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2 Diagnosing and Planning for Change
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Learning Objectives
After reading this chapter, you should be able to
do the following:
1. Explain what it means to diagnose
organizations for change.
2. Determine an organization’s reason for change
using the open-systems theory and model,
environment-industry-
organization contingency model, and organizational

life-cycle model.
3. Examine the assessment model and trigger
questions used to identify what type of
organizational change is needed.
4. Analyze the appreciative inquiry model.
5. Utilize the action research model to
implement change.
6. Describe how organizations can address resistance to
change.
By failing to prepare, you are preparing to fail.
—Benjamin Franklin
On March 24, 2015, Zappos’s CEO TonyHsieh
(pronounced “shay”) sent a company-wide memo
stating Zappos’s change strategy of becoming a
manager-free organization on April 30. His
message was clear: Embrace self-management or
leave the company (Feloni, 2015a). The online
shoe
and clothing retail �irm is a wholly owned
subsidiarypurchased by Amazon for $1.2 billion in
2009. Zappos employs 1,500 people, has
annual
revenues of $2 billion, and is no stranger to
new and unique organizational practices.
Hsieh cameto Zappos as an angel investor in
1999 after selling LinkExchange—which he
cofounded—to Microsoft in 1998 for $265 million,
and

he became full time in 2000 (Hsieh, 2010). He
and his team increased online sales from $0 in
1999 to $70 million by 2003, and in 2008
they
reached $1 billion in gross merchandise sales
before selling the company to Amazon. In
2010 Hsieh attributed the company’s success to
“customer
service, company culture, and employee training and
development” (Hsieh, 2010, “What We’re
Learning from Amazon,” para. 8).
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Continuing his drivetoward greater growth, Hsieh
began experimenting with a self-management
organizational structure known as Holacracy in
2013. Holacracy is a horizontal type of
organizational structure composed of circles where
“equally privileged employees work autonomously in
codependency with other circles, sometimes
overlapping” (Feloni, 2015b, para. 5). The author
of this concept is software engineer Brian
Robertson, who operates HolacracyOne, a company
that distributes software to help clients with
the new arrangement.
Hsieh is clear that he wants to break
down Zappos’s previous structure, which featured

silos/circles of functional departments like
merchandising, �inance, and marketing, and replace
them with self-organizing and self-managing business-
centered circles. The new structure
has fewer roles that alignemployees without the
bureaucracy. Hsieh stated in the company
memo that he realized the new self-managing,
peer-
based structure may not �it everyone; therefore, all
employees in good standing had the opportunity
to take a severance package. He also stated,
“Like all the bold stepswe’ve done in the past, it
feels a little scary, but it also feels like exactly
the type of thingthat only a company such as
Zappos would dare to attempt at this scale”
(Hsieh, 2015, “From Tony,” para. 23).
Fast-forward a month later: 210 employees
(14% of the company) took the severance pay
offer, and 85% went through the �irstpart of
the
transition (Feloni, 2015c). In a company noted
for its customer-focused, happy employee and
“purpose with pro�it” culture, the announcement
and somewhat radical shift to the self-managed system
is another Hsieh experiment that may prove
prophetic, or not (Pontefract, 2015).
Critical-Thinking Questions
1. Why do you think14% of employees took
the severance pay? Could it have been due to
resistance to change? Did they no longer
enjoying working at the company? Was it a bad
culture �it or somethingelse?

2. What would you have done had you been an
employee at Zappos at that time,and why?
3. How would you describe Hsieh’s style as a
change leader?
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AP Photo/TheGrand Rapids Press, Cory Morse
Zappo’s CEO, TonyHsieh, raised many
questions
when he moved so rapidly to restructure
his
organization.
Introduction: Ready, Aim … Plan!
“If you don’t know where you’re going, all
roads lead there,” a Roman proverb states.
The warning here is that if you don’t set a
destination for
yourself or have a goal, then your actions will cease
to have meaningful consequence. Lacking a
goal, of course, is the very opposite of
effective change management. In an increasingly
globalized world, in which change occurs
at an ever faster rate, a good business must
always
have a set of short- and long-term goals and a
detailed strategy for reaching them. As the

Zappos transformational change suggests, having
a
goal is only part of a large-scale change
process. There are otherimportant elements
involved in diagnosing a change as well.
This chapter
focuses on the �irststepsof that process: the
diagnosing and planning methods that effectively
prepare organizations to respond to change.
Diagnosing organizational change raises the key
diagnosticquestions to be asked
by those planning an organizational change: the
why, what, who, and how of the
change. For example, the opening scenario raises
the question of why Zappos’s
CEO decided to move so quickly to adopt a
completely self-managed structure.
Were thereforces in the external or international
organizational environment that
precipitated the need for this change?
In addition, what exactly needed to be
changed at Zappos? Were some of its
internal systems not meeting expectations? Were
any of the groups (sales,
marketing, or operations) not performing
according to plan? Why change the
entire management and employee structure? The
company had a collaborative,
horizontal structure (Holacracy) that seemed to have
been working the previous
few years. Was there a need to change
the structure based on Zappos’s
organizational and leadershiplife cycle? The company
was founded in 1999 but

had successfully undergone several organizational
life-cycle phases, showing
increasingrevenue and othereffectiveness measures.
Another question to be asked is who needed to
change—the managers? It might
seem so, since the reorganization was shifting to a
self-managed, peer-based
system. How would the otherstakeholders in and
outside of Zappos be affected—
namely the surviving employees, managers, customers,
and of�icers? Finally, how
did and will this change continue to roll out?
Hsieh’s e-mail jump-started the
process, which seemed to many like a fait
acommpli (that is, a decision already made
without discussion). We will return to Zappos
and these
questions as we present different frameworks in
this chapter.
Zappos is not representative of the majority of
organizations across industry sectors. It does,
however, present organizational issues,
questions, and lessons from which leaders, team
members, and students of organizational change
can learn. For example, is Hsieh responding
to a problem, opportunity, both,or neither? Do
classic and contemporary organizational change
models and concepts address opportunity
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creation as well as problems and threats to be
solved? We would answer yes to the latter
question and will address the former through
the
models presented here.
Chapter 1 discussed the different types of
changes that affect organizations. Here we present
classic and contemporary frameworks for
diagnosing ways that organizations can meet both
external and internal needs, threats, and
opportunities. We also explain strategies for
understanding and dealing with resistance to change.
The methods used here and throughout this text
are relevant for large, publicly traded
companies, not-for-pro�its, community service,
and government organizations.
Most organizations continually plan and implement
some type of change, whether transformational or
simple. Each day, organizations
respond to different types of change in a
variety of ways. The list is extensive:
Mergers and acquisitions
Reorganizations and restructuring
Spin-off businesses
Expansions
Downsizing
Introducing new products and services
Implementing new IT software

Because nearly threequarters of largeorganizational
changes fail (Dinwoodie, Pasmore, Quinn, &
Rabin, 2013; Keller & Aiken, 2009;
Kotter,
1996), it is important to diagnose leaders’ and
managers’motives for changing and understand
what is to be changed, what type of change is
appropriate, and the change’s strategy. Transformational
changes are very costly in human, material,
and �inancial terms, so they must be
done correctly.
It is important to note at the outset that large-
scaleplanned changes are messy, nonlinear, and in
general only as effective as the people
leading and sustaining them. Such leadershipincludes
knowing why, when, what, and who to change,
but also knowing when not to change.
Kesar (2001) cautions that change is not always
the cure for all business problems. Instead, leaders
should take the time to evaluate and
prioritize change proposals and ideas, rather than
immediately reacting to internal and external
changes. In this way, failing to change can be
positive. Kesar is suspicious of business trends
that encourage organizational recon�iguration every
5 years and the symbolic value of change
as a demonstration of management’s success
(Czarniawska-Joerges & Sevón, 1996). In
the 21st century necessary change is more a
constant
than a luxury; nevertheless, organizational leaders
have the responsibility to determine whether
changes are needed and, if so, what type of
change will work in their particular situations.

