Trends in Economics, Finance and Management Journal, Vol.

2, Issue 2 (2020)

ORGANIZATIONAL CHANGE - IMPORTANCE AND EFFECTIVE

MANAGEMENT OF CHANGE
Tirana Ameti
Faculty of Economics and Administrative Sciences, International Balkan University

ABSTRACT

Organizational change is of high significance for all organizations. It can be considered as

a procedure through which an organization directs its performance toward reaching its ideal
state. Organizational change comes as e result of an ever-changing environment, a reaction to a
crisis situation currently occurring, or is triggered by a leader. Successful organizational change
is not just a process of adapting and adjustment, but also requires sufficient abilities and skills for
managing. However, there are many issues to be tackled in order to achieve successful change.
Hence, this project paper elaborates on what causes organizational change, approaches, its
process and elements, then resistance and how to manage it and lastly the possible factors that
might lead to its collapse.

KEYWORDS
organizational change, organizational development, causes of organizational change, processes of
organizational change, resistance, management of organizational change

JEL classification
M12, M14

1. INTRODUCTION

Every organization will come to a position where it will need to face any type of
changes and most of these changes are brought about by management fads. Consequently,
management fads incorporate in itself change in the process of doing business, culture,
engineering, total quality as well as empowerment. On the other hand, several other changes are
conducted by the organizations taking into consideration the competitive conditions. However,
records show that strategic changes are actually poor within companies. This comes because of
failing to understand that to formulate the plan of change is more important rather jumping
directly into implementing the change. Changing the ways and manners of how people behave in
the organization is the first step towards making a truly strategic change.
The ways on which the managers should concentrate on for a strategic change are three.
Firstly, it is important to realize the behavior, attitude and the culture employees’ exhibit. Second,
designing the implementation of the change efforts to fit organizational context will lead to less
stressful situation. Thirdly, changing people is what actually matters not changing the
organization itself because employees and managers are the major part of any organization that
would bring the pattern’s change of conducting the business. A change in the entire setup of a
company implies change in the way of thinking, way of doing, what they want to achieve, how

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Trends in Economics, Finance and Management Journal, Vol. 2, Issue 2 (2020)

they want to achieve. A strategy in organization’s context involves changes in terms the
resources they have employed, the scope of the company and the competitive advantage they
have on the competitor. While, strategic change incorporates change in terms of production
quality and its difference it provides with the competitor’s products.
In harmony with the definition of strategic change, organizations and their external
environment are the ultimate drivers of strategic change. The reason behind this is that the robust
between organizations and their external environment forces like the existence of opportunities
and threats, dictates the overall performance the firm depends upon. In other words, due
to change in the forces of external environmental, organizations would most probably change
their strategy to respond to these changes.

2. WHY IS CHANGE IMPORTANT IN AN ORGANIZATION?

In today's fast-moving environment, trying to keep up with the pace of change to any
business is likely to be truly disappointed. In fact, organizations should embrace change. The
importance of change for any organization comes as a result of seeing that any business would
likely lose the competitive edge and fail to meet the demands of what most think to be a
mounting base for gaining loyal customers.
Organizational change happens when an organization makes a transition from its present
state to some desired upcoming state. Additionally, today's business environment requires firms
keep up with changes almost constantly if they wish to constantly remain competitive. Factors
such as globalization of markets and rapidly evolving technological advancements force
businesses to respond in order to survive. Changes of this kind may be relatively minor like
installing a new software program or bigger changes like refocusing an overall marketing
strategy, transforming a company in the face of persistent foreign competition and fighting off an
antagonistic takeover.
Organizational change initiatives often emerge out of problems faced by an organization.
In several cases, however, organizations change from the forward motion of enlightened leaders
who first identify and then develop new capabilities dormant in the organization or its state of
affairs. However, organizational change might fail or result in resistance by the personnel. The
failure might be due to the approach in which change has been foreseen, announced, and
implemented or because internal resistance to it. Employees, in other words, interrupt those
changes if they perceive them as adversative to their own interests.

