organizational effectiveness
enhanced. It is also convenient to be able to treat people as “factor” or independent variable that
may be manipulated to effect changes in other sub-systems, or as a dependent variable, whose
responses to manipulations elsewhere in the system can be measured and subsequently.

Unitary View – the unitary view places emphasis on organizations as adaptive systems, where
its members strive for the achievement of common goals in the manner of a well integrated team.
Conflict is regarded as unnatural, and the creation of trouble makers can be “removed through

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appropriate managerial action”. Power tends to be ignored in favor of notions of authority,
leadership and control. The managers exercise their prerogatives of “guiding the organization
forwards the achievement of common interest”.

Pluralist View – the pluralist view, in contrast, places emphasis on the diversity of individuals
and group interests and downplays the status of organizational goals. Conflict is seen as an
inevitable characteristic of organizational action which may have a constructive role to play.
Power is identified as the medium through which conflicts of inherent are resolved. The
organization, as a whole, is viewed as a plurality of power holders, each of which draw upon
different sources of power, in order to pursue objectives which they value, through process of
bargaining and mutual adjustment. Burrell and Morgan pointed out, the systems approach, by
highlighting authority and control over the organization as a goal directed system. A change may
be described as innovative if it involves some notion of discontinuity with what went before, the
idea of a qualitative shift.

Innovative Change- It should be noted at the outset that conventional models of innovation rest
on a systems view of organizations. It is within this meta-perspective that the processes of
innovation have been analyzed in terms of four stages; problem recognition, initiation,
implementations and routinization.

Problem Recognition- The recognition of failure and search for solution has been identified as
the first stage in the process of innovative change. The recognition of failure involves the
identification of some sort of “performance gap”. Hage suggests that the frequency of such
detection will depend on how easy it is to measure performance criteria used. When
measurement is easy, frequently undertaken and against a variety of criteria the deviations will
be quickly revealed and in all probability before performance gaps have grown large. In these
circumstances, the innovation rate is likely to be high, but each innovation will be incremental
rather than radical.

Initiation -This stage on the process of innovatory change has been identified as involving the
search for and acquisition of relevant resources, whether money, personnel or technology.
Therefore, for an innovation to get off the ground; the process of seeking new funds, personnel
and technology must be undertaken.

Implementation -This stage is generally marked by the emergence of tensions, resistance and
conflict. It has been suggested that the extent of conflict that will emerge during the
implementation process will be influenced by the amount of behavior change and the amount of
change in both power and status demanded of existing personnel and positions in the
organization. The resulting role conflict is likely to go hand in hand with conflicts over power
and status. As Hage (1980) points out, new personnel and occupations have to be slotted into an
organization chart if the change is to be allowed some discretion over resources. Hage suggested
three explanations. First, existing power holders may resist change of their “vested interest” in

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the existing over. This is likely to be particularly marked when the gaps in privileges, power and
prestige between them and the lower participants in the organizations are marked.

Routinisations - Resistance to an innovation at the implementation stage may be so great that it

never properly gets off the ground. Hage (1980) suggests that such factors as consensus about the
performance gap, time span before evolution, case of measuring costs and benefits and the cost
of the innovations, will all weigh in the decision whether or not to reutilize it. It is suggested that
routinizations should most timely to occur when, given a consensus about the performance gap
and decision-makers are prepared to allow a relatively long time span for experimentation. The
shorter the time span allowed the more organizations (Burns and Stalker, 1961), being more
receptive to change may have a higher rate of innovation as they do not necessarily produce one
large radical change, as their stability of introduction innovation tends to be participative.

Working with Change- Change is no longer slow but there was time when the pace of life was
slow stretching over generations. The individuals were able to adopt slowly but in the present
day technology is transferring our personal and working lives almost overnight. Slvin Taffler and
other futurist have pointed that technology advances exponentially and threat the rate of change
follows the law of acceleration. Taffler claims that there were more scientists alive in 1970 than
in all previous history added together there will be more changes and more opportunities but
most of the people are ill prepared for change especially when it is constant yet inconsistence.
The hard fact is that the things are changing and we have to handle it whether were would live it
or not. The conflict between human reaction to change and an increased need for change is
affecting the ma managerial functions. The change agents should be equipped to diagnose,
understand and resolve change. Following are the six basic elements in bringing about an
effective change: Association, Involvement, Leadership, Commitment, Action and Feedback.

a) Association – interaction of the member in the work group must get an agent to deal with, be
with and work with each other.
b) Involvement – a procedure through which people being affected by the change are brought
to understand the change.
c) Leadership – this is the feeling part of it and it develops if conditions are right. This is the
emotional attachment among those involved in the change.
d) Commitment – it is an agreement to take an active part in the actual mechanism of change.
e) Action – it is implementation of the change itself.
f) Feed back – it is the signals or measurement data, originating in the work. The data is
presented to those who are directly involved with change. Feed-back must be direct and
honest. Too frequent feed-back is harmful and used for more than one purpose. In a group
sitting, where the level of trust is low, feed-back to one person is really meant for another
target. At times feed-back acts as a bond, feed-back at an another time may function as a
stock record in a person’s giving feed-back and may or may not really apply to individual or
group on the receiving end. Feed-back of this type nullify the relationship which have been
building among the members of the group. Feed-back is a vital part of the action link.

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1.16 Change and Business Reforms

In the new millennium the constant phenomenon will be change. The change is not only in
technology, structure or systems but in values and orientation of people. With a change taking
place in the economic and fiscal policies in the country, organizations are faced with the
inevitable reality of accepting and introducing changes at the work place. In the past, there was
an option in the hands of the organizations to introduce changes or not. For example, only a few
organizations initiated process such as value engineering. OD exercise, management by
objectives, zero inventory, etc. even these organizations started such interventions only on an
experimental basis without seriously investing time and effort after meeting other priorities such
as diversification and expansion. One of the main obstacles of the smooth implementation of the
change management process is the lack of awareness of the context of change by the workmen
and unions. While the top management team is aware of the context in which these changes are
being talked about the workmen and unions are not well informed in this respect.
Conventionally, there has been no free flow of communication across the organizations,
especially from the top to bottom. So far no major attempt was made in many organizations to
educate the work force. In the absence of such enlightenment, the workmen so not see the
relevance of many of the changes that are being introduced. Unfortunately, many of the unit
level union leaders are not educated enough to understand the external economic environment
and many of them are ignorant of the consequences of changing or not changing. Most of the
workmen and union leaders still believe that quality system (ISO 9000) is a ritual which
interferes. ISO 9000 systems and procedures are implemented grudgingly to the external
auditors.

Lack of adequate effort to train the employee to accept changes is the next major obstacle to the
change management process. In the absence of structured training, the knowledge level of
employees will not facilitate the requisite skill and mind set to implement and sustain changes.
Introducing the latest management concepts such as Total Quality Management, Business
Process Redesign, without giving adequate conceptual input is more so with reference to the
middle level supervisor executives. Many misunderstand total quality circles and running
suggestion schemes. However, now the need of the hour is major changes such as reducing
rejections to parts per million, tripling production, drastically cutting down the production cycle
time or new production introducing time, etc. such huge tasks can be achieved only through a
transformation of the mind and not through minor manipulation of behavior at work. The next
important obstacle to the change management process is the lack of appreciation of the task and
time requirement by the top management. In view of the imperative to introduce drastic changes
immediately, organizations are becoming highly anxious and restless. Major changes cannot take
place so easily. For example Successful implementation of Total Quality Management and
sustaining the same as a way of life will easily take 7 to 10 years in an organization.
Organization should have the patience to wait and invest continuous effort to reap the benefit.
One needs constancy of purpose and consistency of action.

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The movement of productivity, quality and service has to be compared with the freedom
movement struggle which was started by the freedom fighters. Unless and until the nationalistic
sentiments are aroused, there can be no personal commitment. The Japanese and the Korean
examples have proved that their achievement became possible only by kindling the nationalistic
spirit. Japan has already proved that a country which was divested by war and natural forces such
as earthquakes and typhoons can stand up to face the challenges by arousing nationalistic spirit.
Japanese miracle would not have been possible. When one looks at the rating of the Japanese
managers with reference to managerial skills the situation is not very attractive. Japan does not
only possess the natural resources. In terms of entrepreneurship and innovation also, Japan does
not compare very favorably with reference to other countries. In spite of these, the only force
which made the Japanese miracle possible is the nationalistic spirit.

1.17Change and Learning

By peter Ducker’s reckoning, most large companies have already cut their management levels by
one-third or more yet the restructuring of corporations has barely begun. In the present
knowledge society, it is imperative that corporation should be creative, innovative, nimble and
flexible. The organization should have concepts, competence, and connections. To achieve this,
we require positive Attitude of executives who manage. Time has come when don’t care attitude
can longer work. If we analyses the various factors responsible for the success both of an
organization or the individual, the single factors that emerge as the most important is the
‘Attitude’. If we deliberate with the group of executives drawn from different industry, functions,
expertise and geographical locations and then co-relate them, we find 85% of the factors are
‘attitudinal’

Negative attitude undermine our self-confidence, we lose the drove. The popular maxim that we
are what we think. We are focused on psychological phenomena. If we think we are a failure,
then we will fail invariably. The person dominated with negative attitude or organization
dominated with executives with negative attitude can longer survive aside remaining a leader.
Executives who keep moving forwards under their own power of positive attitude or
organization dominated with executive with negative attitude can longer survive aside reaming a
leader. Executives who keep moving forward under their own power of positive attitude are in
the list of world’ best prize winners. An executive with inherent positive attitude need not be
pushed form behind, finds out new and better way to take the organization to their own power of
positive attitude are in the list of world’s best prize winners. An executive with inherent positive
attitude needs not be pushed form being, finds out new and better ways to take the organization
to height of achievement with special premium.

i) Changing Technology-Technology innovations leading to restructuring of organizations

operations and culture.
ii) Changing Profiles of Employees- Their aspirations, expectations and quality of life will
undergo tremendous change. The organizations have to grow, sensitive to environment

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 and provide continuous learning to provide them a conducive atmosphere to retain and
develop them.
iii) Competition- To understand that the people edge will always be a dominating factor.
Similarly organizations have to internalize and go for strategic alliances to retain the
competitive edge. The globalization will be cutting edge to remain completive.
iv) Growth of Service Economy- The future are of growth would be the service industry
therefore the employees have to be re-orientated to customer focus and multiple
constituency.
v) Concern for Environment and business ethics-The future change areas will be concern
for de-skilling, re-skilling and multi-skilling. The quality has to become part of our
attitude and to prevail in all what is done may be manufacturing, service and people
management.
vi) Place of Change-World is changing at a phenomenal pace, with old businesses giving
way to new ones with increasing pace of technology–information technology. Survival is
only through improvement in productivity as well as cost reduction and better
performance in all areas via, production efficiency, marketing, distribution and financial
engineering.

1. 18 Responding to Business Requirement

The present economy is still in perfect competition because of the following factors: No entry
barriers, No protection form failures, Consumers have all information for buying decision, No
firm or industry can set the price and producers have lost the pricing power and Producers can
increase profits only selling more and this is possible by bringing down prices and lowering cost.
In view of the above management of business enterprises is a complex affair and responding to
business affair and responding to business requirements at opportune moments is a must for long
run viability. The managing uncertainty will be the primary problem for most senior executives
all over the world in the next millennium.

Obstacles in Building Global Economy

It is not that there are no constraints or obstacles to build global economy, as it requires lot of
ground to be cleared to lay a way for smooth transformation to global economy. Some of
obstacles are lack of infrastructure in the country, people and their attitude to change, poor
development of human resources, paying “lip service” to new ideas, financial pressure to cut
direct expenditure to meet immediate project targets and top managers are unaware that
subordinates do not share their goals and ambitions. The above factors will be handled as
organizations are facing the new realities and preparing themselves for a dynamic transition. The
transforming role which human resources would require to play would be preparing eh
organizations to sense change, manage change and adapt to the new realities, creating high
performance work organizations, with thrust on high performance culture, instituting a system

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for multi-skilling or employees, clear differentiation between the laggards and the stars.
Individual rewards are linked to individual performance and divisional performance and
corporate performance and developing an atmosphere of intellectual change to encourage
creativity.

1.19 Managing Strategic Change

In today's global environment, change rather than stability is the order of the day, Rapid changes
in technology, competition, and customers' demands have increased the rate at which companies
need to alter their strategies and structures to survive in the marketplace. One of the principal
reasons companies fail is their inability to change themselves and adapt to a new competitive
environment because of organizational inertia. Once an organization has been created and task
and role relationships are defined, a set of forces is put into operation that makes an organization
resistant to change. Strategy formulation and implementation is treated from an impersonal,
rational perspective, one from which decisions are made coldly and logically. In reality, this
picture of how strategic managers decide on and change strategy and structure is incomplete; it
ignores the way power and political processes influence the decision-making process and the
selection of organizational objectives. This part discusses why it is difficult to change
organizations and outlines the issues and problems that managers must address and solve if they
are successfully to change a company's strategy and structure so that it matches new competitive
environments. By the end of this part, you will understand the forces at play when strategic
managers try to change their organizations and the role of power and politics in helping to
implement change successfully.

Strategic Change- Strategic change is the movement of a company away from its present state
toward some desired future state to increase its competitive advantage. Most large companies
pursue one of three major kinds of strategic change-reengineering, restructuring, and innovation.