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2.1 Diagnosing Organizations for Change
Organizational diagnosis of change refers to the
process of understanding the current state of
how an organization functions and providing
necessary information to design change
interventions—that is, program elements used to
manage an organization’s internal relationship
(resources, structure, operations) with its external
environment to support a business strategy
(Cummings & Worley, 2015). Interventions
are designed by organizational leaders, managers, and
teams to change behaviors of individuals or
of a population as a whole.
Interventions
are used in different settings, such as communities,
work sites, schools, health care organizations,
religious organizations, or the home, and
include educational programs, policies, environmental
improvements, or promotional campaigns. The
most effective interventions utilize
multiple strategies to create a more lasting change
(Intervention MICA, n.d.).
Discovering and verifying the motivation for change
is the �irststep to a planned organizational
change initiative. Diagnostic change models
are frequently used in this process. Although

such change models are simpli�ications of reality,
they provide both a context in which
organizations operate and highlight the interrelationships
among their internal dimensions, which helps
identify desired effectiveness.
Although change models do not necessarily provide
the “one best way”or “the truth” about
diagnosing organizations, they offer theoretical
and practical ways to understand complex situations.
Burke (2011) offered �ive purposes of
organizational models:
1. Models help reduce the complexity of
thousands of things “going on” into manageable
categories.
2. Models identify aspects of organizational
activities and dimensions that demand attention.
3. Models highlight the interconnectedness of
organizational properties like culture, structure, and
strategy.
4. Models provide a common language and
vocabulary.
5. Models offer a sequence of actions that users
can follow in particular change situations.
As stated earlier, the expertise of an
organization’s leaders, managers, and change
specialists are perhaps the most critical factors
for
diagnosing, planning, and implementing changes.
Consequently, leaders are the ones who must
ultimately make decisions based on model
projections. Diagnostic models can also help detect
and prevent type 1 and 2 errors (discussed
in Chapter 1.4

(http://content.thuzelearning.com/books/AUMGT435.16.1/sectio
ns/navpoint-11#type1and2) ) from occurring.
We have selected both classic and contemporary models
to discuss in greater detail. They include:
(a) classic models that led the way and are
still relevant, (b) models that are based on
different assumptions and view change from
various perspectives, (c) macro and micro
dimensions that are emphasized in the models,
and (d) models that require different quantitative
and qualitative approaches to diagnose
responses to change.
This chapter organizes change models by the
dimensions Why Change, What and Who to
Change, and How to Change. These three
dimensions and the models presented are in some
ways interrelated. However, separatingout major
models with consultative questions in
each dimensionhelps leaders and change teams
pay attention to the systematic process of
change as well as the desired end results.
We begin
by addressing the dimensionWhy Change by asking
what is the need and what is the source? The
major models in the �irstsection include
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open systems, environment-industry-organization contingency,
and the organizational life cycle. Consider these
tools and concepts that can
be used to diagnose change.
Check YourUnderstanding
1. In your opinion, what can happen if
organizational leaders and managers omit or
minimize diagnosing change as a �irststep to
planning
an organizational change?
2. Why and how can change models help
organizational leaders and teams assigned to
plan and implement a signi�icant change?
Explain.
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2.2 Why Change? Identifying the Needto Change
How do organizational leaders and others determine
why a change is needed? Sometimes the
reasons are obvious, othertimes less so. In
the
opening case, it was not entirely clear why Zappos’s

CEO called for a sweeping organizational change.
Some observers also questioned the
way the change was implemented. Diagnosing the
reason and need for change begins with an
analysis of both the external and internal
organizational forces effecting a change.
Open-Systems Theory
Open-systems theory and model, based on Katz
and Kahn’s (1978) work, provides a
framework for studying how organizations interact
with their environments in ways that affect the input,
throughput, and output processes,along with
interdependencies and outcomes. The
model, shown in Figure 2.1, indicates how a
product or service produced at the output
phase is in�luenced by the organization’s
environment
and internal processes.This model is widely used by
consultants and otherorganizations planning
changes.
As Figure 2.1 illustrates, an open-systems
approach can serve as the �irststep in
diagnosing an organizational change sinceit
presents a big-
picture approach for identifying the input,
throughput, and output of resources comprising
and needed in the change. As discussed in
Chapter
1, diagnosing how the forces in the general
environment (that is, the economic,technological,
legal, governmental–political, sociocultural, and
natural disaster elements) affect an organization in
any and all of the threeopen-systems dimensions

provides insights into the need for an
organizational response and, perhaps, change. An
organization’s “taskenvironment” takesa closer
look at the forces that affect organizations
more directly—that is, customers, interest groups,
suppliers, competitors, employees, and regulations
from governing bodies. Perhaps Hsieh
at Zappos reasoned that less managerial bureaucracy
would serve a changing customer base more
effectively and ef�iciently.
Figure 2.1: The open-systems approach
The open-systems approach is a process showing
how the environment changes with the inputof
resources, followed by the throughput of
transformational and organizational processes,such as
leadership, strategy, structure, culture, and systems.
This results in the output, or the product or
service
outputs.
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Source: Adapted from Katz, D., and R. Kahn.
(1978). The social psychology of
organizations (2nd ed.) New York: Wiley.
Consider an example from a different industry that

illustrates the environment’s effects on an open-
systems model. Nursing shortages in the
United States and globally are a recurring
problem. However, a third waveof such shortages
appears to have different causes than previous
shortages. Speci�ically, thereare general environmental
factors external to the industry as well as
task environmental in�luences that are
aggravating this shortage. These include the aging
of nurses, general workforce shortages in
ancillary professions and support labor,
fundamental changes in patient care in a
managed care environment, decreased length of
hospital stays, and demand for more acute
ambulatory and home settings care (Ming, Lam,
Fong, & Yuan, 2012; Nevidjon &
Erickson, 2001; Rosseter, 2014). Although issues
surround
outdated images of nursing, new nurse recruitment,
and retention of nurses, closer scrutiny of
this shortage shows that one underlying cause
of the problem is the level of expertise available
compared to what is needed (Ming et al.,
2012.)
From this partial diagnosis, nursing associations,
educational programs, and care-providing institutions
can consider strategies for change in
how they attract, educate, and generate more specialized
nurses. With this context in mind, we will
look at the input, throughput, and output
dimensions for a hypothetical educational
institutionwith a largenursing program. First,
note that the inputs are resources, information, or
items that are intentionally put into an
organization’s internal system that effect and/or

will be affected by the intended change. Outputs
are
the results that occur after an organization’s
interventions affect the targets of the change
process. In otherwords, outputs are the results
from a department, division, or entire
organization’s change process (Krippendorff, 1986).
At the inputphase, a college program might
analyze demographics and other statistics about
its student nursing recruitment and the
enrolled population to see what changes and
innovations could be made. Administrators
might investigate additional funding and
resource
acquisition initiatives for talent recruitment.
At the throughput phase, institutions could
analyze the retention rate, quality, and
competitiveness of their courses and professors, as
well as how they match external market demand
and nursing requirements. At the output
phase—that is, the results in an open-systems
approach to planned organizational change—
analyzing graduation rates, placement sources,
and feedback from sources of employment and
graduates’ experiences could provide
valuable information for decision makers
regarding the
inputand throughput phases of the programs.
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Environment-Industry-Organization Contingency Model
Related to the open-systems model is Duncan’s
(1972) environment-industry-organization contingency
(“�it”) model, which examines how
effectively an organization is suited to its
environmental niche. Organizations that are able to
respond to external environments are more
effective in meeting goals and serving end users
and customers. Aldrich and Pfeffer’s (1976)
resource dependency theory asserts that
organizations are dependent on the environments in
which they operate, and the main goal of the
individuals running the organization is to
survive and enhance the company’s autonomy,
while also ensuring that its exchange relations
remain stable (Davis & Cobb, 2010).
Drees and Heugens (2013) conducted a meta-
analysis of 175 studies regarding companies’ use of
resource dependence tactics (including
interlocks, alliances, joint ventures, in-sourcing, and
mergers and acquisitions). They found a
positive association between environmental
interdependencies and companies’ use of resource
dependence tactics. Moreover,�irms’ use of
such tactics was positively associatedwith
organizational performance (Davis & Cobb, 2010).
The environment-industry-organization contingency model
shown in Figure 2.2 can be used to
understand an organization’s existing
environment and to diagnose the direction in which

it might need to move to increase its
performance. Duncan’s model is a simple
big picture
and straightforwardway to map an organization’s �it
with environmental complexity. The two dimensions
of environments are shown as
environmental change (that is, stable or
unstable) and environmental complexity (that is,
simple or complex).
Figure 2.2: Environment-industry-organization “�it”
How “�it” an organization is depends on the
level of complexity and the stability of the
environment.
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General Motors and Organizational Change

In this video, the General Counsel for General
Motors
describes the situation leading up to their large-scale
organizational change. Apply the Environment-Industry-
Organization Contingency model to GM’s
situation. What is
GM’s environmental niche? In what ways did they
lose touch
with their niche, and why?
Source: Duncan, R. B. (1972). Characteristics of
organizational environments and perceived
environmental uncertainty. Administrative
Science Quarterly,17(3), 313–327; Daft,R. (2010).
Organization theory and design (10th ed.).
Mason, OH: South-Western,Cengage
Learning, p. 157.
A simple–complex dimensionof environmental
uncertainty indicates the number and dissimilarity
of external elements that affect an
organization’s functioning (Daft, 2015). The higher
the number of forces (such as in�lation
and changing client demographics) and the greater
the number of dissimilar elements (such as
different companies and competitors), the greater
the environmental complexity. Such complex,
unstable, and therefore highly uncertain environments
characterize companies in the aerospace,
telecommunications,airlines, and computer
industries. The following example from Zappos
illustrates an interpretive use of this model.
Referring to Figure 2.2, in which quadrant of
the environment-industry-organization model does
Zappos best �it? It is the number one online

e-tail shoe and clothing company. It has chosen
customer service, company culture, and employee
training and development as competitive
and distinctive competencies. In addition, it has a
superior supply chain, excellent customer service,
trained call center employees, a fast web
interface, and largeonline product offering. Its culture
emphasizes “Wow” (Zappos, n.d.) delivery
services, accepting and driving change,
creating fun and weirdness, being humble, and
otherpassionate elements.
The model suggests that the company may be in a
simple + unstable, high-
moderate uncertainty environment niche with othere-
commerce, fashion
clothing industries. However, because Zappos is
also a technology
company driving toward larger product lines
and customers, as well as
faster and higher sales and revenues, it seems
Hsieh wanted to move into a
complex + unstable, high-uncertainty environment.
Toward which
quadrant is he driving his internal structure? Which
environmental niche
would you recommend that he move in to
be successful over the long
term?
We will now analyze two additional examples of
organizations facing
major change using the environment-industry-
organization model.
Hewlett Packard

