Chapter 3: Overview of Change Management

3.1 Meaning and Implications

Organizational change is defined as the adoption of a new idea or behavior by an

organization. Today’s organizations continuously need to adapt to new situations if they
are to survive and prosper. One of the most dramatic elements of change is the shift to a
technology-driven workplace in which ideas, information, and relationships are becoming
important. Many changes are being driven by advances in information technology and the
Internet. New trends such as e-business, supply chain integration, and knowledge
management require profound changes in the organization.
Managers make many other organizational changes, such as changes in work procedures,
administrative policies, technology, products, or corporate culture. Today’s successful
organizations simultaneously embrace two types of planned change: incremental change,
which refers to organizational efforts to improve basic operational and work processes in
different parts of the company; and transformational change, which involves redesigning
and renewing the entire organization. Change, particularly transformational change, does
not happen easily. However, managers can learn to anticipate and facilitate change to
help their organizations keep pace with the rapid changes in the external environment.

3.2 Forces for Organizational Change

Change can be managed. By observing external trends, patterns, and needs, managers use
planned change to help the organization adapt to external problems and opportunities.
When organizations are caught flat-footed, failing to anticipate or respond to new needs,
management is at fault. Four events comprise the change sequence: (1) internal and
external forces for change exist; (2) organization managers monitor these forces and
become aware of a need for change; (3) the perceived need triggers the initiation of
change; and (4) the change is then implemented. How each of these activities is handled
depends on the organization and managers’ styles.
We will now discuss the specific activities associated with the first two events—forces
for change and the perceived need for the organization to respond and change.

Forces for organizational change exist in the external environment and within the
organization.
Environmental Forces. External forces originate in all environmental sectors, including
customers, competitors, technology, economic forces, and the international arena.
Competition is a formidable force in bringing innovation into an industry.

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Internal Forces. Internal forces for change arise from internal activities and decisions. If
top managers select a goal of rapid company growth, internal actions will have to be
changed to meet that growth. New departments or technologies will be created and
additional people hired to pursue growth opportunities. Demands by employees, labor
unions, and production inefficiencies all can generate a force to which management must
respond with change. To support growth goals at Procter & Gamble (P&G), CEO A. G.
Lafley has acquired the beauty care companies Clairol and Wella, revised manufacturing
systems, switched some suppliers, and put greater emphasis on partnerships, such as a
joint venture with Clorox to develop Glad Press ‘n Seal food wrap

More and more organizations today face a dynamic and changing environment. This, in
turn, is requiring these organizations to adapt. “Change or die!” is the rallying cry among
today’s managers worldwide. Presently, the changing nature of the work force has
become the order of the day. For instance, almost 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 work force. And many companies are having
to spend large amounts of money on training to upgrade reading, math, computer, and
other skills of employees. Technology is changing jobs and organizations. The
substitution of computer control for 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. Companies like AT&T,
Motorola, General Electric, and Chrysler can now develop, make, and distribute their
products in a fraction of the time it took them a decade ago. And, as organizations have
had to become more adaptable, so too have their employees. Many jobs are being
reshaped. Individuals doing narrow, specialized, and routine jobs are being replaced by
work teams whose members can perform multiple tasks and actively participate in team
decisions.
We live in an “age of discontinuity.” In the 1950s and 1960s, the past was a pretty good
prologue to the future. Tomorrow was essentially an extended trend line from yesterday.
That’s no longer true. Beginning in the early 1970s, with the overnight quadrupling of
world oil prices, economic shocks have continued to impose changes on organizations. In
recent years, for instance, interest rates have become more volatile and the economies of
individual countries have become more interdependent. When interest rates rise, for
example, the market for new home loans and refinancing declines. For many mortgage
brokerage firms, revenues decline and layoffs ensue.
Competition is changing. The global economy means that competitors are as likely to
come from across the ocean as from across town. Heightened competition also means that
established organizations need to defend themselves against both traditional competitors

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who develop new products and services and small, entrepreneurial firms with innovative
offerings. Successful organizations will be the ones that can change in response to the
competition. They’ll be fast on their feet, capable of developing new products rapidly and
getting them to market quickly. They’ll rely on short production runs, short product
cycles, and an ongoing stream of new products. In other words, they’ll be flexible. They
will require an equally flexible and responsive work force that can adapt to rapidly and
even radically changing conditions.

