Chapter 17 Organizational Development and Transformation

Learning Objectives Identify the internal and external forces for change in an organization. Discuss the technological, cultural, strategic, structural, and systems dimensions of change. After studying this chapter, you should be able to:

Identify the internal and external forces for change in an organization.

Discuss the technological, cultural, strategic, structural, and systems dimensions of change.

Learning Objectives Analyze the process managers should use in evaluating the need for change. Describe the process of organizational change. After studying this chapter, you should be able to:

Analyze the process managers should use in evaluating the need for change.

Describe the process of organizational change.

Learning Objectives Diagnose the causes of resistance to change and discuss possible approaches to dealing with such resistance. Describe three approaches to planned comprehensive organizational change and compare their similarities and differences. After studying this chapter, you should be able to:

Diagnose the causes of resistance to change and discuss possible approaches to dealing with such resistance.

Describe three approaches to planned comprehensive organizational change and compare their similarities and differences.

Fundamental Issues of Change How much change is enough? How fast should change take place? How should the need for continual changes be balanced against the need for a minimum level of stability and continuity? Who should be the major players in change processes, and what should their roles be? Who, exactly, is likely to benefit and who could be harmed by particular changes?

How much change is enough?

How fast should change take place?

How should the need for continual changes be balanced against the need for a minimum level of stability and continuity?

Who should be the major players in change processes, and what should their roles be?

Who, exactly, is likely to benefit and who could be harmed by particular changes?

Forces for Change Managers’ visions, ideas, and actions Employees’ suggestions and actions Adapted from Exhibit 17.1: Forces for Change Forces outside the organization Economic conditions Competitors’ actions Technology Developments Legal/Political Developments Societal and Demographic Shifts Forces inside the organization Managerial decisions Employee Preferences and Suggestions

Forces outside the organization

Economic conditions

Competitors’ actions

Technology Developments

Legal/Political Developments

Societal and Demographic Shifts

Forces inside the organization

Managerial decisions

Employee Preferences and Suggestions

Focus of Organizational Changes Adapted from Exhibit 17.2: Forces of Organizational Changes Focus Staff Systems Structure Strategy Shared values and culture Technology

Focus Examples Examples of Focus of Changes Adapted from Exhibit 17.3: Some Specific Examples of Focus of Changes Technology Update computer systems Use holography in product design Shared values and Culture Is implement diversity awareness program Institute participatory decision making throughout organization Strategy Change from niche market to general market focus Change focus from individual customer to large corporate customer Change from a geographic to a customer structure Implement an international division Systems Replace batch with continuous flow manufacturing Change from last in/first out to first in/first out inventory valuation Staff Encourage cooperation through cross-training program Increase number and availability of training workshops for lower-level employees Structure

Focus Examples

Update computer systems

Use holography in product design

Is implement diversity awareness program

Institute participatory decision making throughout organization

Change from niche market to general market focus

Change focus from individual customer to large corporate customer

Change from a geographic to a customer structure

Implement an international division

Replace batch with continuous flow manufacturing

Change from last in/first out to first in/first out inventory valuation

Encourage cooperation through cross-training program

Increase number and availability of training workshops for lower-level employees

Relative Cost of Change Adapted from Exhibit 17.4: Relative Cost of Change Crisis Reactive Proactive Cost Time when change is begun Problem severity and immediacy High Low Early Late Low High

Recognizing and Assessing the Need for Change Proactive Recognition Effective managers recognize need for change at earliest possible time Systematic monitoring of the environment Reactive recognition Not all change needs can be identified in advance How and when to react rather than whether to react Crisis recognition Distinct threat to success of the organization and the manager

Proactive Recognition

Effective managers recognize need for change at earliest possible time

Systematic monitoring of the environment

Reactive recognition

Not all change needs can be identified in advance

How and when to react rather than whether to react

Crisis recognition

Distinct threat to success of the organization and the manager

The Change Process Adapted from Exhibit 17.5: The Change Process Planning and preparation Implementation Evaluation of outcomes Dealing with resistance to change

Planning Choices for Change Adapted from Exhibit 17.6: Planning Choices for Change How can support for the change be developed? How should the change be communicated? Whose support will be critical for success? How soon is change needed? Participation Incentives Timing Method Planning

