Change thesis: how to introduce and manage organize change

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“TO STUDY INTRODUCING AND
MANAGING ORGANIZATIONAL CHANGE”
AT ZYDUS CADILA HEALTHCARE LTD., DABHASA
PROJECT SUBMITTED TO:
GUJARAT TECHNOLOGICAL UNIVERSITY
In the partial fulfillment for the degree of
MASTER IN BUSINESS ADMINISTRATION
{PHARMACEUTICAL MANAGEMENT}
GUIDED BY:
FACULTY MENTOR CORPORATE MENTOR
Prof. Ashish Bhatt Ms. Hiral Shah
SUBMITTED BY:
Rangada R Shah
ENROLLMENT NO.: 122140290047
PARUL INSTITUTE OF ENGINEERING AND TECHNOLOGY

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DECLARATION
I undersigned, Ms. Rangada R. Shah declare hereby that this project report entitled – “To study
employee’s percept towards organizational change” is the result of my own research work
carried out during the period of 3rd
July- 17th
October 2017 and has not been previously
submitted to any university/ institution for any other purpose. I will not use this project in future
for submission to any other university/ institution or any other publisher. I hereby also promise
not to allow any person to copy or publish any part/ full material of this report in any form. I
further declare that all sources cited or quoted are indicated or acknowledged by means of a
comprehensive list of references. The data and information given in the report are authentic to
best of my knowledge.
Date: Signature
Place: Rangada R Shah

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PREFACE
Internship Project is a part of MBA-PM Project, which is very helpful in getting practical
knowledge in this increasingly globalizing world. Now-a-days only theoretical knowledge is not
enough for success in life but most importantly we must have practical knowledge. With the help
of this training, I came to know how to apply theoretical knowledge in practice.
The main purpose of this internship training is to have grassroots level awareness about
industrial environment and to know about importance of different functions of Human Resource
department.
I got an opportunity in ZYDUS CADILA HEALTHCARE LTD to undergo Internship Project
as a part of MBA-PM Project. This training has helped me to get a practical knowledge as an
important suffix to the theoretical knowledge into the business environment. To develop healthy,
managerial and administrative skills in potential managers and on managers, it is necessary to
contribute to combine the classroom learning with the practical knowledge of real business
environment.
I’m satisfied with the end result of my project. I pursued original research and learned how to run
focus groups, manage and analyze surveys, and then use collected original data to formulate
strategies. I feel that I was able to obtain working experience outside the classroom and explore
my personal interests.

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ACKNOWLEDGEMENT
The satiation and euphoria that accompany the successful completion of the project would be
incomplete without the mention of the people who made it possible.
I would like to take the opportunity to thank and express my deep sense of gratitude to my
corporate guide Ms. Hiral Shah and my faculty mentor Mr. Ashish Bhatt. I am greatly indebted
to both of them for providing their valuable guidance at all stages of the study, their advice,
constructive suggestions, positive and supportive attitude and continuous encouragement,
without which it would have not been possible to complete the project.
I am thankful to Mr. Mayur Potnis for giving me the opportunity to work with Zydus cadila
healthcare ltd, Dabhasa and learn about HR department. I would also like to thank Mr. Dipesh
Patel (Quality GM) who in spite of busy schedule has co-operated with me continuously. I owe
my wholehearted thanks and appreciation to the entire staff of the company for their cooperation
and assistance during the course of my project.
I would like to thank my lovely and supportive friends, who have supported me throughout entire
process, both by keeping me harmonious and helping me putting pieces together. I hope that I
can build upon the experience and knowledge that I have gained and make a valuable
contribution towards this industry in coming future.

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ABRIDGEMENT:
“He who rejects change is the architect of decay”- Harold Wilson.
Background: One of the most baffling issues which business executives face is employee’s
degree of resistance and adaptation to change. This is a difficult time for global pharmaceutical
companies — the unending series of concerns that pharmaceutical companies face includes
payers tightening up on cost management, strained government healthcare budgets, the need to
understand and adopt new technologies, and challenges to their traditional pricing mechanisms
by empowered stakeholders, from patients to payers. Thus in this hustle and bustle and matching
global cut throat competition, human capital becomes the victim of change where sometimes
they adopt changes and sometimes resist.
Purpose of study: The research study was carried out in Zydus Cadila Healthcare Ltd., Dabhasa,
an API manufacturing plant. The main aim of this dissertation is to study how organizational
changes are introduced, then implemented and further managed successfully to give productive
results. This study also explores employees’ willingness to participate in or resist change as a
multidimensional construct that includes behavioral, affective, and cognitive components and
also recognizes factors which play an important role during change process.
Research methodology: The method undertaken in this project is descriptive type and in which
the sample respondent was given well drafted questionnaire to fill and on basis of that statistical
inferences were found. Data was collected from 40 respondents (sample size) at distinct positions
from different departments of the plant. To assess data likert scale was used and with the use of
different graphs, statistical data were obtained and hence analyzed.
Result: Findings obtained from statistics were gathered which showed that management has
tried different kind of tactics which can help employees to adopt changes but not all strategies
have succeeded in doing so. Thus these results might help management levels to have a look
upon their loopholes and increase interaction with employees so they can get easily acquainted to
organizational changes and may longer become a hurdle in increasing productivity and efficiency
of the organization.

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TABLE OF CONTENTS
DECLARATION........................................................................................................................2
PREFACE...................................................................................................................................3
ACKNOWLEDGEMENT..........................................................................................................4
ABRIDGEMENT:......................................................................................................................5
INTRODUCTION....................................................................................................................10
1.1 Background ..................................................................................................................................................... 10
1.2 Discussion of Problem..................................................................................................................................... 11
1.3 Purpose............................................................................................................................................................ 12
1.4 The Issue.......................................................................................................................................................... 12
1.5 Limitations....................................................................................................................................................... 12
THEORETICAL FRAME OF REFERENCE..........................................................................15
2.1 Organization.................................................................................................................................................... 15
2.1.1 Organization Structure............................................................................................................................. 15
2.1.2 The Organization Structure Depends On the Environment...................................................................... 16
2.1.3 Learning Organization ............................................................................................................................. 17
2.2 Organizational Culture ................................................................................................................................... 21
2.2.1Types of organizational culture................................................................................................................. 22
2.2.2 Creating Corporate Culture..................................................................................................................... 23
2.2.3 How employees learn culture?? ............................................................................................................... 24
2.2.4 The Relationship between Organizational Culture and Individual.......................................................... 25
2.2.5 Sustaining Organizational Culture........................................................................................................... 26
2.3 Changes within Organizations ........................................................................................................................ 27
2.3.1 Definition of organizational change: ....................................................................................................... 27
2.3.2 Different types of change.......................................................................................................................... 28
2.3.3 Reasons for organizational change.......................................................................................................... 30
2.3.4 The Change Agent .................................................................................................................................... 32
2.3.5 Change Strategies..................................................................................................................................... 33
2.3.6 The Organization’s Reactions to Change................................................................................................. 35
2.3.7 Employees Readiness to Change....................................................................................................... 36
2.3.8 Implementation of Change........................................................................................................................ 38
2.3.9 Change can fail......................................................................................................................................... 39
2.3.10 Response and Adaptation of Change...................................................................................................... 40

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2.3.11 Change Management Models................................................................................................................. 41
2.4 Leadership....................................................................................................................................................... 44
2.4.1 Management versus Leadership............................................................................................................... 44
2.4.2 Different styles of leadership.................................................................................................................... 45
2.4.3 Successful leadership stage model ........................................................................................................... 47
2.5 Communication: .............................................................................................................................................. 50
2.5.1 Change communication............................................................................................................................ 50
2.5.2 Factors Influencing Successful Communication of Change..................................................................... 51
2.5.3 Communication Reasons for Failed Organisational Change Attempts.................................................... 58
2.6 Resistance to Organisational Change............................................................................................................. 62
2.6.1 Definition of Resistance to Organisational Change................................................................................. 62
2.6.2 Reasons for Resisting Organisational Change......................................................................................... 62
2.6.3 Effects of Resistance to Organisational Change ...................................................................................... 63
2.6.4 Overcoming Resistance to Organisational Change ................................................................................. 65
2.7 Models for Successful Implementation of Change .......................................................................................... 66
Adkar ................................................................................................................................................................. 66
Lewin's Change Model ...................................................................................................................................... 68
Kotter's Eight Steps for Leading Organizational Change:................................................................................ 69
Comparison of Three Change Models............................................................................................................... 71
Which Change Model is the Best?..................................................................................................................... 73
My Recommendation ......................................................................................................................................... 75
3. COMPANY BACKGROUND...............................................................................................77
3.1 Introduction of company: ................................................................................................................................ 77
3.2 Vision and mission statement:......................................................................................................................... 79
3.3 History............................................................................................................................................................. 80
3.4 Products: ......................................................................................................................................................... 80
3.5 Acquisitions:.................................................................................................................................................... 80
3.6 Milestones: ...................................................................................................................................................... 81
3.7 Board of directors: .......................................................................................................................................... 82
3.8 Plants across India:......................................................................................................................................... 83
3.9 Company at glance:......................................................................................................................................... 85
LITERATURE REVIEW.........................................................................................................88
RESEARCH METHODOLOGY .............................................................................................97
5.1 Research objective: ......................................................................................................................................... 98
5.2 Scope of study:................................................................................................................................................. 98