3.3 Resistance to Change

One of the most well-documented findings from studies of individual and organizational
behavior is that organizations and their members resist change. In a sense, this is positive.
It provides a degree of stability and predictability to behavior. If there weren’t some
resistance, organizational behavior would take on characteristics of chaotic randomness.
Resistance to change can also be a source of functional conflict. For example, resistance
to a reorganization plan or a change in a product line can stimulate a healthy debate over
the merits of the idea and result in a better decision. But there is a definite downside to
resistance to change. It hinders adaptation and progress.
Resistance to change doesn’t necessarily surface in standardized ways. Resistance can be
overt, implicit, immediate, or deferred. It is easiest for management to deal with
resistance when it is overt and immediate. For instance, a change is proposed and
employees quickly respond by voicing complaints, engaging in a work slowdown,
threatening to go on strike, or the like. The greater challenge is managing resistance that
is implicit or deferred. Implicit resistance efforts are more subtle—loss of loyalty to the
organization, loss of motivation to work, increased errors or mistakes, increased
absenteeism due to “sickness”—and hence more difficult to recognize. Similarly,
deferred actions cloud the link between the source of the resistance and the reaction to it.
A change may produce what appears to be only a minimal reaction at the time it is
initiated, but then resistance surfaces weeks, months, or even years later. Or a single
change that in and of itself might have little impact becomes the straw that breaks the
camel’s back. Reactions to change can build up and then explode in some response that
seems totally out of proportion to the change action it follows. The resistance, of course,
has merely been deferred and stockpiled. What surfaces is a response to an accumulation
of previous changes.

Let’s look at the sources of resistance. For analytical purposes, we’ve categorized them
by individual and organizational sources. In the real world, the sources often overlap.

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Individual Resistance
Individual sources of resistance to change reside in basic human characteristics such as
perceptions, personalities, and needs. The following summarizes five reasons why
individuals may resist change.
HABIT Every time you go out to eat, do you try a different restaurant? Probably not. If
you’re like most people, you find a couple of places you like and return to them on a
somewhat regular basis. As human beings, we’re creatures of habit. Life is complex
enough; we don’t need to consider the full range of options for the hundreds of decisions
we have to make every day. To cope with this complexity, we all rely on habits or
programmed responses. But when confronted with change, this tendency to respond in
our accustomed ways becomes a source of resistance. So when your department is moved
to a new office building across town, it means you’re likely to have to change many
habits: waking up ten minutes earlier, taking a new set of streets to work, finding a new
parking place, adjusting to the new office layout, developing a new lunchtime routine,
and so on.
SECURITY People with a high need for security are likely to resist change because it
threatens their feelings of safety. When Sears announces it’s laying off 50,000 people or
Ford introduces new robotic equipment, many employees at these firms may fear that
their jobs are in jeopardy.
ECONOMIC FACTORS Another source of individual resistance is concern that
changes will lower one’s income. Changes in job tasks or established work routines also
can arouse economic fears if people are concerned that they won’t be able to perform the
new tasks or routines to their previous standards, especially when pay is closely tied to
productivity.
FEAR OF THE UNKNOWN Changes substitute ambiguity and uncertainty for the
known. The transition from high school to college is typically such an experience. By the
time we’re seniors in high school, we understand how things work. You might not have
liked high school, but at least you understood the system. Then you move on to college
and face a whole new and uncertain system. You have traded the known for the unknown
and the fear or insecurity that goes with it.
Employees in organizations hold the same dislike for uncertainty. If, for example, the
introduction of TQM means production workers will have to learn statistical process
control techniques, some may fear they’ll be unable to do so. They may, therefore,
develop a negative attitude toward TQM or behave dysfunctionally if required to use
statistical techniques.
SELECTIVE INFORMATION PROCESSING Individuals shape their world through
their perceptions. Once they have created this world, it resists change. So individuals are
guilty of selectively processing information in order to keep their perceptions intact. They
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hear what they want to hear. They ignore information that challenges the world they’ve
created. To return to the production workers who are faced with the introduction of TQM,
they may ignore the arguments their bosses make in explaining why knowledge of
statistics is necessary or the potential benefits the change will provide them.

