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Organisational Change
Chapter 2The Nature of Change
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Introduction
The chapter:
Discusses a number of frameworks for
categorising change. Explains why, in order to be effective, it
is necessary to understand thedifferences between various types ofchange.
O
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ObjectivesTo:
Emphasise the complex nature of organisationalchange;
Describe and discuss the multi-dimensionalnature of organisational change;
Analyse change situations in order to chooseappropriate methods of managing and
implementing change; Recognise that there are limitations to the
common-sense approach to managing changethat assumes that change can be planned as alogical. Step by step, sequence of activities.
This because of cultural, political andleadership dynamics.
B k d A d fi i i f
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Background: A definition of strategy
Strategy is:
the directionand scopeof an organisation over thelong termwhich achieves advantagefor theorganisation through its configuration of resourceswithin a changing environmentto meet the needs
of marketsand to fulfill stakeholderexpectations.
Source: Johnson, G. & Scholes, K. (1993) Exploring Corporate Strategy, London, Prentice Hall, p. 10.
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Environmental turbulence Ansoff & McDonnel (1990)(recap)
Level 1. Predictable
Level 2. Forecastable by extrapolation Level 3. Predictable threats & opportunities
Level 4. Partially predictable opportunities
Level 5. Unpredictable surprises
Strebel (1996) Weak forces
Moderate forces
Strong forces
Stacey (1996) (recap) Close to certainty
Far from certainty
V i i f h ( i )
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Varieties of change (overview) Grundy (1993)
Smooth incremental
Bumpy incremental
Discontinuous
Tushman et al (1986)
Converging (fine-tuning)
Converging (incremental)
Discontinuous or frame-breaking
Dunphy & Stace (1993)
Fine tuning
Incremental adjustment
Modular transformation
Corporate transformation
V i i f h (G d )
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Varieties of change (Grundy)
Smooth incremental evolves slowly, in a
systematic and predictable way. Bumpy incremental periods of relative quiet
interrupted by sudden bursts in the rate of
change (e.g. re-organisations).
Discontinuousdivergent breakpoint,changes involving crisis, breakthrough,response to high turbulence.
M j T f Ch (G d )
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Major Types of Change (Grundy)
Rate
ofchange
Time
Discontinuous
Bumpy incremental
Smooth incremental
Source: Grundy, T. (1993) Implementing Strategic Change, Kogan Page, p. 25
V i ti f h (T h t l)
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Varieties of change (Tushman et al)
Converging (fine-tuning) - trying to do betterwhat is already being done well.
Converging (incremental adaptation) - smallchanges in response to small shifts in theenvironment.
Discontinuous or frame-breaking major,
rapid (spread over 18-24 months) andrevolutionary changes in strategy, structure,people & processes in order to meet radicallynew or different circumstances. Also termedupheaval.Most organisations follow a pattern of
convergence/upheaval cycles. This pattern canapply at all levels (department, unit, corporation).
P f F b ki Ch
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Pressures for Frame-breaking Change
Industry discontinuities, e.g. sharp changes in
the legal, political or technological conditions
which shift the basis of competition Product life-cycle shifts, i.e. strategic change
to fit the next stage of the cycle
Internal dynamics, e.g. new managementteam, with different strategy preferences
Examples of Frame breaking Change
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Examples of Frame-breaking Change
Change of mission or core
values
Power shifts, resource re-allocation
Total reorganization
New workflow procedures New CEO coming from
outside
Scale of change (1) (Dunphy & Stace)
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Scale of change (1) (Dunphy & Stace)
1. 1. Fine Tuning. At departmental level.
Making re-alignments to ensure thatthere is a match between strategy,structure, people and processes.
2. 2. Incremental Adjustment. Bit by bit changes to match the
changing environment.
Minor modifications to strategies orstructures..
Scale of change (2) (Dunphy & Stace)
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Scale of change (2) (Dunphy & Stace)
3. Modular Transformation. Major realignment of one or more
departments or divisions. Downsizing, re-engineering.
4. Corporate Transformation
(frame-breaking effecting the wholeorganisation). As described earlier as discontinuous or
frame-breaking change.
A contemporary research study found thatmost organisations have been undergoingtypes 3 & 4 change.