Reengineering- Often, because of drastic unexpected changes in the environment, such as the
emergence of aggressive new competitors or technological breakthroughs, strategic managers
need to develop a new strategy and structure to raise the level of their business’s performance.
One way of changing a company to allow it to operate more effectively is by using
reengineering. Reengineering is the "fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in critical, contemporary measures of performance
such as cost, quality, service, and speed. As this definition suggests, strategic managers who use
reengineering must completely rethink how their organization goes about its business. Instead of
focusing on a company's functions, strategic managers make business processes the focus of
attention. A business process is any activity (such as order processing, inventory control, or
product design) that is vital to delivering goods and services to customers quickly or that
promotes high quality or low costs. Business processes are not the responsibility of anyone
function but cut across functions. Because reengineering focuses on business processes and not

35
on functions, an organization that reengineers always has to adopt a different approach to
organizing its activities. Organizations that take up reengineering deliberately ignore the existing
arrangement of tasks, roles, and work activities. They start the reengineering process with the
customer (not the product or service) and ask, how can we reorganize the way we do our work,
our business processes, to provide the best quality and the lowest-cost goods and services to the
customer? Frequently, when companies ask this question, they realize that there are more
effective ways to organize their activities. For example, a business process that currently
involves members of ten different functions working sequentially to provide goods and services
might be performed by one person or a few people at a fraction of the cost after reengineering.
Often, individual jobs become increasingly complex, and people are grouped into cross-
functional teams as business processes are reengineered to reduce costs and increase quality.
Reengineering and total quality management (TQM) are highly interrelated and complementary.
After reengineering has taken place and the question, what is the best way to provide customers
with the goods or service they require? has been answered, TQM takes over, with its focus on,
how can we now continue to improve and refine the new process and find better ways of
managing task and role relationships? Successful organizations examine both questions simul-
taneously and continuously attempt to identify new and better processes for meeting the goals of
increased efficiency, quality, and customer responsiveness. Thus, they are always seeking to
improve their visions of their desired future state.
Restructuring- Restructuring is a second form of change that strategic managers choose to im-
plement strategic change to improve performance. There are two basic steps to restructuring.
First, an organization reduces its level of differentiation and integration by eliminating divisions,
departments, or levels in the hierarchy. Second, an organization downsizes by reducing the
number of its employees to reduce operating costs. There are many reasons why restructuring
becomes necessary and why an organization may need to downsize its operations. Sometimes a
change in the business environment occurs that could not have been foreseen; perhaps a shift in
technology made the company's products obsolete or a worldwide recession has reduced the
demand for its products. Sometimes an organization has excess capacity because customers no
longer want the goods and services it provides, perhaps because they are outdated or offer poor
value for the money. Sometimes organizations downsize because over time they have grown too
tall and bureaucratic and operating costs have become much too high. All too often, however,
companies are forced to downsize and lay off employees because they have not continually
monitored the way they operate their basic business processes and have not made the incremental
changes to their strategies and structures that would allow them to contain costs and adjust to
changing conditions. Paradoxically, because they have not paid attention to the need to
reengineer themselves, they are forced into a position in which restructuring becomes the only
way they can survive and compete in an increasingly competitive environment.

Innovation-Restructuring is often necessary because changes in technology make the technology

an organization uses to produce goods and services, or the goods and services themselves,
obsolete. For example, changes in technology have made computers much cheaper to

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manufacture and more powerful and have changed what customers want. If organizations are to
avoid being left behind in the competitive race to produce new goods and services, they must
take steps to introduce new products or develop new technologies to produce those products
reliably and at low cost. Innovation is the process by which organizations use their skills and
resources to create new technologies or goods and services so that they can change and better
respond to the needs of their customers. Innovation can result in spectacular success for an
organization. While innovation brings about change, it also is associated with a high level of risk
because the outcomes of research and development activities are often uncertain. Thus, while
innovation can lead to change of the sort organizations want-the introduction of profitable new
technologies and products-it can also lead to the kind of change they want to avoid-technologies
that are inefficient and products customers don't want. Innovation is one of the most difficult
change processes to manage. When organizations rely on innovation as the source of their
competitive advantage, they need to adopt flexible structures such as matrix or cross-functional
team structures that give people the freedom to experiment and be creative. Functions need to
coordinate their activities and work together if innovation is to be successful, and companies that
rely on innovation have to facilitate the change effort and support the efforts of their members to
be creative. In order to understand the issues involved in implementing these kinds of strategic
change, it is useful to focus on the series of distinct steps that strategic managers must follow if
the change process is to succeed.

Unit Two: Change Management Tools

Introduction

Over the past three decades, management tools have become a common part of executives’ lives.
Whether trying to boost revenues, innovate, improve quality, increase efficiencies or plan for the
future, executives have looked for tools to help them. The current environment of globalization
and economic turbulence has increased the challenges executives face and, therefore, the need to
find the right tools to meet these challenges. To do this successfully, executives must be more
knowledgeable than ever as they sort through the options and select the right management tools
for their companies. The selection process itself can be as complicated as the business issues they
need to solve. They must choose the tools that will best help them make the business decisions
that lead to enhanced processes, products and services—and result in superior performance and
profits. Successful use of such tools requires an understanding of the strengths and weaknesses
of each tool as well as an ability to creatively integrate the right tools, in the right way, at the
right time. The secret is not in discovering one magic device, but in learning which mechanism
to use, and how and when to use it. In the absence of objective data, groundless hype makes
choosing and using management tools a dangerous game of chance. In this unit attempts are
made to expose students to different change management tools and initiatives.

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2.1 Balanced Scorecard (BSC)
A Balanced Scorecard defines what management means by “performance” and measures
whether management is achieving desired results. The Balanced Scorecard translates Mission
and Vision Statements into a comprehensive set of objectives and performance measures that can
be quantified and appraised. These measures typically include Financial performance (revenues,
earnings, return on capital, cash flow); Customer value performance (market share, customer
satisfaction measures, customer loyalty); Internal business process performance (productivity
rates, quality measures, timeliness); Innovation performance (percent of revenue from new
products, employee suggestions, rate of improvement index); Employee performance (morale,
knowledge, turnover, use of best demonstrated practices).

To construct and implement a Balanced Scorecard, managers should: Articulate the business’s
vision and strategy; Identify the performance categories that best link the business’s vision and
strategy to its results (e.g., financial performance, operations, innovation, employee
performance); Establish objectives that support the business’s vision and strategy; Develop
effective measures and meaningful standards, establishing both short-term milestones and long-
term targets; Ensure companywide acceptance of the measures; Create appropriate budgeting,
tracking, communication and reward systems; Collect and analyze performance data and
compare actual results with desired performance; Take action to close unfavorable gaps. A
Balanced Scorecard is used to clarify or update a business’s strategy; Link strategic objectives to
long-term targets and annual budgets; Track the key elements of the business strategy;
Incorporate strategic objectives into resource allocation processes; Facilitate organizational
change; Compare performance of geographically diverse business units; Increase companywide
understanding of the corporate vision and strategy.

2.2 Benchmarking
Benchmarking improves performance by identifying and applying best demonstrated practices to
operations and sales. Managers compare the performance of their products or processes
externally with those of competitors and best-in-class companies and internally with other
operations within their own firms that perform similar activities. The objective of Benchmarking
is to find examples of superior performance and to understand the processes and practices
driving that performance. Companies then improve their performance by tailoring and
incorporating these best practices into their own operations—not by imitating, but by innovating.

Benchmarking involves the following steps: Select a product, service or process to benchmark;
Identify the key performance metrics; Choose companies or internal areas to benchmark; Collect
data on performance and practices; Analyze the data and identify opportunities for improvement;
Adapt and implement the best practices, setting reasonable goals and ensuring companywide
acceptance. Companies use Benchmarking to Improve performance. Benchmarking identifies

38
methods of improving operational efficiency and product design; Understand relative cost
position. Benchmarking reveals a company’s relative cost position and identifies opportunities
for improvement; Gain strategic advantage. Benchmarking helps companies focus on
capabilities critical to building strategic advantage; Increase the rate of organizational learning.
Benchmarking brings new ideas into the company and facilitates experience sharing.

2.3 Business Process Reengineering

Business Process Reengineering involves the radical redesign of core business processes to
achieve dramatic improvements in productivity, cycle times and quality. In Business Process
Reengineering, companies start with a blank sheet of paper and rethink existing processes to
deliver more value to the customer. They typically adopt a new value system that places
increased emphasis on customer needs. Companies reduce organizational layers and eliminate
unproductive activities in two key areas. First, they redesign functional organizations into cross-
functional teams. Second, they use technology to improve data dissemination and decision
making. Business Process Reengineering is a dramatic change initiative that contains five major
steps. Managers should refocus company values on customer needs; redesign core processes,
often using information technology to enable improvements; reorganize a business into cross-
functional teams with end-to-end responsibility for a process; rethink basic organizational and
people issues; improve business processes across the organization. Companies use Business
Process Reengineering to improve performance substantially on key processes that impact
customers.

Business Process Reengineering can reduce costs and cycle time. Business Process
Reengineering reduces costs and cycle times by eliminating unproductive activities and the
employees who perform them. Reorganization by teams decreases the need for management
layers, accelerates information flows and eliminates the errors and rework caused by multiple
handoffs; Improve quality. Business Process Reengineering improves quality by reducing the
fragmentation of work and establishing clear ownership of processes. Workers gain
responsibility for their output and can measure their performance based on prompt feedback.

2.4 Change Management Programs

Change Management Programs enable companies to control the installation of new processes to
improve the realization of business benefits. These programs involve devising change initiatives,
generating organizational buy-in, implementing the initiatives as seamlessly as possible and
generating a repeatable model for ensuring continued success in future change efforts. A Change
Management Program allows leaders to help people succeed, showing where and when trouble is
likely to occur and laying out a strategy for mitigating risks and monitoring progress.

Change Management Programs require managers to: Focus on results. Maintain a goal-oriented
mindset by establishing clear, non-negotiable goals and designing incentives to ensure these
goals are met; Identify and overcome barriers to change. Companies identify employees most
impacted and also work to predict, measure and manage the risk of change; Repeatedly

39
communicate simple, powerful messages to employees. In times of change, leaders alter
communication frequency and methods to manage how a shaken workforce perceives and reacts
to information: Ensure sponsorship throughout the organization. To allow sponsorship to reach
all levels of an organization, companies enlist multiple sponsors to provide all individuals with
access to—and the influence of—a sponsor; Reorganize around decision making. Companies
develop a system for identifying, making and executing the most important decisions;
continuously monitor progress. Companies follow through and monitor the progress of each
change initiative to tell if it is following the intended path or veering off course.
Companies use a change management program to implement major strategic initiatives to adapt
to changes in markets, customer preferences, technologies or the competition’s strategic plans;
Align and focus an organization when going through a major turnaround; Implement new
process initiatives.

2.5 Core Competencies

A core competency is a deep proficiency that enables a company to deliver unique value to
customers. It embodies an organization’s collective learning, particularly of how to coordinate
diverse production skills and integrate multiple technologies. Such a core competency creates
sustainable competitive advantage for a company and helps it branch into a wide variety of
related markets. Core competencies also contribute substantially to the benefits a company’s
products offer customers. It’s hard for competitors to copy or procure. Understanding Core
Competencies allow companies to invest in the strengths that differentiate them and set strategies
that unify their entire organization.
To develop Core Competencies a company must isolate its key abilities and hone them into
organization wide strengths; Compare itself with other companies with the same skills to ensure
that it is developing unique capabilities; Develop an understanding of what capabilities its
customers truly value, and invest accordingly to develop and sustain valued strengths; Create an
organizational road map that sets goals for competence building; Pursue alliances, acquisitions
and licensing arrangements that will further build the organization’s strengths in core areas;
Encourage communication and involvement in core capability development across the
organization; Preserve core strengths even as management expands and redefines the business;
Outsource or divest noncore capabilities to free up resources that can be used to deepen core
capabilities. Core Competencies capture the collective learning in an organization. They can be
used to design competitive positions and strategies that capitalize on corporate strengths; Unify
the company across business units and functional units, and improve the transfer of knowledge
and skills among them; Help employees understand management’s priorities; Integrate the use of
technology in carrying out business processes; Decide where to allocate resources; Make
outsourcing, divestment and partnering decisions; Widen the domain in which the company
innovates, and spawn new products and services; Invent new markets and quickly enter emerging
markets; Enhance image and build customer loyalty.

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2.6 Customer Relationship Management
Customer Relationship Management (CRM) is a process companies use to understand their
customer groups and respond quickly—and at times, instantly—to shifting customer desires.
CRM technology allows firms to collect and manage large amounts of customer data and then
carry out strategies based on that information. Data collected through focused CRM initiatives
help firms solve specific problems throughout their customer relationship cycle—the chain of
activities from the initial targeting of customers to efforts to win them back for more. CRM data
also provide companies with important new insights into customers’ needs and behaviors,
allowing them to tailor products to targeted customer segments. Information gathered through
CRM programs often generates solutions to problems outside a company’s marketing functions,
such as supply chain management and new product development.

CRM requires managers to: Start by defining strategic “pain points” in the customer relationship
cycle. These are problems that have a large impact on customer satisfaction and loyalty, where
solutions would lead to superior financial rewards and competitive advantage; Evaluate whether
—and what kind of—CRM data can fix those pain points. Calculate the value that such
information would bring the company; Select the appropriate technology platform, and calculate
the cost of implementing it and training employees to use it. Assess whether the benefits of the
CRM information outweigh the expense involved; Design incentive programs to ensure that
personnel are encouraged to participate in the CRM program. Many companies have discovered
that realigning the organization away from product groups and toward a customer-centered
structure improves the success of CRM; Measure CRM progress and impact. Aggressively
monitor participation of key personnel in the CRM program. In addition, put measurement
systems in place to track the improvement in customer profitability with the use of CRM. Once
the data are collected, share the information widely with employees to encourage further
participation in the program. Companies can wield CRM to: Gather market research on
customers, in real time if necessary; Generate more reliable sales forecasts; Coordinate
information quickly between sales staff and customer support reps, increasing their effectiveness;
Enable sales reps to see the financial impact of different product configurations before they set
prices; Accurately gauge the return on individual promotional programs and the effect of
integrated marketing activities, and redirect spending accordingly; Feed data on customer
preferences and problems to product designers; Increase sales by systematically identifying and
managing sales leads; Improve customer retention; Design effective customer service programs.

2.7 Customer Segmentation

Customer Segmentation is the subdivision of a market into discrete customer groups that share
similar characteristics. Customer Segmentation can be a powerful means to identify unmet
customer needs. Companies that identify underserved segments can then outperform the
competition by developing uniquely appealing products and services. Customer Segmentation is

41
most effective when a company tailors offerings to segments that are the most profitable and
serves them with distinct competitive advantages. This prioritization can help companies develop
marketing campaigns and pricing strategies to extract maximum value from both high- and low-
profit customers. A company can use Customer Segmentation as the principal basis for allocating
resources to product development, marketing, service and delivery programs.