Organizational Resistance
Organizations, by their very nature, are conservative. They actively resist change. You
don’t have to look far to see evidence of this phenomenon. Government agencies want to
continue doing what they have been doing for years, whether the need for their service
changes or remains the same. Organized religions are deeply entrenched in their history.
Attempts to change church doctrine require great persistence and patience. Educational
institutions, which exist to open minds and challenge established doctrine, are themselves
extremely resistant to change. Most school systems are using essentially the same
teaching technologies today as they were 50 years ago. The majority of business firms,
too, appear highly resistant to change. Six major sources of organizational resistance have
been identified.

STRUCTURAL INERTIA Organizations have built-in mechanisms to produce

stability. For example, the selection process systematically selects certain people in and
certain people out. Training and other socialization techniques reinforce specific role
requirements and skills. Formalization provides job descriptions, rules, and procedures
for employees to follow. The people who are hired into an organization are chosen for
fit; they are then shaped and directed to behave in certain ways. When an organization is
confronted with change, this structural inertia acts as a counterbalance to sustain stability.
LIMITED FOCUS OF CHANGE Organizations are made up of a number of
interdependent subsystems. You can’t change one without affecting the others. For
example, if management changes the technological processes without simultaneously
modifying the organization’s structure to match, the change in technology is not likely to
be accepted. So limited changes in subsystems tend to get nullified by the larger system.
GROUP INERTIA Even if individuals want to change their behavior, group norms may
act as a constraint. An individual union member, for instance, may be willing to accept
changes in his job suggested by management. But if union norms dictate resisting any
unilateral change made by management, he’s likely to resist.
THREAT TO EXPERTISE Changes in organizational patterns may threaten the
expertise of specialized groups. The introduction of decentralized personal computers,
which allow managers to gain access to information directly from a company’s
mainframe, is an example of a change that was strongly resisted by many information
systems departments in the early 1980s. Why? Because decentralized end-user computing

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was a threat to the specialized skills held by those in the centralized information systems
departments.
THREAT TO ESTABLISHED POWER RELATIONSHIPS Any redistribution of
decision-making authority can threaten long-established power relationships within the
organization. The introduction of participative decision making or self-managed work
teams is the kind of change that is often seen as threatening by supervisors and middle
managers.
THREAT TO ESTABLISHED RESOURCE ALLOCATIONS Those groups in the
organization that control sizable resources often see change as a threat. They tend to be
content with the way things are. Will the change, for instance, mean a reduction in their
budgets or a cut in their staff size? Those that most benefit from the current allocation of
resources often feel threatened by changes that may affect future allocations.

3.4 Managing Resistance to Change

Six tactics have been suggested for use by change agents in dealing with resistance to
change. Let’s review them briefly.
EDUCATION AND COMMUNICATION Resistance can be reduced through
communicating with employees to help them see the logic of a change. This tactic
basically assumes that the source of resistance lies in misinformation or poor
communication: If employees receive the full facts and get any misunderstandings
cleared up, resistance will subside. Communication can be achieved through one-on-one
discussions, memos, group presentations, or reports. Does it work? It does, provided that
the source of resistance is inadequate communication and that management – employee
relations are characterized by mutual trust and credibility. If these conditions don’t exist,
the change is unlikely to succeed.
PARTICIPATION It’s difficult for individuals to resist a change decision in which they
participated. Prior to making a change, those opposed can be brought into the decision
process. Assuming that the participants have the expertise to make a meaningful
contribution, their involvement can reduce resistance, obtain commitment, and increase
the quality of the change decision. However, against these advantages are the negatives:
potential for a poor solution and great time consumption.
FACILITATION AND SUPPORT Change agents can offer a range of supportive
efforts to reduce resistance. When employee fear and anxiety are high, employee
counseling and therapy, new-skills training, or a short paid leave of absence may
facilitate adjustment. The drawback of this tactic is that, as with the others, it is time
consuming. Additionally, it’s expensive, and its implementation offers no assurance of
success.

