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  • 1. Chang managementThe term change may be defined as the replacement of existing one with a new one.Change results in new opportunities, challenges and also some hardships. Change isinevitable in the life of an individual or organisation. A change in an organisation isknown as organisational change, which refers to the setting up new productionmethods; producing new products; restructuring of organisation; adoption of informationtechnology; change from public to private ownership or vice-versa etc.Organisations, which learn and cope up with change, will flourish and others, which failto do, so, will disappear. Modern organisations are required to compete in a globalmarket. Further technological developments resulted in changes in the methods ofproducing goods and services. All these developments make changes inevitable,pervasive, and persistent in organisational life. In this Unit, you will learn the forces andprocess of change, their resistance and how to overcome resistance to change. You willfurther learn managing change, targets of change and strategies of change. You will beacquainted with how to build an effective organisation.The change means the alteration of status quo or making things different. It may refer toany alteration which occurs in the overall work environment of an organization. When anorganizational system is disturbed by some internal or external force, the change may occur. Thechange is modification of the structure or process of a system, that may be good or even bad. Itdisturbs the existing equilibrium or status quo in an organization. The change in any part of theorganization may affect the whole of the organization, or various other parts of organization invarying degrees of speed and significance. It may affect people, structure,technology, and other elements of an organization. It may be reactive or proactivein nature. When change takes place due to external forces, it is called reactivechange. However, proactive change is initiated by the management on its own toenhance the organizational effectiveness. The change is one of the most criticalaspects of effective management. It is the coping process of moving from the presentstate to a desired state that individuals, groups and organizations undertake in responseto various internal and external factors that alter current realities. Survival of even themost successful organizations cannot be taken for granted. In some sectors of theeconomy, organizations must have the capability to adapt quickly in order to survive.When organizations fail to change, the cost of failure may be quite high. All organizationsexist in a changing environment and are themselves constantly changing. Increasingly, theorganizations that emphasize bureaucratic or mechanistic systems are ineffective. Theorganizations with rigid hierarchies, high degree of functional specialization,narrow and limited job descriptions, inflexible rules and procedures, andimpersonal management can it respond adequately to the demands for change. Theorganizations need designs that are flexible and adaptive. They also need systems thatrequire both, and allow greater commitment and use of talent on the part of employeesand managers. The organizations that do not bring about timely change in appropriateways are unlikely to survive. One reason that the rate of change is accelerating is thatknowledge and technology feed on them, constantly making innovations at exponentialrates.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 1
  • 2. The Importance of ChangeOne can try to predict the future. However, predictions produce at best a blurred pictureof what might be, not a blueprint of future events or circumstances. The effective andprogressive management of change can assist in shaping a future which may betterserve the enterprises survival prospects. Change will not disappear or dissipate.Technology, civilizations and creative thought will maintain their ever accelerating driveonwards. Managers, and the enterprises they serve, be they public or private, service ormanufacturing will continue to be judged upon their ability to effectively and efficiently managechange.Unfortunately for the managers of the early twenty-first century, their ability to handlecomplex change situations will be judged over ever decreasing time scales. The pace of change hasincreased dramatically; mankind wandered the planet on foot for centuries before theinvention of the wheel and its subsequent ³technological convergence´ with the ox andhorse. In one short century a man has walked on the moon; satellites orbit the earth; the combustionengine has dominated transport and some would say society; robots are a reality andstate of the art manufacturing facilities resemble scenes from science fiction;your neighbour or competitor, technologically speaking, could be on the other side of the planet; andbio-technology is the science of the future. The world may not be spinning faster but mankind certainlyis! Businesses and managers are now faced with highly dynamic and ever more complexoperating environments.Technologies and products, along with the industries they support and serve, areconverging. Is the media company in broadcasting, or telecommunications, ordata processing, or indeed all of them? Is the supermarket chain in general retail,or is it a provider of financial services? Is the television merely a receiving devicefor broadcast messages or is it part of an integrated multi-media communications package?Is the airline a provider of transport or the seller of wines, spirits and