Customer Segmentation requires managers to: Divide the market into meaningful and
measurable segments according to customers’ needs, their past behaviors or their demographic
profiles; Determine the profit potential of each segment by analyzing the revenue and cost
impacts of serving each segment; Target segments according to their profit potential and the
company’s ability to serve them in a proprietary way; Invest resources to tailor product, service,
marketing and distribution programs to match the needs of each target segment; Measure
performance of each segment and adjust the segmentation approach over time as market
conditions change decision making throughout the organization. Companies can use Customer
Segmentation to: Prioritize new product development efforts; Develop customized marketing
programs; Choose specific product features; Establish appropriate service options; Design an
optimal distribution strategy; Determine appropriate product pricing.

2.8 Decision Rights Tools

Decision Rights Tools help companies to organize their decision making and execution by
setting clear roles and accountabilities and by giving all those involved a sense of ownership of
decisions: when to provide input, who should follow through and what is beyond their scope.
Clear decision rights allow companies to cut through the complexity often clouding today’s
global structures by ensuring that critical decisions are made promptly and well and result in
effective actions. Each person involved in the decision-making process should be assigned one
of the five decision-making roles: Recommend: Recommenders gather and assess the relevant
facts, obtaining input from appropriate parties, and then recommend a decision or action; Agree:
Agreers formally approve a recommendation and can delay it if more work is required; Perform:
Performers are accountable for making a decision happen once it’s been made; Input: Inputers
combine facts and judgment to provide input into a recommendation; Decide: Deciders make the
ultimate decision and commit the organization to action.

These assignments should factor in the following: Each decision should have only one Decider
with single point accountability; Each decision has one individual who leads the process to
develop a recommendation, factoring in all relevant input; Agree roles should be used sparingly,
typically only in extraordinary circumstances (e.g., regulatory or legal issues), otherwise they
undermine speed and authority; Input roles should be assigned only to those with knowledge,
experience or access to resources that are so important for a good decision that it would be
irresponsible for the decision maker not to seek their input; Consider soliciting input from those
with perform roles in order to engage early, identify implementation issues and enable upfront
planning. Decision Rights Tools allow companies to: Eliminate decision bottlenecks, such as

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those that often occur between the center versus business units, global versus regional versus
local units, and different functions; Make higher-quality decisions; Make faster decisions
resulting in faster operational performance (e.g., product development, international roll out,
etc.); Create a healthy debate on critical decisions, but through processes that feel productive,
with minimal frustration; Have agility and flexibility in decision making and execution to
respond to dynamic circumstances; Provide a common vocabulary to discuss decisions in a
constructive manner across units.

2.9 Downsizing
In the face of slowing or declining sales, companies often downsize their employee base as a
means of cutting costs to boost profitability. In 2007, nearly one million employees lost their
jobs in a mass layoff (50-plus employees) in the United States (an average of 180 workers in
approximately 5,300 separate events, according to the Bureau of Labor Statistics). The number
of layoff events in the United States in September 2008 was the highest since September 2001.
Although downsizing is effective for significant cost reduction, it often produces unintended side
effects, such as damaged employee morale, poor public relations, future rightsizing hiring costs
and an inability to capitalize quickly on opportunities when the economy improves. Skillful
downsizing should help a company emerge from challenging economic conditions in stronger
shape. Creative efforts to avoid downsizing include hiring freezes, salary cuts or freezes,
shortened workweeks, restricted overtime hours, unpaid vacations and temporary plant closures.
When downsizing proves unavoidable, the ultimate goal should be to eliminate nonessential
company resources while minimizing the negative impact on the remaining organization.
Downsizing can be effective if implemented appropriately. Companies must be careful to avoid
sending the wrong messages to employees, shareholders and the media. Successful downsizing
requires managers to:

Evaluate the overall impact of downsizing. The total cost of downsizing—including both
financial and non-financial costs—must be taken into account. Managers must calculate the
present value of all costs and benefits associated with the cuts, including severance packages,
lower employee productivity due to disorder or talent loss, eventual rehiring expenses, future
rightsizing costs and the lost opportunity costs associated with not having the appropriate
manpower to accelerate out of the downturn. Investing in areas customers care about—while
competitors are cutting back—helps position the company to take or sustain the lead once
conditions improve. The value created from downsizing should exceed the cost of lower
employee morale and potential damage to the company’s reputation; Develop a smooth
downsizing process. It is crucial that managers invest aggressively in upfront planning for the job
cuts. A company typically forms a committee to determine the appropriate level of downsizing
and creates a process that takes into account the best interests of the company and the
shareholders. Other important activities are training managers to conduct layoffs and assisting
former employees in their job searches. Reduce costs; Rightsize resources relative to market

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demand; Signal that the company is taking proactive steps to adjust to changing business needs;
Take advantage of cost synergies after a merger; Release the least-productive resources.

2.10 Enterprise Risk Management

Enterprise Risk Management (ERM) is an approach to making strategic and business decisions
after considering major risks and opportunities. Originally focused simply on managing the
losses and downside, ERM now is also used to help companies decide between alternative
business lines and strategic growth options. Companies are using the tool to take a more value
focused (rather than loss-focused) approach to risk management amid increasing volatility and
uncertainty. ERM considers everything from credit risk to operational and supply chain risk.
ERM examines decisions through a risk lens, identifying creative approaches to succeed in a
world of uncertainty.

To build an Enterprise Risk Management system, all parts of the organization contribute vital
perspectives: Senior executives determine the level of risk a company is willing to take. They
express their risk appetite in concrete terms such as earnings volatility and potential losses of
capital, equity or assets; The risk organization, in cooperation with line managers, continuously
examines the potential impact of various risks (e.g., strategic, business, financial and operational
risks) on the organization. They decide whether to avoid the exposure completely, effectively
mitigate it (for example, through a transfer to another party) or use the company risk insight and
risk management capabilities as an opportunity to generate extra profit from the exposure; Line
managers embed risk management principles into everyday business decisions and activities;
Managers separate risk-taking and risk-monitoring responsibilities to avoid potential conflicts of
interest. Companies use Enterprise Risk Management to: Take a proactive approach to protecting
assets and organizations; Determine which opportunities are worth pursuing; Formalize risk
governance; Optimize returns on capital; Allow regulators and debt-rating agencies to analyze a
company’s risk management processes.

2.11 Knowledge Management

Knowledge Management develops systems and processes to acquire and share intellectual assets.
It increases the generation of useful, actionable and meaningful information and seeks to increase
both individual and team learning. In addition, it can maximize the value of an organization’s
intellectual base across diverse functions and disparate locations. Knowledge Management
maintains that successful businesses are a collection not of products but of distinctive knowledge
bases. This intellectual capital is the key that will give the company a competitive advantage
with its targeted customers. Knowledge Management seeks to accumulate intellectual capital that
will create unique core competencies and lead to superior results.

Knowledge Management requires managers to: Catalog and evaluate the organization’s current
knowledge base; Determine which competencies will be key to future success and what base of
knowledge is needed to build a sustainable leadership position therein; Invest in systems and

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processes to accelerate the accumulation of knowledge; Assess the impact of such systems on
leadership, culture and hiring practices; Codify new knowledge and turn it into tools and
information that will improve both product innovation and overall profitability. Companies use
knowledge management to: Improve the cost and quality of existing products or services;
Strengthen and extend current competencies through intellectual asset management; Improve and
accelerate the dissemination of knowledge throughout the organization; Apply new knowledge to
improve behaviors; Encourage faster and even more profitable innovation of new products.

2.12 Mergers and Acquisitions

Over the past decade, Mergers and Acquisitions (M&As) have reached unprecedented levels as
companies use corporate financing strategies to maximize shareholder value and create a
competitive advantage. Acquisitions occur when a larger company takes over a smaller one; a
merger typically involves two relative equals joining forces and creating a new company. Most
mergers and acquisitions are friendly, but a hostile takeover occurs when the acquirer bypasses
the board of the targeted company and purchases a majority of the company’s stock on the open
market. A merger is considered a success if it increases shareholder value faster than if the
companies had remained separate. Because corporate takeovers and mergers can reduce
competition, they are heavily regulated, often requiring government approval. To increase
chances of the deal’s success, acquirers need to perform rigorous due diligence—a review of the
targeted company’s assets and performance history—before the purchase to verify the
company’s standalone value and unmask problems that could jeopardize the outcome.

Successful integration requires understanding how to make trade-offs between speed and careful
planning and involves: Setting integration priorities based on the merger’s strategic rationale and
goals; Articulating and communicating the deal’s vision by merger leaders; Designing the new
organization and operating plan; Customizing the integration plan to address specific challenges:
Act quickly to capture economies of scale; redefine a business model and sacrifice speed to get
the model right, such as understanding brand positioning and product growth opportunities;
Aggressively implement the integration plan: by Day 100, the merged company should be
operating and contributing value. Mergers are used to increase shareholder value by: Reducing
costs by combining departments and operations, and trimming the workforce; Increasing revenue
by absorbing a major competitor and winning more market share; Cross-selling products or
services; Creating tax savings when a profitable company buys a money-loser; Diversifying to
stabilize earning results and boost investor confidence.

2.13 Outsourcing
When outsourcing, a company uses third parties to perform noncore business activities.
Contracting third parties enables a company to focus its efforts on its core competencies. Many
companies find that outsourcing reduces cost and improves performance of the activity. Third
parties that specialize in an activity are likely to be lower cost and more effective, given their

45
focus and scale. Through outsourcing, a company can access the state of the art in all of its
business activities without having to master each one internally. When outsourcing, take the
following steps: Determine whether the activity to outsource is a core competency. In most
cases, it is unwise to outsource something that creates a unique competitive advantage; Evaluate
the financial impact of outsourcing. Outsourcing likely offers cost advantages if a vendor can
realize economies of scale. A complete financial analysis should include the impact of increased
flexibility and productivity or decreased time to market; Assess the nonfinancial costs and
advantages of Outsourcing.

Managers will also want to qualitatively assess the benefits and risks of outsourcing. Benefits
include the ability to leverage the outside expertise of a specialized outsourcer and the freeing up
of resources devoted to noncore business activities. A key risk is the growing dependence a
company might place on an outsourcer, thus limiting future flexibility; Choose an Outsourcing
partner and contract the relationship. Candidates should be qualified and selected according to
both their demonstrated effectiveness and their ability to work collaboratively. The contract
should include clearly established performance guidelines and measures. Companies use
Outsourcing to: Reduce operating costs; Instill operational discipline; Increase manufacturing
productivity and flexibility; Leverage the expertise and innovation of specialized firms;
Encourage use of best demonstrated practices for internal activities; Avoid capital investment,
particularly under uncertainty; Release resources—people, capital and time—to focus on core
competencies.

2.14 Satisfaction and Loyalty Management

Loyalty Management tools grow a business’s revenues and profits by improving retention among
its customers, employees and investors. Loyalty programs measure and track the loyalty of those
groups, diagnose the root causes of defection among them and develop ways not only to boost
their allegiance but turn them into advocates for the company. Satisfaction and Loyalty
Management quantifiably links financial results to changes in retention rates, maintaining that
even small shifts in retention can yield significant changes in company profit performance and
growth.

A comprehensive Satisfaction and Loyalty Management program requires companies to:

Regularly assess current loyalty levels through surveys and behavioral data. The most effective
approaches distinguish mere satisfaction from true loyalty; they ask current customers how likely
they would be to recommend the company to a friend or a colleague, and frontline employees
whether they believe the organization deserves their loyalty; Benchmark current loyalty levels
against those of competitors; Identify the few dimensions of performance that matter most to
customers and employees, and track them rigorously; Systematically communicate survey
feedback throughout the organization; Build loyalty and retention targets into the company’s
incentive, planning and budgeting systems; Develop new programs to reduce customer and
employee churn rates; Revise policies that drive short-term results at the expense of long-term
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loyalty, such as high service fees and discounts given only to new customers; Reach out to
investors and suppliers to learn what drives their loyalty.

Well-executed Satisfaction and Loyalty Management programs enable companies to: Build
lasting relationships with customers who contribute the most to profitability, and capture a larger
share of their business; Generate sales growth by increasing referrals from customers and
employees; Attract and retain employees whose skills, knowledge and relationships are essential
to superior performance; Improve productivity, and decrease recruitment and training costs;
Strategically align the interests and energies of employees, customers, suppliers and investors in
a self-reinforcing cycle; Improve long-term financial performance and shareholder value.

2.15 Supply Chain Management

Supply Chain Management synchronizes the efforts of all parties—suppliers, manufacturers,
distributors, dealers, customers, and so on—involved in meeting a customer’s needs. The
approach often relies on technology to enable seamless exchanges of information, goods and
services across organizational boundaries. It forges much closer relationships among all links in
the value chain in order to deliver the right products to the right places at the right times for the
right costs. The goal is to establish such strong bonds of communication and trust among all
parties that they can effectively function as one unit, fully aligned to streamline business
processes and achieve total customer satisfaction.

Companies typically implement Supply Chain Management in four stages: Stage I seeks to
increase the level of trust among vital links in the supply chain. Managers learn to treat former
adversaries as valuable partners. This stage often leads to longer-term commitments with
preferred partners; Stage II increases the exchange of information. It creates more accurate, up-
to-date knowledge of demand forecasts, inventory levels, capacity utilization, production
schedules, delivery dates and other data that could help supply chain partners improve
performance; Stage III expands efforts to manage the supply chain as one overall process rather
than dozens of independent functions. It leverages the core competencies of each player,
automates information exchange, changes management processes and incentive systems,
eliminates unproductive activities, improves forecasting, reduces inventory levels, cuts cycle
times and involves customers more deeply in the Supply Chain Management process; Stage IV
identifies and implements radical ideas to transform the supply chain completely and deliver
customer value in unprecedented ways. Recognizing that value is leaking out of the supply chain,
but that only limited improvement can be achieved by any single company, managers turn to
Supply Chain Management to help them deliver products and services faster, better and less
expensively. Supply Chain Management capitalizes on many trends that have changed
worldwide business practices, including just-in- time (JIT) inventories, electronic data
interchange (EDI), outsourcing of noncore activities, supplier consolidation and globalization.

