Organizational Change Management Theory

People and Organization Management in the Built Environment

Organizational Change Management Theory

Introduction-

To understand change in an organization, it is important to study an organization and its culture. This is because, changing an organization is nothing but changing its culture which ultimately causes change in performance.

An Organization can be defined as “social arrangement of consciously coordinated activities for achieving controlled performances in the pursuit of common goals”. (Price and Chahal, 2006, p. 238)

Organizational culture can be defined as “characteristic, spirit and belief of an organization […] generally held about how people should behave and treat each other in an organization […] and attitudes to change.” (Price and Chahal, 2006, p. 238)

Depending on the market requirements, an organization is setup according to- resource allocation, production capacity, technological requirement etc. This is why organizations have to constantly change to adapt to the ever-changing market while securing the organization’s perspectives. Depending on the market situation, it can be a crisis change or chosen change. Organizational change can be developmental (doing better than current situation), transitional (implementation of new desired state) or transformational (evolutionary new state). (Price and Chahal, 2006) But whether it is intended or forced, the company needs to change in order to remain competent. Change management helps resist the effect that change in the market has on an organization, increasing the importance of change management over the years. (Cap Gemini Ernst & Young, 2004)

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Changing an organizational culture affects the people involved in it in various ways like change in job profile, learning new techniques, job cut, etc. So, it becomes necessary to manage all the people involved, to successfully implement change while not disturbing the company’s goal. This makes change management a complex process. Considering different orientations like planning, stake-holder management etc. change management can be defined as- A continuous aggregation of processes, instruments and techniques, to improve the efficiency of the organization in problem solving and target attainment, achieved by eliminating the causes of resistance to change, working in an organized and systematic way, from both company and employee perspectives. (Cap Gemini Ernst & Young, 2004)

Change process:

Since the whole change process is very complex, let us consider a case-study to understand it better. We will analyze it using three models of change management, after which we will attempt to draw a strategic change management framework which can be used in any organization. Our case-study will also be critically analyzed against this framework.

Case-study

Aluminium Company of America (ALCOA) (1990) plant at Swansea is the company under review. (Price and Chahal, 2006) Senior managers of this company realized the need to review their plant culture and processes. They presented their case to the ALCOA board at Pittsburg, USA emphasizing on the company’s present and desired state. The board was convinced about the need to change. Senior managers then established a taskforce to take the responsibility of the change program. It had 12 members ranging from employees, production managers, engineers, personnel, operators and craftsman. The task force drew the following Vision Statement-

‘To help establish ALCOA, Swansea, as a model company by developing a plant that contributes to the long-term prosperity and security of the company and its employees.’ (Price and Chahal, 2006, p. 245)

In 1991, the taskforce drafted the internal document comprising of some important elements and strategies including vision, need to change, benefits, critical factors, resistance, etc. The ‘plan to overcome resistance’ was: “[…] we must go forward and improve or cease to do business”. (Price and Chahal, 2006, p. 245)

The taskforce reviewed and changed their manufacturing processes and procedures by benchmarking with other companies like ALCOA Tennessee, Cadbury’s etc. They observed no initial resistance while implementing new processes and procedures. But, later they noticed some symptoms like reduced productivity and they observed the reasons, as employee aspects like working practices, multi-tasking, pay, arising because of the old structure of organization having seniority and unionized systems. To overcome this, the workforce appointed a new team, which developed a system by analyzing the organization’s present and desired state. They changed the working philosophy of the plant workforce and the basis for remuneration. They conducted a series of workshop trainings for the entire workforce. Though this entire process was difficult, they observed improved performance at the start of 2000. They were very close to their targets. The new reduced workforce was highly committed and motivated. But after all this success, ALCOA Swansea unexpectedly closed down in 2003. The senior management blamed overcapacity and slow market growth for failure. (Price and Chahal, 2006)

Analysis:

Although the senior management blamed overcapacity and slow market growth, it clearly indicates that they failed to analyze the market and adjust to it by aggressive marketing, necessary lay-offs etc. To understand the reasons for the failure, we will analyze the case-study using three models viz. The Leavitt’s Model (1965), Weisbord’s six-boxes (1976), McKinsey 7S Framework (1981-82).

Leavitt’s Model:

Leavitt focused on four variables in the organization, their interdependence and their influence on the change process. The variables considered are-

* Task and subtasks- Those which are involved in achieving the target.

* People- Who carry out the task.

* Technology- Which is adapted to achieve the task.

* Structure of the organization- In terms of authority, communication, workflow etc.

