Impact of business model change onorganizational success

Impact of business model change on
organizational success
Steven H. Appelbaum, Edmiela Profka, Aleksandra Monika
Depta and Bartosz Petrynski
Abstract
Purpose – The purpose of this paper is to investigate the impact
of organizational change, more specifically
business model change, on corporate employees’ motivation
and, consequently, performance.
Design/methodology/approach – The main approaches and
managerial frameworks on organization
change implementation, as well as the assessment methods on
whether the company is ready to implement
the change, were identified by reviewing the current literature
on the subject between 1940 and 2016.
Findings – Reviewed individual behavioral reactions and
provided steps to encourage favorable individual
employee perceptions.
Research limitations/implications – Existing gaps in supporting
empirical data on the subject and a
limited number of direct case studies and real-life scenarios.
The research was primarily focused on employee
motivation during the initial planning phase of organizational
change, with lesser focus on motivation
throughout and especially after the change process.
Practical implications – To benefit from the change,
organizations must avoid improvising and should
follow specific and formal change management procedures
which take employee motivation and individual

response towards change under consideration.
Social implications – By providing real-life illustrations of
successful business model change
implementations, current and future companies facing this type
of change in the future can learn from
these specific scenarios.
Originality/value – The distinction of business model change as
a sub-type of organizational change and the
study of employee motivation under a business model change
specifically is the novel contribution of the paper.
Keywords Performance, Change management, Business model
change, Employee motivation,
Organizational change
Paper type General review
Background and objective
To survive and grow in today’s economic climate, organizations
need to react quickly to changes
occurring on a national or global level. They are forced to make
changes by updating their
technology, remodeling strategies or, in certain cases, even
changing their business model. Per
Womack et al. (1990), the demands for organizational change
grow mainly due to the increasing
speed of technological development and international
competition (Antoni, 2004).
Edmonds (2011) states that change takes time and effort,
leaving employees and managers
unsure on how to adapt to new working practices. Adapting to
change is not an easy transition;
moreover, organizations failing to meet their stated objectives
can pay a high price. “Failure can

lead to loss of market position and credibility with stakeholders
as well as decreased morale
among management and staff resulting in a demotivated
workforce, or worse still, the loss of key
employees” (Edmonds, 2011).
Porras and Robertson (1992) recognized the organizational
member involvement as the most
commonly mentioned factor for successful change (Antoni,
2004). Employees are more likely to
support change if they tend to agree with the objectives set and
the anticipated outcome, which
should be clearly defined to rightly emphasize the impact on
those involved. Even though most
aspects of the foreseen change can be managed, the capability
for change can only be fully
developed once a strategy is in place. As Edmonds (2011)
states, “A conscious approach to
Steven H. Appelbaum is a
Professor of Management at
the John Molson School of
Business, Department of
Management, Concordia
University, Montreal, Canada.
Edmiela Profka is based at the
John Molson School of
Business, Department of
Management, Concordia
University, Montreal, Canada.
Aleksandra Monika Depta is
based at the Reckitt Benckiser,
Lublin, Poland.
Bartosz Petrynski is an
Entrepreneur at the Institute of
Enterprise, Warsaw School of

Economics, Warsaw, Poland.
DOI 10.1108/ICT-07-2017-0058 VOL. 50 NO. 2 2018, pp. 41-
54, © Emerald Publishing Limited, ISSN 0019-7858 j
INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 41
getting ready for change leads to a greater probability of
success, so planning needs to start long
before the change is going to take place.”
A change in business model, a more fundamental type of
organizational change, is “one of the
most arduous and risky changes an organization can undergo”
(van den Oever and Martin,
2015). In this paper, we will pay particular attention to the
relationship between employee
motivation and business model change specifically.
There are many factors, such as internal revisions or trend
changes in the industry, which result in
organizational change. The research will be focused on how this
drastic change affects
motivation. Companies need to embrace change and see it as an
opportunity to advance – how
should they motivate their employees in order to develop and
benefit from the change.
Literature review and analysis
Organizational change
Defining organizational change. Over the years, there were
many definition attempts, but the one
that most clearly conceptualizes the phenomenon was coined by

Struckman and Yammarino
(2003): “Organizational change is a managed system, process,
and/or behavioural response over
time to a trigger event.” This definition, based on extensive and
interdisciplinary literature review,
provides a comprehensive approach to the subject. In general,
organizational change can apply
to a wide variety of processes in the organization, including,
among others, technology
improvements, mergers and acquisitions, structural changes, top
management changes, cultural
changes or downsizing (Struckman and Yammarino, 2003;
Gilley et al., 2009).
Aspects of organizational change. Due to the magnitude of the
subject, many authors attempted
to categorize characteristics of organizational change and
consequently a wide variety of models
emerged. In essence, the following six dimensions of
categorization were most widely used in the
reviewed literature:
■ Type of the change activity, e.g., peripheral vs core
(Struckman and Yammarino, 2003);
■ Process in which the change and implementation occur, e.g.,
planned and programmatic in
theory E vs emergent, less planned and programmatic in theory
O (Beer and Nohria, 2000) or
grow vs drive vs hybrid approach (Sugarman, 2007);
■ Inertia, describing barriers in the organization, e.g.,
organizational resistance (Dent and
Goldberg, 1999);
■ Time in which the change occurs and how long it lasts, e.g.,

continuous vs discontinuous
(Struckman and Yammarino, 2003);
■ Depth to describe to what degree the organization changes,
e.g., transitional: minor and
incremental adjustments, transformational: fundamental and
multilevel, developmental:
growth based (Gilley et al., 2009); and
■ Readiness of the organization undergoing change (Palmer,
2004).
Armenakis and Bedeian (1999), in their attempt to review
literature of organizational change,
distinguished five other research themes on the subject:
■ content issues, which treat the substance and nature of a
change;
■ contextual issues, which focus on forces and conditions in the
organization’s environment;
■ process issues, which treat implementation actions;
■ criterion issues, which treat outcomes of organizational
change; and
■ affective and behavioral reactions to change.
Of the above-mentioned research themes, for the substance of
this study (employee motivation
throughout a business model change) we will focus specifically
on the theme on affective and
behavioral reactions, although it can be considered as a specific
type of criterion issues as well.

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The research on monitoring affective and behavioral reactions
to organizational change has led to
various conclusions. “In addition to traditional affective criteria
(e.g. organizational commitment,
job satisfaction, and cynicism), less-used criteria (e.g.
depression, anxiety, and exhaustion)
offer alternative insights into affective reactions to change. […]
research employing a situated
perspective casts doubt on the notion that radical change should
always occur rapidly and
discontinuously” (Armenakis and Bedeian, 1999).
Foster (2010) points to another aspect, i.e. the organizational
change models. He fittingly argues
that “many change models have roots in Lewin’s three-phase
conceptualization of change.
Lewin’s (1951) conceptualization includes unfreezing, moving,
and refreezing. […] resistance to
change is typically included as part of the unfreezing phase,
justice is typically a component of the
unfreezing or moving phases, and commitment is typically a
component of the refreezing phase.”
This study will relate to the first two Lewin’s stages of
implementation.
Business model vs organizational change. Before we move on, it
is important that we specify the
difference between an organizational change and a business
model change. A change in
business models, as an example of organizational change with
transformational depth, is

strategic and fundamental to the company’s core business
operations, often rejecting current
paradigms or questioning underlying assumptions (Gilley et al.,
2009). According to van den
Oever and Martin (2015), there are three main aspects in which
business model changes may
differ from “ordinary” organizational changes.
First, changes in the business model are assumed to be more
fundamental in economic terms
than most other types of changes. Teece (2010) recognized that
“changing the business model
unsettles a whole series of elements within and across the firm’s
external boundaries that are
foundational to its economic logic, which follows plainly from
the fact that business models
pertain to the very logic of how organizations create, deliver,
and capture value” (van den Oever
and Martin, 2015).
Second, the number and diversity of critical economic partners
engaged in the change effort is
likely to be greater for the business model change than for other
types of change (van den Oever
and Martin, 2015). Third, the complexity of the process is
expected to be higher in a business
model change. As it is described by Salomon and Martin (2008),
the level of complexity is higher
due to an increase both in number of system’s components and
in unpredictability of the
interactions between them. “Business models encompass an
unusually large number and
diversity of organizational elements and interfaces (e.g. a value
proposition, revenue model, and
distribution channels)” (van den Oever and Martin, 2015).