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2.16 Mission and Vision Statements
A Mission Statement defines the company’s business, its objectives and its approach to reach
those objectives. A Vision Statement describes the desired future position of the company.
Elements of Mission and Vision Statements are often combined to provide a statement of the
company’s purposes, goals and values. However, sometimes the two terms are used
interchangeably. Typically, senior managers will write the company’s overall Mission and
Vision Statements. Other managers at different levels may write statements for their particular
divisions or business units. The development process requires managers to clearly identify the
corporate culture, values, strategy and view of the future by interviewing employees, suppliers
and customers; address the commitment the firm has to its key stakeholders, including
customers, employees, shareholders and communities; ensure that the objectives are measurable,
the approach is actionable and the vision is achievable; communicate the message in clear,
simple and precise language; develop buy-in and support throughout the organization. Mission
and Vision Statements are commonly used to:
Internally
 Guide management’s thinking on strategic issues, especially during times of significant
change;
 Help define performance standards;
 Inspire employees to work more productively by providing focus and common goals;
 Guide employee decision making;
 Help establish a framework for ethical behavior.
Externally
 Enlist external support;
 Create closer linkages and better communication with customers, suppliers and alliance
partners;
 Serve as a public relations tool.

2.17 Scenario and Contingency Planning

Scenario Planning allows executives to explore and prepare for several alternative futures. It
examines the outcomes a company might expect under a variety of operating strategies and
economic conditions. Contingency Planning assesses what effect sudden market changes or
business disruptions might have on a company and devises strategies to deal with them. Scenario
and contingency plans avoid the dangers of simplistic, one-dimensional or linear thinking. By
raising and testing various “what-if” scenarios, managers can brainstorm together and challenge
their assumptions in a nonthreatening, hypothetical environment before they decide on a certain
course of action. Scenario and contingency Planning allows management to pressure-test plans
and forecasts and equips the company to handle the unexpected.
Key steps in a Scenario and Contingency Planning process are choose a time frame to explore;
Identify the current assumptions and thought processes of key decision makers; Create varied,
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yet plausible, scenarios; Test the impact of key variables in each scenario; Develop action plans
based on either the most promising solutions or the most desirable outcome the company seeks;
Monitor events as they unfold to test the company’s strategic direction; Be prepared to change
course if necessary. By using Scenario and Contingency Planning, a company can achieve a
higher degree of organizational learning; raise and challenge both implicit and widely held
beliefs and assumptions about the business and its strategic direction; identify key levers that can
influence the company’s future course; turn long-range planning into a vital, shared experience;
develop a clearer view of the future; incorporate globalization and change management into
strategic analysis.

2.18 Strategic Planning

Strategic Planning is a comprehensive process for determining what a business should become
and how it can best achieve that goal. It appraises the full potential of a business and explicitly
links the business’s objectives to the actions and resources required to achieve them. Strategic
Planning offers a systematic process to ask and answer the most critical questions confronting a
management team—especially large, irrevocable resource commitment decisions. A successful
Strategic Planning process should describe the organization’s mission, vision and fundamental
values; target potential business arenas and explore each market for emerging threats and
opportunities; understand the current and future priorities of targeted customer segments; analyze
the company’s strengths and weaknesses relative to competitors and determine which elements
of the value chain the company should make versus buy; identify and evaluate alternative
strategies; develop an advantageous business model that will profitably differentiate the
company from its competitors; define stakeholder expectations and establish clear and
compelling objectives for the business; prepare programs, policies and plans to implement the
strategy; establish supportive organizational structures, decision processes, information and
control systems and hiring and training systems; allocate resources to develop critical
capabilities; plan for and respond to contingencies or environmental changes; monitor
performance. Strategic Planning processes are often implemented to change the direction and
performance of a business; encourage fact-based discussions of politically sensitive issues; create
a common framework for decision making in the organization; set a proper context for budget
decisions and performance evaluations; train managers to develop better information to make
better decisions; increase confidence in the business’s direction.

2.19 Total Quality Management

Total Quality Management (TQM) is a systematic approach to quality improvement that marries
product and service specifications to customer performance. TQM then aims to produce these
specifications with zero defects. This creates a virtuous cycle of continuous improvement that
boosts production, customer satisfaction and profits. In order to succeed, TQM programs require
managers to:

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Assess customer requirements: Understand present and future customer needs; Design
products and services that cost-effectively meet or exceed those needs.
Deliver quality: Identify the key problem areas in the process and work on them until they
approach zero-defect levels; Train employees to use the new processes; Develop effective
measures of product and service quality; Create incentives linked to quality goals; Promote a
zero-defect philosophy across all activities; Encourage management to lead by example; Develop
feedback mechanisms to ensure continuous improvement. TQM improves profitability by
focusing on quality improvement and addressing associated challenges within an organization.
TQM can be used to increase productivity, lower scrap and rework costs, improve product
reliability, decrease time-to-market cycles, decrease customer service problems and increase
competitive advantage.

2.20 Six Sigma

Six Sigma is the term applied to the application of the define, measure, analyze, improve, control
(DMAIC) methodology. It is a structured, disciplined, rigorous approach to process
improvement. The five steps link to each other into a logical sequence, creating an infinite loop
for process improvement. The goal of the method is to achieve 3.4 defects per million parts (or
opportunities of doing it wrong), most commonly known as 6 Sigma. Six Sigma at many
organizations simply means a measure of quality that strives for near perfection. Six Sigma is a
disciplined, data-driven approach and methodology for eliminating defects (driving toward six
standard deviations between the mean and the nearest specification limit) in any process–from
manufacturing to transactional and from product to service. The statistical representation of Six
Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process
must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined
as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity
of chances for a defect. Process sigma can easily be calculated using a Six Sigma calculator. The
fundamental objective of the Six Sigma methodology is the implementation of a measurement-
based strategy that focuses on process improvement and variation reduction through the
application of Six Sigma improvement projects. This is accomplished through the use of two Six
Sigma sub-methodologies: DMAIC and DMADV. The Six Sigma DMAIC process (define,
measure, analyze, improve, control) is an improvement system for existing processes falling
below specification and looking for incremental improvement. The Six Sigma DMADV process
(define, measure, analyze, design, verify) is an improvement system used to develop new
processes or products at Six Sigma quality levels. It can also be employed if a current process
requires more than just incremental improvement.

Six Sigma Consultants all over the world have developed proprietary methodologies for
implementing Six Sigma quality, based on the similar change management philosophies and
applications of tools. Sigma is a measurement that indicates how a process is performing. Six
Sigma stands for Six Standard Deviations (Sigma is the Greek letter used to represent standard

50
deviation in statistics) from mean. Six Sigma methodology provides the techniques and tools to
improve the capability and reduce the defects in any process. Six sigma is a fact-based, data-
driven philosophy of improvement that values defect prevention over defect detection. Processes
require inputs & produce outputs. If you control the inputs, you will control the outputs. This is
generally expressed as the y= f (x) concept. Six Sigma as a set of tools includes all the qualitative
and quantitative techniques used by the six sigma expert to drive process improvement. A few
such tools include statistical process control (SPC), Control charts, failure mode & effects
analysis, process mapping etc. Process Control is pre-requisite for error-free Quality. Cost of
poor quality is a result of poorly controlled process. Six Sigma has shown that the highest quality
producer is also the lowest cost producer. Six Sigma is a Standard of Excellence. It means no
more than 3.4 Defects per Million Opportunities.

Process Defect Per Million Rolled Throughput

Capability Opportunities Yield(Long Term)

2 308,537 69.1%

3 66,807 93.3%

4 6,210 99.4%

5 233 99.97%

6 3.4 99.99966%

Practical Meaning of “99% Good”

 20,000 lost articles of mail per hour
 Unsafe drinking water almost 15 minutes each day
 5,000 incorrect surgical operations per week
 2 short or long landings at major airports each day
 200,000 wrong drug prescriptions each year
 No electricity for almost 7 hours each month

Six Sigma Results

 Defects are eliminated
 Production and development costs are reduced
 Cycle times and inventory levels are reduced
 Profit Margin and customer satisfaction are improved
One Sigma shift improvement yields 20% margin improvement, 12% -18% capacity
increase, 12% workforce reduction and 10% -30% capital reduction.

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2.21 Kaizen
Since 1986 when the book Kaizen: The Key to Japan’s Competitive Success was published, the
term kaizen has come to be accepted as one of the key concepts of management. In the first
decade of the twenty-first century as the Toyota Motor Company surpassed General Motors to
become the top automotive manufacturer in the world, awareness of the vital difference played
by kaizen in Toyota’s success also increased. Today, organizations worldwide from
manufacturers, to hospitals, to banks, to software developers, to governments are making a
difference by adopting kaizen philosophies, mind-sets, and methodologies. Even though the
names of these strategies may change over the decades from continuous quality improvement
and total quality management, to just-in-time and operational excellence, to six sigma and lean
manufacturing, the most successful of these strategies are customer-focused, gemba-oriented,
and kaizen-driven.

The 1993 edition of the New Shorter Oxford English Dictionary recognized the word kaizen* as
an English word. The dictionary defines kaizen as “continuous improvement of working
practices, personal efficiency, etc., as a business philosophy.” In Japanese, kaizen means
“continuous improvement.” The word implies improvement that involves everyone—both
managers and workers—and entails relatively little expense. The kaizen philosophy assumes that
our way of life—be it our working life, our social life, or our home life—should focus on
constant improvement efforts. This concept is so natural and obvious to many Japanese that they
don’t even realize they possess it! Kaizen has contributed greatly to Japan’s competitive success.
Although improvements under kaizen are small and incremental, the kaizen process brings about
dramatic results over time. The kaizen concept explains why companies cannot remain static for
long in Japan. Western management, meanwhile, worships innovation: major changes in the
wake of technological breakthroughs and the latest management concepts or production
techniques. Innovation is dramatic, a real attention-getter. Kaizen, on the other hand, is often
undramatic and subtle. But innovation is one-shot, and its results are often problematic, whereas
the kaizen process, based on commonsense and low-cost approaches, ensures incremental
progress that pays off in the long run. Kaizen is also a low-risk approach. Managers always can
go back to the old way without incurring large costs. Most “uniquely Japanese” management
practices, such as total quality control (TQC) or companywide quality control and quality circles,
and our style of labor relations can be reduced to one word: kaizen. Using the term kaizen in
place of such buzzwords as productivity, total quality control (TQC), zero defects (ZDs), just- in-
time (JIT), and the suggestion system paints a clearer picture of what has been going on in
Japanese industry. Kaizen is an umbrella concept for all these practices. However, these practices
are not necessarily confined to Japanese management but rather should be regarded as sound
principles to be applied by managers everywhere. By following the right steps and applying the
processes properly, any company, no matter what its nationality, can benefit from kaizen. The
widespread acceptance of kaizen into management thinking, including the successes of Kaizen
Institute clients in more than 50 countries, bears this out.

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Major Kaizen Concepts
Management must learn to implement certain basic concepts and systems in order to realize
kaizen strategy: Kaizen and management, Process versus result, following the plan- do-check-act
(PDCA)/standardize-do-check-act (SDCA) cycles, putting quality first, speak with data. The next
process is the customer. By way of introduction, top management must put forth a very careful
and very clear policy statement. It then must establish an implementation schedule and
demonstrate leadership by practicing a kaizen procedure within its own ranks.

Kaizen and Management

In the context of kaizen, management has two major functions: maintenance and improvement.
Maintenance refers to activities directed toward maintaining current technological, managerial,
and operating standards and upholding such standards through training and discipline. Under its
maintenance function, management performs its assigned tasks so that everybody can follow
standard operating procedures (SOPs). Improvement, meanwhile, refers to activities directed
toward elevating current standards. The Japanese view of management thus boils down to one
precept: Maintain and improve standards. Improvement can be classified as either kaizen or
innovation. Kaizen signifies small improvements as a result of ongoing efforts. Innovation
involves a drastic improvement as a result of a large investment of resources in new technology
or equipment. (Whenever money is a key factor, innovation is expensive.) Because of their
fascination with innovation, Western managers tend to be impatient and over look the long-term
benefits kaizen can bring to a company. Kaizen, on the other hand, emphasizes human efforts,
morale, communication, training, teamwork, involvement, and self-discipline—a commonsense,
low-cost approach to improvement.

Process versus Result

Kaizen fosters process-oriented thinking because processes must be improved for results to
improve. Failure to achieve planned results indicates a failure in the process. Management must
identify and correct such process-based errors. Kaizen focuses on human efforts—an orientation
that contrasts sharply with the results-based thinking in the West. A process-oriented approach
also should be applied in the introduction of the various kaizen strategies: the plan- do-check-act
(PDCA) cycle; the standardize-do-check-act (SDCA) cycle; quality, cost, and delivery (QCD);
total quality management (TQM); just-in-time (JIT); and total productive maintenance (TPM).
Kaizen strategies have failed many companies simply because they ignored process. The most
crucial element in the kaizen process is the commitment and involvement of top management. It
must be demonstrated immediately and consistently to ensure success in the kaizen process.

Following the PDCA/SDCA Cycles

The first step in the kaizen process establishes the plan- do- check-act (PDCA) cycle as a vehicle
that ensures the continuity of kaizen in pursuing a policy of maintaining and improving

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standards. It is one of the most important concepts of the process. Plan refers to establishing a
target for improvement (since kaizen is a way of life, there always should be a target for
improvement in any area) and devising action plans to achieve that target. Do refers to
implementing the plan. Check refers to determining whether the implementation remains on
track and has brought about the planned improvement. Act refers to performing and
standardizing the new procedures to prevent recurrence of the original problem or to set goals for
the new improvements. The PDCA cycle revolves continuously; no sooner is an improvement
made than the resulting status quo becomes the target for further improvement. PDCA means
never being satisfied with the status quo. Because employees prefer the status quo and frequently
do not have initiative to improve conditions, management must initiate PDCA by establishing
continuously challenging goals. In the beginning, any new work process is unstable. Before one
starts working on PDCA, any current process must be stabilized in a process often referred to as
the standardize- do- check- act (SDCA) cycle. Every time an abnormality occurs in the current
process, the following questions must be asked: Did it happen because we did not have a
standard? Did it happen because the standard was not followed? Or did it happen because the
standard was not adequate? Only after a standard has been established and followed, stabilizing
the current process, should one move on to the PDCA cycle. Thus the SDCA cycle standardizes
and stabilizes the current processes, whereas the PDCA cycle improves them. SDCA refers to
maintenance, and PDCA refers to improvement; these become the two major responsibilities of
management.