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NEGOTIATION Another way for the change agent to deal with potential resistance to
change is to exchange something of value for a lessening of the resistance. For instance,
if the resistance is centered in a few powerful individuals, a specific reward package can
be negotiated that will meet their individual needs. Negotiation as a tactic may be
necessary when resistance comes from a powerful source. Yet one cannot ignore its
potentially high costs. Additionally, there is the risk that, once a change agent negotiates
with one party to avoid resistance, he or she is open to the possibility of being
blackmailed by other individuals in positions of power.
MANIPULATION AND COOPTATION Manipulation refers to covert influence
attempts. Twisting and distorting facts to make them appear more attractive, withholding
undesirable information, and creating false rumors to get employees to accept a change
are all examples of manipulation. If corporate management threatens to close down a
particular manufacturing plant if that plant’s employees fail to accept an across-the-board
pay cut, and if the threat is actually untrue, management is using manipulation.
Cooptation, on the other hand, is a form of both manipulation and participation. It seeks
to “buy off” the leaders of a resistance group by giving them a key role in the change
decision. The leaders’ advice is sought, not to seek a better decision, but to get their
endorsement. Both manipulation and cooptation are relatively inexpensive and easy ways
to gain the support of adversaries, but the tactics can backfire if the targets become aware
that they are being tricked or used. Once discovered, the change agent’s credibility may
drop to zero.
COERCION Last on the list of tactics is coercion, that is, the application of direct
threats or force upon the resisters. If the corporate management mentioned in the previous
discussion really is determined to close a manufacturing plant if employees don’t
acquiesce to a pay cut, then coercion would be the label attached to its change tactic.
Other examples of coercion are threats of transfer, loss of promotions, negative
performance evaluations, and a poor letter of recommendation. The advantages and
drawbacks of coercion are approximately the same as those mentioned for manipulation
and cooptation.

3.5 Planned Change

A group of employees that works in a small retail women’s clothing store confronted the
owner: “The air pollution in this store from cigarette smoking has gotten awful,” said
their spokeswoman. “We won’t continue to work here if you allow smoking in the store.
We want you to post no-smoking signs on the entrance doors and not allow any employee
to smoke on the floor. If people have to smoke, they can go into the mall.” The owner
listened thoughtfully to the group’s ultimatum and agreed to its request. The next day the
owner posted the no-smoking signs and advised all of the employees of the new rule.

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A major automobile manufacturer spent several billion dollars to install state-of-the-art
robotics. One area that would receive the new equipment was quality control.
Sophisticated computer-controlled equipment would be put in place to significantly
improve the company’s ability to find and correct defects. Since the new equipment
would dramatically change the jobs of the people working in the quality control area, and
since management anticipated considerable employee resistance to the new equipment,
executives were developing a program to help people become familiar with the
equipment and to deal with any anxieties they might be feeling.
Both of the previous scenarios are examples of change. That is, both are concerned with
making things different. However, only the second scenario describes a planned change.
In this section, we want to clarify what we mean by planned change, describe its goals,
contrast first-order and second-order change, and consider who is responsible for
bringing about planned change in an organization.
Many changes in organizations are like the one that occurred in the retail clothing store—
they just happen. Some organizations treat all change as an accidental occurrence.
However, we’re concerned with change activities that are proactive and purposeful. In
this chapter, we address change as an intentional, goal-oriented activity. What are the
goals of planned change? Essentially there are two. First, it seeks to improve the ability
of the organization to adapt to changes in its environment. Second, it seeks to change
employee behavior.
If an organization is to survive, it must respond to changes in its environment. When
competitors introduce new products or services, government agencies enact new laws,
important sources of supply go out of business, or similar environmental changes take
place, the organization needs to adapt. Efforts to stimulate innovation, empower
employees, and introduce work teams are examples of planned-change activities directed
at responding to changes in the environment.
Since an organization’s success or failure is essentially due to the things that its
employees do or fail to do, planned change also is concerned with changing the behavior
of individuals and groups within the organization. There are a number of techniques that
organizations can use to get people to behave differently in the tasks they perform and in
their interactions with others.
It also helps to think of planned change in terms of order of magnitude. First-order
change is linear and continuous. It implies no fundamental shifts in the assumptions that
organizational members hold about the world or how the organization can improve its
functioning. In contrast, second-order change is a multidimensional, multilevel,
discontinuous, radical change involving reframing of assumptions about the organization
and the world in which it operates. Mikio Kitano, director of all production engineering at
Toyota, is introducing first-order change in his company. He’s pursuing slow, subtle,
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incremental changes in production processes to improve the efficiency of Toyota’s plants.
On the other hand, Boeing’s top executives have recently committed themselves to
radically reinventing their company. Responding to a massive airline slump, aggressive
competition from Airbus, and the threat of Japanese competitors, this second-order
change process at Boeing includes slashing costs by up to 30 percent, reducing the time it
takes to make a 737 from 13 months to 6 months, dramatically cutting inventories,
putting the company’s entire work force through a four-day course in “competitiveness,”
and bringing customers and suppliers into the once secret process of designing new
planes.
Who in organizations are responsible for managing change activities? The answer is
change agents. Change agents can be managers or nonmanagers, employees of the
organization or outside consultants. Typically we look to senior executives as agents of
change. CEO Bob Allen has been a primary change agent at AT&T. Mikio Kitano is one
at Toyota. The primary change agent at Boeing is its CEO, Philip Condit. For major
change efforts, top managers are increasingly turning to temporary outside consultants
with specialized knowledge in the theory and methods of change. Consultant change
agents can offer a more objective perspective than insiders can. However, they are
disadvantaged in that they often have an inadequate understanding of the organization’s
history, culture, operating procedures, and personnel. Outside consultants are also more
willing to initiate second-order changes—which can be a benefit or a disadvantage—
because they don’t have to live with the repercussions. In contrast, internal staff
specialists or managers, especially those who’ve spent many years with the organization,
are often more cautious because they fear offending long-term friends and associates.