Based on these three characteristics – fundamental economic
impact, the number of
components involved, and complexity of their interactions – van
den Oever and Martin (2015)
deem “business model change to be one of the most arduous and
risky changes an organization
can undergo.”
Based on this, we will review aspects of how business model
change affects employees, focusing
specifically on employee motivation in the organization.
Motivation
Employee motivation in organization
Motivation is a widely explored subject. Various articles have
been written and a wide array of
studies have been done in order to determine motivation
significance and implementation
(Conrad et al., 2015). Therefore, it is important to define what
the motivation is and how it is
applied in the workplace. Lewis et al. (2001) define motivation
as, “the forces and expenditure
of effort acting on or within a person that cause that person to
behave in a specific,
goal-directed manner.” Daft et al. (2003) adds “the dimension
of “enthusiasm” to the definition
of motivation by referring to motivation as the forces either
within or external to a person that
stimulates enthusiasm and causes a person to persist in the
pursuit of a particular course of
action” (Conrad et al., 2015).
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TRAINING j PAGE 43

Theories of motivation
Theories of motivation are generally divided into two
categories: needs theories and process
theories, and whereas needs theories describe the types of needs
that must be met to motivate
individuals, process theories help understand the actual ways in
which we and the others can be
motivated (Langton et al., 2010).
According to Conrad et al. (2015), the leading motivation
theories come from the work of
Herzberg (1966), Maslow (1954) and McClelland (1985), who
“discuss the basic needs model of
motivation, referred to as content theory of motivation,
highlighting the specific factors that
motivate an individual.” Herzberg’s et al. (1959) work
categorized motivation into two factors:
motivators and hygienes. Motivator or intrinsic factors, such as
achievement and recognition,
produce job satisfaction. Hygiene or extrinsic factors, such as
pay and job security, produce job
dissatisfaction and become demotivators if not met to the
expectations of workers. As stated by
Maslow (1943), employees have five levels of needs:
physiological, safety, social, ego, and
self-actualizing. Maslow (1943) suggested that lower-level
needs had to be satisfied before the
next higher-level need motivated employees (Conrad et al.,
2015).
Impact of motivation on employee performance

Kappelman and Richards (1996) describe motivated and
satisfied employees as more productive
employees, since “organizational research shows there are
positive relationships between
employee satisfaction and such productivity measures as
performance, turnover, and
absenteeism. Even small improvements in employee attitudes
like motivation and satisfaction
can produce meaningful economic benefits.” This statement is
supported by Clark (2003) who
explained that the many gaps between current performance and
the levels required to fulfill
business objectives are created by a lack of motivation, not a
lack of knowledge or skills as
“motivation leads us to invest more or less cognitive effort to
enhance both the quality and
quantity of our work performance.”
Therefore, in order for the transitioning company to achieve
successful performance throughout
and following the organizational change, employee motivation
needs to be a main consideration.
We will discuss how to best manage organizational change in
the following section.
Managing organizational change
Risk in organizational change
Gilley et al. (2009) suggest that “although transformational
change is disruptive in nature, its
successful execution has been identified as leading to increased
competitiveness, to the extent
that an organization can clearly differentiate itself in the
market” (Denning, 2005). Nevertheless,
research and empirical results underline how rare it is for the

organizations to implement
successful transformational change (Gilley et al., 2009).
Studies suggest that many of the organizational change
initiatives fail to be implemented or are
not sustainable in the long term. There are no official statistics
available on the subject, but Beer
and Nohria (2000) estimate that about two-thirds of change
initiatives fail. Gilley et al. (2009)
referred to other authors (Burnes, 2004; Cope, 2003) who
suggest that the rate may reach even
80-90 percent. They reveal that it is a resistance by change
agents themselves that
considerably contributes to the inability of organizations to
successfully exercise a change
project (Ford et al., 2008).
One of the reasons why that happens is that “practitioners who
always follow specific and formal
change management procedures had a 52 percent project success
rate, compared to a
36 percent success rate for practitioners who improvise
according to the situation” (Jørgensen
et al., 2009). This is an approach supported by Davenport
(1992), who believed that successful
implementation of business process transformation requires a
fundamental organizational change
not only in terms of management processes but also
organizational structure and culture.
These changes in management processes and organizational
structure decidedly affect the human
aspect of management as they require a reconstruction of
employees’ work and relationships.
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VOL. 50 NO. 2 2018

Keeping these studies in mind, in the next sections of this paper
we investigate ways to mitigate
risks, ameliorate chances of successful organizational change
implementation by positively
affecting employee motivation and helping managers make more
tailored decisions on planning,
strategies, and tactics so that employees remain enthusiastic
about organizational change.
Role of employees in organizational change
[…] the inherent conundrum of organizational change: that
people, the human resources of
organizations, are both an essential factor in organizational
change and, at times, the biggest
obstacles to achieving change. (Smith, 2005)
The success of any change is contingent on the willingness of
employees to welcome it. Reis and
Peña (2001) emphasize that business changes at times are
introduced without understanding how
the human element influences the success or failure of a project
as too often, management neglects
human resistance issues and the need to consider them in the
implementation plan. This is an idea
supported in “Business process re-engineering”: “without new
leadership skills, involvement,
systems alignment and the right people with the right skills in
the right jobs, even the best technically
re-engineered process is doomed to failure. The processes are
only as good as the people who
make them work and the environment in which they work”
(Business process re-engineering, 1995).

Church et al. (1996) recognized that in relation to the process of
change, the focus should be on
two important areas: the fundamental aspects of change that
concentrate on the general nature
of change, and human aspects of the change process that include
individual responses to
change and managing the people side of change.
Implementation practices on employees’ motivation
management
Excellent implementation of organizational change is crucial,
because, as Guimaraes and
Armstrong (1998) prove in their empirical study, there is a
strong direct correlation between the
effectiveness in implementing business change and business
success. However, “it is interesting
to note that above average focus on the change process is no
guarantee of effective
implementation of change” (Guimaraes and Armstrong, 1998).
Nonetheless, awareness of the
following determinants could be helpful for change agents,
managers, and academic researchers
to better understand the organization and employee readiness
for the change process.
According to Smith (2005), with regard to successful
management of organizational change
“these key steps are salient”:
■ creating a sense of need and urgency for change;
■ communicating the change message and ensuring participation
and involvement in the
change process; and

■ providing anchoring points and a base for the achievement of
change.”
Other steps discussed here are employee engagement and
empowerment (Jørgensen et al.,
2009), and filling the gap between hard and soft factors (Sikdar
and Payyazhi, 2014).
Creating a sense of need and urgency for change
The first step – creating a felt need for change – is crucial.
Harvard Business School Professor
J.P. Kotter (1995) argued that in order to overcome an
organizational tendency towards stability,
the organization needs to create destabilisation and a certain
deliberate unsettlement. This move
must be handled delicately, as there needs to be “sufficient
disequilibrium to create dynamism for
change, while not exceeding the capacity of organizations, and
the people in them, to handle the
stress so engendered” (Smith, 2005). It is important to find a
balance in the introduced
unsettlement so that it does not cause adverse consequences to
the organization. The right
balanced dissatisfaction will facilitate the exhibition of
differences between the current situation
and the intended state, injecting a motivation for change to
employees. This is a subject
supported by Edmonds (2011), who argued that “you need to
create a buzz, engender a sense of
urgency around the need for change by talking to the whole
company, explain your position in the
TRAINING j PAGE 45

marketplace, your competition and why ‘now is the right time’.
Get people talking about the
reason for change, allow them the opportunity to express their
views and ask questions about the
company’s vision.”
Communicating change messages
The second step to successfully managing organizational change
– communicating change
messages and ensuring participation and involvement – helps
create a positive social energy in
the organization, which is a “major factor in the success or
failure of many organizational renewal
initiatives” (Smith, 2005). A variety of perceptions and
emotions will be displayed by employees
before the change period, and it is important to create an
inclination towards excitement and
enthusiasm. This positive social environment will affect the
degree of employee involvement,
confidence in the process, and willingness to change, hence it is
crucial that the message
communicated to the company is honest and genuine (Smith,
2005). Such a message and
attitude will create a foundation of mutual trust, and the leaders
should work on creating and
solidifying that foundation. Appelbaum et al. (1998) point out
another important consideration is
leaders’ communication coherence, by advising that
“management should avoid giving mixed
signals to the organization by promoting managers who do not
support the change effort.”