Implementation Choices Adapted from Exhibit 17.7: Implementation Choices Implementation Technology Shared values and culture Strategy Structure Systems Staff Small Moderate Major Seldom Often Slow Rapid Focus Amount Frequency Rate

Resistance to Change Reasons for resistance Inertia Mistrust Lack of information Lack of capabilities Anticipated consequences Dealing with resistance to change Force field analysis

Reasons for resistance

Inertia

Mistrust

Lack of information

Lack of capabilities

Anticipated consequences

Dealing with resistance to change

Force field analysis

Force Field Analysis Adapted from Exhibit 17.8: Force Field Analysis Driving forces = Restraining forces New technology Visionary leader Pressure from managers for workers to implement new products Cost of updating old plant and equipment Employee groups opposed to change Norms that punish risk taking Restraining forces (examples) Driving forces (examples) Equilibrium

Reducing Resistance to Change Factors to consider Timing of use of approach Cost in managers’ and employees’ time Cost in financial and other resources Degree of risk involved Importance of the issues involved

Factors to consider

Timing of use of approach

Cost in managers’ and employees’ time

Cost in financial and other resources

Degree of risk involved

Importance of the issues involved

Reducing Resistance to Change Basic approaches Participation Communication Facilitation Coercion

Basic approaches

Participation

Communication

Facilitation

Coercion

Commonly Used Approach in Situations— Advantages Disadvantages Dealing with Resistance to Change Adapted from Exhibit 17.9: Possible Methods for Dealing with Resistance to Change Negotiation and Agreement In which someone or some group will clearly lose out in a change, and in which that group has considerable power to resist Sometimes major resistance can be reduced or avoided Can be expensive in many cases if it alerts other groups to want to negotiate too Participation and Involvement In which the initiators do not have all the information they need to design the change, and in which others have considerable power to resist People who participate are more likely to be committed to implementing change, and any relevant information they have will be integrated into the change plan Can be both time-consuming and awkward if participants design an inappropriate change

Commonly Used Approach in Situations— Advantages Disadvantages

Commonly Used Approach in Situations— Advantages Disadvantages Dealing with Resistance to Change Adapted from Exhibit 17.9: Possible Methods for Dealing with Resistance to Change Communication and Education In which there is a lack of information or inaccurate information and analysis Once persuaded, people will often help with the implementation of the change Can be very time-consuming if many people are involved Facilitation and Support In which people are resisting because of problems in adjusting to the changes No other approach works as well with problems of adapting to changes Can be expensive, and still fail Explicit and Implicit Coercion In which speed is essential, and the change initiators possess considerable power It is speedy and can overcome many kinds of resistance Can be risky if it leaves people angry at the initiators and lowers trust in them Source : Adapted and reprinted by permission of Harvard Business Review . An exhibit from “Methods for Dealing with Resistance to Change” by John P. Kotter and Leonard A. Schlesinger (March/April 1979), p. 111. Copyright 1979 by the President and Fellows of Harvard College; all rights reserved.

Commonly Used Approach in Situations— Advantages Disadvantages

Evaluating Change Outcomes Adapted from Exhibit 17.10: Evaluating Change Outcomes Process Issues Type of data: Quantitative Qualitative Amount Cost Timing Goals, standards and/or benchmarks to be used in this step must have been set early on in change process To whom? How? Collect data Compare outcomes against goals Feedback of results

Type of data:

Quantitative

Qualitative

Amount

Cost

Timing

Goals, standards and/or benchmarks to be used in this step must have been set early on in change process

To whom?

How?

Organizational Development (OD) Approach to Change Organizational development (OD) approach Strong behavioral and people orientation Emphasis on planned, strategic, long-range efforts Focus on people and their interrelationships in organizations Evolved from T-groups

Organizational development (OD) approach

Strong behavioral and people orientation

Emphasis on planned, strategic, long-range efforts

Focus on people and their interrelationships in organizations

Evolved from T-groups

Organizational Development (OD) Approach to Change Values and assumptions Basic approach to the process of change Change agents Interventions Behavioral process orientation Organizational renewal