Why did HP recently need an organizational
change? Facing a highly
uncertain environment, HP CEO Meg Whitman
(former eBay CEO) has
been trying to move HP back to its previous
position as a dominant global
technology leader or face failing market share,
which could ultimately
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General Motors
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result in the sale of the company. HP has been
undergoing a
transformation under Whitman’s leadershipsince2011.
She has laid off
more than 55,000 employees and counting.
One problem has been the lack of a unifying vision
for the company, which
is in a complex + unstable, high-uncertainty
environment, according to

Figure 2.2. Whitman has pursued a riskymove
based on her predecessor’s
decision to split the giant company into two
different entities: Hewlett-
Packard Enterprises (focusing on the hypercompetitive
businesses of
cloud technology and cyber security) and HP
Inc. (focusing on the slower
businesses of personal computers and printers).
This division was
determined by Whitman to stimulate HP’s growth
in an ever-changing
technological environment (Chen, 2015).
Each of the two independent companies is large
enough to be listed on the
Fortune 500 list. Fierce competitors seeking
increasing market share in
each company’s industry will either weaken the
companies or provide
them with more �lexibility to succeed in their niches.
Residing in a highly
uncertain (complex + unstable) environmental niche
that splits in two is
not easy. However, HP’s board of directors
has been pleased with
Whitman’s performance. When Whitman arrived in
2011, HP had a net
debt of $12 billion on its operating company, and in
June 2015 the company had $5 billion in net
cash;the stock pricehas climbed from $11 to
$34 (Johnson, 2015).
From an organizational change perspective, the
question arises: Has Whitman accuratelydiagnosed
HP’s situation regarding why it should

change?
Universities
Figure 2.2 suggests that universities in general
inhabit complex but stable, or low-moderate
uncertainty environments. The environments in
this quadrant have traditionally had few elements that
cause instabilityand change but several
dissimilar factors that create complexity. For
this reason, the question of Why Change is not
relevant. Could new competitive global and
domestic forces in the environment move
some
universities to a more complex + unstable
industry �it? A number of forces suggest
this may be the case.
For example, student debt is estimated at $1 trillion,
rising administrative and tuition costshave not
subsided, and sincethe downturn in the
economy, many companies have dropped their tuition
reimbursement programs, presenting additional
challenges for universities. Cutbacks
in budget-constrained state funding for public
universities add yet another dimensionof
uncertainty. Some industries and companies
have
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Dan Whobrey/iStock/Thinkstock
Traditional brick-and-mortar universities are -
evolving their course offerings and processes due to
changes brought about by the increasing
prominence of online institutions, such as the
University of Phoenix.
also questioned the value of traditional
educational degrees, although data showthat
students with certain higher educational degrees
earn
more than those without them (Kurtzleben, 2014).
The environment was more stable for nonpro�it
traditional colleges before
competition from a number of sources
emerged, including free massive online
open curriculum courses and otherInternet-based
institutes and programs. For-
pro�it universities like the University of
Phoenix also provided a market jolt.
Though not all nonpro�itcolleges were threatened by
the for-pro�it universities,
these new market entrants introduced innovative
and convenient educational
opportunities, especially for students who could
not or did not wish to attend
traditional classes. Even Harvard and Massachusetts
Institute of Technology (MIT)
started programs for the masses using online
courses and programs.

Larger environmental threats to contemporary
universities will not subside in the
near future because of the market forces
identi�ied, including a lack of donor
loyalty in giving to many universities
(Giménez, Martıń- Retortillo, & Pires de
Carvalho, 2010). Each college will have to determine
which quadrant in Figure 2.2
it is currently positioned in and if it should
strategically migrate to another to
remain viable and competitive. Simply stated,
creating stable organizations to
perform in an environment of complex and fast-
moving change can be disastrous.
Since the main motivators of organizational
effectiveness are dynamic, the
elements and process of strategy and organization
must be as well (Lawler &
Worley, 2006). Both private and nonpro�ituniversities
will change more now than in the past as
environmental forces shift and competitive
pressures mount (Carey, 2015).
The Organizational Life-Cycle Model
Another model that addresses the Why of change is
Greiner’s (1972, 1998) organizational life-cycle
approach, which remains a classic and
highly used road map for diagnosing the types of
crises and challenges organizations face as
they age. Relevant to the open-systems and
environment-industry-organization approaches, the
organizational life-cycle model adds a historical
dimension to understanding an
organization’s developmental needs in terms of

deciding why it may need to change, especially in
regard to capabilities required of leaders to
groworganizations along their life cycle.
As organizations evolve and follow a somewhat
predictable path, they move through
punctuated equilibrium—periods of stability with
embedded crises. If thesepredicted crises are not
solved, leadershipand management can be forced
out of business and replaced by a team
that can bring in the needed changes (True,
Jones, & Baumgartner, 2006).
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Figure 2.3 illustrates the �ive phases of
growth: creativity, clear direction, delegation,
coordination, and collaboration. Each period is
characterized by a leadershipstyle used to realize
growth that is appropriate for that particular
phase. Each stageis also characterized by a
crisis that must be solved before growth can
occur. The pattern presented in Figure 2.3 is
assumed for organizations in industries with
moderate growth over a long term. Greiner (1998)
stated that companies in fast-growing
industries may experience all �ive phases more
rapidly, and organizations in slow-growing industries
may experience only two or threephases over

several years.
As you look at Figure 2.3, notice that each stage
has extended periods of growth without a
signi�icant change to the organization’s
practices.
Then a revolutionary phase occurs, denoting periods
of extensive disturbance. Greiner (1972)
originally hypothesized that the length of time
in each phase of an organization’s life cycle
varies by industry, company, and the changing
environment. He also proposed that an
organizational crisis could occur at the end of
each growth stageand that the organization’s ability
to manage and solve thesecrises will
determine its survival (Simmons, 2005).
Figure 2.3: The developmental life-cycle of
organizations
The organizational life-cycle model provides
understanding of an organization’s needs based
on its
history, present capabilities, and potential. It
consists of �ive stages, with a crisis in
each stage, followed
by a period of growth.
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Source: Adapted from Greiner, L. (1972, July–
August). Evolution and revolutionas organizations grow.
Harvard Business Review, 50,
37–46; and Quinn, R. E., & Cameron, K. S.
(1983). Organizational life cycles and shifting
criteria of effectiveness. Management Science,
29, 33–51.
This theory also assumes that each stageis both a
result of the previous phase and cause
for the next phase. In stage2 the organization
grows
under leadershipwith clear direction—solving the
previous crisis of leadershipneeded. However,
over time, leadershipwith clear direction
leads to a crisis of control, and then a
leadership style that emphasizes coordination and
delegation is needed. Examine Table 2.1 to
understand the organizational characteristics and
requirements of each stage, not only in terms
of leadershipstyle, but also with regard to
structure, systems, strengths, weaknesses, and crisis
points.
Greiner (1998) hypothesized that during each period,
leaders and managers are limited in what they
are able to do for growth to occur. For
example, a company experiencing a crisis of
control in stage3 cannot return to offer
clear directive management for a solution; the
leader
must adopt a new style of delegation in order
to move to the next stageof development
and growth.