Providing anchoring points
Providing anchoring points in order to build a base for change
entails the process of assisting
employees clearly perceive their role after the change.
According to Smith (2005), if employees
understand “the nature and reasons for change in the early
stages of such an initiative can
provide a sound base for subsequent changes and a greater
willingness to take risks and extend
beyond current boundaries.” Examples of anchoring points
would be employee training, team
buildings, as well as role modeling.
Nurturing employee engagement, empowerment and
commitment
As Jørgensen et al. (2009) argue on the topic of employee
engagement and empowerment,
“engaging employees through involvement and two-way
communication is a powerful
combination: 72 percent of practitioners believe employee
involvement is crucial and
70 percent believe honest and timely communication is
important. Better communications and
employee involvement enable and empower people, and then
change happens through them –
not just to them.” “Empowered employees are more able to
adapt to change and less likely to
resist it, because their need for control is being met through
their empowerment, rather than by
their resistance. In these times of continuous changes in the
world around us, an organization
which fosters empowered employees is an organization ready to
handle change, planned or not.
The ability to cope with change is a survival skill no

organization can do without” (Kappelman and
Richards, 1996).
On the topic of employee engagement, an empirical study
conducted by Shaha et al. (2016) on
more than 500 academic staff in public organizations
undergoing a major restructuring process
suggests that “salary and promotion benefits (i.e. extrinsic
motivators) may lead to a greater initial
attachment with the organization change process – but that
longer term engagement with
change efforts continue to be based upon attitudinal behaviors
in terms of job satisfaction
(i.e. intrinsic motivators).” For example, in successful
organizations managers engage workers by
creating work-group environment to set mutually agreeable
performance goals (Vecchio and
Appelbaum, 1995).
When it comes to commitment, in a study done on 463 managers
and employees from three
telecom companies in China that were undergoing large-scale
organizational change, Ning and
Jing (2012) demonstrated that expectation on the change’s
outcome was positively correlated
with some type of commitment. Thus, it is important to
understand the complex nature of
commitment to change, as only affective and normative
commitments to change can mitigate the
emotional exhaustion caused by organizational change, while
continuance commitment can
enforce the emotional exhaustion.
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Filling the gap between hard and soft factors
Finally, when it comes to aligning technical aspects of business
model change with the changes in
human resources management, Sikdar and Payyazhi (2014)
argued that “there exists a distinct
knowledge gap in how to integrate the technical perspective of
process redesign with the human
and strategic perspective of managing organizational change,”
therefore most of the failures in
organizational change implementation are a result of no linkage
between hard and soft factors.
In order to avoid these failures Sikdar and Payyazhi (2014)
suggest addressing these fundamental
questions: “How to institute organizational change to support
the business process? How should
the organizational change be managed? How to create and
manage the alignment? How the
business process work flow is aligned with the organizational
elements – structure, HR, culture,
etc.? How to link the organizational factors with the process
work flow? How should
the organizational factors be implemented?”
Following the implementation of the suggested practices above
to manage employees’ motivation,
the company shall assess how successful the implementation has
been and whether employees
are prepared for the change. We will discuss assessment of
readiness for change below.
Assessment of readiness for change
After taking into consideration the above-mentioned steps, an

assessment of whether the
company is ready for change is crucial. How can we assess
readiness? Palmer (2004) suggests a
simple assessment method with three basic steps. “The first step
is a compilation of a list of all the
major activities that are underway and which compete for
budget, staff time and attention.
Second, comes an estimation of the level of effort which each of
these activities will require; this
compared with an estimation of the level of effort that will be
required by the particular change
project which is under consideration. Finally, these factors are
put together to enable
consideration of the overall load on the organization and its
capability to take on the additional
effort imposed by any planned changes” (Smith, 2005).
Armenakis and Harris (2002) suggest a more structured method,
which includes “auditing the
thoroughness of communication about the why, when, and how
of change; observing the
behaviour of employees in order to gain indications of likely
reactions to change; directly soliciting
employee reaction via interviews and group discussions; and
applying structured survey
methods” (Smith, 2005).
The company can choose to implement one strategy over the
other or a combination of both,
however, whichever assessment approach is selected will help
evaluate the company’s capacity
to achieve a successful organizational change. It is critical that
an assessment is made before
implementing the change as it can reveal any possible upcoming
problems or the right path
towards success (Smith, 2005).

Resistance to change
The concept of resistance to change is used often in the research
and practitioner literature on
organizational change as an explanation as to why efforts to
introduce large-scale changes in
production methods, management practices, and technology fall
short of expectations or fail
altogether (Oreg, 2006). Piderit (2000) defines resistance as “a
tridimensional (negative) attitude
towards change, which includes affective, behavioural, and
cognitive components.” These
components reflect three different explanations of people’s
interpretations of an object or
situation. “The affective component regards how one feels about
the change (e.g. angry,
anxious); the cognitive component involves what one thinks
about the change (e.g. Is it
necessary? Will it be beneficial?); and the behavioral
component involves actions or intention to
act in response to the change (e.g. complaining about the
change, trying to convince others that
the change is bad)” (Oreg, 2006). Moreover, it is stressed by
Oreg (2006) that these three
components are not independent of one another as what people
feel about the change will often
correspond with their thoughts as well as with their behavioral
intentions.
How do we determine whether employees are prone to change?
According to Oreg (2006),
“one of the first determinants of whether employees will accept
or resist change is the extent to
which the change is perceived as beneficial vs detrimental to
them”, therefore the factors which

TRAINING j PAGE 47
are most likely to impact employees’ evaluations are power and
prestige, job security, and
intrinsic rewards. These factors constitute the “rational”
element of resistance to which Dent and
Goldberg (1999) refer as the most valid motive to oppose
change.
Individual acceptance of change
Gilley et al. (2009) referring to Rogers’ (2003) work on
“Diffusion of Innovation,” note that the reaction
of the individual is gradual, with the following stages of change
incorporated into one’s life:
awareness of the change, interest in the change, trial, the
decision to continue or quit, and adoption.
This derives from the previously introduced classic model of
Lewin (1951), which consists of three
steps: unfreezing, movement, and refreezing, and translates into
individual behavioral reactions.
On what does individual acceptance of change depend?
According to Gilley et al. (2009),
individual acceptance of change depends on his/her perception
of the newness. This means that
acceptance can be influenced by the persuasive communication
methods mentioned in the
sections above. The rate of acceptance depends also on personal
characteristics of individuals
(Rogers, 2003). Five categories of attitude towards change have
been identified: innovators

(thriving on innovation), early adopters (seeking challenges),
early majority (prefer to observe
before adopting), late majority (skeptical, sometimes
suspicious), and laggards (resisters who
often reject change completely). Individual rate of acceptance
should be carefully considered
when assessing readiness for change.
Importance of organizational culture in organizational change
Before we move on to specific instances of successful
implementations of organizational change, it
is necessary to mention the influence of culture on
organizational change. How does culture affect
change management and the way employees respond to change
across companies and
countries? According to Hofstede, there are six dimensions of
culture to be taken into consideration
when discussing reasons behind management preferences from
one institution to another:
■ power distance index, which considers the likelihood that the
employees will accept the
hierarchical order without further expectations on equal power
distribution;
■ individualism vs collectivism, which represents whether
individuals see themselves as part of a
community or as independent entities;
■ masculinity vs femininity, differing by the degree of
individual inclination towards competitive
spirit, vs a more cooperative, consensus-oriented sense;
■ uncertainty avoidance, comparing the levels of risk aversion
and convention;