Environmental conditions and types of change
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Environmental conditions and types of change
ENVIRONMENTAL FORCES FOR
CHANGE
TYPES OF CHANGE
Ansoff andMcDonnell (1990)
Strebel(1996)
Stacey(1996)
Tushman et al.(1988)
Dunphy &Stace (1993)
Grundy(1993)
Stacey(1996)
Predictable
Forecastable byextrapolation
Predictable threatsand opportunities
Partially predictableopportunities
Unpredictablesurprises
Weak
Moderate
Strong
Close tocertainty
Close tocertainty
Far fromcertainty
Converging(fine-tuning)
Converging(incremental)
Discontinuousor frame-breaking
Fine-tuning
Incrementaladjustment
Modulartransformation
Corporate
transformation
Smoothincremental
Bumpyincremental
Discontinuous
Closed
Contained
Open-ended
Phases of Emergent Versus
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Phases of Emergent VersusPlanned Change (1)
Fine tuning and incremental
change are usually also seen asemergent, unfolding as ithappens.
The organisation, an open system,engages naturally in emergentchange as it tries to maintainequilibrium with its changing
environment.
Phases of Emergent Versus
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Phases of Emergent VersusPlanned Change (2)
However, organizations that rely
only on making emergent changemay ignore warning signs of theneed for more radical forms ofchange, and the organisation willsuffer strategic drift, i.e. thestrategy and perceptions of theorganisation will become less and
less in tune with the environment.
Phases of Emergent Versus
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Phases of Emergent VersusPlanned Change (3)
Some theorists argue that
PLANNED CHANGE that is alsoframe-breaking may then benecessary as a drastic remedy tobring the organization back tohealth.
Logical Incrementalism (1)
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Logical Incrementalism (1)
Quinn does not agree that
change is eitheremergentorplanned. Quinn believes thatalthough managers may have anidea of the destination, they donot really plan change in bigchunks.
Logical Incrementalism (2)
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Logical Incrementalism (2) Quinn says that managers:
Are flexible about how to get to thedestination.
Arrive at strategic change throughnegotiation with stakeholders.
Allow strategic change to evolveincrementally, although this is not piece-meal
or haphazard because it is based on agreedpurposes and involves constant critical re-assessment.
The planned change processinvolves
opportunist learning as it goes along. Logical instrumentalism is both emergent and
planned.
Predictable Change (1)
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Predictable Change (1)
Some theorists think that changemight be neither wholly emergent norwholly planned.Instead, change may reflect theorganisations LIFE-CYCLE.
Greiner identifies 4 stages or 5phases through which organisationsgo as they grow and develop.
Predictable Change (2)
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Predictable Change (2)
Each of Greiners stages contains acrisis period.Stage 1 is entrepreneurial - survival
oriented.
Stage 2 is collective - based on division
of labour.Stage 3 is formalised- based on
bureaucracy.
Stage 4 is elaborated - based on
problem oriented teams.
Stages of organisational growth
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Phase 1
Entrepreneurial
Phase 2
Direction
Pahse 3
Delegation
Phase 4
Co-ordination
Phase 5
Collaboration
Structure *Informal *Functional
*Centralized
*Hierarchical
*Top down
*Decentralized
*Bottom up
*Staff functions
*SBUs
*Decentralized
*Units merged
into product
groups
*Matrix-type
structure
Systems *Immediate response
to customer
feedback
*Standards
*Cost centres
*Budget
*Salary
systems
*Profit centres
*Bonuses
*Management by
exception
*Formal planning
procedures
*Investment
centres
*Tight
expenditure
controls
*Simplified and
integrated
information systems
Styles/
people
*Individualistic
*Creative
*Entrepreneurial*Ownership
*Strong
directive
*Full delegation
and autonomy
*Watchdog *Team-oriented
*Interpersonal skills
at a premium*Innovative
*Educational bias
Strengths *Fun
*Market response
*Efficient *High management
motivation
*More efficient
allocation of
corporate and
local resources
*Greater spontaneity
*Flexible and
behaviourial
approach
Crisis Point *Crisis of leadership *Crisis of
autonomy
*Crisis of control *Crisis of red tape ?