Empirical research on substantiating effectiveness criteria
in life-cycle theories of organizations is mixed.
Quinn and Cameron (1983) found
support for one version of the theory but also
noted that the predictions in thesetheories
are oftennot substantiated in research, since
organizational responses to the external environment
differ across the stages of the life cycle.
As you read about each stage, you will be
able to
see how theseresponses would differ across the
life cycle and among companies.
Refer to Table 2.1 as you read through each
stage. Although its elements are explained in
the text, thereare descriptions in this table that
reinforce the characterization and meaning of each
stageof the model.
Stage 1: Growth Through Creativity
Stage 1, growth through creativity,occurs during
the period that resembles a typical start-
up. Greiner (1998) notes that the founders are
generally technically or entrepreneurially oriented
and that their energies are absorbed making and
selling a new product or service.
Communication is frequent and informal. Workdays
are long and pay is modest. Decisions and
motivation are directed to the marketplace.
These individualistic and creative activities are
necessary at this stage. But as the company
develops, those activities and leadershipstyles
become the problem.
Table 2.1: Characteristics of life-cycle growth phases

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Source: Clarke, L. The Essence of Change, 1st
Ed. Copyright © 1994, pp. 12. Reprinted by
permission of Pearson Education, Inc., New
York, New York.
Observe in Table 2.1 that under stage1, the
structure used is informal. The systems re�lect
immediate response to customer feedback and
styles of leaders and employees are
individualistic, creative, and entrepreneurial. The
strengths at this stageof development are fun
and
market response. The crisis pointis that of
leadership, and along those same lines,
the weaknesses oftenhave to do with the fact
that the
founder may not be temperamentally suited to
management and those in charge may be
overloaded.
According to Greiner (1998), a crisis of
leadershipdevelops during this stage. It could
lead to a revolutionif the major problems
are not
solved. Lack of structure and formalized management
systems and practices require a different type of
leadershipand management. If the

existing leadershipdoes not or cannot assume new
responsibilities of organizing, then a more
sophisticated, formalized leadershipstyle must
be brought in for growth to continue.
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Stage 2: Growth Through Direction
Stage 2, growth through direction, occurs under
more structured leadershipand management styles. A
functional organizational structure is
adopted; that is, a basic arrangement of departments
where sales and marketing, manufacturing,
production, �inance, and research and
development are formed with expertise in each area.
Specialized jobs are assigned.
Systems are put into place, such as accounting,
human resources, inventory,shipping, and so on.
Budgets, pay systems, and working rules are
also established. A more structured culture evolves
where communication is formal and impersonal,
titlesand positions are developed, and
managers assume more authority, with strategic decision
making generally occurring at the top level.
The second crisis and possible revolutionGreiner
(1998) notes evolves from a crisis of
autonomy. The new directive styles work to

spur
growth but then become too constraining to
integrate and control the organizational diversity
and complexity that evolve. A centralized
hierarchy constrains and con�ines employees who
know and have learned more about
markets and customers than their leaders and
managers. Employees are con�licted between
following meaningless procedures and taking
action themselves.
To continue to grow, leaders must either give up
somecontrol, learnto delegate, loosen and change
hierarchy, or be replaced. Part of this
crisis stems from leaders and managers who are
perhaps entrenched in past training or older
procedural methods and unable to share
responsibility with lower level managers and
employees. Those leaders and managers who stay
often cause disenchanted, talented
employees to leave. In effect, the crisis of
stage2 is the opposite of stage1; by
formalizing processes in stage2 to growfrom
stage1, the
pendulum swings too far in the otherdirection,
becoming too �ixed and rigid. Stage 3
then works to strike a more productive
balance.
Stage 3: Growth Through Delegation
Stage 3, growth through delegation, occurs
when more responsibility is given to
managers and employees to accomplish
organizational goals
and their work. This stageis also achieved when
the hierarchical structure changes to

decentralized units, bonuses and pro�it centers
are
established, managers stop micro-managing,
communication and decision making is less top
down and also decentralized, and managers are
able to move into larger markets faster and
begin innovating.
Crisis and possible revolutionoccur at this stageif
leadershipand management try to take control of
the entire organization and return to a
centralized system of decision making,
communication, and ways of managing.Greiner
(1998) argued that this revolutionwould fail
because
of the organization’s expanded operations and its
ability to �ind new solutions in special
coordination techniques.
Stage 4: Growth Through Coordination
Stage 4, growth through coordination, occurs
when formal systems are used to achieve
greater coordination by more ef�iciently
allocating
corporate and local resources. As Greiner (1998) noted:
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Decentralized units are merged into product

groups. Formal planning procedures are established
and intensively reviewed.
Numerous staff members are hiredand located at
headquarters to initiate companywide programs of
control and review for line
managers. Capital expenditures are carefully weighed
and parceled out across the organization. Each
product group is treated as an
investment center where return on invested
capital is an important criterion used in
allocating funds. Certain technical functions,
such as data processing, are centralized at
headquarters, while dailyoperating decisions remain
decentralized. Stock options and
companywide pro�it sharing are used to encourage
employees to identify with the organization as
a whole. (p. 62)
The crisis occurs over the accumulation of red
tape. Systems and programs exceed their usefulness.
A lack of con�idence and resentment
grows between line and staff (“line” are
professionals in an organization’s departments
that are revenue generators, such as
manufacturing
and selling; “staff” are in organizational support
departments that are revenue consumer, such as
human resources and accounting),
headquarters and the �ield, and different groups of
employees, usually over bureaucratic procedures.
In addition, thereis a lack of innovation
and a rigidity in obtaining information, making
decisions, and completing work.
Stage 5: Growth Through Collaboration and
Innovation

Stage 5, growth through collaboration and
innovation, occurs as a result of and a
reaction to stage 4. This stage endorses
interpersonal
collaboration, �lexibility, and behavioral leadership
and management styles. Whereas the previous
stage emphasizes formal systems and
procedures, this stage promotes spontaneity
through teams and meaningful confrontation over
interpersonal differences. Red tape and
formal controls are replaced by self-discipline and
social control.
This stageis accomplished through quick problem
solving by cross-functional teams; reducing
and reintegrating headquarters staff members;
institutingmatrix types of structures with the right
teams solving appropriate problems; holding
frequent conferences with key managers to
solve signi�icant problems; launching educational
programs to train managers; adopting real-time
information systems that are integrated
into daily decision-making processes; offering
economic rewards for team performance (rather
than individual performance); and
experimenting with new practices across the organization
(Greiner, 1998).
Although Greiner (1998) did not identify a
particular crisis that would develop from stage5,
he stated that the revolutionstemming from the
crisis in this stagewould probably result from a
high number of employees who are physically
and emotionally exhausted because of the
extreme amount of teamwork needed and the
pressure to create new solutions. If this

happens, part of the solution would involve new
programs and structures that permit employees to
regularly rest and refresh themselves. The
following scenario illustrates one example of
this model.
Steve Jobs and Apple
Steve Jobs passed awayfrom cancer in October
2011, but his legacy continues in the brand
he
created. Tim Cook, appointed by Jobs,
assumed leadership of the company that year.
The
relationship between Jobs and Apple exempli�ies
the dynamics of the organizational life-cycle
10/17/2017 Print
AP Photo/Paul Sakuma
The late Steve Jobs of Apple was an
extremely innovative CEO who helped
reinvent and revitalize Apple over
several stages of its organizational life
cycle.
model. Few, if any, CEOs have successfully
reinvented themselves as many times as
Jobs did at

Apple. It may be more accurate to say that few
CEOs have reinvented a company like Apple
over
its life cycle as did Jobs. Although there
are no de�initive dates that characterize
Apple’s
organizational life cycle, the following grouping of
stages (based on and reconstructed from
Geek, 2010; Linzmayer, 2006; Young &
Smith, 2005) is an approximation designed to
discuss and
illustrate Greiner’s (1972, 1998) framework.
Apple Computer’s entrepreneurial stage(stage 1),
based on the logicof the organizational life-
cycle model, started before 1976 but lifted
off April 1, 1976, when Jobs and Steve
Wozniak
launched their company. The Apple I computer
sold for $666.66. In 1977 the Apple II was
introduced as the �irstpersonal computer; it camein
a plastic case and featured colorgraphics.
In 1980 Apple went public, selling 4.6 million
shares priced at $22 each. It was an
exciting and
challenging time for the technically oriented
Wozniak and the intellectually shrewd Jobs.Neither
was a leader or manager, but both were pioneers,
blazing a new historical path in very informal
but focused ways.
The collectivity stage(stage 2) likely started in
1981 when Jobs brought in Mike Markkula to
serve as Apple’s �irstpresident. Jobs and Wozniak
acknowledged that they did not have the skills
for running a growing company at that time.The

company struggled to launch the Macintosh
(the �irst computer with a graphical user interface)
in 1984. The machines accumulated in
storage and did not sell during the 1984 Christmas
season. Apple announced its �irstquarterly
loss in the company’s history and laid off 20% of
its staff. The collectivity stagewas coming to
an
end, sincetherewas a need for clear direction. Jobs was
�ired after a power struggle with the
newly appointed CEO John Sculley (former president of
PepsiCo), who, as an older, experienced
corporate ex-president, brought a sense of
direction and order. There was a de�initive
crisis of
leadershipduring this time.Wozniak left that same year,
and Jobs started NeXT Inc., another
computer �irm.
The formalization stage(stage 3) began and lasted
during the years that Sculley, followed by
CEOs Michael Spindler (1993–1996; former
chief
�inancial of�icer [CFO] of Apple) and Gil Amelio
(1996–1997) took unsuccessful turnsat leading
the company. Although they each tried to
manage and innovate while formalizing systems
and bringing order to Apple, product
innovation and quality suffered during this
period. The
bureaucratization, control, and lack of coherent
delegation cameto an end after Sculley’s last
successor,Markkula,was let go.
Jobs returned in 1997 as interim CEO, which
marked the beginning of the elaboration period