■ long term orientation vs short term normative orientation: are
companies more like to maintain
previous conventional norms, or will they see change as an
encouragement to prepare for the
future? and
■ indulgence vs restraint, comparing whether the culture allows
or suppresses human needs
outside of work (Hofstede, 1980).
These dimensions vary across societies, nations, and companies,
thus must be considered when
assessing how ready the company is to change its business
model. Following the suggested
practice implementations and the assessment of readiness for
change, we review how these
practices have been historically applied in the business world.
Application of motivational approaches in business model
changes
In this section, we analyze two scenarios of organizations
completely transforming their business
models and the way they implemented different approaches on
employee motivation.
These illustrations of successful business model change
implementations are made to serve as
an example for other companies facing this type of change in
the future and learning from these
specific scenarios.
VOL. 50 NO. 2 2018

IBM: from manufacturer to customer-oriented service provider
“When the environment shifts, it is very hard for the cul ture to
change. In fact, it becomes an
enormous impediment to the institution’s ability to adapt”
(Chacko, 2005). This is a lesson IBM
learned the hard way before it transformed its business model
from products-led to services-led
in 2002. Roughly 80 percent of the company’s total revenue
growth was coming from services,
however, it wasn’t until 2001, when IBM realized they had lost
$16 billion and 175,000 employees
in three years (Chacko, 2005; Frasch et al., 2006), that it was
time for a fundamental change in
the business model.
IBM CEO of the time (1993-2002) Louis V. Gerstner
understood that he could not continue with
the corporate impulse to put on a happy face. Gerstner believed
that the company should create
the conditions for transformation and provide incentives for the
employees, however, in the end
“management does not change culture. Management invites the
workforce itself to change the
culture” (Gerstner, 2002; Chacko, 2005).
What did Gerstner do to make IBM employees want to change?
First and foremost, he “decided to
keep the crisis front and center – not irresponsibly; I didn’t
shout fire in a crowded company.
But I did not want to lose a sense of urgency permanently”
(Lagace, 2002; Chacko, 2005).
This approach is perfectly in line with the change strategy
proposed in this paper by Smith (2005)

and Kotter (1995). Gerstner enforced this sense of urgency by
“galvanizing the prospect of
institutional death” (Chacko, 2005) and not concealing the fact
that the lack of change would
abruptly collapse IBM. In the first senior management meeting
he convened, Gerstner shared the
company’s current position in the market. “The share picture
was startling—a loss of more than half
our share [value] since 1985 in an industry that was expanding
rapidly […] We were eleventh in the
industry [in customer satisfaction] […] This is going to be a
performance-based culture […] I am
looking for people who can make things happen, not who watch
and debate things happening”
(Gerstner, 2002).
Gerstner completely transformed the company’s business model
by organizing resources
around customers, not products or geographies. By informing
and involving employees in the
corporate change, Gerstner also engineered a cultural
transformation. Gerstner expressed his
belief in the corporate culture’s importance in his biography
(Gerstner, 2002): “Until I came to
IBM, I probably would have told you that culture was just one
among several important elements
in any organization’s makeup and success — along with vision,
strategy, marketing, financials,
and the like […] I came to see, in my time at IBM, that culture
isn’t just one aspect of the game, it
is the game. In the end, an organization is nothing more than the
collective capacity of its people
to create value.”
In response, there was a “staggering 8-year 38.1% annual
growth in shipped mainframe

capacity, […] a 4-year 1900% return on CMOS technology, […]
and 80% of IBM revenue growth
from services for 8 years” (Chacko, 2005). According to Chacko
(2005), the IBM CEO planned to
create “a group of change agents – people who are imbued with
the feeling of empowerment and
opportunity, for ourselves and all our colleagues,” and he
achieved his plan by knowing how to
positively involve and motivate his employees.
In proceeding years the change was continued and even deeper
embedded into the organization
by next IBM’s CEO, Samuel Palmisano. He further empowered
teams while holding them
accountable, and in the process “the center of gravity” in IBM
was much lowered. He also got rid
of the businesses that didn’t fit and acquired the capabilities
needed: “The consulting arm of
PriceWaterhouseCoopers was bought to provide thousands of
professionals who understood
the process needs of key industries. In a near-miraculous feat of
management, those consultants
were partnered with technologists and successfully integrated
into the company” (Bower, 2012).
Bharti Airtel: outsourcing the company’s core business
Bharti Airtel, India’s largest telecommunications provider, is
another example of successful
business model change. The company decided to unbundle its
core business services and shift
into a global partnering model (Giesen et al., 2010). Per Giesen
et al. (2010), “Bharti was very clear
about its core focus in five areas: customer management, peopl e
management and innovation,

TRAINING j PAGE 49
brand management, financing and regulation.” The company
explicitly stated that above all
“the key success factors for the growth and development of the
organization have been the
internalizing of talent management as a process and not
restricting it to a few people in
the organization” (Anand, 2011).
How did Bharti motivate its employees? Similarly to many well -
known innovators like Google or
Apple, it focused on innovative leadership: “strong leadership
and perseverance help overcome
inherent organizational inertia” (Giesen et al., 2010). This way
it ensured participation and
involvement in the change process. Moreover, the talent
management team is continually
involved in preparing, tracking and executing talent processes
throughout the entire organization.
The company focuses heavily on “development of internal
talent, grooming people to hold key
positions in the future and adding value to those employees’
portfolios. Mentoring and coaching
plays an important role in motivating and monitoring
employees’ growth” (Anand, 2011).
In addition, Bharti nurtured an entrepreneurial and innovative
mindset and their management style
provided anchoring points and a base for the achievement of
change.
Reviewing the organizational structure and the ways it affects
its employees is a crucial step to

successful management of a business model change. As a result
of these implementations and
adaptations, “even at the height of the economic crisis in 2008,
Bharti was able to grow revenue by
37 percent, with net income up 26 percent” (Giesen et al., 2010)
and nowadays the company is
referred to as an example of a company which “created novel
business models to gain competitive
advantage and as a result achieved superior profit (Purkayastha
and Sharma, 2016).
Conclusions
Based on the extensive review of the literature and concrete
examples of companies, which
examined the impact of organizational change, specifically
business model change, on employee
motivation, the following conclusions are derived. First,
organizational success is increasingly
perceived by firms as highly dependent on change management,
as supported by Gilley et al.
(2009): “recent decades have seen increasing emphasis on
change as a critical driver of
organizational success.” However, as estimated by Beer and
Nohria’s (2000) study, there is a high
probability for the company to fail in the execution of an
organizational change (about two-thirds of
implementations are unsuccessful); hence, special attention and
tailored effort need to be paid to its
successful implementation. Considering these studies, we
believe that the key to a successful
implementation is the careful management of human resources,
by helping employees smoothly
adjust to organizational change, considering their readiness for
change and their culture dimension
indexes. Porras and Robertson (1992) also recognize that

organizational member involvement is
the most commonly mentioned factor for successful change
(Antoni, 2004).
Second, organizational change is an immensely complex process
which can create uncertainty,
anxiety, and instability, so a clear change implementation plan
must be developed by and tailored
by the company undergoing change in order to minimize adverse
feelings. More specifically a
business model change, a subset of organizational change, due
to the limited literature and
corporate change examples is bound to escalate these feelings.
These perceptions have an
adverse effect on overall employee motivation and performance.
The literature reviewed many
approaches to be taken, singularly or combined, to prepare
employees for the upcoming change,
guide them through and motivate them to perceive the corporate
change as positive and beneficial.
It is highly recommended that the companies examine the
implementation steps introduced by
Smith (2005) and Edmonds (2011). The creation of a sense of
urgency for change, the
communication of an honest change message, and the provision
of anchoring points should be a
staple in their change implementation plan. Employee
encouragement and empowerment
promotes worker motivation and reduces resistance toward
organizational changes (Kappelman
and Richards, 1996). We observe from real-life cases that a
balanced combination of these
strategies, specifically adapted to the company model and
vision, is necessary for creating a base
for change and ensuring a positive social energy in the
organization, as concluded by Smith (2005).