3. THE DIFFERENT TYPES OF ORGANIZATIONAL CHANGE

Responding at its best to changes is not an easy task at all due to the availability of choices
that exist on how one could approach them. Several types of change exist which managers can
adopt with the aim of helping companies achieve desired future status. On the whole, types of
change fall into two broad categories: evolutionary change and revolutionary change.
Evolutionary change manifests itself gradually, alternating, and focused in a narrower way.
(George & Jones 2007; Miller, 1980-198213. Its main principle is to make continuous
improvement in order to fiddle with the environment changes (Wick, & Quinn, 1999)14.

13
George, J. M., & Jones, G. R. (2007). Understanding and Managing Organizational Behavior (5rd) New York:
Pearson Education, Inc.
14
Wick, K. E., & Quinn, R. E. (1999). Organizational change and development.- Annual Review of Psychology, 50,
361-386.

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Trends in Economics, Finance and Management Journal, Vol. 2, Issue 2 (2020)

Revolutionary change manifests itself in a more rapid, vivid, and focused in a broader way.
It often occurs when the present operation scheme can no longer accomplish the demand of the
external environment, and a noteworthy change has to be made in a short period to keep the
organization work. The most far and wide known types of evolutionary change is the theory of
socio-technical systems, management by objectives and total quality management (George, &
Jones, 2002; Yang, Zhou, & Yu, 2009)15.The theory of socio-technical systems stresses out the
significance of the social and technological views within the organization along the process of
change. With other words, it gives the accent to the development of the most advantageous
partnership between members of the organization and the technology. Next, management by
objectives specify the weight of regular meetings between management and its subordinates.
The objective is to evaluate work performance, assess future work goals and thrash out
challenges and barriers in an endeavor to motivate work efficacy and coherence (Cummings, &
Worley, 2001)16.
There are also three crucial types of revolutionary change: reengineering, restructuring, and i
innovation (George, & Jones, 2002)17. First, reengineering involves the essential rethinking and
fundamental redesign of business processes to accomplish dramatic improvement in serious,
contemporary actions of performance such as quality, cost, service, and speed (Hammer &
Campy, 1993)18. In addition, when organization experiences a quick worsening in performance,
managers may attempt to turn things around by reform and reorganization. For instance, a
company tries to make straightforward its organizational structure by eliminating divisions,
levels in the hierarchy or departments; and downsizing employees to lower working costs.
Innovation as it will be more thoroughly elaborated in the project later on, is the successful use
of skills and resources to construct new technologies or fresh goods and services so that an
company can change and better response to the demands of customers (Jones, 1988)19.

4. AREAS OF ORGANIZATIONAL CHANGE

Each area, of course, is interrelated with the other and companies often must apply changes each
of them when they endeavor to make changes in one. Strategic change for instance, can happen on a large
scale when an organization shifts its resources to penetrate a new line of business or on a small scale for
instance, when a company makes productivity improvements in order to lower the costs.

4.1. Technology

Technological changes usually represent the apparatus of greater strategic changes,

although they sometimes take place on their own. A crucial aspect of changing technology is
deciding who in the organization will be endangered and threaten by the change. To be
successful, a technological change must be implemented into the organization's overall systems,
and the structure of the management must be developed to support it. Moreover, structural
changes can also happen due to strategic changes - as in the case where an organization decides

15
George, J. M., & Jones, G. R. (2002).Understanding and Managing Organizational Behavior (3rd) New York:
Pearson Education, Inc.
16
Cummings, T. G.., & Worley, C. G. (2001). Organization Development and Change. Cincinnati, OH:
SouthWestern College Publishing.
17
George, J. M., & Jones, G. R. (2002). Understanding and Managing Organizational Behavior (3rd). New York:
Pearson Education, Inc
18
Hammer, M., & Champy, J. (1993). Reengineering the Corporation. New York: HarperCollins.
19
Jones. (1988). Organizational Theory. In Burgelman, R. A., & Maidique, M. A. Strategic Management of
Technology and Innovation. Homewood, IL: Irwin.

