Discuss psychological effecs of change management

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The management of an organisation may be required by its board of directors or share holders to carry out minor or significant changes in running the organisation. This is borne as a result of a series of collective reasons, mainly associated with the desire for the company to remain competitive within the industry it specialises in. Examples of reasons why changes are embarked upon by companies are; the introduction of new technology, impact of demand and supply elements within the market, new regulations, or even company acquisitions or mergers. Potter (1998) supported this fact by identifying five competitive indicators for company assessment, as well as SWOT analysis of company performance against its history of cash flow and profitability over time.

Although the McGregor X theory can be highly effective in an autocratic establishment or in an economy in recession, changes within a large establishment such as most companies, cannot be successfully implemented based on the theory without addressing its implication on the company stake holders (employees). This issue is more pronounced when making significant changes in an international company comprising of mainly a multicultural workforce, such as many shipping companies in today's 21st century. For this reason, change management is regarded as a highly efficient method in implementing new changes within a company. Change management if properly implemented is designed to involve the employees of the company when creating goals and productive strategies related to making policies and procedures within the company, with the aim of remaining competitive in the industry. Change management recognises the fact that employees need to be motivated and have the ability to productively contribute and effectively accept change if their needs are addressed and not threatened as identified by Maslow (1960), recognising that human beings have a hierarchy of needs ranging from physiological, stability, social acceptance, appreciation and self realisation in an ascending order. Addressing these issues when initiating and executing a change within an organisation would determine the extent of success realised; this is in concordance with the McGregor Y theory; it motivates the work force by imbibing a democratic management style to proposed changes; its only drawback is that it requires a reasonable time frame to implement.

Managing Significant Changes

Many company managers recognise the relevance of change within an organisation, but change typically tends to encounter strong resistance from employees, particularly if not properly handled. This is as a result of its psychological impact on the needs of the employees, particularly in the event of the existence of a company culture or an accepted norm, relating to all employee condition of service and belief in the company management. For this reason, change is most times regarded as an unnecessary inconvenience to the employees, and managers are most times obliged to carry employees along, giving a very good understandable reason for change; while diplomatically assuring employees of the security of their jobs and other benefits they are entitled to; thus generating a collective feeling of unity in the company workforce and management as a whole. This is done with the sole aim of gaining the trust of the employees and keeping them highly motivated to remain responsive in order to be productive.

Psychological effects of change on employees

The main challenge of change management stems from its psychological effects on the company employees, particularly if it is not properly handled to address their needs. This is a common problem observed in a company management applying the authoritarian notion of change, without considering its impact on its employees; this psychological impact stems out of the perceived mutual obligation both employer and employees expect from one another. Guest and Conway, (2002) regarded this unwritten mutual understanding as a psychological contract between the employer and employee.

A change disregarding the psychological contract between all parties involved could trigger the following psychological effects as described below:

Change could create a sense of insecurity on the employees: A sudden significant change in management policy could make the employees feel insignificant to the company. This could lead to lack of commitment particularly if the workers feel threatened and believe this change could result in Job losses. Maslow (1960) identifies this need for security under physiological and safety needs. He deduced that humans first set of needs in his hierarchy is a sense of safety in an organization. The employee needs to feel the new change management would be organised and structured, giving him a sense of belonging.

Misinterpretation of the company goals and objective: A significant change without a clear cut feedback from employees could lead to a lot of misinterpretation by the workforce, leading to a lot of confusion on how to accommodate or apply the new policy or strategy, due to the perceived sense of alienation from company management. This would eventually result in the inability of employees to listen to or regard management policies as practicable, and for this reason, it might not receive enough support to be properly implemented. In an extreme scenario, change management could be viewed as being solely for the financial profit of the share holders without any positive implications for the employees. This creates an atmosphere of unhappiness on employees and could lead to strike actions like the British airways strike of December 22nd 2009, published by Harry (2009) in the UK telegraph. Maslow (1960) identified this issue under a need for social acceptance; the relevance of this issue varies between cultures, and age groups.

Lack of appreciation of workforce: A Sudden significant change in a company could make workers feel under-appreciated; particularly when they are not carried along with the change strategy if no consultation or feedback from employees have been made or acted upon. If employees don't feel a sense of belonging to the company, they become less motivated to perform; this becomes more pronounced if the changes involve demotion, salary restructure, cancellation of benefits or even longer work hours and increased work load, without any form of increase in compensation or reward. These issues undermine the hopes and anticipated aspirations an employee desires, and could lead to a deep sense of frustration and discontent.