Third, as mentioned in the “Assessment of readiness for
change” section, an assessment of
readiness for change is crucial before any organizational
change, business model change
included, is truly executed. Due to limited data available,
business model change has to be
VOL. 50 NO. 2 2018
treated as a subset of organizational change, hence
organizational model change suggestions
apply to business model as well. The assessment can pinpoint
any resistance to change and
organizational inertia, or reveal any possible upcoming
problems before the change. Per Oreg
(2006), the main factors that are likely to impact employees’
evaluations are the power and
prestige, job security and intrinsic rewards, so distinctive
consideration should be given to these
factors. A balanced linkage between hard vs soft skills also
needs to be maintained, and the
individual acceptance of change must be considered as well.
Limitations and further research
Although extensive material was extracted from literature
reviews on motivation and the impact of
organizational change on motivation, we found a gap in
supporting empirical data on the subject
and a limited number of direct case studies and real -life
scenarios. In addition, our research was
primarily focused on employee motivation during the initial

planning phase of organizational change;
however, there was less focus on motivation throughout and
especially after the change process.
Many research papers have been written on the impact of
organizational change on employee
motivation; however, there are limited research resources
available specifically on the impact of a
business model change. Even though a business model change is
defined as a category of
organizational change, additional specific research needs to be
conducted on this, as a business
model transformation is a pivotal change with differing
implications for the company.
Conclusions
Referring to our initial objective, in order to develop and
benefit from the change, organizations
must avoid improvising and should follow formal change
management procedures which take
employee motivation and individual response towards change
under consideration. Under the
pressure to innovate and adapt to new business opportunities,
companies need to utilize a sound
foundation of empirical data and theoretical approaches which
have been put to the test, to assist
them in successfully managing change. Companies such as the
above-mentioned cases of IBM
and Bharti Airtel understood the gravity and the ensuing
implications of a business model change,
implemented the right frameworks, and succeeded, turning
themselves into fine examples for
other companies to follow.
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Corresponding author
Steven H. Appelbaum can be contacted at: [email protected]
For instructions on how to order reprints of this article, please
visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: [email protected]
VOL. 50 NO. 2 2018
Review of HRM, Vol. 2, April 2013
35
Proceedings of 3
rd

National Conference on Human Resource Management,
NCHRM 2013
Employee Motivation, Adjustment and Values
as Correlates of Organizational Change
Anurakti Mathur
Amity Institute of Psychology and Allied Sciences, Amity
University, Noida
E-mail: [email protected]
Abstract
Change is inevitable in any organization. Every one fears the
unknown before the change
takes place, however after the change event there is a severe
problems that the
employees may face with regards to adjustment to the
disturbances that the change has
created. The present research sets out with an aim to understand
the effect of
organizational change on Employee Motivation, Adjustment and
Values in an organization
that has recently undergone massive organizational change. This
research was conducted
on a sample of 50 employees who are working in an
organization which has experienced a
major change in the recent past. Data was obtained through
questionnaires devised for
the purpose of this research keeping in mind the above
mentioned variables. The findings
show that the respondents have revealed the tendency to try and

maintain moderate
levels of motivation after the change. They also try to make the
desired adjustments that
are required in order to cope with the multiple roles in the
organization. The values shift
from achievement to personal survival ones to maintain ones
existence in the
organization and to function as a well-balanced individual.
Keywords: Motivation, Values, Organizational Change
Introduction
Changing organisations involves building a network of
relationships between
organisational entities that are defined and shaped (against
various resistances) to
contribute towards some particular goal of change (Law, 2000).
Or, as Brunsson and
Sahlin-Andersson (2000) suggest, the construction of entities so
that they come to
resemble some general or abstract concept of organisation –
perhaps one that is
perceived to be somehow more “complete”. In the context of
recent public sector reform
in a number of Western countries, much organisational change
can be seen as
representing attempts to reconstruct public sector organisations
as more consistent with
popular notions of “modern management” taken from the private
sector.
mailto:[email protected]

36
Proceedings of 3
rd
NCHRM 2013
An operational definition of ‘organisational change’
While the phrase ‘organisational change’ is much used in
management discourse it is a
phrase, like the word ‘management’, that is rarely defined at a
conceptual level. It is
clearly not a unitary concept as organisational change can be
implemented using a variety
of instruments either in series or, as our data show, more often
in parallel. Change may
be further explained in terms of its various types that the
researchers have divided it into.
Planned versus emergent change
Sometimes change is deliberate, a product of conscious
reasoning and actions. This type
of change is called planned change. In contrast, change
sometimes unfolds in an
apparently spontaneous and unplanned way. This type of change
is known as emergent
change. An important (arguably the central) message of recent
high-quality management
of change literature is that organisation-level change is not
fixed or linear in nature but
contains an important emergent element.

Episodic versus continuous change
Another distinction is between episodic and continuous change.
Episodic change,
according to Weick and Quinn (1999), is ‘infrequent,
discontinuous and intentional’.
Sometimes termed ‘radical’ or ‘second order’ change, episodic
change often involves
replacement of one strategy or programme with another.
Continuous change, in contrast, is ‘ongoing, evolving and
cumulative’ (Weick and Quinn,
1999). Also referred to as ‘first order’ or ‘incremental’ change,
continuous change is
characterised by people constantly adapting and editing ideas
they acquire from different
sources. At a collective level these continuous adjustments
made simultaneously across
units can create substantial change.
The distinction between episodic and continuous change helps
clarify thinking about an
organisation’s future development and evolution in relation to
its long-term goals. Few
organisations are in a position to decide unilaterally that they
will adopt an exclusively
continuous change approach. They can, however, capitalise
upon many of the principles
of continuous change by engendering the flexibility to
accommodate and experiment with
everyday contingencies, breakdowns, exceptions, opportunities
and unintended
consequences that punctuate organisational life (Orlikowski,
1996).
Developmental, transitional and transformational change

Change can also be understood in relation to its extent and
scope. Ackerman (1997) has
distinguished between three types of change: developmental,
transitional and
transformational.
37
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rd
NCHRM 2013
1. Developmental change may be either planned or emergent; it
is first order, or
incremental. It is change that enhances or corrects existing
aspects of an organisation,
often focusing on the improvement of a skill or process.
2. Transitional change seeks to achieve a known desired state
that is different from the
existing one. It is episodic, planned and second order, or
radical. The model of transitional
change is the basis of much of the organizational change
literature (see for example
Kanter, 1983; Beckhard and Harris, 1987; Nadler and Tushman,
1989). It has its
foundations in the work of Lewin (1951) who conceptualised

change as a three-stage
process involving:
• unfreezing the existing organisational equilibrium
• moving to a new position
• refreezing in a new equilibrium position.
3. Transformational change is radical or second order in nature.
It requires a shift in
assumptions made by the organisation and its members.
Transformation can result in an
organisation that differs significantly in terms of structure,
processes, culture and
strategy. It may, therefore, result in the creation of an
organisation that operates in
developmental mode – one that continuously learns, adapts and
improves.
Systems thinking and change
Many of the approaches to organisational change found in the
literature give the
impression that change is (or can be) a rational, controlled, and
orderly process. In
practice, however, organisational change is chaotic, often
involving shifting goals,
discontinuous activities, surprising events, and unexpected
combinations of changes and
outcomes (Cummings et al., 1985; Dawson, 1996). Accordingly,
change can be understood
in relation to the complex dynamic systems within which
change takes place.
Systems are described as closed or open. Closed systems are
completely autonomous and
independent of what is going on around them. Open systems
exchange materials, energy
and information with their environment. The systems of interest

in managing change can
all be characterised as open systems. In terms of understanding
organisations, systems
thinking suggest that issues, events, forces and incidents should
not be viewed as isolated
phenomena but seen as interconnected, interdependent
components of a complex entity.
Areas of Change
Organizations typically respond to the challenges of new
technologies, new competitors,
new markets, and demands for greater performance with various
programs, each
designed to overcome obstacles and enhance business
performance. Generally, these
programs fall into one of the following categories:
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• Structural change.–These programs treat the organization as a
set of functional parts—
the “machine” model. During structural change, top
management, aided by consultants,
attempts to reconfigure these parts to achieve greater overall