Putting Quality First

Of the primary goals of quality, cost, and delivery (QCD), quality always should have the highest
priority. No matter how attractive the price and delivery terms offered to a customer, the
company will not be able to compete if the product or service lacks quality. Practicing a quality –
first credo requires management commitment because managers often face the temptation to
make compromises in meeting delivery requirements or cutting costs. In so doing, they risk
sacrificing not only quality but also the life of the business.

Speak with Data

Kaizen is a problem-solving process. In order for a problem to be correctly understood and
solved, the problem must be recognized and the relevant data gathered and analyzed. Trying to
solve a problem without hard data is akin to resorting to hunches and feelings—not a very
scientific or objective approach. Collecting data on the current status helps you to understand
where you are now focusing; this serves as a starting point for improvement. Collecting,
verifying, and analyzing data for improvement is a theme that recurs throughout kaizen.

The Next Process Is the Customer

All work is a series of processes, and each process has its supplier as well as its customer. A
material or a piece of information provided by process A (supplier) is worked on and improved

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in process B and then sent on to process C. The next process always should be regarded as a
customer. The axiom “the next process is the customer” refers to two types of customers: internal
(within the company) and external (out in the market). Most people working in an organization
deal with internal customers. This realization should lead to a commitment never to pass on
defective parts or inaccurate pieces of information to those in the next process. When everybody
in the organization practices this axiom, the external customer in the market receives a high -
quality product or service as a result. A real quality-assurance system means that everybody in
the organization subscribes to and practices this axiom.

Major Kaizen Systems

The following are major systems that should be in place in order to successfully achieve a kaizen
strategy: Total quality control (TQC)/total quality management (TQM); A just -in- time (JIT)
production system (Toyota Production System); Total productive maintenance (TPM); Policy
deployment; A suggestion system; Small-group activities

Total Quality Control/Total Quality Management

One of the principles of Japanese management has been total quality control (TQC), which, in its
early development, emphasized control of the quality process. This has evolved into a system
encompassing all aspects of management and is now referred to as total quality management
(TQM), a term used internationally. Regarding the TQC/TQM movement as a part of kaizen
strategy gives us a clearer understanding of the Japanese approach. Japanese TQC/TQM should
not be regarded strictly as a quality-control activity; TQC/TQM has been developed as a strategy
to aid management in becoming more competitive and profitable by helping it to improve in all
aspects of business. In TQC/TQM, Q, meaning “quality,” has priority, but there are other goals,
too—namely, cost and delivery. The T in TQC/TQM signifies “total,” meaning that it involves
everybody in the organization, from top management through middle managers, supervisors, and
shop-floor workers. It further extends to suppliers, dealers, and wholesalers. The T also refers to
top management’s leadership and performance—so essential for successful implementation of
TQC/TQM. The C refers to “control” or “process control.” In TQC/TQM, key processes must be
identified, controlled, and improved on continuously in order to improve results. Management’s
role in TQC/TQM is to set up a plan to check the process against the result in order to improve
the process, not to criticize the process on the basis of the result. TQC/TQM in Japan
encompasses such activities as policy deployment, building quality-assurance systems,
standardization, training and education, cost management, and quality circles.

The Just- in-Time Production System

Originating at Toyota Motor Company under the leadership of Taiichi Ohno, the just- in- time
(JIT) production system aims at eliminating non-value-adding activities of all kinds and
achieving a lean production system that is flexible enough to accommodate fluctuations in

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customer orders. This production system is supported by such concepts as takt time (the time it
takes to produce one unit) versus cycle time, one-piece flow, pull production, jidoka
(“automation”), U-shaped cells, and setup reduction. To realize the ideal JIT production system,
a series of kaizen activities must be carried out continuously to eliminate non-value-adding work
in gemba. JIT dramatically reduces cost, delivers the product in time, and greatly enhances
company profits.

Total Productive Maintenance

An increasing number of manufacturing companies now practice total productive maintenance
(TPM) within as well as outside of Japan. Whereas TQM emphasizes improving overall
management performance and quality, TPM focuses on improving equipment quality. TPM
seeks to maximize equipment efficiency through a total system of preventive maintenance
spanning the lifetime of the equipment. Just as TQM involves everybody in the company, TPM
involves every-body at the plant.

Policy Deployment
Although kaizen strategy aims at making improvements, its impact may be limited if everybody
is engaged in kaizen for kaizen’s sake without any aim. Management should establish clear
targets to guide everyone and make certain to provide leadership for all kaizen activities directed
toward achieving the targets. Real kaizen strategy at work requires closely supervised
implementation. This process is called Policy Deployment. First, top management must devise a
long-term strategy, broken down into medium-term and annual strategies. Top management must
have a plan-to-deploy strategy, passing it down through subsequent levels of management until it
reaches the shop floor. As the strategy cascades down to the lower echelons, the plan should
include increasingly specific action plans and activities. For instance, a policy statement along
the lines of “We must reduce our cost by 10 percent to stay competitive” may be translated on
the shop floor to such activities as increasing productivity, reducing inventory and rejects, and
improving line configurations. Kaizen without a target would resemble a trip without a
destination. Kaizen is most effective when everybody works to achieve a target, and management
should set that target.

The Suggestion System

The suggestion system functions as an integral part of individual-oriented kaizen and emphasizes
the morale-boosting benefits of positive employee participation. Japanese managers see its
primary role as that of sparking employee interest in kaizen by encouraging them to provide
many suggestions, no matter how small. Japanese employees are often encouraged to discuss
their suggestions verbally with supervisors and put them into action right away, even before
submitting suggestion forms. They do not expect to reap great economic benefits from each
suggestion. Developing kaizen -minded and self-disciplined employees is the primary goal. This

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outlook contrasts sharply with that of Western management’s emphasis on the economic benefits
and financial incentives of suggestion systems.

Small-Group Activities
A kaizen strategy includes small-group activities—informal, voluntary, intra-company groups
organized to carry out specific tasks in a workshop environment. The most popular type of small-
group activity is quality circles. Designed to address not only quality issues but also such issues
as cost, safety, and productivity, quality circles may be regarded as group-oriented kaizen
activities. Quality circles have played an important part in improving product quality and
productivity in Japan. However, their role often has been blown out of proportion by overseas
observers, who believe that these groups are the mainstay of quality activities in Japan.
Management plays a leading role in realizing quality—in ways that include building quality-
assurance systems, providing employee training, establishing and deploying policies, and
building cross -functional systems for QCD. Successful quality-circle activities indicate that
management plays an invisible but vital role in supporting such activities.

The Ultimate Goal of Kaizen Strategy

Since kaizen deals with improvement, we must know which aspects of business activities need to
be improved most. And the answer to this question is quality, cost, and delivery (QCD). Quality,
cost, and scheduling (QCS) may be given attention. QCD has replaced QCS as the commonly
accepted terminology. Quality refers not only to the quality of finished products or services but
also to the quality of the processes that go into those products or services. Cost refers to the
overall cost of designing, producing, selling, and servicing the product or service. Delivery
means delivering the requested volume on time. When the three conditions defined by the term
QCD are met, customers are satisfied. QCD activities bridge such functional and departmental
lines as research and development, engineering, production, sales, and after-sales service.
Therefore, cross-functional collaborations are necessary, as are collaborations with suppliers and
dealers. It is top management’s responsibility to review the current position of the company’s
QCD in the market-place and to establish priorities for its QCD improvement policy.

Group Assignment (10%)

Select one change management tool and show how you initiate, introduce and implement the
change idea in one organization that you may lead using change management models,
strategies and techniques. In addition explain what means you may use in overcoming
resistance and barriers to the change initiative you are going to introduce. How are you going to
manage the stress that may occur as a result of the change introduced? Clearly show your role
as a leader in initiating and sustaining the change initiative.

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Unit Three: Business Process Reengineering

I. Discussion Questions for Individual Assignment (5%)

1. Compare and contrast BPR and continuous quality improvement programs

2. List the steps and phases in Business Process Reengineering
3. What are the weaknesses of BPR?

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Unit Four: Balanced Scorecard

Discussion Questions for Individual Assignment (5%)

1. Most organizations tend to have good strategic plans, but they fail to successfully implement
their strategic plans. Identify at least two reasons why organizations fail to implement their
strategic plans?
2. Briefly describe the “strategic foundation” for building the Balanced Scorecard?
3. What two ingredients are important for creating a “clear and concise” strategy?
4. What is the recommended maximum number of strategic areas, objectives, measurements,
and targets for a balanced scorecard?
5. What are the steps of building and implementing BSC?
6. What is the ultimate goal behind full-scale implementation of the Balanced Scorecard?
7. What are the driving forces behind implementing Balanced Scorecard?
8. Explain the principles of strategy focused organizations.

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Unit Five: Managing Stress

Introduction

Many have, for years, been attaching only negative meaning or impact to stress. Stress can have
a very destructive impact both on the individual workers and the organization at large. On the
other hand, stress can at times have a constructive role as well. In this chapter, we will consider
what causes stress, how it affects people differently, and ways individuals and organizations can
manage stress. Dear student, in this Unit, you’ll be made to examine the most important issues
that characterize stress, the most likely issues which result in stress, the individual differences in
relation to stress, the consequences of stress both on the individual employee and the
organizations at large, and how organizations or managers cope up with work related stresses.

5.1 Meaning and concepts

It is our body’s physical, mental and chemical reaction to circumstances that frighten, excite,
confuse and irritated. Stress if controlled is a friend that strengthens of the next encounter. Stress
if handled poorly becomes an enemy which can cause diseases like high B.P., Ulcers, Asthma,
Overactive thyroid etc. It is important to know how to keep lid on stress. Because what causes
stress isn’t always what’s going on around us that strange look from the boss, the traffic jam –
it’s how we perceive these events. The word “stress” technically refers only to how our body
reacts to different external inputs, known as stressors. The way that people cope makes a
difference in handling stress. It is natural to feel some amount of stress when faced with a
stressor. It’s not like automations. But there are ways of handling the situation. When we
perceive a threat of any kind, the nervous system releases hormones lime adrenaline and nor
adrenaline which inc reassess one’s heart and breathing rates, blood, pressure and muscle
tension. This is known as the fight-or flight response, and it served our rugged ancestors well as
they hunted or battled. Some stress is good for us and does help us get things done. Its
effectiveness lies on a bell curve known as the “Yerkes – Dodson Law”. As tress increases so
does performance and efficiency, but only up to a point. If the stress continues beyond that point,
performance and efficiency drop off. There is no single solution to the problem of stress. After
all what is stressful of one person is not necessarily stressful for everyone. The key factors of

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stress are fear of unknown, performance, anxiety and fear, boredom, grief, social re-adjustments
and personality. Personality is the most important influence of the way we respond to all events
and situations. The signals of stress may arise individually and in many combinations such as
chronic stomach upset, headache, skin rashes, irregular breaths and sleeplessness. The other
diseases related to stress are heart disease, diabetes, hypertension, acidity, backache and neck
problems.

5.2 Stressors

Managing stress is the key. The exercise and stroking reduces stress. Transactional analysis
study helps to understand our behavioral pattern and then helps to understand stress. It is also
helpful in finding individual difference in stress management. In fact the stress is caused by
internal stressors and external stressors. The internal stressors are life style choices-not enough
sleep, overloaded schedule, negative self Talk-pessimistic thinking, self criticism, mind traps–
Unrealistic expectations, talking things personally, stressful personality types-perfectionist,
workaholic. The external stressors are physical environment-noise, heat, social-rudeness,
aggressiveness, organizational–regulation, deadliness, major life events–death of a relative, new
baby, daily hassles–traffic, vehicle breakdown.

The most of the stress that most of us have is internal–self generated. We can do something to
reduce our stress. We are always in control of our interpretation and response to any situation.
Some people experience panic symptoms like difficulty in breathing, heart pounding, numbness
or tingling in extremities. Prolonged stress can contribute to anxiety, depression, anger and
hostility, high blood pressure or cardiac irregularities. However a person can train him or herself
to lessen the effects of stress and stressors through simple “Thought training”.

Major Types of Stressors

Some of the major types of stressors are psychological–attitude, personality, self-esteems and
ethnicity, physical–environment, nitration, drugs and chemicals, role–conflict of role, role
ambiguity, multiple roles, sociological–political, economic, ethnic cultural background,
biomechanical-job site design flow, and state of human development–adolescence, adulthood,
maturity and death.

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Behavioral Signs and Symptoms of Stress

The signs and symptoms of stress are increased smoking, aggressive behavior, increased alcohol
or drugs abuse, carelessness, under eating overeating, withdrawal, listlessness, hostility,
accident-proneness, nervous, laughter, compulsive behavior and impatience. In addition
behavioral disorders are primarily “conduct disorder”; eating disorders and alcoholism.

Stress Influenced by specific dietary deficiency and excesses

The physiological arousal is exaggerated and behavior is altered dramatically by the following
dietary excess; caffeine, sugar, faulty food, sodium, alcohol and nicotine. Similarly following
vitamins get depleted during the body going through stress; Vitamin C, Vitamin B-complex and
Vitamin D.

Physical Disorders caused by Stress

Some of the disorders that are caused by stress are hypertension, cardiovascular and tension
headaches, cancer, arthritis, respiratory disease, ulcers, colitis and mule tension problems.

Emotional disorders caused by Stress

Some of the emotional disorders that occur due to excessive stress are anxiety, panic attack, and
depression and adjustment disorders.

Factors Influencing Susceptibility to Stress

Following are some of the key factors influencing susceptibility to stress

 Cultural –self esteem, value, introversion and extroversion

 Age dependent – children’s susceptibility, elderly persons at risk.
 Men – hear diseases, stoicism, anger and hostility.
 Women – cancer, susceptibility to immune system disorder.