A sense of betrayal and lack of Job satisfaction: If the psychological contract is breeched as a result of significant change, most employees will feel betrayed by the company management; because they will believe their expectations are no more being considered, and favourable prospects under the previous policies or structure could be lost. This creates a sense of Job dissatisfaction that could cause staff to start considering leaving the company. The Chartered Institute of Personnel Development (2010) research on Employee Voice identifies the fact that a two way communication between employers and employees could be carried out through a Joint Consultation Committee (JCC). The research considers it important to create a sense of belonging through a forum for consultation prior to initiating and acting on change strategies; the JCC consists of both management and employee representatives.

Proposed method of Mitigation of the psychological effects of change on employees

Change is still very important and valuable for a company's development and competitive strength, and a well planned change management strategy has to be developed, addressing all perceived and anticipated problems, with the aim of mitigating all issues that could negatively impact on the desired management goal. This is achieved by considering all the possible psychological effects the change transition process could have on employees, with the sole aim of getting them motivated to be more productive. Kotter (1990) established that change management could be effective, if categorised into eight stages; these stages are described in more details below:

A sense of urgency: The workforce needs to understand the importance and notion behind carrying out a change within the company; it has to do with why the change is necessary and how it would promote the company vision and objectives, particularly when such a change program would require employees to make certain sacrifices and bear some form of inconvenience. The objective of this stage is to inspire employees to accept that change is the only viable option available for progress.

The next stage involves creating a change management team comprising of all levels of stake holders within the company; the team should include leaders and managers capable of brain storming and subsequently creating a strategy for implementing and promoting the change vision. Jarzabkowski et al (2010) (pp.4), deduced that strategy tool kits like SWOT Analysis, Industrial cycle life analysis, potters competitive force analysis and scenario planning could be used by this team in creating a strategy at the initiation stage of the change management program. This can be achieved by involving the company Joint Consultation committee (JCC) or union representatives at the stage of developing the change management policy or strategy; the JCC would ensure there is a good balance in employee interest when developing the strategy. The team should preferable comprise of employees and managers alike, with the sole aim of promoting the company vision among peers and colleagues.

Once the strategy to implement the change has been created by the team, the vision has to be disseminated among the work force, preferably in a language or tone they would understand. This is achievable by carefully selecting team leaders within the workforce capable of promoting and passing on this vision. Electronic media is also an attractive alternative, but great care has to be given to how the information is sent, and in certain cultures, how it is written. A clear and effective communication of the company's goals and objectives would eliminate the psychological problem related to misinterpretation of the policy or strategy by the workforce. It gives them a clear and logical understanding of why the change management resolution was considered the only available alternative.

Once the vision and strategy has been broadcasted, room should be given for feedback from employees to air their views, and possibly constructively criticize or even generate good solutions to unanticipated issues arising from the change strategy; particularly when it wasn't addressed by the change management team. It is imperative that these issues are observed to be addressed by the employees in order to avert any sense of betrayal, while at the same time giving the employees a sense of belonging and appreciation by the management. This would enable employees give innovative ideas that could benefit the company in the immediate future; Kotter (1990) identifies this stage as giving employees a sense of empowerment.

Kotter's eight stage process also lays emphasises on the fact that the policies and strategies designed to carry out a change management has to be perceived as achievable against a future mile stone and it has to be reinforced as part the company culture through recruitment of new leaders and promotion of the benefit of the change policy through its immediate successes. This would give the employees a psychological sense of Job security and satisfaction; it makes the employee realise that the change management is effective and organised; it also gives the workforce a feeling that the management is not considering downsizing the work force through laying off staff as the option only available option.


A significant change management is important for companies to remain competitive in a dynamic changing market, but it is important to realise that change can only be effective if the workforce are properly motivated to make it a reality. The system of initiating a significant change to an organisations method of operation has to be handled with a lot of care, since it could psychologically de-motivate the workforce if their needs as stipulated in Maslow (1960)'s hierarchy of needs are not met. This brings about a sense of frustration and insecurity, as well as an unwillingness to participate in the change process; the dept and intensity of the psychological impact depends on certain factors like the age or cultural background of the workforce and even what is assumed to be the company culture since its inception. Applying the McGregor X theory of management, would involve ignoring the psychological contract between employer and employee, and this could lead to serious resistance through strike actions or even mass exodus of the workforce; this could force a company management into 'damage control mode' as a result of heavy financial losses.

Kotter (1990) deduced an eight stage change management technique which if adhered to would address all the employee needs and benefit all stake holders affected by the significant change management strategy; but this principle might be relatively difficult to achieve in the shipping industry because the workforce predominantly affected by the changes are the seafarers, who are most times not physically present to lay their fears to the management; an example of a common solution to this problem is the introduction of modern information technology and communication equipment as a channel for internal communication available in a good number of ships presently.