(stage 4). It is reported that very shortly
after
Jobs walked back into the Apple of�ices he was
�ired from 12 years earlier,
wearing shorts, sneakers, and a few days’ growth
of beard, he sat down in a swivel
chairand spun slowly.… “Ok, tell me what’s
wrong with this place?” … Executives began
offering someanswers. Jobs cut them off. “The
products SUCK!” he roared. “There’s no
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sex in them anymore!” (Burrows & Grover, 2006,
para. 2)
He returned to Apple and stayed until the day he
retired, in August 2011. His product
innovations and the company he built (which
some
describe as a mix between GE and Disney) during
this time remain legendary. In 2001 the iPod,
a palm-sized, hard drive–based digital music
player, was introduced. In 2003 the iTunes Music
Store, which sold music, audio books,
and movies for Internet download,was launched. In
2005 the iPod that played video was introduced.
During that year Jobs also announced that Apple

computers would use rival Intel
Corporation’s microprocessors. During 2006 Apple
started selling Macs that ran on Intel chips,
and in 2007 the iPhone and iPod Touch were
announced. In 2008 the App Store—an update to
iTunes—was added to Jobs’s list of
innovations, and in 2009 Apple released the
iPhone 3GS,
which was later followed by the 4G version. Jobs
brought the iPad to market in 2010, a
tablet computer with an Apple homemade
processor.
The global popularityof theseproducts and innovations
speaks directly to the success of Jobs’s
decision making in revitalizing Apple.
Greiner (1972) placed a question mark after the
elaboration stagein his original organizational
life-cycle model, which indicated that an
organization can either be revitalized to grow
and prosper or it can decline. Jobs’s
successor,Cook, has proved that he can and is
revitalizing
Apple, with introductions of new iPhone models
along with the Apple Watch. In April
2015 Apple became the �irstcompany in U.S.
history to
reach a $700 billion valuation. The organizational
change that has occurred from Jobs’s death to
the leadershipunder Cook should not be
overlooked.
Organizational Failure
The organizational development life-cycle model is a
useful framework for understanding why
organizations fail and succeed, and at what

stageof their development. As Anderson (2015) wrote
with regard to start-ups in the sharing
economy, “Studying failure is a recipe for
success in the collaborative economy” (para. 1).
She reported on a study of 45 of the
more signi�icant collaborative economy start-ups
across
Europe/the United Kingdom, Asia–Paci�ic, and the
United States between 2010 and 2014 that either
closed their doors or faced a setback
that
could have destroyed the company. Thirty-�ive �irms
were based in the United States, seven
were UK companies, two were European, and one
was Australian. Firms included Accoleo,
Arribaa, BlackJet, Car2Go, Crashpadder, Legit.Co,
WhipCar, Neighborrow, Airbnb, Uber, and
Lending
Club.
Major reasons for failure or signi�icant setback
included lack of scale(inability to achieve a
level of business activity to sustain a
business
model), unclear value proposition (the product
did not compel customers to become repeat
users), insuf�icient funding, lack of and shift in
product focus and target market, regulation
and government issues, lack of market readiness,
lack of trust and engagement with their
customer community, invalidated product offering
(lacking a suf�icient market for the
product), and competition.
Referring back to Greiner’s (1972, 1998)
organizational life-cycle model, we may assume

that not only did the collaborative company start-
ups fail from a potential crisis in leadershipin
the �irststage, but their founders and teams
made othermistakes as well. For example, start-up
founders and leaders may misread or overlook the
need for their product or service at the input
phase of the open-system model. They may
also misjudge the effects that environmental forces
can have on their start-ups: namely, regulation,
customer demand, and suf�icient
resources (funding). Moreover,not having a clear vision
and business model is also a detriment.
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All of theseissues may arise during the �irstphase
of a start-up’s existence. Perhaps thesefailings
also contribute to the fact that more than
100,000 U.S. nonpro�itgroups will fail by 2017.
Even a few largerecognizable nonpro�its that
succeed do not account for largenumbers in
this area, despite about 1.4 million nonpro�it
organizations that are registered with the Internal
Revenue Service and that do account for 5.2%
of GDP with 8.3%of wages and salaries paid in
the United States (Alliance Trends, 2015).

1. Brie�ly explain why is it important to
understand where an organization is in its
life cycle and how it can be helpful in
diagnosing and
planning an organizational change.
2. What lessons can be learned about today’s
Apple (and its products) by understanding its
past life-cycle history?
3. Using the life-cycle approach, determine what type of
leader would make the ideal successor for
Cook at Apple. Explain your reasoning.
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2.3 Diagnosing What to Change
After identifying why change is needed within
an organization, the questions turn to what,
who, and what type of change is needed? In
the

previous section, we discussed models for diagnosing
and assessing an organization’s present state,
and where it “is” in its present state.
Now
we will turn our attention to diagnosing what needs
to be changed.
Assessment Model: Determining What Changes to
Make
Figure 2.4 shows threetypes of changes
available to an organization, as well as levels
of intervention, issues, and opportunities that
trigger a
change. Note that although this �igure appears
sequential on paper, the connecting arrows
between the dimensions are multidirectional.
Identifying what to change within an
organization is not a mechanistic process but a
messy, sometimes political, argumentative,
but
(hopefully) creative and productive one, so long as
it is tempered by sound judgment.
Figure 2.4: Diagnostic change issues,
opportunities, and interventions
When matching types of change interventions to
organizational needs and issues, it is
important to ask,
“What types of changes are needed to
produce optimal results in an organization’s
internal systems?”

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Source: Adapted from Cummings, T. G., &
Worley, C. G. (2015). Organization development
& change (10th ed.). Stamford, CT: Cengage
Learning, Chapter 5.
Depending on what needs to be changed,
different types of change can be used. We
discussed three types of change in Chapter 1:
developmental, transitional, and transformational. These
changes are also referred to as �irst- and
second-order changes. First-order (-
adaptive) changes are incremental, small-scale, �ine-
tuning, and developmental. These changes involve
adjustments to systems, processes,
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and structures rather than fundamental or radical
changes to strategy, core values, or identity
(Newman,2002). Examples include installing a
new software application in a department,
revising procedures for a purchasing system,

and revising a training system for business
userson a
new IT system. The level of intervention in Figure
2.4 may be departmental, divisional, by team,
by group, or by number of individuals.
Second-order (discontinuous) changes are radical,
transformational, and sometimes transitional in
nature and involve the entire
organization or different units (Bate, 1994). Such
changes are also called “frame bending” and
may be done with a big bang, as illustrated
earlier by HP’s move to divide the company
into two separate entities.
Many change management texts focus on
transformational rather than transitional and
developmental changes. Frohman (1997), however,
argued that small-scale organizational changes that
involve personal initiatives deserve more attention.
Frohman emphasized the importance
of people to organizations, especially people who
initiate and bring about local organizational
changes by exceeding their job responsibilities,
striving to make a difference, being action
oriented, and focusing on results. These people
are known by staff members in their organization
but are less recognized by managers and higher-ups
(Palmer, Dunford, & Akin, 2009).
Individuals may trigger the need for a radical
change, as was shown by Mohamed Bouazizi, a
26-year-old Tunisian street vendor who in
2011
took his life by burning himself in protest of a
stodgy government bureaucracy that negatively

affected his livelihood (Fahim, 2011; Ryan,
2011). The incident set off the Arab Spring, a
waveof demonstrations, protests, and riots that
ushered in frame bending changes in the
Tunisian government and across the Middle East.
However, although individuals like Bouazizi can be
catalysts for change, it is still institutions
and organizations—in this example, governments,
military, and legislatures—that must follow
through to implement and institutionalize
changes.
There are threelevels of intervention—that is,
planned actions to enhance an organization’s
effectiveness that focus on the organization,
group, or individual, shown in Figure 2.4.
This is an important decision that could be
wasteful and costly if misjudged. Zappos
CEO Hsieh
decided to make a complete structural and systems
change by removing most of the formal
management positions. This change decision was
made by the leader, Hsieh himself, with the
assumed intent of keeping a dynamic culture
alive among employees, their peers, and groups
in
order to drivethe hypercompetitive growth
strategy of staying closeto customers.
Presenting issues are problems and opportunities
that are believed, perceived, and/or argued to
be of primary importance for requiring a
planned change. Several classi�ications of issues
that organizational leaders use to identify and
justify changes are listed in Figure 2.4.