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5.3 Types of Research and Research Design: ....................................................................................................... 98
5.4 Descriptive Research Design: ......................................................................................................................... 99
5.5 The Target Population................................................................................................................................... 100
5.6 The Choice of Sampling Method ................................................................................................................... 100
5.6.1 Sample Design........................................................................................................................................ 101
5.7 Measurement Scales...................................................................................................................................... 102
5.8 Survey Design................................................................................................................................................ 102
5.9 Pilot Study ..................................................................................................................................................... 102
5.10 Respondent Briefing .................................................................................................................................... 103
5.11 Data Collection Methods............................................................................................................................. 103
5.11.1 Questionnaires...................................................................................................................................... 103
5.11.2 Documentation review.......................................................................................................................... 104
5.11.3 Interviews ............................................................................................................................................. 104
5.12 Response Rate.............................................................................................................................................. 104
5.13 Validity ........................................................................................................................................................ 104
5.14 Reliability .................................................................................................................................................... 105
5.15 Ethical Considerations ................................................................................................................................ 105
5.16 Limitations of the Research Survey ............................................................................................................. 105
DATA ANALYSIS AND INTERPRETATION....................................................................108
6.1 Data Analysis Process................................................................................................................................... 108
BIBLIOGRAPHY ....................................................................................................................140

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INTRODUCTION
__________________________________________________________
In this introductory chapter, the reader will be provided with a picture of what has been studied and why,
commencing with a description of the subject’s background. The background is followed by a subject
discussion, which then leads to its definition. The purpose of this thesis is also presented.
_________________________________________________________________________________
1.1 Background
othing is permanent in this world, except changes”. Changes occur in all aspects
of life, from the smallest to the largest decisions and actions. This is especially
true for today’s businesses and organizations. Change is the process of
continually renewing an organization’s direction, structure and capabilities to meet the expectations
from both external and internal customers that makes an organization as successful as possible. It has
been said that today’s business environment is changing in a fast pace, wherefore organizations have to
quickly adapt to avoid falling behind their competitors and to prevent being caught by external forces.
They have to change their business strategy to accommodate a changing environment and to be ready for
what the future has in store. Also, it is vital that organizations quickly adapt to any changes to stay alert
and to be better equipped when embarking on the journey towards the fulfillment of their vision. This has
made change management an important focus of today’s management strategy.
Organizational learning, development and planned change cannot be understood without considering
culture as a primary source of resistance to change. The culture has a big impact on a process of change,
while the culture is always “the winner” over the strategy. A changed strategy will not automatically lead
to a wished change if the culture has not changed in the same way.
Another vital component of organizational success is leadership. Leaders and managers have to cope with
internal and external changes ranging from small-scale reforms such as employee’s job role change,
changes of the workplace location, or implementing new processes or programs, and all the way to large-
scale changes such as major reconstructions of the whole organizations.
Competent leaders can be the difference between success and failure, not only for the organization itself,
but also for internal projects such as business or strategy development. Leaders and managers have
important roles to fill, such as influencing and encouraging employees that may rank from top
management to lower level, regular workers in striving towards the fulfillment of the organization’s
vision. The leader cannot perform organizational changes by using only formal structure and systems as
principal instruments. The leaders also have to pay attention to the organizational culture and provide a
new basis for cohesion.
“N

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1.2 Discussion of Problem
Goodstein and Burke (1991) claims that change in organizations today is a way of life. But how should
an organization handle all these changes? And can an organization be too adaptive to changes? If an
organization changes in response to all external signals, it is not an organization. The essential conditions
of organizational life – recurrent cycles of behavior, predictability and internal coordination would
disappear very quickly and the organization would lose the properties that differentiate it from its
environment.
The global pharmaceutical industry has long been known for unpredictability. Returns on investment
from research efforts are volatile, and payer pressure and the vagaries of regulatory decisions often add to
the uncertainties of the sector. Still, it would be difficult to find a period in the past when pharmaceutical
companies faced a more challenging and disruptive time than they are experiencing now — a time, that
is, when drug companies have no choice but to reevaluate their business model to survive.
The above described situation and future, is also a reality for Zydus Cadila Healthcare Ltd.
The organization used in this study has undergone a recent change which includes bringing of advanced
technology for production of API with highest rate of accuracy and precision and also making employees
work exactly as per their standard operating procedure (SOP). These both changes were done specifically
to get meet requirements of USFDA and MHRA. Basically having a new machine with advanced
technology in corporate world has many business advantages for an organization’s economic growth and
development such as decreased labour cost, increased productivity and efficiency but it can have a
negative effect on employees as they need to learn how to operate it and employees might get transferred
to different section as requirement of labour work will decrease. Secondly, employees need to adopt a
different method of working that is to work according to SOP as per standard protocols, so they need to
FACTORS
RESPONSIBLE FOR
ORGANIZATIONAL
CHANGE AT ZYDUS
Squeezing
Budgets
Organization
Restructuring
Empowered
Consumerism
Change in
demography of
workforce
Innovative
technologies
To survive in
competition
Different regulatory
policies globally
Adapting newer
techniques
Figure 1

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be educated and trained such that all employees irrespective of their age, education and attitude adapts
change successfully and in benefit of company.
Thus while introducing change, it is very important to know how employees perceive this change? What
need to be done, so that they easily adapt change? How to influence them for successful implementation
of change? Whether they communicate with managers about change? What are the factors due to which
they resist change? How managers should lead the change in a proper direction? After introducing and
implementing change, is it important to manage change and if so then how? Which kinds of models are
used for successfully implementing change?
Earlier many organizational changes were introduced within the organization, however some were
successful and some weren’t. Therefore this time few changes were done while introducing the change
and managing too.
1.3 Purpose
The purpose of this thesis is to be an ultimate book, which can be used when carrying out organizational
changes within the firm in a structured format. This thesis shall provide them a way about how to
introduce and manage organizational change. It will also provide company a checklist about the factors
which play a pivotal role in success of change. This checklist shall also include a couple of different tools
that will help the organization to measure the progress of the change project.
1.4 The Issue
The above presented purpose resulted in a couple of questions that this thesis has tried to respond to. The
questions are:
 Which factors are important while introducing change within organization?
 How does employees’ perception towards change affect successful implementation of change?
 To what extent communication and leadership affects success of organizational change?
 What are the reasons of employees’ resistance towards change?
 Which are the solutions implied to increase adaptation towards change?
1.5 Limitations
This change project is studied and the research is based on interviews and answers from survey forms
with persons who are involved at some stage during this project. This thesis is the completed within the
program of master of business administration (pharmaceutical management) and the time was limited to
17 weeks.

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This time limitation has made it impossible to do a complete research and to speak with all employees
within Zydus Cadila healthcare ltd. Consequently, all voices within zydus cadila have not been heard, but
people from as many different departments as possible have been interviewed and they represent the
company as a whole.
Only large organizational changes, which influence the whole company, have been studied. This means
that the conclusions from this thesis are only useful for this type of change project.
Changes that only affect one department or other smaller units of the company are not studied and the
results are therefore not adapted to these types of changes.
When identifying measure variables, existing measure variables for evaluating have been used and
employees within the firm have been asked their views on measure variables and in suggesting which can
prove most useful. It could also be possible to develop free standing measure variables, but there was no
time for this work to be carried out in the scope of this thesis.