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Trends in Economics, Finance and Management Journal, Vol. 2, Issue 2 (2020)

to get hold of another business and must integrate it - as well as due to changes in a managerial
style or operational changes. For instance, a company that wanted to execute more participative
decision making may require changes in its hierarchical structure. Changes in the people or employees is
a necessary action to be taken due to other changes, or sometimes companies only look for change in
workers' attitudes and behaviors in order to rise their effectiveness or to inspire individual and team
creativeness and hard -work. Usually people changes are the easier said than done type of changes and
vital part of the overall change process. So, the science of organization development was created to
arrange on changing people on the job through various techniques like education and training, career
planning and team building.

4.2. Customer Needs

A world constantly evolves and together with it customer needs grow and change as well,
opening new requirements for new types of goods and services and creating new areas of
opportunity for organizations to meet needs.

4.3. The Economy

The impact of the area of economy is great to organizations, the influence can be stressful
and manifested in both positive and negative ways. Expansion incorporating additional
personnel, facilities and resources must be taken into consideration, if there is a strong economy
and rising demand for goods and services. Opportunities for staff brought about by these changes
are very precious and beneficial, but also represent new challenges to deal with. On the other
hand, a weak economy gives an open way to more problems as organizations find themselves
obliged to make hard decisions that can blow employees' salaries and benefits and even threaten
their jobs. At this point what is crucial for companies is the ability to quickly manage both ends
of the continuum in order to maintain a powerful brand and strong relationships with
consumers/customers as well as employees.

4.4. Growth Opportunities

Change is important in any company because in this way employees learn new skills,
exercise their creativity in ways that ultimately benefit the company through fresh ideas and
increased commitment and it also offers chances to them explore new opportunities. Basically,
preparing employees to confront successfully with these changes includes a deep analysis of the
tools, methods and training needed to help them acquire new skills. Moreover, training can be
provided through both ways traditional and online. Traditional classroom settings, for instance,
are still practiced or, increasingly, through different online learning opportunities in the form of courses.
Significantly, companies need to do a well-obtained job of evaluating employees' skills
and capabilities and then undertaking necessary steps to fill the gaps between present skills and
the skills required to respond to growth.

4.5. Challenging the Status Quo

To affect the bottom line directly, a simple burden of asking the question ‘why?’ can
produce many answers leading to fresh ideas and innovations. Organizations benefit from change
that whose outcomes create new ways of looking at customer needs, new ways of strengthening
customer interactions, new ways of delivering customer service and new products that might
attract new markets where a company can in turn penetrate. Furthermore, new employees joining
a company are especially important and valuable because they can often point to areas of

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opportunity for improvement rather than those who have been involved for a longer period in the
organization and who may have overlooked. However, even existing employees/workers should
be encouraged and motivated to question why things are done in a particular way and search for
new ways to get the tasks and work done faster, better and with greater levels of outcome,
quality and service.

5. TOTAL QUALITY MANAGEMENT

The process by which management and employees are engaged and involved them self in
the constant and day by day improvement in products and services is defined as Total Quality
management820. The fundamental aim of the TQM is to boost the business towards higher levels
by the combination management apparatus and quality and to avoid as much as possible the
unnecessary outcomes that happen due to wasteful practices. Additionally, in TQM the word
quality is a trait that describes the attitude and behavior and the overall culture of a company,
striving to provide better services and goods to their customer. The whole philosophy integrating
all organizational functions should direct it energy and focus on the satisfaction of customer
needs. Besides, TQM shows the way to constant improvement in all aspects of the business that
definitely causes the continuous improvement in capabilities of people, procedures and
processes, technology and machine capabilities.