performance. Mergers,
acquisitions, consolidations, and divestiture of operating units
are all examples of
attempts at structural change.
• Cost cutting.–Programs such as these focuses on the
elimination of nonessential
activities or on other methods for squeezing costs out of
operations. Activities and
operations that get little scrutiny during profitable years draw
the attention of cost
cutters when times are tough.
• Process change.–These programs focus on altering how things
get done. Examples
include reengineering a loan approval process, the company’s
approach to handling
customer warranty claims, or even how decisions are made.
Process change typically aims
to make processes faster, more effective, more reliable, and/or
less costly.
• Cultural change.–These programs focus on the “human” side
of the organization, such
as a company’s general approach to doing business or the
relationship between its
management and employees. A shift from command-and-control
management to
participative management is an example of cultural change.
Two Different Approaches to Change
While there are many types of change programs, two very
different goals typically drive a
change initiative: near-term economic improvement or an
improvement in organizational
capabilities. Harvard Business School professors Michael Beer

and Nitin Nohria coined the
terms “Theory E” and “Theory O” to describe these two basic
goals.
Theory E: An Economic Approach
The explicit goal of Theory E change is to dramatically and
rapidly increase shareholder
value, as measured by improved cash flow and share price.
Popular notions of employee
participation and the “learning organization” take a back seat to
this overarching goal.
Financial crisis is usually the trigger for this approach to
change. Driven to increase
shareholder value, Theory E proponents rely heavily on
mechanisms likely to increase
short-term cash flow and share price: performance bonuses,
headcount reductions, asset
sales, and strategic reordering of business units. According to
Theory E, all implicit
contracts between the company and its employees, such as
lifetime employment, are
suspended during the change effort. Individuals and units whose
activities fail to
demonstrate tangible value creation The CEO and the executive
team drive Theory E
change from the top
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Theory O: An Organizational Capabilities Approach
The goal of Theory O change is to develop an organizational
culture that supports learning
and a high performance employee base. Companies that follow
this approach attempt to
invigorate their cultures and capabilities through individual and
organizational learning.
And that requires high levels of employee participation, flatter
organizational structure,
and strong bonds between the organization and its people.
Because employee
commitment to change and improvement are vital for Theory O
change to work, implicit
contracts with employees are considered too important to break.
The leaders of Theory O
change are less interested in driving the success themselves than
in encouraging
participation within the ranks, and in fostering employee
behaviors and attitudes that will
sustain such change.
Employee Psychological Dynamics during Organisational
Change
A debate exists over the reactions that individual employees
have towards change. While
there has been a long tradition of researchers who argue that
employees tend to resist
organisational change in general (e.g. Judson 1991; Odiorne
1981; Strebel 1996), Dent
and Goldberg (1999) argue that the term ‘resistance’ should be

removed from the
literature as it does not reflect the complex interactions that
occur during change. Piderit
(2000) takes a more conciliatory view suggesting that the
ambivalence that employees
feel towards change does not always produce resistance, but
generally produces
confusion. Regardless of what term is used, there is a wealth of
literature that shows that
employee ambivalence to management change initiatives is
often linked to dysfunctional
conflict during organizational change and associated with
negative outcomes such as job
dissatisfaction and expressed grievances (Kirkman, Jones &
Shapiro 2000). Employees
who are expending their energy on these types of reactions to
change have less energy
for participating or contributing to that change. Therefore,
identifying factors that
moderate this change resistance would be beneficial to both the
individuals involved in
the change process and the organisation. Examining
organisational behaviour,
researchers have identified change as having the potential to
elicit a broad range of
emotion whether the transformation is a major restructure or
minor re-organisation
(Mossholder et al., 2000).
Change can be perceived as a challenge or an opportunity and
triggers positive emotions
such as excitement, enthusiasm and creativity (Goleman,
Boyatzis & McKee 2002).
Change can also, however, be threatening and create negative
emotions such as anger,
fear, anxiety, cynicism, resentment, and withdrawal (French

2001). Clearly change poses
significant challenges, both to those who implement and those
who are affected by the
change (O’Neill & Lenn 1995). Management theory, however,
tends to focus on cognitive
issues such as cognitive dissonance during change (Bacharach,
Bamberger & Sonnenstuhl
1996). The result of this focus is consideration of solutions in
dealing with attitudes to
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change, rather than emotional reactions (e.g. Brockner 1988;
Brockner, Grover, Reed &
DeWitt 1992). A small body of research that has examined the
role of emotion during
organisational change has largely focused on emotional
responses such as stress (Terry &
Jimmieson 2003), and behaviours such as withdrawal and low
organisational commitment
(Begley & Czajka 1993), thereby ignoring the emotive/cognitive
processes that engender
such outcomes (O’Neill & Lenn 1995).

Work Motivation
Work motivation may be defined as the internal or external
force that compels an
individual to perform optimally in the organization where he is
employed. Work
motivation has been found to be positively related to job
satisfaction, performance and
organizational commitment. The motives may be extrinsic or
intrinsic in nature.
Extrinsic motives are tangible or visible to others. They are
distributed by other people. In
the workplace extrinsic motives include pay, benefits,
promotions etc. extrinsic motives
also include the drive to avoid punishment, such as termination
or being transferred. In
each situation an external agent distributes these items.
Furthermore, extrinsic rewards
are usually contingency based. That is, the extrinsic motivator
is contingent on improved
performance, or performance that is superior to others in the
same workplace. Extrinsic
motivators are necessary to attract people into the organization
and keep them on the
job. They are also used to inspire workers to achieve at higher
levels or to reach new
goals, as additional payoffs are contingent on improved
performance. They do not,
however, explain every effort made by an individual employee.
Intrinsic motives are internally generated. In other words, they
are motivators that the
person associates with the task or job itself. Intrinsic reward
include feeling of
responsibility, achievement, accomplishment, that something
was learned from

experience, feeling of being challenged or competitive, or that
something was an
engaging task or goal. Performing meaningful work has also
been associated with intrinsic
motivation.
The two types of motivators are not completely distinct from
one another. Many
motivators have both extrinsic and intrinsic components.
Cognitive Evaluation Theory
suggests a more complicated relationship. This theory says that
a task may be intrinsically
motivating, but when an extrinsic motivator becomes associated
with that task, the actual
level of motivation may decrease. In other words, extrinsic
motivation may actually
undermine intrinsic motivation. But there is considerable
research evidence that extrinsic
reward may not detract from intrinsic motivation and at least for
interesting, challenging
tasks, extrinsic reward may increase the level of intrinsic
motivation.
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According to David McClelland there are three major types
work motivators need for
achievement (n-ach), need for power (n power) and the need for
affiliation (n aff). These
set of needs are said to guide and direct employee motivation in
the organizational
setting.
The Power Motive: Winter (1973) has defined social power as
“the ability or capacity of a
person to produce (consciously or unconsciously) intended
effects on the behaviour and
emotions of another person”. The goal of power motivation are
to influence, control,
cajole, persuade, lead, charm others and to enhance ones own
reputation in the eyes of
other people. People with strong power motivation derive
satisfaction from achieving
these goals.
The leading advocate of the power motive was the psychologist,
Alfred Adler. To explain
the need for power- the need to manipulate others or drive for
being in charge of others-
Adler developed the concept of inferiority complex and
compensation. He felt that every
small child experiences a sense of inferiority. When this feeling
of inferiority is combined
with what he sensed as an innate need for superiority, the two
rule all behaviour. The
person’s lifestyle is characterized by striving for compensation
for the feeling of
inferiority, which are combined with the innate need for power.