3.6 Strategies for Planned Organizational Change

What can a change agent change? The options essentially fall into four categories:
structure, technology, physical setting, and people. Changing structure involves making
an alteration in authority relations, coordination mechanisms, job redesign, or similar
structural variables. Changing technology encompasses modifications in the way work is
processed and in the methods and equipment used. Changing the physical setting covers
altering the space and layout arrangements in the workplace. Changing people refers to
changes in employee attitudes, skills, expectations, perceptions, and/or behavior.

1. Changing Structure
Changing conditions demand structural changes. As a result, the change agent might need
to modify the organization’s structure. An organization’s structure is defined by how
tasks are formally divided, grouped, and coordinated. Change agents can alter one or
more of the key elements in an organization’s design. For instance, departmental
responsibilities can be combined, vertical layers removed, and spans of control widened
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to make the organization flatter and less bureaucratic. More rules and procedures can be
implemented to increase standardization. An increase in decentralization can be made to
speed up the decision-making process.

Change agents can also introduce major modifications in the actual structural design.
This might include a shift from a simple structure to a team-based structure or the
creation of a matrix design. Change agents might consider redesigning jobs or work
schedules. Job descriptions can be redefined, jobs enriched, or flexible work hours
introduced. Still another option is to modify the organization’s compensation system.
Motivation could be increased by, for example, introducing performance bonuses or
profit sharing.
2. Changing Technology
Most of the early studies in management and organizational behavior dealt with efforts
aimed at technological change. At the turn of the century, for example, scientific
management sought to implement changes based on time-and-motion studies that would
increase production efficiency. Today, major technological changes usually involve the
introduction of new equipment, tools, or methods; automation; or computerization.
Competitive factors or innovations within an industry often require change agents to
introduce new equipment, tools, or operating methods. For example, many aluminum
companies have significantly modernized their plants in recent years to compete more
effectively. More efficient handling equipment, furnaces, and presses have been installed
to reduce the cost of manufacturing a ton of aluminum. Automation is a technological
change that replaces people with machines. It began in the industrial revolution and
continues as a change option today. Examples of automation are the introduction of
automatic mail sorters by postal services and robots on automobile assembly lines.
The most visible technological change in recent years has been expanding
computerization. Many organizations now have sophisticated management information
systems. Large supermarkets have converted their cash registers into input terminals and
linked them to computers to provide instant inventory data. The office of 1998 is
dramatically different from its counterpart of 1978, predominantly because of
computerization. This is typified by desktop microcomputers that can run hundreds of
business software packages and network systems that allow these computers to
communicate with one another.
3. Changing the Physical Setting
The layout of work space should not be a random activity. Typically, management
thoughtfully considers work demands, formal interaction requirements, and social needs
when making decisions about space configurations, interior design, equipment placement,
and the like. For example, by eliminating walls and partitions, and opening up an office
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design, it becomes easier for employees to communicate with each other. Similarly,
management can change the quantity and types of lights, the level of heat or cold, the
levels and types of noise, and the cleanliness of the work area, as well as interior design
dimensions like furniture, decorations, and color schemes.
4. Changing People
The final area in which change agents operate is in helping individuals and groups within
the organization to work more effectively together. This category typically involves
changing the attitudes and behaviors of organizational members through processes of
communication, decision making, and problem solving. The concept of organizational
development has come to encompass an array of interventions designed to change people
and the nature and quality of their work relationships.

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