fancy goods, or theagent for car hire and accommodation?As industries and products converge, along with the markets they serve, there is a growingrealization that a holistic approach to the marketing of goods and services is required,thus simplifying the purchasing decision. Strategic alliances, designed to maximize theadded value.Throughout a supply chain, while seeking to minimize costs of supply, are fast becomingthe competitive weapon of the future. Control and exploitation of the supply chain make goodcommercial sense in fiercely competitive global markets. The packaging of what were oncediscrete products (or services) into what are effectively µconsumer solution willcontinues for the foreseeable future. Car producers no longer simply manufacturevehicles, they now distribute them through sophisticated dealer networks offeringattractive servicing arrangements, and provide a range of financing options, many ofwhich are linked to a variety of insurance packages. Utility enterprises now offer farmore than their original core service.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 2
  • 3. Scottish power have acquired utilities in other countries and have recently moved intowater, gas and telecommunications, to become a unified utilities company offeringµone-stop shopping to domestic and commercial customers. How can we manage change insuch a fast moving environment without losing control of the organization and existing corecompetencies? There are no easy answers and certainly no blueprints detailing best practice.Designing, evaluating and implementing successful change strategies largely dependupon the quality of the management team, in particular the teams ability to designorganizations in such a way as to facilitate the change process in a responsive and progressivemane.Types of change –Planned organizational change is normally targeted at improving effectiveness at one ormore of four different levels : human resources, functional resources, technologicalcapabilities, and organizational capabilitiesHuman ResourcesHuman resources are an organizations most important asset. Ultimately, anorganizations distinctive competencies lie in the skills and abilities of its employees.Because these skills and abilities give an organization a competitive advantage,organizations must continually monitor their structures to find the most effective way of motivatingand organizing human resources to acquire and use their skills. Typical kinds of changeefforts directed at human resources include : (i) New investment in training and development activities so that employees acquire new skills and abilities; (ii) socializing employees into the organizational culture so that they learn the new routines on which organizational performance depends; (iii) changing organizational norms and values to motivate a multi-cultural and diverse work force; (iv) ongoing examination of the way in which promotion and reward systems operate in a diverse work force (v) changing the composition of the top-management team to improve organizational learning and decision making.Functional ResourcesEach organizational function needs to develop procedures that allow it to manage theparticular environment it faces. As the environment changes, organizations oftentransfer resources to the functions where the most value can be created. Criticalfunctions grow in importance, while those whose usefulness is declining shrink. Anorganization can improve the value that its functions create by changing its structure,culture, and technology.The change from a functional to a product team structure, for example, may speed thenew product development process. Alterations in functional structure can help provide asetting in which people are motivated to perform. The change from traditional massPrepared By Mrs Neha Rathi Faculty of KKPIMS Page 3
  • 4. production to a manufacturing operation based on self-managed work teams oftenallows companies to increase product quality and productivity if employees can share inthe gains from the new work system.Technological CapabilitiesTechnological capabilities give an organization an enormous capacity to change itself inorder to exploit market opportunities. The ability to develop a constant stream of newproducts or to modify existing products so that they continue to attract customers is one oforganizations core competencies. Similarly, the ability to improve the way goods andservices are produced in order to increase their quality and reliability is a crucialorganizational capability.At the organizational level, an organization has to provide the context that allows it totranslate its technological competencies into value for its stakeholders. This task ofteninvolves the redesign of organizational activities. IBM, for example, has recently movedto change its organizational structure to better capitalize on its strengths in providing ITconsulting. Previously, it was unable to translate its technical capabilities intocommercial opportunities because its structure was not focused on consulting, but onmaking and selling computer hardware and software rather than providing advice.Organizational CapabilitiesThrough the design of organizational structure and culture an organization can harnessits human and functional resources to take advantage of technological opportunities.Organizational change often involves changing the relationship between people andfunctions to increase their ability to create value. Changes in structure and culturetake place at all levels of the organization and include changing the routines anindividual uses to greet customers, changing