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CHAPTER 2:
THEORETICAL
FRAME OF
REFERENCE

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THEORETICAL FRAME OF REFERENCE
_____________________________________________________________________________
This chapter will create an understanding of the issue handled in this thesis. It is divided into three sub
chapters: Organization, Organizational Culture and Changing within Organization. This frame of
reference has built the basis for the rest of the report.
__________________________________________________________________________
2.1 Organization
In order to understand the change process for an organization, it is obvious that an understanding of the
organization itself is required. Therefore, some literature discussing organization science is summarized
below.
An organization is when people interact in some kind of structured or organized way to achieve a defined
purpose or goal and a group of this kind needs managing. There has to be a person who is responsible for
the organization and who is in charge of the control and coordination support.
When the organization consists of more than ten people, the organization needs a structure for their
activities if chaos is not to ensue. The allocation of responsibilities, the grouping of workers activities and
the coordination and control of these are all basic elements of what is called an organization’s structure.
The purpose for any structure must be to achieve the goals of the organization. Besides a formal structure,
there normally exists an informal structure that is not designed by management but is rather the output of
shared interest and friendship. One important difference between the formal and the informal structure is
that the purpose and main interest are not always the same. The formal structure always works for the
organizations best, while the informal structure sometimes has interests which are not related to the
organization’s goals.
2.1.1 Organization Structure
There are a couple of different ways of how an organization can be structured. One of the best known
forms is the bureaucratic form. It was the German sociologist, Max Weber, who defined the form and
asserted that this was the only effective way of how an organization could be structured. The
characteristics for a bureaucratic organization are that different roles are well defined and specialized.
These roles are strict, hierarchically arranged and there is a single chain of command from the top of the
organization to the bottom. It also has impersonal rules and relationships. This organization structure
relies greatly on the use of rules, procedures and written records. The intention of the bureaucratic form
was to imply fairness and neutrality in the way the people in the organization were treated, but nowadays
the term bureaucratic has a quite negative undertone with a feeling of hard, undesirable rules and a lot of
control mechanism.

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The bureaucratic organization can be tall or flat. A flat organization needs fewer managers compared to
that of a tall organization. One rule is that the more similar the jobs are, the more people a manager can
coordinate and control. It takes a lot of time and attention in managing many people carrying out very
different kinds of jobs. Another rule is that the more decentralized the decision making is, the broader the
span of control. If it is the manager who has to take all decisions, it is natural that the manager cannot
manage a lot of people.
Regarding the number of levels in the organization, these should be as few as possible. If there are a lot
of levels, it is harder to understand the objectives and to communicate, both up and down in the
organization. In a horizontal dimension, the bureaucratic organization can be organized by function,
product or service or by location.
Nowadays, many bureaucratic organizations complement their organization with teams, network, or
project organizations in order to obtain a higher flexibility. When complex tasks arise, the organization is
prepared and can easily put together a group with specialists from many different areas, who are then
used to collaborate with other specialists.
Another type of organization structure is the matrix structure. This form has normally a functionally
designed vertical axis, but with a horizontal axis designed in some other way, for example products or
regions. This means that there are two chains of command, one vertical and one horizontal, which operate
at the same time. The matrix organization often is developed by a crisis when the organization becomes
too big and complex and it starts to be impossible to manage through normal bureaucratic systems. To
succeed with a matrix organization, it is important to have good teamwork with managers who possess
both high level behavior and management skills. The focus should be to solve problems through team
action.
2.1.2 The Organization Structure Depends On the Environment
A study regarding how the environment affects organizational structure shows that the organization has
different structure depending on whether they operated in a stable environment or a more dynamic,
changeable environment. The study identified two different main types of structure, mechanistic structure
which is suitable for stable environments and organic structure which suits a more unpredictable
environment.
ORGANIZATION STRUCTURE
BASED ON TYPE OF ENVIRONMENT
ORGANIC STRUCTUREMECHANISTIC STRUCTURE
Figure 2

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Mechanistic organization is characterized by a well-known business environment and routine operations.
Mechanistic organizations often have specified and standardized products and organizational control is
provided through structure, goals and rules. A mechanistic organization is quite rigid bureaucratically.
Organic organizations live in high uncertainty of both market and technology and they have often limited
hierarchy. They also include many people with entrepreneurial roles, and often work with product
innovation. Organic organizations often have structures similar to matrix organizations or even loosely
coupled organic network.
2.1.3 Learning Organization
Introductions of improvement programs are a common phenomenon and are emerging everywhere. The
organization’s purpose is of course to better themselves, but unfortunately, there are many programs that
have failed and one reason for this high rate of failure is that the companies did not put enough attention
on the fact that improvement requires a commitment to learning. It is obvious that learning comes before
improvement.
Regardless if the company wants to solve a problem or introduce a product or re-engineer a process, all
these changes demand the company to see the world in a new light. If the company does not learn before
changing, the change remains cosmetic and possible improvements are either fortuitous or short-lived.
There are many different theories about organizational learning. Some researchers believe that it is
necessary with behavioral change to learn while others claim that thinking in new terms is enough. Some
believe that learning takes place during the information process while others say that it necessary with
shared insights and organizational routines. Furthermore, some assert that organizational learning is
common, while others do not believe this to be the case.
“A learning organization is an organization skilled at creating, acquiring, and transferring knowledge, and
at modifying its behavior to reflect new knowledge and insight.”
It is a truth that new ideas are essential if learning is to take place. The ideas can come from the outside or
through flashes of creative insight, but regardless of the source of the idea, it is a trigger for
organizational improvement. New ideas cannot by themselves create a learning organization. If the
organization does not change the way it works only a potential for improvement will exist.
What identifies a learning organization? Learning organizations are skilled at five main activities:
1. Systematic problem solving
2. Experimentation with new approaches,

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3. Learning from their own experience and past history,
4. Learning from the experiences and best practices of others
5. Transferring knowledge quickly and efficiently throughout the organization.
There are a lot of companies that practice these activities to some extent, but there are only a few that are
consistently successful. Most companies rely on luck, circumstance and isolated examples instead of
creating systems and processes that support these activities and integrate them into the companies’ daily
operations, thereby resulting in a better management of their learning.
The five different activities will be presented in more detail below.
Systematic problem solving: This first activity is related to philosophy and methods of the quality
movement. It argues for using scientific method rather than guesswork for diagnosing problems, where
Deming’s model, “Plan Do Check Act” cycle is an example. It is also important to use data rather than
assumptions as background for decision making, so called fact based management. It is also common to
organize data and draw inferences by using simple statistical tools, like histograms, Pareto charts and
“cause and effect” diagrams. It is important that organizations are more disciplined in their thinking and
more attentive to details. They must frequently ask themselves; “How do we know that’s true?” If they
really want to learn, they cannot be satisfied with things that are close enough. They must constantly
being taking one step further, to asses underlying causes and not remain satisfied with the first
explanation.
LEARNING
ORGANIZATION
SYSTEMATIC
PROBLEM SOLVING
TRANSFERRING
KNOWLEDGE
LEARNING FROM
OWN EXPERIENCE
LEARNING
FROM OTHERS
EXPERIMENTATION
Figure 3

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Experimentation: This kind of activity involves systematic searching for and testing of new knowledge.
It has a lot in common with systematic problem solving, but the difference is that experimentation is
motivated by opportunity and expanding horizons, not by current difficulties.
Experimentation can take two different main forms: ongoing programs and “one of a kind” demonstration
projects. Ongoing programs involve series of small experiments and are common on the shop floor.
Successful ongoing programs have normally some factors in common. They normally work hard to get a
steady flow of new ideas, from inside or outside of the organization.
It also supports some degree of risk taking, while the employees must feel that the benefits of
experimentation exceed the costs. For the manager it can be quite tricky, while they must maintain the
accountability and the control over the experiments, without stifling creativity by penalizing employees
for failures. Finally, ongoing programs really need managers and employees that are skilled to perform
and evaluate experiments. These skills must usually be learned and they cover a wide scope from
statistical methods, like design of experiments to creative techniques, like role playing. The other form of
experimentation, demonstration projects, is usually larger and more complex. They often involve system
wide changes, introduced at a single site and the goal is often to develop new organizational capabilities.
These kinds of projects often represent a sharp break from the past and are usually designed from scratch.
Even demonstration projects share a number of characteristics, for example they are often the first project
to embody principles and approaches that the organization later wants to introduce in large scale. They
will form guidelines and decision rules for later projects and include many tests, to see if the rules have
changed. They are often developed by a multi-functional team that reports directly to senior management
and they do not normally impact the rest of the organization.
Learning from past experience: Companies must investigate their success and failures systematically. A
famous philosopher, named George Santayana, once said, “Those who cannot remember the past are
condemned to repeat it.” Even though a study of more than 150 new products has shown that knowledge
achieved from failures is often involved in gaining subsequent successes, there are many managers that
are hostile to the past and do not reflect on it.
Learning from others: All learning and knowledge does not come from reflection and self analysis.
Sometimes it can be really powerful when looking at the outside to gain a new perspective. Even
companies that produce completely different products can be important sources of ideas that start a
process of creative thinking. Benchmarking is a source of ongoing investigation and learning experience,
which can ensure that best industry practices are uncovered, analyzed, adapted and implemented. The