Managing stress

When we are feeling tense and tired there is a natural tendency for the problems in your work
and life to appear magnified. The disappointments seen like disasters, helpful advice stings like
criticism. The daily hassles seem to look a personal curse and there is a greater chance of one’s
getting upset over small issues. The simple problems and events seem more unmanageable when
one is tense and stressed. Most of us waste enormous amounts of energy by strongly racing to
even the most minor delays. If one notices a feeling of lack of time, frustrating day after day, it
may be an early warning time to do something about it – a time to change the environment, work
habits and review of one’s life. These sign and symptoms are indicator of stress and tension have
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entered an intense and potentially harmful level. This is the stage which calls for relaxation. The
relaxation response calls for creating the opposite reaction to stress “invoking the relaxation
response” – the breaking principle.

According to the Herbert Benson approach to stress involves two basic steps: repeating a prayer,
word, round or phrase and disregarding other thoughts. This quiet part of the brain activates
others which in turn command puffs of Nitric oxide to be secreted, helping the body to be less
responsive to stress hormones. These changes influence for 24 – hour period, and you’re calmer
and you’re more efficient. The repeated prayers, yoga and meditation have the same effect.
These are the things experts, priests have described over decades is the science for what people
have been doing for millennia regardless of the culture. These techniques have been there, but
they all come back to the basic relaxation response. Another tactic is to change the negative or
distorted patterns of thought that cause us stress which are often called “catastrophising”.

5.3 Assessing Stress

To assess what causes you the stress, list your priority work activities/objectives and assess what
you are in control of and what you are not. Don’t agree to take on duties you can’t accomplish
successfully and also delegate task. You should be prepared for meetings, presentations and
discussions, if someone has said something that bothers you, seek clarification. If you are angry,
upset with someone; deal with it soon after you have cooled down. It is important making stress
management a habit. Select one stress management activity. Convince yourself that you want to
do it. Set realistic goals; break it down into monthly/ weekly goals. Then do it. Enlist with the
help of family and friends. Then reward yourself for accomplishing your goals. It takes 20 – 30
days of repletion to form a habit. The following are three massages which can help you to
manage stress.

 Stress is bad when it causes you to be upset or sick.

 Most of your stress is self-generated.
 You can do something to reduce the stress.
Some of the activities of managing stress are eating healthy foods, exercise regularly (3
times/week for 30 minutes), meditate/relax, get adequate sleep, stop smoking, limit alcohol use,
pursue enjoyable diversions, talk with friends and family, look for activities that make you laugh
and seek professional help.

Stress Is All In Your Head

The negative stress is the most harmful type of stress. It occurs when we view change and
pressure as a burden and perceive rising demands as threats. We feel a sense of frustration and
helplessness and consider ourselves as a victim of circumstances. The repeated and prolonged
negative stress can trigger complex physiological reactions that may involve more than 1500
different chemical changes in the brain and the body which may lead to exhaustion of mental and

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physical energies and a weak immune system. The chemical messengers of the brain secreted by
hypothalamus and the hormones from our pituitary glands signal the adrenal glands to produce
cholesterol. The adrenaline and cholesterol raise blood pressure during stress. The mismanaged
negative stress affects the immune system, functioning of the heart, hormones levels, the nervous
systems, memory and thinking, physical co-ordination and metabolic rate, raisers blood
cholesterol, blood pressure and uric acid levels, increases the risk of many diseases such as heart
diseases, cancer, immuno-deficiency diseases and common cold. The negative stress also affects
brain cells and nearby areas to prematurely age the adult brain, continuous bombardment of
stress hormones on the brain destroys the cerebral hormones receptors and weakens the brain
areas that control emotions, the stress inducing adrenal hormones – glucocorticoids can also
block the entry of glucose into the brain cells, thereby killing them.

The sources of stress are highly personal and may vary from person to person. What may affect
one individual may not affect or irritate other (even one’s spouse) at all. The ability to stay calm
and healthy depends on “small things” and this need to be learnt to be effective. How we respond
to the irritation of everyday life such as anger, rejection, interruptions, traffic jams and deadlines
etc. are often indicative of our psychological and physical stress.

5.4 Tools of stress Management

People all over the world suffer more from stress than from any other disease. Research has also
shown that majority of diseases in human beings have a psychosomatic origin. They first start in
the mind and then manifest themselves in the body. Since the mental make-up of human beings
is so prone and vulnerable to stress, it becomes imperative that we have a clear understanding of
its causes, effects and solutions. In today’s highly stressful world, our health and performance
depends, to a large extent, on remaining calm under pressure, alert yet relaxed. Stress
management is also a tool of managing one’s emotions. Stress management is a process of
coping, recovery, re-interpretation, reframing cognitive structuring. We can manage stress,
which needlessly saps our energy. We can also heal physical aches and pains with the same tool.

Once, we begin emotional management, w will begin to feel empowered. We will live in the
present moment free of past burdens and future worries. We need to learn the meaning of
emotional freedom. We should express it appropriately. Even though it may feel good to snap at
the object of your fury, do not speak up. Say let us talk about, out difference of opinion or
something is really bothering me – this is called catharsis. Do not Accuse. Arrest Anxiety. If you
cannot say write it.

Handling Negative Feelings

Replace negative feelings with positive feeling. None of us can avoid having negative feelings
about our job sometimes but good news is that we have the power to do something about it. The
potential benefits of stress management training are significant as individual recognize the early

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warning signs of overloading and burnout (headache and fatigue) and can respond to early
signals. Following are some of the other benefits of stress management.

 The individual become aware of the immediate physical signs of stress (cold, sweaty
hands, nervous tense).
 Recognize and respond to emotionally distressing events in one’s life
 Learn to recognize speech patterns that neglect tension (rapid acceleration, staccato
couplets).
 Develop more efficient and relaxing breathing patterns to reduce tension (abdominal
breathing).
 Discover way to use these warning signs as signals to change work or leisure
circumstances to reduce stressors.
 Hold his breath for a moment, then let it go, imaging that as you breath out, you are
breathing out all unnecessary tension from your body.
 As you breadth out, repeat several times the words, “let go … and relax”.

Devise a plan for dealing Unnecessary Thoughts

Unplug your negative thoughts one of the keys to overcoming depression is learning how to
control your low moods and revising them. After doing the above breath exercise the body is
relaxed and emotions calm down but unnecessary thoughts continue to parade through the mind.
In order to handle the thoughts following exercise should be undertaken:

 All negative thoughts are caused by a disruption in the body’s energy system.
 Not to fight these thoughts because that will make the distraction more powerful.
 With awareness we can left ourselves out of irritation, restlessness, anxiety, fear and
move.
 Imagine that each fresh breath you take in your mind is being cleansed to unnecessary
thoughts.
 We can equally let go of long term hurts and bitterness.

Tips for Reducing Stress

Simple common sense strategies for transforming mental, physical and emotional tension into
energy that is creative and effective are listed as under:

 Take time to be alone on a regular basis.

 Listen to your heart, check your intentions, re-evaluate your goals and activates.

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  Simplify your life, start eliminating the trivial things. Do not think too much about the
minor things in life.
 Take deep, slow breathe frequently especially while on the phone or in the car or waiting
for something or someone. Use every opportunity to relax and revitalize yourself.
 Each day plan to do something that brings you joy, something that you love to do,
something just for yourself.
 When you are concerned about something talk it over with someone you trust or write
down your feelings.
 Say “No” in a firm but kind way, when asked to do something you do not really want to
do.
 Exercise regularly. Stretching your body releases tension.
 Remember, it takes less energy to get an unpleasant task done right then, than to worry
about it all day.
 Take time to be with nature, people you like, children and to enjoy music.
 Noticing the seasonal changes or watching people faces can be a good harmonizer.
 Consciously practice doing one thing at a time keeps your mind focused on the present.
 Try not to waste your precise life on guilt about the past or concern for future.
 Learn a variety of relaxation techniques and practice at least one regularly.
 When you find yourself angry in situation ask yourself – “what can I learn form this?”
 Take frequent breaks to relax.
 Organize your life to include time for fun and spontaneity.
Relaxation

The relaxation means a state of restful alertness, when you can distance yourself from life’s
tensions and distractions and cultivate a clear mind at your own will.

One Touch Relaxation

This is one of the simplest, fastest way to relax anywhere, any time. One touch relaxation elicited
through the key muscles and can trigger a water fall affect and quickly dissolve tension prevalent
in the body.

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Example

 Place your finger tips on your jaw points in front of your ears.
 As you inhale, tense your jaw muscles bringing the upper and lower jaw together. You
will feel as if you are clenching your teeth –for 5 seconds.
 Then as you exhale, looser the jaw muscles, release all tension. Let the lower jaw drop
and relax your tongue.
 Repeat the exercise, but use only half the tightness in your jaw muscles. Hold for 5
seconds, then release.
 In this method, you use touch to set a sensory cue for relaxation.
 Now take a deep breath as you press your fingertips on the jaw. While exhaling relax the
jaw muscles almost like saying “Ah-h-h-h”.
 Let you tongue relax and settle down into the base of the mouth touching your lower
front teeth.
 Imagine yourself breathing out all your tensions and emotional burdens.
 You can produce a similar effect by shrugging your shoulders, lifting them up towards.
Your ears and then totally relaxing all the muscles form your neck down to your
shoulders and across your chest and upper back saying “Ah-h-h-h” as you breath way
stiffness and release inner tensions.
Five Minutes of Deep Relaxation

In this exercise the focus there is in dissipating tension at the mental level. The deep relaxation
involves the following steps:

 Select a quiet place and a comfortable position.

 Grant yourself the permission to relax.
 Choose any object placed at a distance as your object of focus.
 Keep your eyes fixed on it and silently repeat to yourself - “there is nothing that I have to
do and not problem that I have to solve”.
 Concentrate on your breathing as you release yourself of your tension.
 Take a deep breath, filling your abdomen.
 Learn the delegate responsibility.
 Monitor your intake of sugary, salt, caffeine and alcohol.

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  Laugh, smile, stop worrying and be happier.
 There is nothing quite like the sound of wind on chimes when stress gets to a high pitch.
 Create and maintain a personal support system–people with whom you can be vulnerable.
 Welcome change and challenges as an opportunity to learn and grow.
 Watch the clouds or waves in the water. Listen to music or to the sounds around you.
 In this journey of life, remember to stop and smell the flowers.
 Managing stress require mastery of self-awareness, self management and self renewal
skills.

Exercises for Relieving Stress

Some of the exercises for relieving stress Engotropic (work)–metabolizes stress hormones,
rigorous motion breaks up bracing patterns, mood–enhancing effect (anti-depressant) and
anxiolytic effect.

Sleep and Ability to Cope with Stress

 Necessary recovery from effort stress/ strain

 Sleep – not restful amidst stress (nightmares)
 Discuss your experience with stressful sleep.
Better Fitness

Research by Dallas- based Cooper Clinic indicates that bring a faithful exerciser may cut hospital
strays and doctor’s visits – for serious or minor illnesses – by almost half. In a study spanned 19
years, nearly 7000 mean aged 20 to 80 were given a physical that included maximum treadmill
test to determine that level of fitness; to follow-up exam and survey later were administered. The
collective data suggest that fit mean reduced their medical visits – and their medical bills – by a
half 46%. The findings were that the mean who were out of shape and eventually became fit
were able to lower their chances of being hospitaled by 42%. It was confirmed that “to get out of
the low – fit group took only 30 minutes of physical activity three to five days a week”.

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Brisk walk

Exercise was burn off the excess adrenaline that fuels your feeling of anxiety. Exercise releases
endorphin, a potent group of natural chemicals in the body that may block anxiety and
depression.

Hum our or Laughter

It is the best medicine proved by both the medical and psychological professions in helping and
healing the “Body” and the “Mind”. The major healing power comes in the changes of the
person’s biochemistry in the brain. Laughter activates endorphins which de-stress and heal the
body and mind. The laughter in the workplace should be sensitively and appropriately enjoyed.
However, inappropriate hum our may do more harm than good. The hum our caused at the
proper time can help break the “Panic Cycle” that so often accelerates the patient illness or state
of mind. Laugher can broaden the focus and diffuse the intensity of negative thoughts, thereby
aiding the individual’s ability to gain controls.

Everyone despite cultural and nationality difference, has little clown within. Sometimes the
clown is allowed to come out and the other time suppressed. Humour is a powerful enhancer to
bring out the clowns for laughter is contagious and addictive.

Signals of Distress

Some of the signals of distress are time urgency, tension, tiredness, mistakes, distractions, feeling
blue, aggression or hostility, change the way you look at things and handling primary energy
states.

Time urgency

 It is trying to do more in less time and yet lagging behind

 It is chronically glancing at your watch
 Becoming angry when other people seem slow.
Tension

 Noticing your muscles tighter or posture slump

 Sensing the need to stretch, move or change your routine.

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Tiredness

 Feeling increasingly fatigued in mind, body and emotions.

Mistakes

 Nothing a drop in your performance

 Making careless errors
 Diminished co-ordination in speech, writing, body language and movement.
Distractions

 Finding the mind wandering

 Having difficult in concentrating
 Experiencing some forgetfulness
Feeling Blue

 An emotional response – feeling angry, despairing or pessimistic

 Having a heightened sense of vulnerability.
Aggression or Hostility

 Feeling a surge of anger at other people

 An urge to harm them that they can be harmed or “taught a lesson”.
Change the way you look at things

 Many of us fail to realize that tension and headache are often brought on or worsened by
straining the eyes. Here is a simple “do it anywhere” technique.
 If you have been doing close work, take 5 seconds or more to blink your eyes and look at
more distant objects.
 If you have been scanning far away scenery, switch to focusing on something nearby.
 Whenever you can, take another half minute or so to brighten or dim the lighting or step
outside for some fresh are and fresh air and fresh view.
 These kinds of “visual shifts” draw new blood to the eyes, relax tired ocular muscles and
reduce brain fatigue.
Primary energy States

Following are two energy states which drive the stressful situation

Tense energy

It is a stress driven mood, characterized by and almost present sense of excitement and power.
Your physical energy may be thigh, even when you face high levels of stress and stain from long

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hours of hectic work schedule. In a tense energy state, you tend to push yourself towards one
objective after another, rarely pausing to rest or reflect. Without realizing it, you may suddenly
make up to find yourself at the edge of burn-out and exhaustions.
Calm Energy

It is a mood state that few of us experience calm energy feels remarkably serve and under
control. It replaces tense – energy with an alert and more optimistic presence of mind, peaceful
and pleasurable body feelings a deep sense of physical stamina and well being. The metal and
physical reserves are high while experiencing calm energy; you have the best combination
health, vitality and an increased level of creative intelligence.