work group relationships,improving integration between divisions, and changing corporate culture bychanging the top-management team.These four levels at which change can take place are obviously interdependent, it is often impossibleto change one without changing another. Suppose an organization invests resources and recruitsa team of scientists who are experts in a new technology ± for example, biotechnology.If successful, this human resource change will lead to the emergence of a newfunctional resource and a new technological capability. Top management will be forcedtore-evaluate its organizational structure and the way it integrates and coordinates itsother functions, to ensure that they support its new functional resources. Effectively utilizing the newresources may require a move to a product team structure. It may even requiredownsizing and the elimination of functions that are no longer central to theorganizations mission.Unplanned ChangePrepared By Mrs Neha Rathi Faculty of KKPIMS Page 4
  • 5. Not all the forces for change are the results of strategic planning. Indeed organizationsoften are responsive to changes that are unplanned ± especially those derived from thefactors internal to the organization.Two such forces are the changes in the demographic composition of the workforce andperformance gaps.‡ Changing Employee Demographics :It is easy to see, even within our own lifetimes, how the composition of the workforce has changed.The percentage of women in the workforce is greater than ever before. More and morewomen with professional qualifications are joining the organization at the junior and themiddle management levels. In addition to these, the workforce is getting older.Many of the old retired employees from government and public sector are joining the private sector,thereby changing the employee demographics. With the opening up of the economy andglobalization, the workforce is also continually becoming more diverse. To peopleconcerned with the long-term operation of organizations, these are not simply curioussociological trends, but shifting conditions will force organizations to change. Questionsregarding the number of people who will be working, what skills and attitudes they willbring to the job, and what new influences they will bring to the workplace are of key interest tohuman resource managers.‡ Performance Gaps :If you have ever head the phrase, ³It is not broken, don’t fix it,´ you already have a good idea of one ofthe potent sources of unplanned internal changes in organizations ± performance gaps. A productline that isn’t moving, a vanishing profit margin, a level of sales that is not up tocorporate expectations ± these are examples of gaps between real and expected levelsof organizational performance. Few things force change more than sudden unexpectedinformation about poor performance. Organizations usually stay with a winning courseof action and change in response to failure; in other words, they follow a win-stay/lose-change rule. Indeed several studies have shown that a performance gap is one of thekey factors providing an impetus for organizational innovations. Those organizationsthatare best prepared to mobilize change in response to expected downturns are expected to be theones that succeed. Further, one of the greatest challenges faced by an organization is its ability to respondto changes from outside, something over which it has little or no control. As the environmentchanges, organizations must follow the suit. Research has shown that organizationsthat can best adapt to changing conditions tend to survive. Two of the most importantunplanned external factors are governmental regulation and economic competition.FORCES OF CHANGEOrganisations today operate in a very dynamic and changing environment. They haveto make suitable changes from time to time to become competitive; to serve customersbetter; to be on par with latest technology; to maintain or to improve upon existing levelPrepared By Mrs Neha Rathi Faculty of KKPIMS Page 5
  • 6. of profits. All the forces, which initiate changes, can be broadly divided into twocategories:Internal Forces and External Forces. Let us learn them in detail.Internal Forcesi) Change in Leadership: A change in leadership of an organisation may result inchange in perceptions, strategies, activities and results.ii) Change in Employees Profile: Some changes in employees profile are inevitablebecause of death, retirement, transfer, promotion, discharge or resignation. Womenemployment is on the increase. Further in the context of present day globalization,employees are recruited from different national and cultural backgrounds. HumanResource policies and practices have to be reoriented to suit the diverse workforce.iii) Change in Employees Morale and Motivation: The changes in leadership, theirpolicies and practices may affect the morale and motivation of the employees resultingin declining productivity, production and profits.iv) Union Influence: The influence of the union on many organisations in respect ofrecruitment, service conditions, wage rates etc. is still perceptible in spite of theimplementation of policies of liberalisation by many Governments. The management willhave to make suitable changes in response to demands of the union.v) Implementation of New Technology: Technological developments result in changeof job, production process, and employee profile. More computers, automation; andreengineering programmes result in substantial changes in most of the organisations.The Internet has its profound impact on the markets of number of organisations.Biotechnology