Power motivation varies in strength from person to person and
situation to situation in
the same person. It may be expressed in many ways; the manner
of expression depends
greatly on the person’s socioeconomic status, sex, level of
maturity, and the degree to
which the individual fears his or her own power motivation.
There are five categories of power:
ability to control
resources and reward others. In addition, the target of this
power must value
these rewards. If the managers offer their people what they
think are rewards, but
the people do not value them, then managers do not really have
reward power. By
the same token, the managers may not think that they are giving
rewards to their
people, but if they perceive this to be rewarding, the managers
nevertheless have
reward power. Also managers may not really have the rewards
to dispense, but as
long as people think they have it, they do indeed have reward
power.
person with coercive
power has the ability to inflict punishment or aversive
consequences on another
person or, at least make threats that the other person believes
will result in
punishment or undesirable outcomes. Managers frequently have
coercive power
in that they can fire or demote people who work for them or

dock their pay. A
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manager can also directly or indirectly threaten an employee
with these punishing
consequences.
and Raven, stems from
the internalized values of the other person that give the
legitimate right to the
agent to influence them. The others feel that they have the
obligation to accept
this power. It is closely aligned with both reward and coercive
power because the
person with legitimacy is also in a position to reward and
punish. But unlike
reward and coercive power it does not depend on the
relationships with others
rather on the position or role that the person holds. Managers
generally have
legitimate power because employees believe in the value of
private property laws

and in the hierarchy where higher positions have been
designated to have power
over lower positions. People can obtain legitimate power from
accepted social
structure or from being designated as the agent or representative
of a powerful
person or a group.
the part of the
other person to identify with the agent wielding power. They
want to identify with
the powerful person, regardless of the outcome. The others
grant the person
power because he or she is attractive and has desirable
resources or personal
characteristics. Managers with referent power must be attractive
to their people
so that they will want to identify with them, regardless of
whether the managers
later have the ability to reward or punish or whether they have
legitimacy. The
manager who depends on referent power must be personally
attractive to the
subordinates.
Expert Power: This source of power is based on the extent to
which others attribute
knowledge and expertise to the power holder. Experts are
perceived to have knowledge
or understanding only in certain well defined areas. The target
must perceive the agent to
be credible, trustworthy, and relevant before expert power is
granted. Staff specialists
have expert power in their functional areas but not outside

them. Expert power is highly
selective, and, besides credibility the agent must also have
trustworthiness and relevance.
Managers and staff specialists, who seldom have the other
sources of power available to
them, often have to depend on their expertise as their only
source of power. As
organizations become increasingly technologically complex and
specialized, the expert
power of the organization members at all levels has become
more and more important.
This is formally recognized by some companies that deliberately
include lower level staff
members with expert power in top level decision making
Research Objectives
The research has been conducted with an objective of
understanding the psychological
after-effects of organisational change on the employees of that
organisation. For this
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purpose few aspects of the human psyche such as motivation

(extrinsic and intrinsic),
adjustment(personal and professional), and values have been
incorporated, though many
other aspects have been left out due to the constraints faced by
the researcher and in
order to narrow down the scope of the study.
Thus the research has been carried out keeping the following
aims in mind:
after a change event.
fit into their
organisations after change has occurred.
loyees after a change
event with respect
to need for power, affiliation and achievement.
-place in the
employees after the change
process.
Review of Literature
The present research is aimed to develop a theoretical
understanding of psychological
dynamics of the employee during the organisational change,
informed by a perspective
on employee work values, motivation and adjustment. This
chapter provides a literature
review that introduces the issue of employee’s psychological
aspect during organisational
change. The review draws primarily on the psychological

literature focusing on aspects of
the human psyche like motivation, values and adjustment.
Research on Nature of Organisational Change
The increasing pace of global, economic and technological
development makes change an
inevitable feature of organisational life (Cummings & Worley,
1997). Organisations are
often ineffective at managing the psychological components of
organisational change
(Bennett & Durkin, 2000) and it has been noted that there is
considerable room for
improving the effectiveness of change efforts (Porras &
Robertson, 1992). Kotter (1995)
noted that as many as 90% of initiatives fail to achieve their
strategic objectives mainly
due to human factors such as change related responses, attitudes
and behaviours.
Organisations cannot achieve their strategic change objective
until a critical mass of
employees has successfully completed their individual
transitions (St Amour, 2001).
Armenakis, Harris and Mossholder (1993) argued that employee
attitude towards
organisational change affect not only the success of the change
process but other
important organisational outcomes such as job satisfaction,
productivity, morale,
absenteeism and turnover (Eby, Adams, Russell & Gaby, 2000).
The costs involved with
such consequences may be directly attributable to the distress
that is created when an
organisation’s employees encounter constant change (Mack,
Nelson & Quick, 1998).

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Large scale organisational change is defined as change that
encompasses the entire
organisation, has occurred over a number of years, and involves
fundamental
modifications in ways of thinking about the business, the
organisation, and how the
organisation is managed (Nadler, 1988). This type of change has
important and often
underestimated psychological implications for the empl oyees.
The necessary adjustments
can foster enthusiasm and opportunities for learning and growth
or, alternatively, can
lead to frustration and alienation (Thompson & Van de Ven,
2001).
Judge, Thoresen and Welbourne (1999) argued that
organisational change research has
been dominated largely by macro systems oriented focus and
that a limited number of
studies of organisational have taken a micro level,
psychological approach. Hence

assessing the impact of organisational change on employee
attitudes and behaviours is
identified as an important research direction.
Despite widespread research on why and how organisations
change, what constitutes
change is often taken for granted. Its definition is avoided.
Studies based on individuals'
rational choice imply that change flows from purposive actions
in accordance with an
objective, external reality whereas contextualism argues that
change results from
institutional pressures, isomorphism, and routines. But both
depict change as the passage
of an entity, whether an organisation or accounting practices,
from one identifiable and
unique status to another. Despite their differences over whether
reality is independent,
concrete and external, or socially constructed, both assume that
actors (or researchers)
can identify a reality to trace the scale and direction of changes.
This reflects modernist
beliefs that organisational space and time are unique and linear.
Many organisations are implementing major changes in the way
they do business in
response to growing international competition, a significantly
changing workforce,
increasingly complex and changing work environments, and
other pressures (Lawler,
1986, Manz, 1992). As an organisation strives to maintain their
competitive edge they are
reorganising, downsizing and implementing new technology.
Ultimately, new and
additional job demands are placed on individuals within these
organisations. These

changes are inevitable inn today’s work environment. Also
inevitable is the fact that
employees must adapt to these constantly changing
environments in order to survive and
prosper. Development of a body of knowledge about managing
change is an important
body of knowledge for both academics and for general managers
(Beer, 1987). The need
for adaptive workers has become increasingly important due to
the fact that today’s
organisations are characterised by changing, dynamic
environments (Pulakos, Arad,
Donovan, & Palmondon, 2000, Ilgen &Pulakos, 1999). In a
recent article stressing the
attributes graduates need to enter the workforce, adaptability to
the changing work
environment was at the top of the list (Gow & Mc Donald,
2000).
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In today's turbulent, often chaotic, environment, commercial
success depends on
employees using their full talents. Yet in spite of the myriad of

available theories and
practices, managers often view motivation as something of a
mystery. In part this is
because individuals are motivated by different things and in
different ways. In addition,
these are times when delayering and the flattening of
hierarchies can create insecurity
and lower staff morale. Moreover, more staff than ever befor e
are working part time or
on limited-term contracts, and these, employees is often
especially hard to motivate.
Organisational Change and Employee Motivation
Twyla Dell writes of motivating employees, "The heart of
motivation is to give people
what they really want most from work. The more you are able to
provide what they want,
the more you should expect what you really want, namely:
productivity, quality, and
service." (An Honest Day's Work (1988). In his research
London (1983) found that a
resilient workforce is better equipped to deal with the
organisational change. He found
that organisations which have resilient and thriving employees
have a more motivated
workforce that works towards the success of the organisational
change. Also, findings
support the fact that a motivated and positive employees is very
less likely to be prone to
turnover and absenteeism.
Change can be perceived as a challenge or an opportunity and
triggers positive emotions
such as excitement, enthusiasm and creativity (Goleman,
Boyatzis & McKee 2002).
Change can also, however, is threatening and create negative

emotions such as anger,
fear, anxiety, cynicism, resentment, and withdrawal (French
2001). Clearly change poses
significant challenges, both to those who implement and those
who are affected by the
change (O’Neill & Lenn 1995). Management theory, however,
tends to focus on cognitive
issues such as cognitive dissonance during change (Bacharach,
Bamberger & Sonnenstuhl
1996). The result of this focus is consideration of solutions in
dealing with attitudes to
change, rather than emotional reactions (e.g. Brockner 1988;
Brockner, Grover, Reed &
DeWitt 1992). A small body of research that has examined the
role of emotion during
organisational change has largely focused on emotional
responses such as stress (Terry &
Jimmieson 2003), and behaviours such as withdrawal and low
organisational commitment
(Begley & Czajka 1993), thereby ignoring the emotive/cognitive
processes that engender
such outcomes (O’Neill & Lenn 1995).
A research conducted by Chew Man Min and Petrovic-Lazarevic
(2005) found that high
spirited employees are better equipped to maintain harmonious
working relationships
with their colleagues and continue keeping high morale while
facilitating the same for
others in their team and the organisation as a whole. It is
imperative that managers
always maintain a pleasant workplace for the employees there
by keeping them