Interlinking of the variables suggests that this is an interactive and continuous process. He did not take external factors into account. (Falletta, 2005)

In our case-study, the first factor to vary was ‘Task’. Change managers decided to change the company’s plant culture and processes. Then they appointed a workforce, so the second variable changed was ‘People’. Then ‘Technology’ and ‘Structure’ changed as a result of the changed plant processes and procedures that is change in the working philosophy and remuneration. But later on, an outbreak of resistance demanded a change in the human variable as well as the Structure. This resulted in the creation of a new highly motivated workforce. This increased the company’s productivity and changed the sub-task, which was to win enough projects for the workforce to keep them motivated and achieve the ‘vision’. But, the senior management was not a part of the task force and became an external factor leading to ignorance of vital marketing function. Considering the slow market growth, the change managers could have changed either ‘Technology’ or ‘People’ variable; that is they could have sold some machinery or reduced the workforce to achieve the desired productivity. Ignorance of all these resulted in failure of the change process and ultimately company closure.

Weisbord’s six-boxes:

Weisbord considered six broad categories as shown above. When compared with Leavitt’s model, there are three different factors considered-

* Relationship- The way in which people interact with each other and with the technology.

* Rewards- Given to workforce for performance.

* Leadership- Common leadership tasks including the equilibrium between the other factors.

External environment is also considered in this model unlike Levitt’s model. It also tells us about the importance of input and output in relation to the external and internal environments. It does not highlight much on interconnectivity of all the internal factors (Falletta, 2005).

In our case study, Relationship between the team was maintained well, making it highly motivated. Relationship between people and technology was also maintained which was achieved through training. Provision for rewards was made by changing the basis for remuneration. But, the Leadership failed. This is because of the failure to analyze the balance between external and internal inputs and outputs like reduced market growth, less productivity and profitability. This may be the result of lack of co-ordination between senior and junior management and non inclusion of senior management in the task force. When the junior managers observed lesser productivity than expected, senior managers should have made an attempt to get more jobs by aggressive marketing or should have reduced the manpower. The ‘vision’ was partially achieved. Though they tried to achieve employee security by retaining them, the company’s perspective of long term prosperity and security was not achieved and the process failed.

McKinsey 7S Framework:

This model was drawn by the employees at McKinsey, who did corresponding research in business and industry. It considers seven variables which are-

* Strategy- The plan in allocating resources to achieve the target.

* Systems- Existing processes followed in the organization.

* Staff-Different categories of personnel.

* Skills- Different capabilities.

* Style- How key managers behave to achieve the goal.

* Shared value- The significant guiding concepts common among the organization.

The interconnectivity between these is shown by the shape of the model. The author advises that the company cannot just change one or two variables to change the whole organization. In order to achieve long term benefit, variables should be changed to become more congruent as a system, suggesting that change is a continuous process. It does not consider external environment. The concept of the performance or effectiveness is not clear in the model. (Falletta, 2005)

In our case-study, Shared values are the ‘vision statement’ as this is the common goal of all the employees. Skills were as per the requirement of the change process which was achieved through training. Production Systems were as per requirements, but Financial Systems needed more check on productivity and profitability. Staff and Style failed because of lack of coordination between senior and junior managers due to non-inclusion of the senior management in the task force, making them an external factor. As a result, they were unable to establish system to take care of shared values. Strategy failed as the company did not allocate more staff in marketing team, while production team needed lay-off. Hence, the vision was not achieved and company closed down.

Strategic framework of Change management

We will draw a six step strategic framework to help implement change in any organization. We will also analyze our case study using this framework. The main distinguishing characteristic of this framework is, that it considers the detailed role of all those involved in the change management process.

1. Preparing the organization

This initiates the thought process. The first step is to study the organization’s present state to determine its change capacity to have a realistic vision. Studying the organization’s present routines gives an understanding of how the organization operates which guides about its performance in a specific routine. This will again strengthen the understanding of organizational operations and will guide about relevant performance. (Feldman, 2003, p. 729) Change managers then interact with different stakeholders to understand the need to change to achieve the right purpose and agree on the organization’s desired state, considering internal and external drivers of change. This helps managers list out broad types of cultural and technological changes required. This is then conveyed to the entire workforce along with the benefits the company and employees would get through the change. This helps win their confidence and make them feel secured and involved. Care is taken not to convey information about a specific group or individual to avoid the feeling of mistrust amongst the whole organization. (Price and Chahal, 2006)

In our case study, this step was implemented effectively. Organizational analysis for present and future state was done perfectly and it was conveyed to people in such a way that everybody was convinced about the need to change.

2. Developing the process

Vision is the guiding statement of the change process which relates the company’s ultimate goal, making it the most important step of the change management process. The vision and objectives should be realistic and clear. (Cap Gemini Ernst & Young, 2004) Change managers first decide three groups viz. implementation team, range of stakeholders and workforce. Feedback from step one is analyzed and used as the basis to find out different change strategies. All these strategies are then evaluated against certain questions which are –

* Does the option have a clear perspective and a systematic approach?