For example, suppose a university is performing
well with the exception of decreasing
enrollments in its graduate degree programs.
This
becomes the presenting issue. At �irst,
administrators may attribute the issueto increased
regional and local competition. Closer scrutiny by
a
consultantand otherstaff members shows that the
programs are not as attractive or marketable as
competitors’ offerings. Further analysis
reveals that those responsible for selecting and
planning the courses were not knowledgeable about
competitors’ programs. Also, theredid
not seemto be a compelling strategy or
suf�icient online marketing to promote the
programs. The presenting problems, or what needs
to
change, then shift from focusing only on competition to
analyzing each program’s strategy, marketing, and
people responsible for selecting
program content.
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Figure 2.5: The focus of organizational change
These questions help identify and diagnose who and
what part of

an organization needs to change, and why.
Larger, transformative organizational changes may involve
an entire organization, as is the case in
many of the chapter’s examples. A question
arises: How many of theselargeenterprise
transformations are successful? As indicated
earlier, 1 out of 3 transformations
succeeds (Aiken &
Keller, 2009; James, 2012). Although thereis an
abundance of theories, anecdotal conjecture, as
well as somesubstantial evidence to explain
this failure rate, it can be argued that the
presenting issues of leaders whose rationales
are not supported by evidence may also be a
contributing factor. Again, taking a big-picture
systems view of planned organizational change
requires systematically diagnosing the why,
what, who, and how of presenting problems and
desired opportunities.
Diagnostic Trigger Questions: Identifying the
Level(s) of
Intervention
Internal change teams and change specialists
can use trigger questions to
pinpoint speci�ic change targets and interrelationships
with and between
leadership, strategy, structure, culture, people, and
systems. The questions
shown in Figure 2.5 are simple and
straightforward. They serve as a �irst
step for further investigation, planning, and decision
making to identify
what and who to change. In conjunction with the

previous diagnostic
approach, Figure 2.5 provides a simpli�ied view of
what needs to change.
For example, Atlassian, an Australian software
company founded in 2002
with more than 1,100 employees, was organized into
teams. Using a “best
HR practices” performance review, employees
reviewed their own and
peers’ performance twice a year using a
�ive-point scale in a 360-degree
performance review—similar to Google’s and
Salesforce’s. This system
determined employee bonuses (Luijke, 2011). The
trigger question
—“Where’s the pain, tension, in the system?”—
became obvious: The model
was not working as planned. The lengthy reviews
were demotivating
employees and managers instead of uplifting them.
So, what needed to be changed, and how? The
vice president (VP) of Talent
& Culture worked with a team to analyze
the traditional performance
review model in detail. Employees were asked
what made them perform at
a higher level and what sections of the reviews
worked. The VP and his
team talked with othertech companies about their
experiences. They found
nothing on the market, including HR approaches,
that matched what they
wanted.

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Source: Adapted from Cohen, A., Fink, S., Gadon,
H., & Willits, R., with Josefowitz, N.
(1992). Behavior in organizations (5th ed.). Boston:
Irwin, pp. 424–426.
They therefore created their own more lightweight
performance review
that included coaching and focused on employees’
strengths and spending
time on what they love to do. The new system also
centered on motivation
and recognition, including a “kudos model” in
which coworkers can
recognize great performance among each other
without a manager’s
approval. The new performance system was
implemented. The result?
Seventy-�ive percent of staff who showed outstanding
performance were
recognized by peers. Independent, internal staff
surveys showed that 87%
received extraordinarily high engagement scores. The
company has been
on a number of best employer lists and was named
a best U.S. medium-
sizedcompany to work for.

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1. Frohman (1997) argued that small-scale
organizational changes that involve personal
initiatives deserve more attention than
transformational changes. Do you agree or
disagree? Explain your reasoning.
2. Consider an organization you have worked for in
the past. Describe a change this company may
have needed based on your answers to
each trigger question.
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kaspiic/iStock/Thinkstock
The AI method involves engaging employees from
the bottom up and asking questions to diagnose
and

plan for change.
2.4 How to Change Transformationally Using the
Appreciative Inquiry Approach
Large-scale transformational change requires
comprehensive planning approaches that both the
organizational development and change
management �ields offer. The models in this
chapter have thus far shown how to identify
why a change is needed, where in an
organization’s
system the presenting issues are, and what needs
to be changed. In this section, we present a
model for further diagnosing how a change
can
be planned: the appreciative inquiry (AI) approach
from Cooperrider and Whitney (1999).
In the following section, we will present a second
model, the OD action research model (also
known as Kotter’s [1996] eight-step approach,
which was discussed in Chapter 1.1
(http://content.thuzelearning.com/books/AUMGT435.16.1/
sections/navpoint-8#ch01sec1.1) ). Note that the AI
approach is used as a collaborative method. It is
based on opportunity creation as well as
problem resolution when thereis suf�icient
time,
supportive leadership, and willing followers, and a
need to identify problems as opportunities for
improvement. Kotter’s approach involves
methods for planning and implementing change
processes that address problems and issues
requiring change. These models are based on
different motivations and ways of thinking
(philosophies) that serve different purposes at

different times. One approach does not replace
the
other, nor is one approach superior.
The eight-step approach and the AI approach are the
two most popularly used
multistep road maps (by all types of
organizations). These approaches include
leadership, a shared need, guidance, commitment,
communication, empowerment,
and ensuring that changes stick (Gilley, Gilley, &
McMillan, 2009). Both approaches
have been used for transitional changes that
involve organizational divisions,
departments, and business units of organizations.
Examples of programs that result from
transformational planning processes
include mergers and acquisitions, restructuring, new
leadershipand management,
cultural change, and crises requiring complete
organizational turnarounds.
Kotter’s model is more of a traditional,
top-down problem solving and
opportunity-producing corporate process that has become
a classic standard for
corporate change planning. The AI approach centers on
bottom-upopportunity-
generating processes to identify the What and
How elements of organizational
change.
Unlike traditional problem-solving approaches, AI
engages employees across the
organization in creating positive change that
focuses on learning from success

(Cooperrider, Whitney, & Stavros, 2003). As
de�ined by Cooperrider and Whitney
(1999), AI leadsto discovering the best of what
exists—such as the best in people,
organizations, and the surrounding world. It
means asking
questions and searching for what gives an effective
and capable system “life” so as to
increase its positive potential.
point-8#ch01sec1.1
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AI is commonly used in all types of
organizations—pro�it, not-for-pro�it, governments,
educational institutions, hospitals, and largeprivate
and publicly traded corporations around the world.
It starts by asking, “What is possible?
What do we wish to achieve?” The approach
applies
at any level: individual, group, department,
division, or for the entire organization. At
the organizational level, AI begins by
involving a large
group of individuals that includes leaders,
employees, and members external to the
organization (for example, customers, partners,

suppliers), then moves across groups with
designated individuals in each group,
recording main insights to be combined and
analyzed. Figure
2.6 depicts the overall model. The process is
explained from each of the four phases, or the
four Ds: discovery, dream, design, and
delivery.
We will discuss the methods involved in each phase
�irstbefore reviewing the approach in theory
and practice.
Figure 2.6: Appreciative inquiry four Ds model
The process of appreciative inquiry is explained
using the four Ds: discovery, dream, design,
and delivery.
10/17/2017 Print
Source: Based on Cooperrider, D. & Whitney, D.
(1999). Appreciative inquiry: A positive
revolutionin change. Fig. 1, p. 249. In P.
Holman
& T. Devane (Eds.), The change handbook:
Group methods for shaping the future.
Copyright © 1999 by Peggy Holman and Tom
Devane. Berrett-Koehler Publishers, Inc.

Discovery Phase
The discovery phase mobilizes a systemic inquiry
into the positive change core (Cooperrider &
Whitney, 1999). Each individual in each group
(8 to 12 people) is interviewed and interviews
others on the selected topicor question of
positive inquiry that is grounded in the best of
what
exists. Topic selection starts the process. It
requires searching for positive statements of what
is desired by the organization. The topic
10/17/2017 Print
represents what the organization wants to discover
and/or learnand what will evoke dialogue about
a desired future, or what people want to
see develop in their organization (Stevenson, 2014).
Examples of topical questions with regard to
attorney/employee satisfaction in law �irms
include: “What situations or circumstances created
your loyalty to this �irm? Describe a situation in
which you felt that you received exceptional
mentoring. How are you best mentored?” The
results of the discussions and re�lections are
recorded and serve as a resource during

the next phase.
Dream Phase
In the dream phase, participants envision the
organization’s greatest potential for positive
in�luenceand impact on the world. Participants
share dreams through stories, recollections, and
re�lections collected during the interviews.
The intent during this phase is to
energize the
participants and their insights through a mutually
shared learning process. Possibilities and new
ideasemerge about the topicas participants
are encouraged to dream big.
Design Phase
During the design phase, each individual and the
group as a whole begins to design an
organization to enact positive change. The
design phase
involves creating a provocative proposition, which
bridges the best of “what is” in the
organization’s present state toward a speculative
“what
might be” future state. This idea is provocative
in the sense that it extends beyond the
current status quo by challenging common
assumptions or routines and suggests a realistic,
desirable future for the company and its
employees (Cooperrider, 2002).
This phase creates a platform for developing
the idealized state derived from the �irst
two phases of the process. Actual organizational

dimensions are discussed with concrete characterizations
in terms of the leadership, culture,
strategy, shared values, business practices,
social responsibility, competencies, stakeholder
relations, and desired results in �inancial,
diversity, or otherareas(Stevenson, n.d.).
Destiny Phase
Finally, the destiny phase involves an invitation to
action inspired from the otherphases. During
this phase, groups publicly declare intended
actions and ask for support to consider next steps.
Self-selected groups are organized to move
the organization forward.
The AI Approach Put Into Practice
A case presented in the Harvard Management Update
provides a good representation of the strengths of
AI, as general manager John Cwiklik
of the Santa Ana Star Casino in Barnanillo,
New Mexico, used this approach to �inancially
turn the entire organization around. The
establishment opened in 1993 and had the largest
market share in the region until competition
arrived. Even with a $60 million facility
expansion, the casino was ranked in fourth
place (Kinni, 2003). Problems appeared in
the form of poor customer service and a
lack of
10/17/2017 Print