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best thing to study is practice, the way that work gets done, rather than results. Benchmarking is only one
way of getting outside perspective.
Another source can be conversation with the customers, as they can provide up to date product
information and immediate feedback about services and other important areas. It does not matter what the
source of outside ideas is, learning can only be possible in an open environment.
Managers cannot allow themselves to be defensive. Instead they must be open to criticism and bad news.
Learning organizations are characterized by open and attentive listening.
Transferring knowledge: If the learning should be widely spread in the organization, the knowledge
must be transported quickly and efficiently throughout the organization. To spread the information, a
variety of mechanisms should be involved, like written, oral and visual reports, site visits and tours,
personnel rotation programs, education and training programs and standardization programs. Personnel
rotation programs are seen as one of the most powerful methods of transferring knowledge, as actively
experiencing something is more valuable than having it described. Also education and training programs
are powerful tools for transferring knowledge, but for maximum effect they must be linked to the
implementation. It is too common, that trainers think that new knowledge will be applied without
concrete help and without taking concrete steps to ensure that trainees actually follow through. (Garvin,
1993)
It is important to recognize the differences between individual and organizational learning.
Individual learning is primarily a cognitive process that takes places “inside people’s heads” which leads
to individual insights and changes of habits, competences and action. Organizational learning is a
complex, interpersonal process that occurs via structural mechanisms and leads to changes in norms,
doctrines, production process and cultures. An organizations change competence as is its ability to
manage theory and method in proportion to the organization’s actual level of development and change
competences develop stepwise. When an organization’s choice of change strategy agrees with its own
development level, there is good potential to achieve set goals in a change process and the organization
has change competence.
Change competence is a relative concept; it is only in relation to the situation and condition of the
specific organization it is possible to speak about change competence.
There are also relationships between organizational and individual learning and change. If the
organization will change, the individual organization members must change. The individuals are

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influenced by signals received directly from their work setting and indirectly from organizational vision
and these signals produce new behavior.
Becoming a Learning Organization
Even though a learning organization is not built over night, all companies that want to become a learning
organization can begin with a couple of steps. The first step is to ensure that the environment is
conductive to learning. The organization must have time for reflection and analysis as learning is difficult
in a stressed or rushed environment. The members must have time for brainstorming, problem solving,
evaluating experiments and other core learning activities.
The next step is to open up boundaries and stimulate the exchange of ideas, with conferences and project
teams with members from different parts of the organization. When these steps are established, the
manager can create learning forums, which are programs or events that are designed with a learning goal
in mind. Together these efforts can improve learning and also shed some light on the issue of learning in
the organization.
2.2 Organizational Culture
Culture is the unique dominant pattern of shared beliefs, assumptions, values, and norms that shape the
socialization, symbols, language and practices of a group of people. The attitudes and approaches that
typify the way staff carry out their tasks. Culture is developed and transmitted by people, consciously and
unconsciously, to subsequent generations.
Organizational Culture is the totality of beliefs, customs, traditions and values shared by the members of
the organization. Corporate culture can be looked at as a system. It is important to consider culture while
managing change in the organization. Culture can be both, as input and as output.
There are three different levels of culture; observable artifacts, values and basic underlying assumptions.
Artifacts can be observed by anyone who enters the organization and it includes everything from the
physical layout, the dress code, the manner in which people address each other, products, statements of
philosophy etc. In order to identify values, interviews, questionnaires or survey instruments can be used.
Values include norms, ideologies, charters and philosophies. Values are then agreed conditions that often
are written down and describe how the organization shall act in different situations. Through more
intensive observations, more focused questions and through involving motivated members of the group in
intensive self-analysis, it can be possible to identify the taken for granted, underlying and usually
unconscious assumptions.

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These assumptions are often hard to change and by understanding them it is easier to understand the
meaning in behavior and artifacts that have been observed. Several identified variables are claimed to be
parts that together create the organizational culture. These variables are basic assumptions, values, norms,
language and jargon, rituals, history, stories, myths and symbols.
The key characteristics of corporate culture are:
 Innovation and Risk Taking
 Attention to Detail
 Outcome Orientation
 People Orientation
 Team Orientation
 Aggressiveness
 Stability
2.2.1Types of organizational culture
Figure 4 {source: http://www.pearltrees.com}

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 The Clan Culture: This culture is rooted in collaboration. Members share commonalities and see
themselves are part of one big family who are active and involved. Leadership takes the form of
mentorship, and the organization is bound by commitments and traditions. The main values are
rooted in teamwork, communication and consensus. A prominent clan culture is Tom’s of Maine,
the maker of all-natural hygiene products. To build the brand, founder Tom Chappell focused on
building respectful relationships with employees, customers, suppliers and the environment itself.
 The Adhocracy Culture: This culture is based on energy and creativity. Employees are
encouraged to take risks, and leaders are seen as innovators or entrepreneurs. The organization is
held together by experimentation, with an emphasis on individual ingenuity and freedom. The
core values are based on change and agility. Facebook can be seen as a prototypical adhocracy
organization, based on CEO Mark Zuckerberg’s famous admonition to, “Move fast and break
things – unless you are breaking stuff, you are not moving fast enough.”
 The Market Culture: This culture is built upon the dynamics of competition and achieving
concrete results. The focus is goal-oriented, with leaders who are tough and demanding. The
organization is united by a common goal to succeed and beat all rivals. The main value drivers are
market share and profitability. General Electric under ex-CEO Jack Welch is a good example of
this culture. Welch vowed that every G.E. business unit must rank first or second in its respective
market or face being sold off. Another example of the market culture is software giant Oracle
under hard-driving Executive Chairman Larry Ellison.
 The Hierarchy Culture: This culture is founded on structure and control. The work environment
is formal, with strict institutional procedures in place for guidance. Leadership is based on
organized coordination and monitoring, with a culture emphasizing efficiency and predictability.
The values include consistency and uniformity. Think of stereotypical large, bureaucratic
organizations such as McDonald’s, the military, or the Department of Motor Vehicles.
2.2.2 Creating Corporate Culture
The ultimate source of an organization’s culture is its founders. Culture creation occurs in three
ways:
 Employees hire and keep employees with same thinking
 They indoctrinate and socialize the employees with the organization’s thinking
 The founder’s behavior acts as a role model for the employees
With the organizational success, the founder’s personality is embedded in the organizational culture.

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2.2.3 How employees learn culture??
Culture is learned within the organization, but the process of learning something that becomes shared
within a group is still only partially understood.
Norms and beliefs arise according to how members respond to critical incidents. When there are many
emotions involved in an episode, it will affect the group. For example, they mean that a members attack
on the leader can be such an emotional happening, especially if everyone witnesses it and if the tension is
high when the attack occurs. The behavior that follows after a happening like this tends to create a norm.
For example, if the leader counter-attacks, the group members concur with silence or approval and the
attacking member apologizes and admits his or her mistake and a new norm that says “we do not attack
our leader” is created. This norm will after a while become a belief and then a statement, if the same
pattern should arise. On the other hand, if the responses to the attack are constantly different, a new norm
will arise after each attack and no real statement will occur.
Another mechanism of culture creation is when group members identify with the leaders and internalize
their values and assumptions. It is common that there are some dominant persons or founders whose own
beliefs, values and assumptions work as a model for how the organization should be structured and how it
should function in the starting phase. After a while, when these beliefs are put into practice, it turns out
that some succeed and some do not. The organization then learns what part of these person’s beliefs and
assumption that work for the group as a whole. This kind of joint learning then gradually creates shared
assumptions.
Even after this first phase, the leaders continue to have a big impact on the organizations culture and their
own views on how things should be still influence the organization.
Primary embedding mechanisms have the most impact and are the following:
 What leaders pay attention to, measure and control
Top management
Selection
criteria
Philosophy of
organization
founders
Socialization
Organization
culture
Figure 5