* Does the option support organizational or personal goals?

* Were all the working environments and source perspectives considered?

(Price and Chahal, 2006)

Different change strategies analyzed above are again brainstormed and evaluated within the group and a final strategic process is decided which can even be the combination of some of the options evaluated. Finally a working document is drafted. Different sections in the draft include- Background, Vision, Goal, Objectives, Design, Implementation plan, Timescales, etc. (Price and Chahal, 2006) Implementation plan should include important aspects like cultural development, employee mobilization, knowledge management, incentive systems, transformation map, and stakeholder management. It is observed that 10% to 30% of companies fail to plan for this. (Cap Gemini Ernst & Young, 2004)

Cost-benefit analysis is a very important aspect of change. Every change costs something which can be categorized as economic and psychological. Economic cost is related to expenditure incurred, while psychological cost is the strain caused when people try to adjust to the change. (Newstrom and Davis, 2000) So this cost-benefit analysis is required to determine the worthiness of change. Only 40% of the companies think that cost-benefit analysis is a must because all activities are investments that must pay off in the end. (Cap Gemini Ernst & Young, 2004)

In our case study, the vision statement was well written and the implementation plan was fairly drawn. But they failed to apply the Cost-benefit analysis at the right time and could not recognize that their resources were over assigned. Also, they failed to plan for the changing market situation, therefore could not adjust to the market growth.

3. Test support

This is the phase before the final planning stage. Once the strategic process is decided, management ensures that the team is still enthusiastic about the plan. This is the last opportunity to review all the documentation and accommodate any last minute developments before the actual implementation. This stage confirms the decision about the strategic process. (Newstrom and Davis, 2000)

In our case study, this step was either not taken or not mentioned in the article. But, it ultimately did not affect the process.

4. Communication

Successful communication of vision and objectives at the right time, to the stakeholders and the people affected by the change is the key to success. In order to link strategic and operational change, it is necessary to communicate it ending on a warning. (Whipp and Pettigrew, 1992) Implementation team should identify the effect change has on the groups as well as on the individuals. While assigning new jobs, they should try to cooperate with the employees to the highest degree possible and make them feel involved. “When people think about what actions they are to take in an organizational routine, they are not confined to thinking about performances of the routine they are enacting but may think broadly about a wide variety of organizational performances”. (Feldman, 2003, p. 729)

Change managers need to be proactive in reducing the amount of resistance by having the ‘plan to overcome resistance’ ready. (Price and Chahal, 2006) Personal communication, conflict management, leadership development and team building are the most important aspects of effective communication. Retention management is the most overlooked aspect observed in nearly 50% of the companies. (Cap Gemini Ernst & Young, 2004)

In our case study, communication with employees ended on a warning note as given in the plan to overcome resistance. Change was communicated successfully and the managers cooperated with the workforce resulting in successful restructuring of the organization; correcting all the defects.

5. Implementation

This is a crucial phase of the process. Change managers follow the implementation plan and continue to do so till the end. If not done properly, there is a great risk of encountering resistance which can be recognized through symptoms like reduced productivity, gossips/rumors, etc. When recognized, its source needs to be identified and treated according to the ‘plan to overcome resistance’ drawn at step 4. (Price and Chahal, 2006)

There are some common implementation barriers observed, such as- too many activities without prioritization, no sustained monitoring of activities (observed in more than 40% of the companies). Other barriers are- constant reorganizations of the company, inadequate support from line management, inadequate readiness to take responsibility etc. (Cap Gemini Ernst & Young, 2004)

In our case study, implementation of the plan was successful in the beginning. When they observed resistance, they took necessary action against it. But it was not followed till the end. The plan was to increase the productivity. When the market slowed down, necessary action should have been taken like workforce reduction or aggressive marketing to bring sufficient jobs for the highly motivated workforce.

6. Evaluation

Change managers can evaluate the effectiveness of the process using Key Performance Indicators, at any stage of implementation. Generally, planning engineer or implementation team is not involved because of the obvious vested interests. Middle management can do it better, with unbiased views. This can be done with process inspections and audits. New processes can be reviewed and compared with the chosen process. After doing so, if any problem is identified, necessary adjustments need to be made to the process; this can be repeated several times. This continues and the process becomes a driver for the next change. (Price and Chahal, 2006)

In our case study, this step was almost neglected by the change managers. They either failed to analyze the less productivity resulting from the slow market growth or failed to incorporate necessary changes in the process to achieve the vision.

Conclusion:

Change management is a very complex process because of the different factors involved in it. Though there is no globally accepted model, we can use different models in the same situation. Some models are easier to use, while others need more critical analysis according to the situation. It depends on the change manager to adapt a certain process. If all the steps are followed through, keeping the vision in mind, we can successfully implement change. Otherwise it can be as disastrous as company closure.