5.1. Elements of TQM

The process of TQM incorporates several elements that are being used by a company. These are:
 Involvement of leadership and upper management
 Vision, mission and guiding principles
 Job-related skills training, communication, teamwork and leadership
 Improvement of the overall communication
 Customer satisfaction
 Focal point is improving the working environment
 Struggle for continuous improvement

6. INNOVATION AND CHANGE

Innovation has to be supported by collaboration, ideation, implementation and value creation.

6.1. Collaboration

Teamwork is crucial to getting things done. Nowadays the global and digital 24/7 world,
challenges are more complex; it's becoming highly important to bring more diverse and fresher
minds to the table and to break down silos.
Collaboration is one kind of group activity familiar to community development. In addition,
there is no shortage of initiatives which intend to be two-way. It is true that collaboration has
never been easy, mostly because competition and conflict within and among teams dominates the
scene. As everyone tends to avoid tension, what we actually may be left with in communities is
peaceful coexistence, and not collaboration. Furthermore, it may be a good time for re-thinking

20
Kristen Terry (2010)

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collaboration as collaboration means to work together on the relationships towards a well-prepared

process in achieving common outcomes.

6.2. Ideation

Fresh, new ideas help your organization stand out. With passionate competition for
resources, companies must differentiate in order to survive. Mark Lange 21, was the presenter in the
session entitled "Accelerating Entrepreneurship and Its Impact on Community and
Economic Development."
The Edward Lowe Foundation makes use of ideation to elaborate entrepreneurship in the form
of economic development strategy. Lange says:
 Companies headquartered out of the state do not provide much more influence on job
creation than the local businesses
 Taking care of second-stage businesses is highly important to job growth
 Business relocation has not a much larger impact on job creation compared to business
expansion.

6.3. Implementation

How good are the ideas if they are not practiced? Organizations must appoint the best
people to champion their ideas and keep boosting those good ideas moving forward.
So, there is no shortage of conversations on how technology is changing lives and how
technological innovations and advancements are being implemented at the speed of light.

6.4. Value Creation

If the new ideas are able to create vale that’s when you have created an innovation.
Companies must implement ideas and programs identified as most efficient and effective in
delivering value to all involved stakeholders.
The main purpose of innovation is to create business value. Value is explained in many
ways, such as the creation of entirely new goods and services, incremental improvements to
existing products or cost reductions. Businesses strive to create value because their survival,
growth and ability to compete in a speedily changing market highly depends on whether they
innovate effectively22.

7. MANAGING ORGANIZATIONAL CHANGE

Planning and implementing change in organizations in such a way as to minimize employee

resistance and cost to the organization while simultaneously maximizing the effectiveness of the
change effort are all elements within the process of effectively managing organizational change.

21
executive director of the Edward Lowe Foundation
22
https://www.stlouisfed.org/publications/bridges/summer-2009/the-four-key-elements-of-innovation-
collaborationideation-implementation-and-value-creation

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7.1. Resistance to Change

In the procedure of a change, no matter how small, the manager should expect to expect
some resistance from within the organization. Resistance to change is considered as normal
phenomenon; people stick to habits and to the status quo most of the time. However, resistance
can be minimized by good managerial actions. In addition to this, people must be motivated to
shake off old habits. This must occur in stages rather than suddenly so that "managed change" is
manifested as "natural change." Moreover, to normal inaction, organization change introduces
anxieties about the future and if future after the change comes to be perceived positively,
resistance will be present in a lower extent.
Key ingredients in minimizing negative reactions and feedback are education and
communication. Employees can be informed about both the logic behind it before it takes place
through, group presentations, or individual discussions, reports, memos and the nature of the
change as well. Another important component of overcoming resistance is inviting employees to
involve themselves and participate in the process of the design and implementation levels of the
change effort. What can be deployed, are organized forms of facilitation and support. Managers
can make sure that employees/workers will have the resources and tools to bring about the
change. Furthermore, managers can make themselves available to provide explanations and to
minimize stress arising in many angels of situations.
Some organizations manage to overcome resistance to change through negotiation and
rewards. They offer employees very concrete incentives to make sure their cooperation is
guaranteed. Other organizations resort to using subtle tactics such as giving a resistance leader a
prominent position in the change effort, which in other words can be called manipulation. A final
option is coercion, which comprises of practices such as punishing people who resist or using
force to ensure their cooperation. Although this method can be useful when rapidity is of the
essence concern, it can have quite negative effects on the organization. Of course, no method is
convenient and appropriate to every situation that might happen in the company, and a number of
different methods may be combined if they promise better results.