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motivated as a dull, stressful and unmotivated organisational
environment will bring harm
to nay business.
In any organisation, any change initiative which is not
supported by the managers as
employees become demotivated and low spirited and cannot
sustain the humungous task
of carrying out the change initiative on their own. In such
organisations employees feel
totally lost and direction less and often fear the change event as
there is no one to
motivate them or spur them on there by encouraging them to
carry out the change. Thus
motivation is of utmost importance in to build a sustainable
competitive advantage and
carry out change successfully.
All employees are generally afraid of the change involved in
any business and the
impending effects that the change and the new organisational
setting will have on their
job process and job situation. The idea and concept behind the
change and the new work

process should be sold to the employees before the actual steps
towards implementing
the change in the organisation are taken. Managers need to
emphasise the benefit that
the change will bring for the employees and how it is not a
threat but an enhancement to
their jobs.
Organisational Change and Adjustment:
The impact of organisational change on employee adjustment
has emerged as an
important area of research due to high emotional and financial
costs to employees and
organisations when the change is not managed well. Terry et al.
(1996) found that the
application of Lazarus and Folkman’s (1984) cognitive
phenomenological framework
proved a useful approach. This model focuses on how
individuals appraise the change
event, their coping response and the extent to which access to
personal and social coping
resources determine their levels of adjustment to corporate
change. The success of
organisational change initiatives is often determined by
employee attitudes towards the
change (Almaraz, 2000; Beer, Eisenstadt, & Spector, 1990). In
addition to their effect on
the success of change initiative, employee attitudes towards a
pending change can have
wider impact in terms of job satisfaction, organisational
commitment, morale,
productivity and turnover intentions (Wanberg & Banas, 1997).
Another study by Judge, Welbourne, et al (1999) shows that
variables like job satisfaction,
organisational commitment etc have a very positive correlation

with how well an
individual copes with change. Research by Wanberg and Banas
(2000) found that
employee attitudes towards change, acceptance of and opinion
about change were
positively related to job satisfaction. Also employees with
lesser tendency to adapt to on-
going change process has lower levels of job satisfaction,
higher work related irritation
and a higher intention to quit their organisation. According to
McManus et al. (1995) and
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Schneider and Bowen (1993), if an organisation is attempting to
create a climate that
values change, the importance of change may be evident in
employee attitudes,
relationships, job characteristics, availability and quality of
resources and the context in
which the organisation operates. Hence to improve employee
adjustment during change,
priority should be place on improving the organisational climate
and developing aspects

of it which act as resources that assist employees to engage in
positive appraisal of
change.
Change for an individual is organisational usually means loss of
power as responsibility
and accountability are shifted. It can also mean that critical
relationships and new
patterns pf interactions are demanded. Additionally, there are
potential losses in reward,
particularly status and monetary rewards as power shifts, and
losses in identity as the
meaning people make of their work lives is threatened by
changes in the organisation
(Beer, 1987). Theory and past research suggests that change is
traumatic for individuals
within an organisation (Callan, Terry & Schweitzer, 1994,
Burke, 1988). The degree of
trauma will depend on the nature of change. In the
psychological literature, there has
been much discussion surrounding how trauma events shatter
our fundamental schemas
(Janoff-Bulman, 1992). A person’s ability to change and adapt
will depend on how strong
their beliefs (schemas) were prior to the change. In addition,
how this cognitive process
occurs in an individual will dictate how well they adapt to the
change (Janoff-Bulman,
1992).
In looking at change as a trauma, we can associate individual’s
responses to organisation
change in a similar fashion as our brethren scholars do in the
field of psychology. (Carver,
1998). A debate exists over the reactions that individual
employees have towards change.

While there has been a long tradition of researchers who argue
that employees tend to
resist organisational change in general (e.g. Judson 1991;
Odiorne 1981; Strebel 1996),
Dent and Goldberg (1999) argue that the term ‘resistance’
should be removed from the
literature as it does not reflect the complex interactions that
occur during change. Piderit
(2000) takes a more conciliatory view suggesting that the
ambivalence that employees
feel towards change does not always produce resistance, but
generally produces
confusion. Regardless of what term is used, there is a wealth of
literature that shows that
employee ambivalence to management change initiatives is
often linked to dysfunctional
conflict during organizational change and associated with
negative outcomes such as job
dissatisfaction and expressed grievances (Kirkman, Jones &
Shapiro 2000). Employees
who are expending their energy on these types of reactions to
change have less energy
for participating or contributing to that change. Therefore,
identifying factors that
moderate this change resistance would be beneficial to both the
individuals involved in
the change process and the organisation. Examining
organisational behaviour,
researchers have identified change as having the potential to
elicit a broad range of

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emotion whether the transformation is a major restructure or
minor re-organisation
(Mossholder et al., 2000).
Organisational Change and Dynamics of Employee Psychology
According to previous researches, redundancy affects survivors’
emotions, attitudes and
behaviours (Worrall et al., 1999). The emotions synonymous
with grieving, such as anger,
anxiety and fear have been noted alongside decreased
motivation, trust in the
management and levels of organisation commitment in
subsequent jobs (Worrall et al.,
1999). However, Reilly et al (Reilly et al., 1993) suggested the
individual becomes more
loyal to their own personal development rather than to the
organisation itself. It perhaps
explains the origin of the concept “manager- as- mercenary”
that has begun to appear in
literature (Worrall et al., 1999). It has been found that all
forms of organisational change
have reduced managers' sense of loyalty, motivation, morale
and job security with the
impact on morale and sense of job security having been more
pronounced than on loyalty
and motivation.

There is strong evidence that the perceived impact of change
generally is to cause the
attrition of organisations’ skills and knowledge bases: this is
somewhat paradoxical given
the recent emphasis on knowledge management and ‘the
learning organisation’ in
current management discourse. Different forms of change have
impacted on managers'
perceptions of their organisation as a place to work. While 47
per cent of managers in ‘no
change organisations’ have reported increased job
fragmentation, this is much lower than
in those organisations where there has been some form of
change and substantially lower
than in those organisations where redundancy without
delayering has been used. Speed
decision making in post-redundancy organisational settings has
been adversely affected
and we suggest that this has been brought about by an increase
in managers’ role
overload, an increase in spans of control and an increase in task
fragmentation among
surviving managers. These issues raise concern for the
management of post-redundancy
survivors in terms of rebuilding their commitment, re-
establishing their perception that
the organisation has some commitment to them, redeveloping
their sense of job security
and rekindling their sense of identification with the newly
downsized and restructured
organisation.
The case study participant company is an international blue-
chip manufacturing company
based in the UK, with 35,000 employees around the world. This
company has a very

complex structure, containing four core businesses, each
supported by an operational
unit. Moreover, under the operational unit, there are seven
operational subunits spread
around the world; five of which are located in the UK. This case
study focus on one of the
subunits, involved with around 1500 full time employees and
nearly 100 temporary
contractors. Despite our being able to access more than one
subunit in this manufacturing
49
Proceedings of 3
rd
NCHRM 2013
company, we take just one specific subunit as our research
focus group in order to narrow
down uncertain variables.
Interviews were conducted in a semi-structured style,
surrounding the restructuring event
and its process when the company adopted the activity three
years ago. Interviewees
were chosen via the researcher’s point of contact, who was
asked to provide a list form a
range of functions, locations and viewpoints. The business is

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