employee attention and engagement with customers—few
people smiled or talked. Cwiklik stated
that employees felt that management did
not care about them or wish to speak to them
(Kinni, 2003).
Cwiklik engaged the entire 820-member staff in
an AI consultation focused on delivering a
superior service experience to customers.
However, when the casino was pressured to lay
off 250 employees in October 2002, many
developed a mind-set that the AI effort played
an
unexpectedly helpful role. Cwiklik stated, “We had to
do it to save the business but we wanted to
do it in an appreciative way”(as cited in
Kinni, 2003, p. 1). In an effort to use
best practices, the casino achieved its goals
and gave a generous severance and outplacement
package to
permanent employees.
Cwiklik again turned to AI consultants in
December 2002 and January 2003, with the aim of
repositioning the business as “the hometown
casino” to bring in local customers. He stated,
“We did an AI in our table-games department
and in our slots department. We asked
employees
how to become this new hometowncasino, and we
took their ideasand implemented them in our

marketing and operations” (as cited in
Kinni, 2003, p. 1). One result, Cwiklik noted,
was a $10 million turnaround in operating
pro�its in �iscal year 2003. He stated,
“AI has been
instrumental in making our numbers a lot better”
(as cited in Kinni, 2003, p. 1).
Effectiveness and Questions About the Approach
Case studies, anecdotal evidence, and testimony
demonstrate that as a transformational change
method, AI has been successful at the
individual, group, community, corporation, and
national levels (Browne & Jain, 2002;
Cooperrider, Whitney, & Stavros, 2008; Kelm,
2005).
Still, somescholars argue for more empirical, longitudinal,
and comparative studies to address such
questions as: How long lasting are the
effects of an AI consultancy? Does this method
�it within a particular cultural or managerial
orientation; that is, could the failure of an
AI
project be attributed to a certain consultative
style, facilitator skills, or cultural context?
Also, under what conditions would this
method be
considered an effective change process (Bushe,
2010, 2011)? These unanswered questions
are reasonable and can be applied to any
and all
change methods. In the meantime,AI remains a
respected and major change approach.

1. Brie�ly summarize AI and explain the ways it
differs from Kotter’s approach to organizational
change.
2. If you were to help plan and implement a
sizable organizational change with a team,
would you prefer Kotter’s (eight-step) or
Cooperrider’s (AI) approach? Explain your reasons.
10/17/2017 Print
2.5 How to Change Using Action Research
The best change strategies and plans can be
compromised if the human factor is
neglected.Ultimately, regardless of what diagnostic
model is
employed or what strategy for change is put into
place, it is people who directly enact
the change, and it is people who are directly
affected.
Not to account for such a critical factor in all
phases of the change process is to greatly
imperil the strategy as a whole. The
following storyis
based on actual events and illustrates what can
happen when an organization’s personnel are
neglected in the change process.

An organization asked its operations and IT
departments to select a strategy to implement
what they felt would best save costs. The
departments decided to consolidate the use of
printers: They would remove all personal printers
and install conveniently located networked
printers that employees could connect to
wirelessly. This strategy was estimated to save
the company $3 million annually. Leadership
agreed
to the plan, the printers were purchased, and
employees were told about the new system
and how they would bene�it.
A few weeks after the networked printers
were installed, IT began removing personal printers
from of�ices, which was met by much
resistance. Employees objected to the new setup,
complaining that they were not asked about
the change and that con�idential documents
would be unprotected—despite the fact that the
printers were only feet awayfrom the employees.
The resistance compelledthe leadership
team to revise the plan and instead gradually
implement the changes over 2 years,
signi�icantly decreasing the projected savings.
Now that we have seen what can happen when the
human factor is ignored in a change
strategy, we turn to an action research model
that
presents a classic OD process. This useful
teaching and learning method puts individuals in
the driver’s seat if the change management
team
asks them to participate from the start.

The action research model provides a step-by-step
approach for identifying the problem or
opportunity, researching and diagnosing the targets
for change, and presenting the diagnosis in a
plan to the client (a CEO, HR executive,or
change team). This is a common process that
can be used by an internal team, consultant,
or student intern working with a change
team.
The action research model, shown in Figure
2.7, has been described as the dominant
methodologicallogicand basisfor planned change
(Cummings & Worley, 2015). It was
originally
adapted to an applied OD context by Frohman,
Sashkin, and Kavanagh (1976); Shein (2004);
and
Cummings and Worley (2001). This approach is
designed to provide objective information and
analysis that goes beyond the super�icial level of
presenting issues.
The model’s straightforwardprocess is presented from
the perspective of an external consultant.
In practice, the change specialists are considered
“colearners” vis-à-vis the organizational
members with whom they are working. They are equal
partners in the process, so neither party
is dominant and tasks are shared (Cummings &
Worley, 2001). Both bring different and
important expertise and perspectives.
The consultative, problem, and/or opportunity search
process shown in Figure 2.7 illustrates
how potential sources of organizational problems and

opportunities are discovered from
structured steps. As noted with other�igures in
this text, the actual change cycle is rarely
as
Figure 2.7: The action research
model
The action research model provides a step-
by-step process that OD and change
management consultants can use when
working with a change team.
10/17/2017 Print
linear as this model suggests. There are usually
continuous feedback loops (informal and formal)
as contingencies, mishaps, and changes in the
environment and the organization occur.
Identify the Problem or Opportunity
The initial phase begins when a CEO or
othertop-level member of the executive team
discovers a
problem or realizes a potential opportunity that
needs to be solved. Consider the following
example: Kevin Rollins, former president and CEO
of Dell, said his company was always

“scouring for anything that could come up and
bite us. In fact, we asked ourselves all the
time,
‘What is our greatest fear?’ Whenever we
�ind something, we try to �igure out how we
can
embrace it” (as cited in Fishburne, 1999, para.
10). Jack Welch, former GE CEO, would
talk to his
managers about the industry and advise them to
understand their competitors. They would then
explore what they could to do to “change the
game” (Fulmer, Gibbs, & Goldsmith,
2000).
Consult With the Client—Initial Meeting
The initial consultation between the change
consultant and the client involves a mutual
assessment of purpose, roles, and relationships.
The client is generally interested in the
consultant’s experience, expertise, methods, and fees.
The consultantis likewise interested in
the client’s methods, as well as the organization’s
culture and goals.
Culture and other assumptions should be
clari�ied, including those of the consultant. For
example, in international settings it is important
to understand what roles, information,
and
level of involvement lower and midlevel employees
can play in problem identi�ication, diagnosis,
and otherphases of the process. In somecountries
(for example, in Asia and the Middle East),
relationships and power are more hierarchical than

they are in the West. OD consultants whose
values, perceptions, and practices view employees
as partners and colearners in certain
international or even local cultures could encounter
problems.
Value differences can also vary in both
international and national cultural contexts. Some
consultants view their role as identifying and solving
problems, whereas top management may
disagree. What happens when a consultant
discovers systematic sexual harassment while
diagnosing an inventory system? This problem is
reported to management who may be
uninterested, or even ask the consultant to
avoid the issue. Communicating a clear
understanding between the consultant and the client
with regard to work and professional
values and operating ethical principles and practices is
important before and at the contracting phase.
Source: Adapted from Cummings, T. G., &
Worley, C. G.
(2001). Organization development & change.
Cincinnati:
South-Western College, Fig. 2.1, p. 19. Copyright ©
2001
by South-Western College Publishing, a division of
Thomson Learning.
10/17/2017 Print

Another role-and-method question to be clari�ied at
this phase is how proactive the consultantshould
be in the engagement. It is best to
obtain this type of information and understanding at
the contractual phase where the consultant
asks for clari�ication on cultural “do’s and
don’ts” that extend from strategic to procedural
decisions and ways of doing (or not doing)
things.
Collect Data
As noted previously, the presenting issueor
opportunity needs to be veri�ied. The
consultantand his or her team gain access and,
depending
on the problem or opportunity, begin the search
and collection process using interviews,
observation (in meetings, business processes,
transactions), questionnaires and surveys, performance
reports, �inancial data, and otherinformation
relevant to the consultant’s search plan.
This phase is usually an iterative process; that
is, members of the consulting team may return
for additional information to obtain a
longitudinal set of observations rather than one-
shot looks or interviews. Consultants may also
interview customers, vendors, suppliers, and
otherexternal stakeholders relevant to the search.
At this stage, con�identiality and privacy (as
well as otherethical issues) must be strictly

clari�ied, agreed on, and observed. For instance,
how
will the information be used? How will it be
interpreted, protected, and disseminated? Who can be
unintentionally hurt by this information?
Some of the same cultural issues already
discussed also apply here. For example, Mack,
Woodsong, MacQueen, and Namey (2005)
discuss
ethical guidelines for observing con�identiality
and privacy during this phase of data
collection. They state that consultants should
be
unobtrusive and avoid disrupting normal activity,
but they should also be open, so that
individuals being observed and interacted with do
not
feel their privacy is compromised. Consultants’ manner
is oftendependent on the situation: sometimes
consultants should announce who
they are and what their purpose is, while othertimes
it may not be appropriate to do so.
It is the OD consultant’s responsibility to protect
the privacy and integrity of all individuals
who participate in surveys, interviews, and
discussions that relate to the data collection
process. However, it is also the consultant’s
responsibility to provide truthful information
and
results to the sponsor of the consultancy.
Make a Preliminary Diagnosis
This diagnosis follows data collection and

interpretation. The preliminary diagnosis is just that—
preliminary. Because the consultant is
reporting the �indings and interpretation back to the
client, it is important to note that the
diagnosis could change as more information is
collected. Also, additional hypotheses and different
views of the problem or opportunity may
arise after initial data is collected. This raises
the question of whether the consultant is simply
a messenger who delivers what she or
he is told, or is a more active and
inquiring
participant.
The consultantmay have started with an initial request
to �ind data that con�irms top management’s
interpretation of a problem. However, he
or she could later discover information that
disproves management’s problem identi�ication. This
phase should anticipate how to present and
10/17/2017 Print
Digital Vision/Photodisc/Thinkstock
A critical aspect of a change specialist’s
job is to
provide timely, comprehensive, and objective
feedback to the client.