is another field where large number of products are likely to be created.External Forcesi) Competition: Global competition has come into existence. Mergers and acquisitionshave been on the increasing trend. Organisations have to make suitable changes inresponse to the demands from the competition. They should acquire the capacity ofdeveloping new products rapidly and market them quickly. Short production runs, andshort product cycles by equally flexible and responsive systems will be required to facethese competitive challenges.ii) Economic Fluctuations: The fluctuations in security markets, interest rates,exchange rates etc. have continued to impose changes on organisations.iii) Social Trends: Increase in college attendance; delayed marriages by young couple;economic upliftment of women and backward communities etc. suggest changes, whichare to be considered by organisations. All these result in fluctuations in the demand forproducts used by these groups.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 6
  • 7. iv) Global Politics: Collapse of Soviet Union, the reunification of Germany, the policiesof W.T.O., U.S attack on Afganistan and Iraq etc. have their impact on the business ofdifferent organisations, whose activities are related to such developments.THE PROCESS OF CHANGEA successful change process involves three steps :• Identifying the need for change;• Cultivating a new behaviour or substitute; and• Feeling comfortable with the new situation.Let us now consider two popular models of change process. The first one is Lewin’sthree-step model. Which is discussed below.Lewin’s ModelAccording to Kurt Lewin, the change process consists of three steps:i) Unfreezing the status co;ii) Movement to a new stage; andiii) Refreezing the new change to make it permanent.Unfreezing is the process by which people are made to realise the need for change.Environmental pressures, declining performance, recognition of a problem or availabilityof a better way of doing things, may speed up unfreezing. While the driving forces ofchange are to be encouraged and the forces of resistance are to be discouraged.Changes introduced without undergoing this process of unfreezing are sure to fail dueto unawareness and resistance on the part of the employees.The second stage is the changing or moving stage. This involves taking action to modifya situation by changing things such as the people, tasks, structure and technology ofthe organisation.The final stage in the change process is refreezing, which consists of making the newtasks, technologies, and relations relatively permanent. The introduced changes arethus reinforced and stabilised. When this stage of refreezing is not done, the changesintroduced are likely to be abandoned within a short time or incompletely implemented.Continuous Process ModelThe Lewin’s model is very simple and straightforward. However it does not deal withseveral important issues. Hence the second model of change process continuouschange process model has come into existence. This model treats the change from theperspective of top management. In this approach, the top management perceives thatcertain forces or trends call for change and the issue is referred to organisation’s usualproblem solving and decision-making process. The top management defines the goalsto be attained after the change. Alternatives for change are also considered andevaluated, and an acceptable one is selected.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 7
  • 8. The top management may seek the assistance of a change agent – a personresponsible for managing the change effort who may be a member of the organisationor an outsider. While an internal change agent is likely to know the organisation, people,tasks, political situations etc. very well; an outsider is likely to view the situation moreobjectively. As per the direction and management of the change agent, the organizationimplements the change through Lewin’s model.The final step in this model is measurement, evaluation and control. Through thisprocess, the top management determines the effectiveness of the change process byevaluating various indicators of organisational productivity or employee’s morale.It takes time for employees to absorb even small changes. Much more time and effortmay be required for employees to adapt to complex changes. Transition management isthe process of systematically planning, organising and implementing change. Once thechange starts, the organisation is neither in the old state nor in the new state. But thebusinesses will have to continue. Transition management ensures that businesscontinues while the change is occurring. The members of the regular management teamassume the role of transitional managers to co-ordinate organisational activities with thechange agent. Communication about the change is an important step in transitionmanagement.RESISTANCE TO CHANGEResistance to change is an attitude or behaviour that shows unwillingness to approve aparticular change. This resistance is to be overcome for successful change. Sometimesresistance to change serves as a feedback to reconsider the proposed change. Thusresistance to change can also be used for the benefit of the organisation.The essence of constructive approach to resistance is to consider objections raised andmake suitable amendments and educate the employees about the proposed change.Resistance can be overt, implicit, immediate and differed. When it is overt andimmediate, the management can take immediate remedial steps to deal with suchresistance. Implicit resistance may result in loss of loyalty, loss of motivation, increasedmistakes, increased absenteeism etc. In course of time, similarly differed resistancecreates problem to the management particularly when substantial amounts havealready been invested in carrying out the change.Resistance to change may be introduced by the organisation, the individual or both. Weshall now examine the different sources of resistance either from organisation or fromindividuals.Organisational ResistanceThe following six major sources of organisational resistance have been identified.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 8