25
 How leaders react to critical incidents and organizational crises
 Deliberate role modeling and coaching
 Operational criteria for the allocation of rewards and status
 Operational criteria for recruitment, selection, promotion, retirement and excommunication
There exists also another sort of more indirect way of influencing the organization, called the Secondary
articulation and reinforcement mechanism which consist of the following:
 The organization’s design and structure
 Organizational systems and procedures
 The design of physical space, facades and buildings
 Stories, legends, myths and symbols
 Formal statements of organizational philosophy, creeds and charters
When the organization evolves and grows, by expanding with more departments, there are two processes
that will exist at the same time. A process of differentiation where the organization develops various
kinds of subcultures that will create diversity and on the other hand, a process of integration, where
various deeper elements of the culture become congruent with each other caused by the human need for
consistency.
2.2.4 The Relationship between Organizational Culture and Individual
The culture has a large influence in many situations, for example when new members should enter the
organization. The process begins with recruitment and it is common that the selection is based on if the
person has the “right” set of assumptions, beliefs and values, according to the organization. When a
person is found, that matches the profile, the person is trained and acculturated, a kind of socialization
process. The socialization process can vary due to the specific company and its philosophy. The result
from the socialization process is not uniform, individuals respond differently to the same treatment and
different tactics of socialization can produce different outcomes for the organization.
Three different kinds of outcome are possible:
• Custodial orientation, the person accepts completely all norms and assumptions
• Creative individualism, where the person learns all central assumptions and norms of the culture with
importance, but also rejects peripheral ones. These kinds of selections permit the individual to be creative
while still maintaining respect for the organization and its culture
• Rebellion, where the person totally rejects all assumptions

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At the same time, new members in a group will influence the group by bringing new beliefs and
assumptions with him or her that will have impact on existing culture. By this influence, the culture will
constantly grow and evolve, but just like individuals, an organization does not easily give up its basic
underlying assumptions or norms and change identity. When the organization grows and forms new
functional, geographic or other kinds of departments, the culture will also change and evolve. These new
departments start to build their own subcultures. The total culture of the organization now becomes a mix
of the different subcultures.
2.2.5 Sustaining Organizational Culture
Three forces play a particularly important part in sustaining a culture:
• Selection practices
• Actions of top management
• Socialization methods
Selection: Explicit goal – identifying and hiring individuals having knowledge, skills and abilities to
perform the jobs successfully. Individuals having values consistent with those of the organization are
selected as per the decision maker’s judgments. Selection becomes a “two-way street‟ as it provides
information about the organization to the applicants.
Top management: The action of top management establishes the norms for the organization as to:
 Whether risk taking is desirable
 How much freedom managers should give to their subordinates
 What actions will pay off in terms of pay rises, promotions and other rewards, etc.
Socialization: New employees are not familiar with the organizational culture and are potentially likely
to disturb the existing culture. The process through which the employees are proselytized about the
customs and traditions of the organization is known as socialization. It is the process of adaptation by
which new employees are to understand the basic values and norms for becoming “accepted” members of
the organization.
Socialization process: Socialization is a process made up of three stages:
1. Pre-arrival - All the learning occurring before a new member joins.
2. Encounter - The new employee sees what the organization is really like and confronts the
possibility that expectations and reality may diverge.

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3. Metamorphosis - The relatively long-lasting changes take place. The new employee masters the
skills required for the job, successfully performs the new roles, and makes the adjustments to the
work group’s values and norms.
2.3 Changes within Organizations
Before this thesis I found the change process a little diffuse. Starting to read previous research I soon
realized a change process is operated through different steps and involves different stages. There are of
course different definitions of these, however all imply that the focus of these steps is different and need
to be operated in different ways. The research question “how does a change process operate” refers to
how a change process really works and which steps that needs to be handled. Therefore this section will
discuss the change process itself and the stages that a change process implies.
A similarity between the different sorts of changes with the strength of the wind can be drawn. A small
change can be as a soft summer breeze that only disturbs a few papers while a big change is like a mighty
howling gale which may cause devastation to structures causing a need for rebuilding.
The organizational life is much more uncertain today compared with the situation a couple of years ago.
The differences are that the pace of change is quicker and the future becomes more unpredictable.
Furthermore, this development is predicted to continue and the organizational world will change at a fast
rate. To have the ability to follow this fast rate of change, it is important that the organizational managers
and decision makers understand and are aware of the factors that trigger the organizational change.
2.3.1 Definition of organizational change:
REFERENCE DEFINITIONS
Lewin, 1951 Change has also been defined as an event that is frozen, unfrozen, and refrozen
Huber (1991) Organizational change means a new position or another position compared to
how the organization functioned and how it members and leaders acted earlier.
Change is a type of organizational development while the members of the
organization change by the input of new strategies, which in turn leads to
behavioral change.
Van De Ven
and Poole
(1995)
Organizational change was expressed as “an empirical observation of difference
in form, quality, or state over time in an organizational entity. The entity may be
an individual’s job, a work group, an organizational strategy, a program, a
product, or the overall organization”.
Ford and Ford
(1995)
Described change as “the difference(s) between two (or more) successive
conditions, states, or moments of time”.

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French and Bell
(1999)
“Change means the new state of things is different from the old state of things”.
Organizational change thus means the new state of things in the organization is
different from the old state of things in the organization.
Nadler and
Tushman
(1997)
Change process is ranging from a current state to a future state, via a transition
state, where the current state needs to be changed in order to meet the
organizations vision, the so-called future state. This is done through a transition
of the organization, or an implementation of the desired changes. It is during
this phase that many of the problems occur, and is therefore vital to manage.
Jones (2010) organizational change as the process when organizations increase their
effectiveness by making a transition from their current state to their future one
Table 1
Based on these definitions, change in organizations can take on numerous configurations and dimensions.
These varying definitions of organizational change allow for readily identification of change in
organizations.
2.3.2 Different types of change.
Change is the one of the most important and difficult problem with which organizations is dealing. The
ability to change rapidly, efficiently, and almost continually is a major dilemma for organizations in
today’s rapidly changing environment.
Typically, the phrase “organizational change” is about a significant change in the organization, such as
reorganization or adding a major new product or service. This is in contrast to smaller changes, such as
adopting a new computer procedure. Organizational change can seem like such a vague phenomena that
it is helpful if you can think of change in terms of various dimensions as described below.
Types of
change
ORGANIZATION-WIDE
VERSUS SUBSYSTEM
CHANGE
UNPLANNED VERSUS
PLANNED CHANGE
REMEDIAL VERSUS
DEVELOPMENTAL
CHANGE
TRANSFORMATIONAL
VERSUS
INCREMENTAL
CHANGE
Figure 6

29
1) Organization-wide Versus Subsystem Change
Examples of organization-wide change might be a major restructuring, collaboration or “rightsizing.”
Usually, organizations must undertake organization-wide change to evolve to a different level in their life
cycle, for example, going from a highly reactive, entrepreneurial organization to one that has a more
stable and planned development. Experts assert that successful organizational change requires a change in
culture – cultural change is another example of organization-wide change.
Examples of a change in a subsystem might include addition or removal of a product or service,
reorganization of a certain department, or implementation of a new process to deliver products or
services.
2) Transformational Versus Incremental Change
An example of transformational (or radical, fundamental) change might be changing an organization’s
structure and culture from the traditional top-down, hierarchical structure to a large amount of self-
directing teams. Another example might be Business Process Re-engineering, which tries to take apart (at
least on paper, at first) the major parts and processes of the organization and then put them back together
in a more optimal fashion. Transformational change is sometimes referred to as quantum change.
Examples of incremental change might include continuous improvement as a quality management
process or implementation of new computer system to increase efficiencies. Many times, organizations
experience incremental change and its leaders do not recognize the change as such.
3) Remedial Versus Developmental Change
Change can be intended to remedy current situations, for example, to improve the poor performance of a
product or the entire organization, reduce burnout in the workplace, help the organization to become
much more proactive and less reactive, or address large budget deficits. Remedial projects often seem
more focused and urgent because they are addressing a current, major problem. It is often easier to
determine the success of these projects because the problem is solved or not.
Change can also be developmental – to make a successful situation even more successful, for example,
expand the amount of customers served, or duplicate successful products or services.
Developmental projects can seem more general and vague than remedial, depending on how specific
goals are and how important it is for members of the organization to achieve those goals.
Some people might have different perceptions of what is a remedial change versus a developmental
change. They might see that if developmental changes are not made soon, there will be need for remedial