Values and assumptions

Basic approach to the process of change

Change agents

Interventions

Behavioral process orientation

Organizational renewal

Intervention Objective Examples Types of OD Interventions Adapted from Exhibit 17.11: Types of OD Intervention Diagnostic Activities To determine the current state of the organization or the parameters of a problem Interviews Questionnaires Surveys Meetings Individual Enhancement Activities To improve understanding of an relationships with others in the organization Sensitivity training (T-groups) Behavior modeling Life and career planning Team Building To improve team operation, abilities, cohesiveness Diagnostic meetings Role analysis Responsibility charting Intergroup Activities To improve cooperation between groups Intergroup team building

Intervention Objective Examples

Intervention Objective Examples Types of OD Interventions Adapted from Exhibit 17.11: Types of OD Intervention Technostructural or Structural Activities To find solutions to problems through the application of technological and structural changes Job enrichment Management by objectives New technology introduction Process Consultation To disseminate information concerning the future diagnosis and management of human processes in organizations including communication, leadership, problem solving and decision making, and intra- and intergroup relationships Agenda setting Feedback and observation Coaching and counseling Structural change suggestions Source: Adapted from Wendell L. French and Cecil H. Bell Jr., Organization Development: Behavioral Science Interventions for Organizational Improvement , 5th ed. (Upper Saddle River, NJ: Prentice Hall, 1995), p. 165.

Intervention Objective Examples

Process Redesign (Reengineering) Process redesign (reengineering) Fundamental redesign of business processes to achieve dramatic improvements Technology driven Most successful efforts have both breadth and depth (across units and core organizational elements)

Process redesign (reengineering)

Fundamental redesign of business processes to achieve dramatic improvements

Technology driven

Most successful efforts have both breadth and depth (across units and core organizational elements)

Potential Objectives Coverage Drawbacks Issues in Process Redesign Adapted from Exhibit 17.12: Issues in Process Redesign Reduce Costs Shorten Cycle Times Improve Quality Breadth Depth Requires high level of persistence and involvement of top management Effort may be greater than results High chaos factor High levels of resistance

Potential

Objectives Coverage Drawbacks

Reduce Costs

Shorten Cycle Times

Improve Quality

Breadth

Depth

Requires high level of persistence and involvement of top management

Effort may be greater than results

High chaos factor

High levels of resistance

Organizational Learning Organizational learning Occurs in a organization that is skilled at Creating, acquiring, and transferring knowledge, Modifying its behavior to reflect new knowledge and insights Factors that facilitate learning by organizations Central, core competencies of current personnel Organizational culture that supports continuous improvement Organizational capabilities (such as managerial expertise) to implement necessary changes

Organizational learning

Occurs in a organization that is skilled at

Creating, acquiring, and transferring knowledge,

Modifying its behavior to reflect new knowledge and insights

Factors that facilitate learning by organizations

Central, core competencies of current personnel

Organizational culture that supports continuous improvement

Organizational capabilities (such as managerial expertise) to implement necessary changes

Organizational Learning Systematic, organized,and consistent approach to problem solving Experimentation to obtain new knowledge Drawing lessons from past experiences Learning from the best practices and ideas of others Benchmarking Focus groups Transferring and sharing knowledge

Systematic, organized,and consistent approach to problem solving

Experimentation to obtain new knowledge

Drawing lessons from past experiences

Learning from the best practices and ideas of others

Benchmarking

Focus groups

Transferring and sharing knowledge

Rank Business Processes Being Benchmarked Business Processes Being Benchmarked Adapted from Exhibit 17.13: Top Ten Business Processes Being Benchmarked 1. Customer Service / Satisfaction 2. Information Systems / Technology 3. Employee Development / Training 4. Process Improvement / Management 5. Call Centers / Help Desks 6. Performance Measurement / Improvement 7. Employee recruiting / Staffing 8. Manufacturing / Assembly 9. Human Resources 10. Project Management Service Source: http://www.benchnet.com, accessed December 18, 2002.

Rank Business Processes Being Benchmarked

Rank Organization U. S. Organizations Utilizing Benchmarking Adapted from Exhibit 17.14: major U.S. Organizations Utilizing Benchmarking 1. Bank of America 2. TRW 3. American Express 4. Xerox 5. U.S. Army 6. Dana 7. U.S. Department of Veterans Affairs 8. Eastman Kodak 9. Social Security Administration 10. Internal Revenue Source: http://www.benchnet.com, accessed December 18, 2002.

Rank Organization