Weaknesses *Founder often
empermentallyunsuited to
managing
*Boss overload
*Unsujited to
diversity*Cumbersome
*Hierarchical
*Doesnt grow
people
*Top managers
lose control asfreeom breeds
parochial attitudes
*Bureaucratic
divisions betweenline/ staff,
headquarters/field
, etc
*psychological
saturation
Source: Clarke, L. (1994) The Essence of Change, Prentice Hall, p.12.
Stages of organisational growth
Predictable Change (3)
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Predictable Change (3)
Greiners model is potentially useful in
identifying what stage an organization is at,
and therefore what type of change situation itis in and will be in.
The model may therefore help an organisationto plan change and predict the next crisis
point.
Diagnosing Change Situations
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Diagnosing Change Situations
Diagnosis of change situations is not anexact science.
Various diagnostic methods can be usedin combination, e.g. SWOT, PETS, multi-cause diagrams.
Some more methods are now discussed.
Evolutionary Cycle of Competitive Behaviour - 1
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y y p
Strebel has suggested a model that examines
the industry within which the organisation is
located, i.e. the organisations competitiveenvironment.
Two key concepts are:
the evolutionary cycle of competitive behaviour.
breakpoints, when companies must change theirstrategies in response to changes in competitors
behaviour.
Evolutionary Cycle of Competitive Behaviour - 2
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y y p
The cycle involves two main phases.
1. The DIVERGENT PHASE, based oninnovation/variety: beginning whenone organisation discovers a newbusiness opportunity, the industry as a
whole strives to create differentiatedproducts and services that addcustomer value.
Evolutionary Cycle of Competitive Behaviour - 3
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y y p
2. Eventually a breakpoint occurs, as theemphasis shifts to the CONVERGENTPHASE, based on efficiency/survival,
which begins with imitation ofcompetitors best features, and thenleads to an emphasis on reducingcosts. Competitors converge on total
quality management, continualimprovement & re-engineering to cutcosts and maintain market share. Onlythe fittest survive.
3. Then back to 1, as further savings aremarginal.
Evolutionary Cycle of Competitive Behaviour - 4
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y y p
Progressively, with cycle after cycle, industriesdeliver both more customer value throughvarious generations of differentiation (e.g.mobile phone technology) each followed bymore cost reduction. Industries vary according to the relative emphasis on
divergent phases versus convergent phases
Evolutionary Cycle of Competitive Behaviour - 5
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Concern forInnovation &
customer value
Low
CustomerValue
HighCustomer
Value
LowCosts
Delivery of efficiency & cost savings
= breakpointspioneering/
novelty
phase
cost reduction phase
HighCosts
differentiation
phase
cost reduction phase
new
generationof products
Evolutionary Cycle of Competitive Behaviour - 6
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Spotting the breakpoints. Formal Methods include:
Environmental scanning
Benchmarking
Monitoring, data collection and data interpretation Detecting when a new divergent phase is about to begin
is more difficult because the new wave of innovationcannot yet be seen.
Informal methods include:Open-minded attitudes
Cooperation across the organisation
Culture supporting innovation and change
Difficulties and Messes
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Difficulties.
These are characterisedby hard complexity.
There are lots of factorsand variables.
But they can bemeaningfully quantified.
Optimal solutions can bedeveloped.
Messes.
These are characterised bysoft complexity.
Peoples description ofevents is ambiguous.
There are multipleinterpretations andreconstructions of what the
problem is. Stakeholder groups will see
things according to theirstake in the problem.
Thus there are manydifferent ideas about whatkind of solutions theremight be.
Difficult versus messy problems
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DIFFICULTIES - Smaller scale, well-defined, hard complexity, multiple variables, cerebral
BOUNDED
limited
timescalepriorities
clear
limitedapplications
can be treated
as a separate
matter
limited
number of
people involved
know what
needs to be
known
know whatthe problem is
know what
would be a
solution
UNBOUNDED
longer uncertain
timescale priorities called
into question
cant be
disentangled
from its contextmore people
involved
dont know what
needs to be known
uncertain
but greater
implications;
worrying
know what
the problem is
no solutions
MESSY PROBLEMS - bigger, poorly defined, soft complexity, multiple perspectives, emotional
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Concluding Remarks
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Diagnosing necessary change and managing
subsequent change is usually not just amatter of objective calculation.
Soft problems present various emotional andsocial dimensions which demand a broad
range of managerial change competenciesand approaches.