  • 9. i) Structural Inertia: Every organisation has built in mechanisms or systems to maintainstability. It may be training and other socialised techniques or formulation procedures.The people are recruited; they are trained and they are shaped to behave in certainways. When change is proposed in any of these systems and procedures, the existingemployees may not accept it.ii) Limited Focus of Change: Organisations consist of interdependent sub-systems.We can’t change one without effecting the other. If management desires to change thetechnological process without simultaneously modifying the organisational structure, thechange in technology is not likely to be accepted.iii) Group Inertia: Some times even if individuals want to change their behaviour, groupnorms may act as a constraint.iv) Threat to Expertise: A change in the organisation may threaten specialisedexpertise developed by the individuals and groups over the years. Hence they are likelyto oppose the change.v) Threat to Established Power Relations: Any redistribution of decision-makingauthority may threat individuals’ power relationship with others and leads to Resource Allocation: The groups in the organisation, which control resources oftenconsider change as a threat.Individual ResistanceThe reasons for resistance from individuals can be traced to basic humancharacteristics such as perceptions, personalities and needs. The following are the sixreasons for individual resistance to change.i) Habit : The human beings prefer to carry out their daily jobs in the same way.Introduction of any new steps in carrying out the job makes them feel that the job hasbecome difficult. So they resist this change.ii) Security : People with high need of job security are likely to resist the change whichis likely to affect their feelings of safety. Introduction of new technological changes in anorganisation may make the employees feel that their jobs are in jeopardy.iii) Economic Factors : Employees may feel that the proposed changes may reducetheir monthly pay. Hence they oppose such changes.iv) Fear of Unknown : When the change is proposed, a known situation is sought to bereplaced by an ambiguous and uncertain situation, which may not be liked by theemployees. As a result, they develop a negative attitude towards the proposed change.v) Lack of Awareness: People may not be aware of the benefits of the proposedchanges and consequently they resist those changes due to ignorance.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 9
  • 10. vi) Social Factors : Individual employee may resist changes either because of theinfluence of the group or the union to which they belong. They may feel that if thosechanges are accepted, they may be ridiculed by their colleagues or the union officials.OVERCOMING RESISTANCE TO CHANGEWhen there is a resistance to change, the management has to take appropriate steps toovercome the resistance. The following six ways have been suggested for dealing withthe resistance to the change:Education and Communication: The first approach to overcome resistance is througheducation and communication. Under this approach, the employees are educated aboutthe change before it is implemented.This helps them to understand the logic of the change and its benefits. This method isthe best method when resistance is based on inaccurate or incomplete information.ii) Participation and Involvement: Resistance to change can be reduced significantlyby inviting the concerned employees to participate in its decision making process. Theyfeel that it is their own proposal and consequently they stand by its implementation.iii) Facilitation and Support: This involves providing both emotional, training andfinancial assistance to employees experiencing the hardships of change.iv) Negotiation and Incentives: This approach Provides for negotiation with concernedemployees and offers incentives to make them agree to the change.v) Manipulation and Co-optation: This method consists of attempts to influence theemployees and more especially, the opinion makers, through some special benefits orproviding more attractive information or by withholding undesirable Coercion: This is the application of direct threats or force upon the resisters. Thethreats may consist of transfer, loss of promotion, retrenchment etc.MANAGING CHANGEFinally we consider the factors influencing successful management of organisationalchange. The following six factors are to be considered in this context:i) Environmental Influences: Environment is an important factor in bringing aboutorganisational change. The demands of the environment have to be considered infinalizing the change. The environmental complexities increase as the area of theorganisation’s operations increase – local, regional, national and international. Furtheracceptance of change varies widely from place to place and from culture to culture.Moreover, the techniques to be adopted for managing change also differ from country tocountry.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 10