30
changes. Also, organizations may recognize current remedial issues and then establish a developmental
vision to address the issues. In those situations, projects are still remedial because they were conducted
primarily to address current issues.
4) Unplanned Versus Planned Change
Unplanned change usually occurs because of a major, sudden surprise to the organization, which causes
its members to respond in a highly reactive and disorganized fashion. Unplanned change might occur
when the Chief Executive Officer suddenly leaves the organization, significant public relations problems
occur, poor product performance quickly results in loss of customers, or other disruptive situations arise.
Planned change occurs when leaders in the organization recognize the need for a major change and
proactively organize a plan to accomplish the change. Planned change occurs with successful
implementation of a Strategic Plan, plan for reorganization, or other implementation of a change of this
magnitude.
Note that planned change, even though based on a proactive and well-done plan, often does not occur in a
highly organized fashion. Instead, planned change tends to occur in more of a chaotic and disruptive
fashion than expected by participants.
2.3.3 Reasons for organizational change
Given a choice, most organizations prefer stability to change because the more predictable and routine
activities are, the higher the level of efficiency that can be obtained. Thus, the status quo is preferred in
many cases.
But organizations are not static; they are continuously changing in response to a variety of forces coming
from both inside and outside. For leaders, the challenge is to anticipate and direct change processes so
that the performance is improved.
2.3.3.1 Why organizations change
Organizations have to transform, they cannot survive if they are static. What causes organizations to
change is usually not one special factor, but a convoluted web of forces of change.
Organizations are open systems, this means that they interact with their respective environments and are
subject to constraints imposed by those environments.
Thus any change to one part of the system will have an impact on other parts of the system, and in turn,
on the overall performance.
They are open in two respects: Firstly, they are open to, and interact with, their external environment.
Secondly, they are open internally; the various subsystems interact with each other. Therefore, internal

31
changes in one area affect other areas, and in turn have an impact on the external environment, and vice
versa.
Internal factors are those factors that affect the organization’s performance from within its boundaries.
These factors are within the organization’s control. External factors are those factors that are outside the
control of the organization.
EXTERNAL FORCES:
The major external forces for change are:-
1. Nature of the workforce: Almost every organization must adjust to a multicultural environment,
demographic changes, immigration and outsourcing.
2. Technology is continually changing jobs and organization. Ex: faster, cheaper and more mobile
computers and handheld devices.
3. Economic shocks: rise and fall of global housing market, financial sector collapse, global
recession.
4. Competition is changing. Competitors are as likely to come from across the ocean as from across
town. Ex: increased government regulation of commerce.
5. Social trends don’t remain static. Companies must continually adjust product and marketing
strategies to be sensitive to changing social trends. The State Bank of India did the same when it
started a zero-balance bank account program for villagers.
INTERNAL FORCES:
Pressures for change that originate inside the organization are generally recognizable in the form of
signals indicating that something needs to be altered, such are the internal forces.
1. Declining effectiveness is a pressure to change. A company that experiences its third quarterly
loss within a fiscal year is undoubtedly motivated to do something about it. Some companies react
by instituting layoffs and massive cost – cutting programs, whereas others look at the bigger
picture, view the loss as symptomatic of an underlying problem, and seek the cause of the
problem.
FORCES OF CHANGE
EXTERNAL FORCES INTERNAL FORCES
Figure 7

32
2. A crisis situation also may stimulate change in an organization. Strikes or walkouts may lead
management to change the wage structure. The resignation of a key decision-maker is one crisis
that causes the company to rethink the composition of its management team and its role in the
organization. A much-publicized crisis that led to change with Exxon was the oil spill accident
with Exxon’s Valdez oil tanker. The accident brought about many changes in Exxon’s
environmental policies.
3. Changes in employee expectations also can trigger change in organizations. A company that
hires a group of young newcomers may be met with a set of expectations very different from
those expressed by older workers. The work force is more educated than ever before. Although
this has its advantages, workers with more education demand more of employers. Today’s
workforce is also concerned with career and family balance issues, such as dependent care. The
many sources of workforce diversity hold potential for a host of differing expectations among
employees.
4. Changes in the work climate at an organization can also stimulate change. A workforce that
seems lethargic, unmotivated, and dissatisfied is a symptom that must be addressed. This
symptom is common in organizations that have experienced layoffs. Workers who have escaped a
layoff may grieve for those who have lost their jobs and may find it hard to continue to be
productive. They may fear that they will be laid off as well, and many feel insecure in their jobs.
2.3.3.2 How organizations change
Transformation in organizations can be stressful, but depending on the kind of change, this stress can be
managed. Change that is sudden or drastic is more likely to cause stress or resistance, whereas gradual
and programmed change is easier to manage.
Recently, emphasis has been placed on the continuing process of change rather than a sequence of “step”
changes required for organizations to be successful.
Change should be treated as a norm rather than a series of once-off exercises. Organizational
transformation can be continuous or radical in nature. The continuous perspective can be deliberate,
controlled or managed.
2.3.4 The Change Agent
The change agent is often a person whose mission is to build the motivation to make the change and help
the organization to identify changes in functions that must be done. The change agent also helps the
organization to carry out necessary changes for the future.

33
The agent’s task starts with a diagnostic phase where the agent tries to evolve a model with existing
theory that is adapted to the particular organization. In short, the change agent’s role is to act as
transducer between scientific knowledge regarding organizational functioning and change processes and
the particular situation during this phase. The developed model must be reasonably complete, predictive
and adequate to provide the organization with useful information.
The model must be presented to the members of the organization in an excellent way, because the issue
of acceptance is critical. Even if it is a really good model, it has no value without a good understanding of
the members of the organization. To realize this, the change agent must be a good communicator and has
enough knowledge about the groups’ tasks to relate the model with these tasks, that is to say an
understanding of the organizations reality.
In later stages, the change agent often helps the organizations members with skill acquisition and
perfection. The agent must not only know which skills are necessary, but also be competent in guiding
the acquisition. The agent needs skills for handling everything between problem solving, giving and
receiving feedback, listening, general leadership, resolving conflict etc. In the end of the change process,
the goal is that the organizational members start to rely more and more on themselves and the need for
the change agent decreases.
2.3.5 Change Strategies
There are a couple of strategies that have been developed after studying Indian pharmaceutical
companies.
Gustavsen et al. presented the following five change strategies: expert driven strategy, concept driven
strategy, technology driven strategy, design driven strategy and communication driven strategy.
1. In a concept driven change process, communication is of central importance for how change
processes are run. It is often the used strategy when concerning extensive organizational change
or parallel and simultaneous changes or all main functions in an organization.
2. Expert driven change process, are driven and initiated by experts in a particular area. Both expert
and concept driven strategy are built on analytical knowledge with focus on participation,
knowledge base and goals.
3. Technology driven strategy is formed from earlier experiences when new technologies were
introduced, while new technology often demands an organizational development.
4. Design driven strategy is a development of the technology driven strategy, when the organization
has experience from a number of introductions of new technologies.

34
5. Communication driven strategy is based on the communication between management and
employees and this communication is seen as an important part of the change process. This
strategy needs participation on the part of the employees throughout the change process.
Concept and communication driven strategies both use the communication between management and
employees as the driving force for the development, but the difference between them is that the concept
driven strategy has a stronger structure for how the change will be implemented.
 A second research identified four different change strategies:
1. Expert project, which represented the traditional change strategy where the change process is
started in order to meet a development need and the initiative is taken by top management.
2. Problem focused change strategy is also initiated by top management but the focus is to solve
problems that have emerged. In these cases an expert group is often formed to manage the change.
3. Process oriented change strategy can be initiated by both the management and the employees and
the change involves participation regarding problem solving on all levels of the organization.
4. Broad strategy is the fourth strategy and can also be initiated by all levels of the organization.
Here too all members of the organization participate, but employees on different levels in the
organization have different responsibilities for carrying out change work in their department.
There are great similarities between episodic, planned change, expert projects and expert driven change
strategy. In the same way, there are parallels between concept driven change strategy, process oriented
and broad strategies for organizational change.
A third research handling change strategies in Swedish organizations identified two different strategies,
programmatic change strategy and learning strategy for change.
A company working according to the programmatic change strategy tries to identify a desired future
condition, a goal for the change process and the steps that are needed to reached this desired end status.
The management often copy proven strategies and methods to carry out the change, and adaptations to
the specific organization are only done when it is absolutely necessary. These companies have a lot of
confidence in existing, proven methods and believe that used correctly, the methods will lead to the
desired effects. The change is seen as in equilibrium with the organization’s natural balance. Expert
knowledge and formal power among those who are making decisions are expected to reduce uncertainty
in the organization. The project group for the change normally only involves a small number of people
and is expected to delimit the risks that the change process may develop in an unexpected direction.