Meditation a mysterious ladder

Mind is an elusive animal difficult to tame. Mediation creates positive channels in the mind and
eradicates destructive influences. It is a scientific process but, the goal is spiritual. Good and evil,
friend and energy are all in the mind only. Every man can create a world of virtue of vice.
Pleasure or pain out of his imagination, there is a power or energy in each person and can be
tapped. Mediation unleashed this immense potential in each individual. People seldom try to
notice what goes on inside. If they contemplate they will see that the mind is being constantly
bombarded by sense perceptions. It is in this context that meditation comes in. it is a practice by
which leads form “Earth to Heaven”; form falsehood to Truth’ from darkness to light, form pain
to bliss, from restlessness to abiding peace, form ignorance to knowledge and form mortality to
eternity. It helps to discover that the infinite weed of wisdom that lie inside men. It acts as a
tonic, opening the avenue of institutional knowledge and helps develop a strong will power.

Man must not shirk his duties

The special appeal of the Gita is to a person who stands bewildered at the cross roads wondering
how to get rid of the various problems. God gives his confidential advice to his in his hour of
distress. The message in the Gita is face and not a void action. The lord in his directive ness
given through this hymn refers to the three fundamental evils viz., “Ego”; “Attachment” and
“Desires”. Man should not be gripped by delusion. He should not be completely immersed in
sorrow when grief strikes him nor be elated when praise is showed him. The Gita a doctrine of
moderation, stands of sublimation. The lords’ message include the steps to check the mind which
can be achieved by practice. It refers to the chain reaction which is the result of unbridled
desirers and adds that context of mind can be effected by constant vigilance and practice of
dispassion. God wants everyone to do the enjoined duties without motivation, desire or
anticipating reward. In “his” Bhagwad Gita, God lays great emphasis on human effort, along
with devotion to him; not swept off by un wholeness exceeding or obsessed by the anticipation
of the benefits.

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 Unit Six: Leadership and Change
Introduction
Organizations today face a myriad of potential challenges. To be successful they must cope
effectively with the implications of new technology, globalization, changing social and political
climates, new competitive threats, shifting economic conditions, industry consolidation, swings
in consumer preferences, and new performance and legal standards. This subject became
especially relevant in the 1980s when many private and public-sector organizations were
confronted with the need to change the way things were done in order to survive. This topic,
therefore, focuses on the leaders’ major activities in planning and implementing change in the
organizations.

Leading change is one of the most important and difficult leadership responsibilities. For some
theorists, it is the essence of leadership and everything else is second. Leading change is perhaps
the most difficult challenge facing any leader. Yet it may be that this skill is the most
differentiator of managers from leaders, and of mediocre from exceptional leaders. Effective
leadership is needed to revitalize an organization and facilitate adaptation to a changing
environment. The best leaders are those who recognize the situational and follower factors
inhibiting or facilitating change, paint a compelling vision of the future, and formulate and
execute a plan that moves their vision from a dream to reality.

The scope of any change initiatives varies dramatically. Leaders can use goal setting, coaching,
mentoring, delegation, or empowerment skills to effectively change the behaviors and skills of
individual direct reports. Some change initiatives may obviously involve more than individual
coaching and mentoring. To successfully lead larger-scale change initiatives, leaders need to
attend to the situational and follower factors affecting their group or organization. They then
must use their intelligence, problem-solving skills, creativity, and values to sort out what is
important and formulate solutions to the challenges facing their group. But solutions in and of
themselves are no guarantee for change; leaders must use their power and influence, personality
traits, coaching and planning skills, and knowledge of motivational techniques and group
dynamics in order to drive change. Finally, leaders can use some measures to monitor the
progress of their change initiatives.

Leaders inspire and develop others, challenge the status quo, ask what and why questions and are
more apt to take a long-term view. Managers administer programs, control budgets and costs,
maintain the status quo, and are more likely to take a short-term view. So leadership involves
changing the way things are, whereas management involves maintaining the current state of
affairs. Much like a driver uses the gas, brakes, clutch, gears, and steering wheel to control the
speed and direction of a car, a manager uses various accounting, information, hiring,
performance management, compensation, training, planning, quality and inventory systems to
align the behavior of followers toward the accomplishment of team or organizational goals. If

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followers are over budget on travel expenses or fail to come to work on time, then managers use
various levers in the accounting or performance management system to correct the situation.
These systems help followers to behave in both a consistent and an efficient manner.
Organizations tend to be more successful when followers exhibit those behaviors most closely
aligned with organizational goals. And organizations that need fewer resources to deliver goods
and services tend to be more profitable (i.e., efficient) than those needing more resources to do
the same thing. There is nothing inherently good or bad with organizational systems, but to some
degree the quality of these systems dictates the ease with which a manager can do his or her job.

Leadership = change (vision, inspire, empower, coach, revenues, forecasts, possibilities,

opportunity, synergy).

Management = Control (plan, reward, direct, train, expenses, budgets, systems and procedures,
schedule, coordinate)

Although there are several benefits to organizational systems, one of their inherent problems is
that they are fairly resistant to change. Adding to this resistance is that many people have high
security values and have a tendency to fall in love with their systems. Whole bureaucracies and
departments are designed to do nothing but support organizational systems. Oftentimes the
people working in the accounting, information technology, or quality departments invented the
relevant systems used throughout the organization, and pride of ownership may get in the way of
needed changes. Likewise the users of these systems may not want to learn new graphics
programs, accounting procedures, sales models, or six sigma quality processes. Even if current
systems are inefficient and dysfunctional, people know how to use them, and with these
knowledge comes a certain degree of stability and predictability. Learning new systems and
behaviors requires some tolerance for ambiguity and can take a considerable amount of patience,
persistence, and hard work. All things being equal, many followers may prefer to have a
predictable path rather than risk their success on some uncharted course for the future.

A leader is a person who takes the car down a different road, has a different final destination, or
determines whether a car is even the right vehicle. Because technology, globalization, market
conditions, consumer preferences, and demographic changes can have a big impact on any team
or organization, leadership is the key to aligning organizational systems and follower behaviors
around a new organizational vision. Whereas managers focus on compliance on existing
procedures, leaders take a step back and ask why a system even exists. They create and align
systems around a new set of goals for the organization, rather than having existing systems
dictate what the organization can and cannot do. Successful leaders are also able to align
followers’ behaviors with this new vision and systems. But changing followers’ behaviors and
organizational systems, structure, and goals takes a tremendous amount of skill and effort. It
takes a combination of both leadership and management skills to successfully implement any
team or organizational change effort. One of the main reasons for the high base rate of the

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managerial incompetence is that many people in positions of authority struggle with leadership,
management, or both sets of skills.

The Rational Approach to Organizational Change

A number of authors have written about organizational change. All of the authors have unique
perspectives on leadership and change, but they also share a number of common characteristics.
Beer (1988, 1999) has offered a rational and straight forward approach to organizational change
that addresses many of the issues raised by the other authors. Beer’s model also provides a
roadmap for leadership practitioners wanting to implement an organizational change initiative, as
well as a diagnostic tool for understanding why change initiatives fail. According to Beer:

C= D x M x P > R

The D in this formula represents followers’ dissatisfaction with the current status quo. M
symbolizes the model for change, and includes the leader’s vision of the future as well as the
goals and systems that need to change to support the new vision. P represents process: This is
concerned with developing and implementing a plan that articulates the who, what, when, where,
and how of the change initiative. R stands for resistance; people resist change because they fear a
loss of identity or social contacts, and good change plans address these sources of resistance.
Finally the C corresponds to the amount of change. Notice that leaders can increase the amount
of change by increasing the level of dissatisfaction, increasing the clarity of vision, developing a
well-thought-out change plan, or decreasing the amount of resistance in followers. We should
also note that the D x M x P is a multiplicative function-increasing dissatisfaction but having no
plan will result in little change. Likewise, if followers are content with the status quo, then it may
be very difficult for leaders to get followers to change, no matter how compelling their vision or
change plan may be. This model maintains that organizational change is a very systematic
process and large scale changes can take months if not years to implement (Beer, 1988; 1999).
Leadership practitioners who possess a good understanding of the model should be able to do a
better job developing change initiatives and diagnosing where their initiatives may be getting
stuck.

Dissatisfaction
Followers’ level of satisfaction is an important ingredient in a leader’s ability to drive change.
Followers who are relatively content are not apt to change; malcontents are much more likely to
do something to change the situation. Although employee satisfaction is an important outcome of
leadership, leaders who want to change the status quo may need to take action to decrease
employee satisfaction levels. Followers’ emotions are the fuel for organizational change, and
change often requires a considerable amount of fuel. The key for leadership practitioners is to
increase dissatisfaction (D) to the point where followers are inclined to take action, but not so
much that they decide to leave the organization. So what can leaders do to increase follower
dissatisfaction levels? Probably the first step is to determine just how satisfied followers are with
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the current situation. This information can be gleaned from employee satisfaction surveys,
grievance records, customer complaints, or conversations with followers. To increase
dissatisfaction, leaders can talk about potential competitive, technology, or legal threats or
employee concerns about the status quo. They can also capitalize on or even create some type of
financial or political crisis, benchmark against other organizations, or substantially increase
performance standards. All of these actions can potentially heighten followers’ emotional levels;
however, leaders must ensure that these emotions are channeled toward the leader’s vision for
the organization.

Model
There are four key components to the model (M) variable in the change formula, and these
include environmental scanning, a vision, setting new goals to support the vision, and identifying
needed system changes. Organizations are constantly bombarded with economic, technological,
competitive, legal, and social challenges. Good leaders are constantly scanning the external
environment to assess the seriousness of these threats. They are also adept at internal scanning;
they understand where the organization is doing well and falling short. Thus, keeping up to date
on current events, spending time reviewing organizational reports, and taking time to listen to
followers’ concerns are some of the techniques leaders use to conduct external and internal
scans. This information in turn is used to formulate a vision for the change initiative. What
would a new organization look like if it were successfully counter the gravest external threats,
take advantage of new market opportunities, and overcome organizational shortcomings? What
would be the purpose of the new organization and why would people want to work in it? A good
vision statement should answer these questions. The good news about a vision statement is that it
does not have to be a solo effort on the part of the leader. Oftentimes leaders will either solicit
followers for ideas or work with a team of followers to craft a vision statement. Both of these
actions can help to increase followers’ commitment to the new vision.

It is important to understand the difference between an organization’s vision and goals. Just as
the ancient mariners used the stars to navigate, so too should a vision provides guidance for an
organization’s actions. A vision helps the organization make choices about what it should and it
should not do, the kind of people it should hire and retain, the rules by which it should operate,
and so on. But just as the stars were not the final destination for the ancient mariners, so too is a
vision not the final destination for an organization. An organization’s goals are the equivalent of
the ancient mariner’s final destination, and they should spell out specifically what the
organization is trying to accomplish and when they will get done. Depending on the
organization, these goals might concern market share, profitability, revenue or customer growth,
quality, the implementation of new customer service or information technology systems, the
number of patents rewarded, school test scores, fund raising targets, or the reduction of crime
rates. Thus, an organization’s goals can be externally or internally focused or both, depending on
the results of the environmental scan and the vision of the organization.

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After determining its goals, the leader will need to determine which systems need to change in
order for the organization to fulfill its vision and accomplish its goals. In other words, how do
the marketing, sales, manufacturing, quality, human resource, shipping, accounting, or customer
service systems need to change if the organization is to succeed? And does the current
organizational structure or culture support or interfere with the new vision? Leaders wanting
their organizational change initiatives to succeed will need to take a systems thinking approach
after setting organizational goals. A systems thinking approach asks leaders to think about the
organization as a set of interlocking systems, and explains how changes in one system can have
intended and unintended consequences for other parts of the organization. For example, if a
company wanted to grow market share and revenues, then it might change the compensation
system to motivate salespeople to go after new customers. However, this approach could also
cause a number of problems in the manufacturing, quality, shipping, accounting, and customer
service departments. Leaders who anticipate these problems make all of the necessary systems
changes in order to increase the odds of organizational success. Leaders may need to set goals
and put action plans in place for each of these system changes. These actions can be contrasted to
soiled thinking, where leaders act to optimize their part of the organization at the expense of
suboptimizing the organization’s overall effectiveness. For example, the vice president of the
sales could change the sales compensation plan if she believed her sole concern was annual
revenues. This belief could be reinforced if her compensation was primarily based on hitting
certain revenue targets. If she is a soiled thinker, she would also believe that profitability,
quality, or customer service were not her concern. However, this model of thinking could
ultimately lead to her downfall as quality and order fulfillment problems may cause customers to
leave at a faster rate than new customers are buying products.

Figure below is a graphic depiction of a systems model for leadership practitioners. All of the
components of this model interact with and affect all the other components of the model.
Therefore, leaders changing organizational vision or goals will need to think through the
commensurate changes in the organization’s structure, culture, systems, and leader and follower
capabilities. Similarly, changes in the information or hiring systems can affect the organization’s
capabilities, culture, structure, or ability to meet its goals. One of the keys to successful
organizational change is ensuring that all components-vision, culture, structure, systems,
capabilities) are in alignment. A common mistake for many leaders is to change organization’s
vision, structure, and systems and overlook organization’s culture and leader and follower
capabilities. This makes sense in that it is relatively easy to create a new vision statement,
organization chart, or compensation plan. Leaders either discount the importance of
organizational culture and capabilities, falsely believe they are easy to change, or believe they
are a given because they are so difficult to change. It is possible to change the culture and the
capabilities of an organization, but it takes considerable time and focused effort. Unfortunately,
about 70 percent of change initiatives fail; and the underlying cause for many of these failures is
the leader’s inability or unwillingness to address these culture and capabilities issues.