discuss what happens if the consultantdiscovers
another, radically different set of problems. In
such a case, it is key to be honest and
tactful.
Feedback serves two purposes: to ensure the results
are validly interpreted and to increase
ownership among the members of the
organization (McLean, 2006).
For example, suppose a manager hires a consultantto
prove that members of a sales team are lazy
and not performing to their potential.
However, the consultanthas preliminary evidence
indicating that the team’s leader is not setting
an effective strategy. It is the consultant’s
obligation to report this evidence, even though it is
contrary to what the hiring manager asserted.
If preliminary results differ or even con�lict
with later discoveries, consultants can offer context
and explain their �indings. Again, the goal is to
report what actually happened or is happeningin
order to �ind the root cause(s) of problems,
issues, and possibilities for opportunities.
Present Feedback to the Client
This is also a preliminary phase in which
the consultantpresents an analysis of the
data. During this initial “show and tell,” no
recommendations are made. This
meeting presents strengths and weaknesses and
con�irms, discon�irms, or even
extends the initial problem identi�ication or
opportunity statement.This meeting

also provides the consultantwith initial impressions
regarding the �indings before
the next step.
During this phase, a consultant’s obligation is to
report and emphasize �indings
and recommendations based on reliable evidence.
Returning to the sales leader
and team example, at this meeting, the consultant
presents the evidence, data, and
interpretations showing that the sales leader could
not articulate a strategy that
motivated and effectively organized the team to meet or
exceed its sales objectives.
The consultantwould also explain the methods used to
discover and con�irm this
�inding, and offer recommendations to address the
problem.
Jointly Diagnose Problem/Opportunity/Findings With the
Client
This step in the process offers the consultant
an opportunity to share the
preliminary �indings, the methods used in the
diagnosis, and the diagnosis itself. If
the consultant develops a common frame of
reference in which the client can
collaboratively discuss, share, argue, and ultimately
reach agreementon the methods,
problem/opportunity, and ways to proceed, the
process
can continue and the action research method can, to
this point, be considered effective (Schein,
1969).

10/17/2017 Print
Involving clients as coparticipant observers in a
consulting project, as discussed earlier in
this section, facilitates reporting �indings and
diagnosing problems and opportunities. The consultant
from the sales team example can provide a
framework to involve the hiring manager
and/or staff members to also examine the evidence
and help diagnose the team and leader’s issues.
Instigate Joint Action Steps
The consultantnow directly involves the client in
planning how to implement the change
management process in order to reach
the “desired
state” of the initiative. The design of the
interventions to be used is also agreed on in
this phase, along with an assessment of
the
organization’s readiness, capabilities, resources,
budget, risks, timelines, and responsibility chart
(who does what, when, and how).
Enterprise- or organization-wide change requires a
communication rollout plan involving the
organization’s leaders and its top-level
management team.

After the hiring manager and the consultant
discover, verify, and agree that the leader of
the sales team has a dif�icult time identifying
and
implementing an effective team strategy, the manager
and consultantdraw up a plan together to help
the leader design and enact a sales
strategy. The manager and consultantmay have also found
that leaders of othersales teams could also
bene�it from learning how to use new
software to develop a more sophisticated sales
strategy. In effect, the plan involved a much
broader scaleand scope of participants, and
the
president of the company as well as the hiring
manager and vice president of sales were all
involved in planning the new training, because
the
anticipated bene�its would enhance revenues and
reduce costsfor the entire company.
Implement Change
This phase means “go.” It involves actually
transitioning procedures, structures, work, jobs,
technologies, and people into place. New
behaviors and practices may require training, coaching,
and advising to build new skills and reinforce
desired behaviors. At this phase,
interventions are required at the individual, team,
business unit, division, and entire enterprise
levels. In the sales team example, an
implementation plan involved not only training to
use new software, but also new reporting procedures,
skills, and behaviors that affected all
sales team members’ overall effectiveness.

Managing Change
The Change Consultant’s Role
Suppose a largecorporation utilizes an of�ice
services support company. The company has served
the corporation’s needs in-house for
5 years, performing maintenance duties,
cleaning, shipping/receiving, printing, mail delivery,
and service to copiers. The manager of
10/17/2017 Print
the services company has a direct liaison in
the corporation’s operations department, and
the working relationship has been strong
thus far.
In recent months the number of complaints
from employees has risen, regarding everything
from cleanliness to printer outages. There
have been equipment problems and the level of service
requests has increased to a level that is
challenging for the number of staff on
duty at a given time.
You are a change consultantbrought in by the
corporation to work with both the operations

representative and the service company
manager to systematically diagnose and implement
needed changes.
Discussion Questions
1. What phase of growth do you thinkthis
of�ice services company falls into, and what type of
leadershipis needed to return to
positive progress?
2. What type of change do you thinkis needed,
in general?
3. As the change consultant, using the action
research model, describe the process for
diagnosing change in this circumstance.
(See the end of the chapter for possible answers.)
Collect Postimplementation Data
Collecting postimplementation data requires gathering
further information from individuals, teams,
business units, divisions, and top
management—as well as from external stakeholders
(vendors, suppliers, customers, and government
agencies)—to ensure the effectiveness
of the changes, both from an internal systems
perspective and from an external view.
Feedback from multiple departments helps identify
whether the systems changes are aligned and their
effectiveness. This information is then given to
different client teams and individuals who
evaluate the results and make adjustments as
needed. In somecases, of course, additional
diagnoses are required.

Diagnostic Change Tactics: Identifying the
Level(s) of Intervention
Identifying the level of intervention, referred to
in Figure 2.4
ns/navpoint-
19#�ig2.4) , occurs during the action
research process when an external consultant
working with assigned organizational managers and
members follows evidence leading them to speci�ics
such as leadership, strategy, structure, culture,
people, and systems, or interrelations
among these dimensions. In addition to these
organizational dimensions, the change components
illustrated in Figure 2.5
ns/navpoint-19#�ig2.5) are useful and more basic.
point-19#fig2.4
point-19#fig2.5
10/17/2017 Print
For example, after Jobs was �ired from Apple, the
locus of many of the company’s
problems became obvious. The leadershipstyles of

CEOs
Sculley, Spindler, and Amelio were lacking.
Because Apple was essentially a product
company, without Jobs’s creative and innovative
leadership, new products were not invented.
Consequently, therewas confusion and decline in
the company’s strategy, structure, culture, and
systems. Employee morale also suffered during that
period. Revenues and pro�its tumbled while
expenses mounted.
Apple’s storybefore Jobs returned illustrates how the
formal and informal components of an
organization’s interconnected and interrelated
systems and subsystems can work together
unsuccessfully. Formal components generally include
organizational strategies, structures,
systems, and business processes. Informal
organizational dimensions include culture, leadership
styles, politics, groups, and team
relationships. Both formal and informal systems are
interwoven with the values, beliefs, and
attitudes that employees bring to and adapt
from
their workplaces (Senior & Fleming, 2006b). When
thesesystems and attitudes are not working in
harmony, change becomes imperative.
1. Explain the importance of including the human
factor when planning and implementing a
change strategy.
2. Describe each step in the action research model.

10/17/2017 Print
ajkkafe/iStock/Thinkstock
Change introduced without warning or adequate
preparation can create uncertainty and resentment
among employees.
2.6 Why People Resist Change
Ten reasons people resist organizational change
are loss of control, loss of face,
excess uncertainty, sudden surprise, everything
seems different, fear of
incompetence, increased workload, ripple effects,
previous resentments
remembered, and the hurt of change (Kanter, 2012).
Signi�icant organizational
changes can cause emotional pain and hurt, especially
when jobs are lost, perks
are cut, salaries are lowered, and favorite customers
and accounts are threatened,
if not lost. Kanter (2012) suggests that although
leaders may not be able to help
those in pain feel comfortable, they can minimize
discomfort by identifying each
source of resistance in order to take the
�irst step toward solutions. Even the
process of asking for feedback from resistors can
begin the process of accepting
changes.

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