8. FORCES IN ORGANIZATIONAL CHANGE

According to Lewin’s model of force-field analysis, a company is an open system. There

are two forces in organizational change (Lewin, 1951)23, one it is the driving force - switching of
the company to a totally new direction; while the other it is the restraining force - preventing the
company from changing. In situations when the driving force is more powerful than the
restraining force, change in the company occurs, and the company will shift towards a new
direction, while when restraining is more powerful than the driving force, organization will stay
at the excising position; and when both of these forces are equally powerful and balanced, it will
stay stable for some limited period. Additionally, when organization is about to change, there are
various forces to prevent them from change, which is the above-mentioned restraining forces.
Moreover, restraining forces can be divided into three levels: individual level, secondary unit
level, and organization level. (Yang, Zhuo, & Yu, 2009)24. These factors mentioned in the level of a
company include the organizational structure inactivity, system anxiety and the pressure
from past success as well as managerial culture. Next factors in secondary unit level include the
different point of view and conflict of interest arises between different departments. First, factors

23
Lewin, K. (1951). Field Theory in Social Science: Selected Theoretical Papers. New York: Harper & Raw.
24
Yang, R. S., Zhuo, X. Z., & Yu, H. Y. (2009). Organization theory and management: cases, measurements, and
industrial applications. Taipei: Yeh-Yeh

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in individual level include the lack of trust, misunderstanding, own benefit threat feeling,
uncertainty, custom and so on so forth. The question arises on how to manage such factors that
may threaten the successful change of the business. The active ways to gain the support of
organization’s members are through communication, education, involvement and active
participation. On the other hand, the passive ways to diminish members' resistance are the
following acts: negotiation control, assistance, and coercion (Kotter, & Schlesinger, 1979)25.
These represent the most effective methods and approaches in different situations. Therefore, the
supervisor must manage the organization change at all steps.

8.1. Techniques for Managing Change Effectively

Moving the business from its present state to a future desired situation at lower costs to the
company is actually effective and successful management of the change Key steps in that process
are:
1. Considerate attention on the present state of the company -this means to identify problems
and troubles the company faces right now. All these problems should be given a priority
according to its state of urgency and assessing the sorts of changes needed to solve the
particular problems.
2. Proficiently envisioning and thoroughly structuring the state of the company which is desired
- this point is when you basically picture the ideal condition for the company after the change is
implemented, transmitting this vision clearly to everybody involved in the process of change
effort, and scheming a resources for transition to the new state. An important part of the
transition in this phase is to be able to manage stability and other components such as key staff
together with the organization's overall mission, which should remain steady in the center of
chaos to help people decrease the level of stress and anxiety.
3. The order in the implementation of change is crucial – supervising and dealing effectively
with the transition may be useful to design a plan, find the necessary resources, and employ a
key individual to take care and be constantly in charge of the change process. The leaders of the
company should attempt to produce enthusiasm and euphoria for the change by sharing their
visions, aims and goals, and acting as role models. In some cases, it might be beneficial to
direct energy for smaller victories first in order to open the way for later greater successes.
Of course, change in natural. A more creative way of facing with the dynamisms of
transformation in industries rather than watching them happen in a chaos way, proactive
management of change better adapt with the future is invariably a more required process that will
show greater results with the help of the organization's human resources management rather than
without them.