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 Vision

Capabilities
1. technical Culture
2.Leadrship  Norms
 Shared values

Structure
Systems 1. Span of control
1. Accounting 3.Sales 2. Team composition
2. HR 4. IT 3. Hierarchy

FIGURE 6.1 The components of organizational alignment

Process
At this point in the change process, the leader may have taken certain steps to increase follower
dissatisfaction. She may also have worked with followers to craft a new vision statement, set
new team or organizational goals, and determined what organizational systems, capabilities, or
structures need to change. In many ways, the D and M components of the change model are the
easiest for the leadership practitioners to accomplish. The process (P) component of the change
model is where the change initiative becomes tangible and actionable because it consists of the
development and execution of the change plan. Good change plans outline the sequence of
events, key deliverables, timelines, responsible parties, metrics, and feedback mechanisms
needed to achieve the new organizational goals. It may also include the steps needed to increase
dissatisfaction and deal with anticipated resistance, an outline of training and resource needs, and
a comprehensive communication plan to keep all relevant parties informed.

Depending on the depth and breadth of change, change plans can be fairly detailed and
complicated. A plan itself is only a roadmap for change. Change will only occur when the action
steps outlined in the plan are actually carried out. This is another area that where leadership

77
practitioners can run in to trouble. One of the reasons why CEOs fail is an inability to execute
and it is also one of the reasons why first-line supervisors through executives derail. Perhaps the
best way to get followers committed to a change plan is to have them create it. This way
followers become early adopters and know what, why, when, where, who, and how things are to
be done. Nevertheless, many times it is impossible for all the followers affected by the change to
be involved with the creation of the plan. In these cases follower commitment can be increased if
the new expectations for behavior and performance are explicit, the personal benefits of the
change initiative are made clear, and followers already have a strong and trusting relationship
with their leader. Even after taking all of these steps, leadership practitioners will still need to
spend considerable time holding people accountable for their roles and responsibilities in the
change plan. Followers face competing demands for the time and effort, and a lack of follow-
through will cause many followers to drop the change initiative off of their radar screens.
Leaders should also anticipate shifts in followership styles once the change plan is implemented.
Exemplary followers may shift to become alienated followers, conformist to passive followers,
or passive to alienated followers. Leaders who address these shifts in styles and inappropriate
follower behaviors in a swift and consistent manner are more likely to succeed with their change
initiatives.

Resistance
So why would followership styles shift as a result of a change initiative? One reason is that it
may take some time before the benefits of change are realized. Many times leaders, followers
and other stakeholders assume that performance, productivity, or customer service will
immediately improve up on the acquisition of new equipment, systems, behaviors, and so on.
However, there is often a temporary drop in performance or productivity as followers learn new
systems and skills. This difference between initial expectations and reality can be the source of
considerable frustration. If not managed properly, it can spark resistance (R), causing followers
to revert back to old behaviors and systems to get things done. Leadership practitioners can help
followers deal with frustration by setting realistic expectations, demonstrating a high degree of
patience, and ensuring followers gain proficiency with the new systems and skills as quickly as
possible. Good change plans address the expectation-performance gap by building in training
and coaching programs to improve follower skill levels.

Another reason why followers resist change is a fear of loss. Because of the change, followers
are afraid of losing power, close relationships with others, valued rewards, and their sense of
identity or, on the other hand, being seen as incompetent. According to Beer (1999), the fear of
loss is a predictable and legitimate response to any change initiative, and some of a leader’s
responses to these fears can be found in the table below (table 6.1). Change initiatives are more
likely to be successfully adopted if their change plans identify potential and address these areas
of resistance. People also seem to go through some very predictable reactions when confronted
with change. There are four reactions to change-shock, anger, rejection, and acceptance-make up

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what is known as the SARA model (Kubler-Ross, 1981). It is important to note that most people
go through these four stages whenever they get passed over for a promotion, receive negative
feedback on 360-degree report, get criticized by their boss, and so on.

Table 6.1 Common losses with Change

Loss of: Possible Leader Actions

Power Demonstrate empathy, good listening skills, and new ways to build
power.
Competence Coaching, mentoring, training, peer coaching, job aids, and so forth.
Relationships Help employees build new relationships before change occurs, or soon
thereafter.
Rewards Design and implement new reward system to support change initiative
Identity Demonstrate empathy; emphasize value of new roles.

But what a leadership practitioner do with the SARA model? Perhaps the first step is to simply
recognize the four reactions to change. Second, leaders need to understand that individual
followers can take more or less time to work through the four stages. Leaders can, however,
accelerate the pace in which followers work through the four stages by maintaining an open door
policy, demonstrating empathy, and listening to concerns. Third, as it is important to note that
people are not likely to take any positive action toward a change initiative until they reach the
acceptance stage. This does not mean they are happy with the change; only that they accept the
inevitability of the change. Fourth, they also need to understand that where people are in the
SARA model often varies according to the organization level. Usually the first people to realize
that a change initiative needs to be implemented are the organization’s top leaders. Like
everyone else, they go through the four stages, but they are the first to do so. The next people to
hear the news are middle managers, followed by first-line supervisors and individual
contributors. These three groups also go through the emotional stages of the SARA model, but
do so at different times. These differences in emotional reactions by organizational level are
depicted in fig 6.2. What is interesting in fig 6.2 is that just when top executives have reached the
acceptance stage, first-line supervisors and individual contributors and individual contributors
are in the shock or anger stages. By this time top leaders are ready to get on with the
implementation of the change initiative and may not understand why the rest of the organization
is still struggling. Because they are already at the acceptance stage, top leaders may fail to
demonstrate empathy and listening skills, and this may be another reason for the depressed
performance depicted in fig. 6.2.

Concluding Comments about the Rational Approach to Organizational

Change
The situational, follower, and leader components of the rational approach to organizational
change are shown in fig below (fig 6.3). Although organizational vision, goals and change plans

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are often a collaborative effort between the leaders and followers, they are the primary
responsibility of the leader. Leaders also need to think about the importance of critical mass for
driving change. They may be more successful by initially focusing their change efforts on early
adopters and those on the fence rather than on those followers who are the most adamant about
maintaining the status quo. Once critical mass is reached, the adopters can then exert peer
pressure on those followers reluctant to change. This approach also maintains that the leader
needs both good leadership and good management skills if a change initiative is to be successful
over the long term. Leadership skills are important for determining a new vision for the
organization, increasing dissatisfaction, coaching followers on how to do thing differently, and
overcoming resistance. Management skills are important when setting new goals and creating
and implementing change plans. Both sets of skills are not only important components in
organizational change but also may play a key role in determining whether a new company will
succeed or fail. Because of their strong leadership skill, entrepreneurs are often very good at
starting up new organizations, such as dot-coms. Many of these leaders can get followers excited
about the leader’s vision for the new company. However, if the entrepreneurial leaders fail to
possess or appreciate the importance of management skills, they may not create the systems,
policies, and procedures necessary to keep track of shifting consumer preferences, revenues,
customer satisfaction, quality, and costs. As a result, these leaders may not have the information
needed to make good operational and financial decisions, and their companies may eventually
have to file for bankruptcy. On the other hand, it is hard to see how planning and execution skills
alone will result in the formation of a new company or drive organizational change. It is almost
impossible to start up a new company-or an organization to successfully change-if a person in
charge does not have a compelling vision or fails to motivate others to do something different.
Many of the other reasons why organizational change initiatives succeed or fail also have their
roots in underdeveloped leadership or management skills.

Although both sets of skills are important, leadership practitioners should recognize that there is
a natural tension between leadership and management skills. In many ways management skills
help to maintain the status quo; they help to ensure consistency in behaviors and results.
Leadership skills are often used to change the status quo; they help to change the purpose and
processes by which an organization gets things done. Leaders who overuse or overemphasize
either set of skills are likely to suboptimize team or organizational performance. Leadership
practitioners need to better understand when to use these skills in the change process, and
education and experience can help leadership practitioners to improve both sets of skills.

Finally, it is worth noting that the rational approach provides leaders with a systematic process
on how to drive change and increased understanding on why change initiatives succeed or fail in
their respective organizations. Leadership practitioners can use the C= D x M x P > R model as a
roadmap for creating a new vision and goals, changing the products and services their
organizations provide, or changing the IT, financial operations, maintenance, or human resource
systems used to support organizational goals. Likewise, leadership practitioners can also use this

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 model as diagnostic to determine where their change initiatives have fallen short-perhaps
followers were reasonably satisfied with the status quo, did not buy-in to the new vision and
goals, critical systems of changes were not adequately identified, or change plans were
incomplete or were not properly implemented. Given the explanatory power of the model, the
rational approach to change provides leaders and leaders-to-be with a useful heuristic for driving
organizational and community change.
Emotional Level

Time
Top leaders
Middle managers
Individual contributors

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Table 6.2 Eight Reasons Why Change Efforts Succeed or Fail

1. Demonstrate a sense of urgency 1. Allow too much complacency

2. Form a strong change coalition 2.Fail to create a strong change coalition
3. Envision the future and build strategy 3.Underestimate the power of vision
4. Constantly communicate the vision 4.Undercommunicate the vision by a factor of
10
5. Remove barriers and align the 5.Permit obstacles to block the vision
organization
6. Build on early successes 6. Fail to create short-term wins
7. Maintain (or increase) the pace of 7.Declaring victory too soon
change
8. Put systems in place to reinforce 8. Neglect to anchor changes in the culture.
change

Leader
Environmental scans
Vision
Goals
Change plan
Systems vs siloed thinking
Leadership and management capabilities
Followers Situation

 Dissatisfaction 1. Crisis
 Resistance 2. Consumer preference
 SARA model 3. Market conditions
 Loss of: 4. Societal shifts
-Power 5. Political and legal challenges
-Competence 6. Competitive threats
-Identity 7. Organizational structure
-Reward 8. Organizational systems
-Relationships 9. Organizational culture
 Technical/functional capabilities

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The Emotional Approach to Organizational Change: Charismatic and
Transformational Leadership
Although the rational approach provides straight forward model for organizational change, it
seems like many of the large-scale political, societal, or organizational changes were not this
formulaic. For example, it is doubtful that many former leaders of the world including Nelson
Mandela, Mahatma Gandhi and others followed some change formula or plan, yet these
individuals were able to fundamentally change their respective societies. Although these leaders
differ in a number of important ways, one distinct characteristic they all share is charisma.
Charismatic leaders are passionate, driven individuals who are able to paint a compelling vision
of the future. Through this vision they are able to generate high levels of excitement among
followers and build particularly strong emotional attachments with them. The combination of a
compelling vision, heightened emotional levels, and strong personal attachments often compels
followers to put forth greater effort to meet organizational or societal challenges. The enthusiasm
and passion generated by charismatic leaders seems to be a dual-edged sword, however. Some
charismatic movements can result in positive and relatively peaceful organizational or societal
changes. On the downside, when this passion is used for selfish or personal gains, history
mournfully suggests it can have an equally devastating effect on society.

So what is it about charismatic leadership that causes followers to get so excited about future
possibilities that they may willingly give up their lives for a cause? Even though many people
conjure up images of charismatic individuals when thinking about leadership, the systematic
investigation of charismatic leadership is relatively recent. The debate surrounding charismatic
leadership shifted dramatically with the publication of James MacGregor Burns’s leadership
(1978). Burns was a prominent political scientist who had spent a career studying leadership in
the national political arena. He believed that leadership could take one of two forms.
Transactional leadership occurred when leaders and followers were in some type of exchange
relationship in order to get needs met. The exchange could be economic, political, or
psychological in nature, and examples might include exchanging money for work, votes for
political favors, loyalty for consideration, and so forth. Transactional leadership is very common
but tends to be transitory, in that there may be no enduring purpose to hold parties together once
a transaction is made. Burns also noted that while this type of leadership could be quite effective,
it did not result in organizational or societal change and instead tended to perpetuate and
legitimize the status quo.

The second type of leadership is transformational leadership, which serves to change the status
quo by appealing to followers’ values and their sense of higher purpose. Transformational
leaders articulate the problems in the current system and have a compelling vision of what a new
society or organization could be. This new vision of society is intimately linked to the values of
both the leader and the followers; it represents an ideal that is congruent with their value
systems. According to Burns, transformational leadership is ultimately a moral exercise in that it

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serves to raise the standard of human conduct. This implies that the acid test for transformational
leadership might be the answer to the question, “Do the changes advocated by the leader advance
or hinder the development of the organization or society?” Transformational leaders are also
adept at reframing issues; they point out how the problems or issues facing followers can be
resolved if they fulfill the leader’s vision of the future. These leaders also teach followers how to
become leaders in their own right and incite them to play active roles in the change movement.

It is important to note that all transformational leaders are charismatic, but not all charismatic
leaders are transformational. Transformational leaders are charismatic because they are able to
articulate a compelling vision of the future and form strong emotional attachments with
followers. However, this vision and these relationships are aligned with followers’ value systems
and help them get their needs met. Charismatic leaders who are not transformational can convey
a vision and form a strong emotional bonds with followers, but they do so in order to get their
own (i.e., the leader’s) needs met. Both charismatic and transformational leaders strive for
organizational or societal change; the difference is whether the changes are for the benefit of the
leader or the followers. Finally, transformational leaders are always controversial. Charismatic
leadership almost inherently raises conflicts over values or definitions of the social “good.”
Controversy also arises because the people with the most to lose in any existing system will put
up the most resistance to a transformational change initiative. The emotional levels of those
resisting the transformational leadership movement are often just as great as those who embrace
it, and this may be the underlying cause for the violent ends to Martin Luther King, Mahatma
Gandhi, etc. Burns stated that transformational leadership always involves conflict and change,
and transformational leaders must be willing to embrace conflict, make enemies, exhibit a high
level of self-sacrifice, and be thick-skinned and focused in order to perpetuate the cause.

Although charismatic or transformational leadership often results in large-scale organizational

change and higher organizational performance, there is little evidence that these changes remain
permanent in business settings after the leader moves on (Conger, 1999). In addition, some
researchers have found that charismatic or transformational leaders did not result in higher
organizational performance, but they did earn higher paychecks for themselves. In other words,
these leaders were very good at calling attention to themselves and changing their respective
organizations, but many of these changes did not result in higher organizational performance.

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