  • 11. ii) Whole View of the Organisation : It is always necessary that managers should takewhole view of organisation while proposing change. A partial view can affect the changeeffort adversely.iii) Support of Top Management: The success of any change effort depends to a largeextent on the support of top management. Complaints may be made against the changeproposals of local/regional managers to the top management. Therefore, unless the topmanagement is informed in advance and their support is ensured, problems may ariseand the local/regional management may fail in implementing the change.iv) Employee’s Participation: Employees or their representatives may be invited toparticipate in discussions relating to the proposed change. If they are given a role indesigning the change, they are likely to cooperate with the management inimplementing the change.v) Open Communication: Open communication between management and employeesis an important factor in managing the change. Employees are likely to have certainmisapprehensions about the change and unless correct information is provided throughopen communication system, the change efforts are likely to fail.iv) Incentives and Rewards: Employees who are responsible for the successful implementation of the change should be recognized and appropriately rewarded. Sometimes people who resist in the beginning or oppose throughout are given more importance than employees who support the change right from the beginning. Employees who support the change actively and help others adjust to changes deserve special recognition by way of news release; special consideration in performance appraisal; an increment in pay or a promotion etc.STRATEGIES OF CHANGEAn appropriate strategy for implementing the change is to be followed to get the bestresults from proposed changes. The strategies of changes can be classified into twocategories:i) Evolutionary – which is gradual, incremental and specifically focusedii) Revolutionary – which is sudden, drastic and organisation wideManagers who choose an evolutionary strategy make incremental changes toorganisational strategy and structure. On the other hand, managers who choose therevolutionary strategies make drastic changes to organisational strategy and structure.Instead of making changes one by one, they wait until change is really necessary andthen make all the changes simultaneously.The revolutionary change, which is otherwise known as top down change calls forintervention of the top management. This involves massive dislocation and theuncertainty. This approach is preferred because it is the only way in which anorganisation can overcome the inertia that threatens efforts to restructure thePrepared By Mrs Neha Rathi Faculty of KKPIMS Page 11
  • 12. company.As against the revolutionary change, evolutionary change depends on bottom upchange strategy. The change is carried out through incremental steps in which all theemployees may be involved in decision-making and implementation. Top managementalso guides the actions and make sure that they are in conformity with overall corporateobjectives. However, this strategy requires longer period of implementation than topdown change.The evolutionary change facilitates organisational learning and allows the organisationto respond to changing environment. The revolutionary strategy can be implemented byemploying one of the following three approaches:i) Re-engineering: Re-engineering involves the re-thinking and re-design of businessprocess to increase organisational effectiveness. The attention will be on the businessprocesses rather than the organisational functions.ii) Re-structuring: Restructuring is a second form of revolutionary change. There aretwo basic steps to re-structuring:• An organisation reduces its level of differentiation and integration by eliminatingdivisions or departments• An organisation downsizes the number of its employees to reduce operating cost.• Change in the relationships between divisions or functions are common inrestructuring.iii) Innovation: Innovation is the process by which organisations use their skills andresources to develop new goods and services or to develop new production andoperating system. The objective is to meet the needs of customers in the best possiblemanner. However, innovation is also associated with high level of risk because theresults of research and development activities are often uncertain.The other classification of change strategies is on the basis of methods usually used inmaking the employees accept the changes. These methods are as follows:i) Force Coersion Strategy: Under this strategy, rewards or punishments are appliedto induce or to force the employees to accept the change. The effects of this strategycontinue as long as the rewards or punishments are effective.ii) Rational Persuasion Strategy: Under this strategy, an attempt is made to make theemployees to accept the change through the use of special knowledge, empiricalsupport or rational arguments. This strategy is also known as empirical-rational strategy.When this strategy succeeds, it results in a longer and more internalized acceptancethan the force coercion strategy.iii) Shared Power Strategy: This involves inviting the employees to participate indecision-making relating to the proposed change. This strategy is also known asnormative re-educative approach, which tries to develop directions and support forPrepared By Mrs Neha Rathi Faculty of KKPIMS Page 12
  • 13. change through involvement and empowerment. This strategy lasts long andinternalises change.Prepared By Mrs Neha Rathi Faculty of KKPIMS Page 13