35
Organizations using learning strategy see change as a pattern of constant modifications. While they do
not believe it is possible to create complete control over the change process and the organizations
development, they do not see the value of deciding exact final results in advance.
They do not neglect the planning process, but they see the need for balancing improvisation with a clear
plan. Management and employees try together to decide the future goal and the task then for the
management is to create conditions where the employees can participate in the process. The learning
strategy places focus on getting groups with different wills and knowledge together. These mixed groups
will lead to a broad acceptance and understanding of the change.
2.3.6 The Organization’s Reactions to Change
The hazard of organizational failure increases with organizational change and such a change increases the
likelihood of an additional change of the same type. Both these effects decline over time.
Organizations exist as long as they are reliable and act rationally. When organizational goals are strong
and institutionalized and the activities are routines, the reliability and accountability are high within the
organization. However institutionalization and routinization also generate strong pressure against
organizational change. This means, that the characteristics of organizations stability also generates
resistance to changes.
Changes disturb internal routines as well as connection with external stakeholders and both internal and
external stakeholders prefer reliable and predictable performance. This means, that organizational change
is hazardous and normally disturbs the equilibrium of the organization. Organizational change increases
the failure rate of organizations, independent of the effects of the changed characteristics. The reason for
this statement is as stated above, that a change disturbs the routines in the company.
The disruptive effect of organizational change increases with the age of the organization. The reason is
that internal roles and formal structures are more established in older organizations. The old organization
also has more standardized routines and a change in this environment leads to more disruption in both the
internal and the external environment.
Even a change that is perfectly adapted to an organization has a start period that leads to disruption, and
the good effect can only be fully shown after this period. This time period can also lead to problems when
changes occur too often, as this recovery process may never take place. Change processes can be almost
like a routine, but to achieve this, the process must gain experience by modifying operating routines. The
more an organization changes its operating routines, the more likely it is to develop routines that need
further changes of the same character.

36
The probability of an organizational change increases with the number of former changes of the same
type. Each occurrence of a change increases the likelihood of other changes, and they mean that the fact
that the organization has previously implemented changes and survived increases the openness to new
changes.
The longer the time that has elapsed since a change of a special type occurred, the less probability it is for
this given type of organizational change to occur again. The reason for this is that when searching for a
solution, it is likely to start with the most recently used routines. The more time that has passed since the
last implementation of a special type of change, the less likely it is that this type of change will be used
again.
2.3.7 Employees Readiness to Change
Irrespective of how far an organization is willing to go in order to enforce change, it is considered to be
the management’s job to “implement appropriate organizational changes that will be embraced by the
employees”. As a result, necessary steps need to be taken well in advance so employees will accept,
support and adapt to the changes.
Generally, employees who are ready to accept change and are actively engaged in the change process, in
accordance with a managing developing program, are equally more receptive to it and more positive in
evaluating its “content and delivery”.
Readiness, according to Armenakis et al., defines the cognitive indicator of the behaviours of resistance,
or support, for organizational change. Based on this belief, Armenakis and Harris distinguish the words
“resistance” and unfreezing and instead of them they introduce the term “readiness” because it designates
a more “positive approach” of defining change.
Based on the studies of Armenakis and Harris, it is proven that readiness to change is a separate and
important part of the organizational change process, and that organisations have the responsibility to
follow a proactive program and take the appropriate actions for convincing employees to accept and
adapt to organizational changes.
According to these authors, management must enter a process of diagnosing the employees’
characteristics and motivations towards the proposed changes.
The organization should follow a persuasive strategy before proceeding to the implementation of the
changes, since it is very important to place emphasis on employees’ involvement and participation.
Moreover, they identified five key change beliefs, which explain concisely employees’ motives for
accepting and adopting change.
These are: shape discrepancy (acceptance of change necessity), appropriateness (accepting the selected
change design as appropriate), efficacy (the belief that cooperation will result to the successful

37
accomplishment of change), principal support (the belief that managers are completely devoted to the
change success) and valence) (employees are convinced about the benefits of change on themselves).
In general, the readiness model indicates how an organization’s management can create the right
moment for implementing change, but will employees’ readiness be connected with the organizational
culture, and who accepts changes easily?
Figure 8

38
2.3.8 Implementation of Change
The temporal dynamics of change and the way change is implemented within the organization
can be divided into four dualities: negative versus positive, continuous versus episodic, proactive
versus reactive and open versus closed.
Dualities are polar opposites that often work against one other. Negative dimension occurs when
it is negative aspects that lead to a change, like various problems, whereas positive dimension
focuses on the positive reasons for organizational change, such as developing a positive future
vision. Continuous versus episodic process represent two different temporal patterns of change
initiatives.
The episodic approach argues that a change is experienced and implemented as an occasional
interruption from the normal state, while continuous approach assumes that change is an ongoing
modification of work and groups pattern.
The third pair is proactive versus reactive change. Proactive indicates that it is changes that are
implemented before a problem occurs while a reactive change is a response to a problem.
Finally, open versus closed focus on how widely the change is spread in the organization.
What is the right strategy to manage implementations of change? There are four different ways
of managing dualities: selection, separation, integration and transcendence. Selection includes
denial where the opposite part is ignored. This is the most typical way of managing dualities.
Separation implies that both sides receive credit, but they are separated by different levels of
analyzing or temporal processes. For example, an organization can use one model at the
individual level and another model at the organizational level. Integration combines the dualities
by neutralization; which means a compromise or splitting the difference.
The fourth approach, transcendence refers to managing dualities by transforming them into a
new perspective so that the original tension among them no longer exists. For example, the
tension between cooperation and competition in a conflict situation, become reframed when
parties transcend their differences and uncover a new definition of the dispute.
Most studied theories argue for taking one side of the pole when deciding if they should have a
negative or a positive focus, a selection. Most of the change processes that they have studied

39
were motivated with a negative focus. Selecting is also the common strategy when handling the
approach of episodic or continuous change process, where most processes were episodic.
When dealing with proactive versus reactive approach, most studied theories draw attention to
the need for both, a sort of integration. Finally the open versus closed duality, where all studied
theorists prefer a selection of the open approach.
2.3.9 Change can fail
Over a period of three years six large companies that had made a huge investment in change
programs to help they become more competitive, these companies have all ended up in
uncompetitive positions.
When analyzing these six organizations, the researchers found policies and practices that led to:
• Inflexible and unadaptive rules
• Managers and workers out of touch with customer needs
• Managers who were not committed, not cooperative and often not competent to produce change
• Poor interaction among functional groups
• Top management refusing to believe that lower revenues and market share were more than a
temporary perturbation
• Lack of strategic thinking
• Lower level employees not fully informed
• Low levels of trust
Even though there was a huge need for change in these organizations most of these changing
programs failed or had limited success. Even in the program that was judged the most successful,
there was little sign of change. Most of the programs began with a big fanfare, but faded away.
One reason for the failure of these programs was that they were constructed with no
consideration to what was really going on in the organization. Most of the programs were
designed for quick success and quick fix and the focus was to change what the root causes

40
produced, not the root causes themselves. Another reason to the rate of failure was that the
companies used programs that others companies used, with no adaptation to their own company.
2.3.10 Response and Adaptation of Change
When a change event occurs, the adaptation can be either directed or undirected. Undirected
adaptation works like species evolution, it is a cycle of variations before a new stable phase can
be introduced. Directed adaptation is more structured and often follows a plan with a lot of
information and active choices.
The response to a change event can come both before and after the change event. It is quite rare
with prevention of the event and the organizer often places more attention on toning down its
consequences. There does not have to be a strong proportionality between the magnitude of
change events and the response to them. It can also be good to know that responses to change
events often have unexpected consequences, both desirable and undesirable.
An organization consists of a number of people. Early in life, people are taught how to act in
ways to be in control, especially when they are dealing with issues that can be embarrassing or
threatening. People transform these lessons into theories of action and the program exists in two
different ways.
The first way is the set of values and beliefs that tell people how to manage their lives, called
their espoused theories of action.
The second way is the actual rules they use to manage their beliefs, called their theories-in-use,
which is possible to change. Most people, irrespective of childhood and adolescence, sex or
education level use the same theories-in-use, called Model I.
Model I theory-in-use motivate people to be in unilateral control, to win and not to upset people.
It recommends actions that are primarily selling and persuading and strategies that save their
own and others faces. When people with Model I theory-in-use thinking deal with issues that are
upsetting, embarrassing or threatening, the result is often defensiveness which lead to
misunderstanding, distortions and self-sealing processes. Because most people think and act
these ways, most organizations also have defensive routines.