9. WHY DOES ORGANIZATIONAL CHANGE FAIL?

According to a research conducted by Mckinsey (Isern & Pung, 2007)26, 38 percent of the
interviewees responded that the change implemented in their company successfully increased
their performance in the work, and 30 percent responded that they think the change within the
organization has managed to provide a long term health in the overall business process. This is a
result of several factors that have considerate effects on either success or failure of the business.

25
Kotter, J. P., & Schlesinger, L. A. (1979). Choosing strategies for change. Harvard Business Review, 57, 106-
114
26
Isern, J., & Pung, A. (2007). Harnessing energy to drive organizational change. McKinsey Quarterly, 1, 16-19.

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The six most vital factors are the following: the reluctance or readiness to change, quick solution
expectation, lack of systematic plan for organization change, the spotlight of change activity
instead of result, mismatch between change plan and company context as well as generally poor
management in the whole change process (Yang, Zhuo, & Yu, 2009) 27. Organizational change is
achieved successfully if all these factors are considered and reviewed carefully. The following
part of the paragraph will explain one by one each of them briefly.
To be ready to change means the extent of positive acceptance and realization that the
change is more than necessary accompanied by positive attitude toward the effect of change on
self and the company (Armenakis, Harris, & Mossholder, 1993)28. The more you prepare, the
greater the reception and decision-making power of the member would be. At the same time as
groundwork is lower, the greater is the resistance to change, and the probability of organizational
change to fail is going to be.
One more common reason why change in organizations can fail, is that most of the
companies do not take the systematic viewpoint to make a holistic plan for organizational
change. For instance, overlooking other factors that may affect employee’s behavior like,
structure, the system of organizing, culture, and so on so forth, and the trying to make change
only through education and training does not work. Furthermore, some companies undertake
identical plans of change applied to all departments and individuals without considering their
differences.
Another error is to make a quick decision and quick solution. They usually suppose that if
they introduce a set of organizational changes can solve all the troubles, and that recruiting an consultant
out of the company can help on everything. However, this expectation, leads to a high
dependence on the consultant which would make them invest less which in turn can end the plan
programme too soon if the obtained results do not match their expectations believed in the start..
Besides, when designing the plan for the organizational change, members usually take the
motion and change activity too seriously, while neglect the most important change goal itself.
Therefore, members involve themselves in the activity energetically, but the achievement is
actually quite limited.
Finally, poor management in change process is the next mistake that could be fatal.
Numerous factors have to be considered and evaluated, moving, freezing or unfreezing levels.
Overlooking definite factors go ahead to total failure of the organizational change.
Lastly, the harmony between organizational context and the plan of change may also play a
crucial role in the success or failure of organizational change. Thus, organizational change is to
frame a new pattern of thinking and behavior in employees and when the new pattern contradicts
with the old ones, the reluctance to change tends to make the plan to fail. Therefore, when
designing a change plan, we must include the organizational context.

10. CONCLUSION

We can conclude that organizational change is one of the most significant factors, which
through innovation and improvement obtains the intended success and productivity, which make
companies survive in the era of vigorous competition. Organizational change happens for a
number of reasons. Often this is because of changes in the internal and external environment.
Factors of different nature such as globalization of markets and speedily evolving technology
force businesses to respond in order to stay alive.

27
Yang, R. S., Zhuo, X. Z., & Yu, H. Y. (2009). Organization theory and management: cases, measurements, and
industrial applications. Taipei: Yeh-Yeh.
28
Armenakis, A. A., Harris, S. G., & Mossholder, K. W. (1993). Creating readiness for change. Human Relations,
46, 681-703.

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Organizations implement changes to increase the effectiveness of the business. Change

can be a complex process and there may be barriers to overcome. This is why implementing
change programmes within an organization or a company requires effective managers.

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