41
Organizational defensive routines are actions or policies that prevent individuals within an
organization from experiencing embarrassment or threat and these routines are anti-learning,
overprotective and self-sealing.
These defensive routines make it highly likely for both individuals and groups to not detect or
correct embarrassing and threatening errors. Instead, the fundamental rules when these kinds of
errors occur, is to ignore the errors and act as if they were not being made. To successfully
introduce a change or a new strategy in a defense organization, some advice must be followed. It
is important to clearly define new roles and responsibilities, suitable for the new strategy.
These new roles must be carried out by the right people with adequate financial support and
effective information systems. These people also need to feel supported by the management team
yet feel they have the right to take risks.
The first step to improve the organizations ability to learn, especially concerning problems that
are embarrassing or threatening is to identify how the organization presently deals with such
problems.
The next step is to help each individual in the organization to diagnose the extent to which each
person creates and maintains the current way of dealing with problems.
The third step is to reeducate the members in the organization to another theory-in-use than the
current one. It is important that the individuals feel that the new theory-in-use is positive and see
the advantage of it.
The fourth step is to repeat the learning experience to solve new problems as they arise. It is also
important not to ignore the organizational defense. The only thing that can be worse than having
organizational defenses is denying that these exist.
2.3.11 Change Management Models
Emergent and planned models are two well-known change management models which various
organisations follow based on to the challenges they face.
2.3.11.1 Emergent Model of Change
The emergent model is applied when the need for change is driven by the environment; hence the
control is outside the organization. Moreover, Dawson states that the emergent model reconciles

42
the organization’s needs and the “objectives of different functions”, while change management
should be clearly based on the complication of the “issues involved”.
The model emphasizes that change is an “open-ended and ongoing process of adaptation to the
change conditions and circumstances”, since complex environmental changes occur rapidly, and
as a result, make it difficult for the organization to respond immediately.
The implementation of the emergent model relies on whether someone believes that “all
organisations operate in a dynamic and unpredictable environment to which they continually
have to adapt”. In this belief, this model is suitable for all organisations, all situations and at all
times.
However, its success depends on interpreting and understanding the complexity of the concerned
issues and on distinguishing the alternative options.
2.3.11.2 Planned Model of Change
According to Cummings and Huse the concept of the planned model suggests that an
organization operates in different stages at different times, and that “planned activities can occur
from one stage to the next”.
Figure 9

43
Moreover, the authors agree that in order for the planned model to be understood, it is important
to realize the reasons which brought about change, and also evaluate the stages that an
organization should go through in order to move from an unsatisfactory present stage to a more
desirable future stage.
The fundamentals and principles of the planned model are included in Kurt Lewin’s work.
Lewin’s change model – force field analysis, is amongst the most well-known of diagnostic
techniques for understanding the reasons behind each step of the change process. Specifically,
Lewin supports that the way to settle conflicts in organisations is by learning what enables
employees to realize and revise their beliefs about the world around them.
He also claims that equilibrium is interrupted by an impermanent period of instability which
drives to the desire for change, but in order to successfully achieve change within an
organization, it must first understand the forces and the constraints that support the status quo
and also why people prefer to stay as they are.
Based on this philosophy, Lewin introduces three phases of change: unfreezing the status quo,
movement, and refreezing.
Unfreezing the status quo basically refers to the weakening of the restraining forces which
support organizational stability, and simultaneously the strengthening of the driving forces which
will convince employees about the usefulness of the desired change.
During movement, on the other hand, instability prevails over stability; thus, it is vital to
encourage employees’ engagement in the change process, teach them new behavioral methods,
enhance relationships, differentiate between reward approaches and promote new methods of
management.
The final step is refreezing, by which a balance between forces has been achieved; thus, the
organization stabilizes in a new form of equilibrium.
Generally, Lewin’s technique is used as a tool to specify where people and or conditions
encourage change, and where they resist such change. Opinions on how pioneering Lewin’s
work is differ.

44
Lewin’s model is applicable to most of the change situations, as it contains and combines key
aspects of other change models and it sufficiently separates the change process with the change
phases.
Lewin’s model has been characterized as simple, static, mechanistic and tenuous which cannot
be applied because “organizational change is a continuous and open-ended process”.
The planned model is considered to be suitable for stable and predictable situations, while the
emergent model deals with rapidly changing and unpredictable situations. The change models
are strongly related to the types of change, since the organization has to specify the type of
change process which will eventually follow, how revolutionary, and to what extent changes will
be formalized, since employees will probably react differently to different types of
organizational change.
2.4 Leadership
Leadership and management are prototypical components of any organization and are arguably,
the most important aspects for organizational success. A successful leader can stimulate and lead
the organization towards success. Therefore, it is important to understand what makes a good
leader.
The following sections will attempt to explain some of the most common theories of leadership
and how they are connected to change management. The first part discerns transactional versus
transformational leadership, which is connected to economical and organizational leadership in
the sense that both focus on the hard versus the soft side of management. The last section focuses
on the evolution of a great leader from a good leader.
2.4.1 Management versus Leadership
Management involves a set of processes intended to keep a complicated system of people and
technology running smoothly.
The most important aspects of management include planning, budgeting, organizing, staffing,
controlling, and problem solving. Management is often identified as leadership, but that is not

45
the case. Leadership is a set of processes that creates organizations in the first place or adapts
them to significantly changing circumstances.
Leadership defines what the future should look like, aligns people with that vision, and inspires
them to make it happen despite the obstacles.
Management is tasked with creating stability, while leadership seeks to create change. It
produces orderly results, which keep something working efficiently, whereas leadership creates
useful change; neither is necessarily better or a replacement for the other, but both are needed if
organizations are to prosper.
2.4.2 Different styles of leadership
One of the most important aspects during a change program is leadership. A good leader is,
many times, vital in order to maximize the chance of success, wherefore this part is describing
some different leadership styles and trying to explain what good leadership is and how it can be
related to change processes.
2.4.2.1 Transactional versus transformational leadership
Transactional and transformational leadership are based on the assumption that the transactional
leader relies on bureaucracy and legitimacy within the organization whilst the transformational
leader focuses on motivating followers by appealing higher ideals and moral values such as a
well-defined vision for the organization that are attainable. The most common leadership in
business is transformational leadership, due, in part, to the notion that transformational leaders
are said to be inspirational because they expect the best from all teams. These attributes and
expectations lead to higher overall productivity and inspire the creation of value, adding
activities. For managers, the most common leadership is transactional leadership, because they
ensure that routine work is accomplished in a reliable and sufficient way.
Transactional leader is as one that uses contingent rewards, manages by exception, and
uses elements of laissez-faire, whilst transformational leaders’ uses charisma, inspiration,
intellectual stimulation and individualized consideration.
The characteristics of transactional leadership are defined as:

46
1. Contingent rewards: leaders rewarding employees in one way or another, it can be either
a monetary reward for certain achievements or an express of good performance.
2. Management by exception: a way of managing through rules, regulations, standards and
corrective actions.
3. Laissez-faire: a leadership style described as a hands-off approach, meaning leaders try to
avoid excessive involvement and decision-making. This means that the leader is
unavailable when needed and delays responding. This leader allows total freedom to all
employees through a non-interference policy and non-existing goals.
The characteristics of transformational leadership are defined as:
1. Charisma: a personality trait that is beneficial for creating affiliation within an
organization. Leaders that are charismatic create a shared identity within the organization
through gaining trust, affection and also through generating excitement and motivation
amongst the employees. The three core components of charismatic leadership are
identified as envisioning, empathy and empowerment, where envisioning influences the
followers need for achievement, empathy stimulates the employee’s need for affiliation
and empowerment enhances the employees need for power.
2. Inspiration: a way of communicating high expectations, enlighten important aspects,
being sensitive towards the employees, and being knowledgeable. Inspirational leaders
tend to communicate through symbols and are said to express important purposes in
simple ways.
3. Intellectual stimulation: promotes intelligence, rationality and careful problem solving to
employees.
4. Individualized consideration: a style of leadership where leaders give employees
individual attention, advice and personal coaching in order to reach the organizations
goals.
2.4.2.2 Economical versus organizational leadership
The idea of change leadership was developed by Beer and Nohria and it focuses on the
differences between economical leadership and organizational leadership, here in referred to as
Theory E and Theory O, respectively.

Change thesis: how to introduce and manage organize change

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