Organization design & change

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Part – I : Organization and Its Environment
# Organizations and Organizational Effectiveness:
In simple terms, an organization is made of people with specific goals and objectives. It is also defined as the
relations among components of a system. Organizational structure denotes these components and relations that bind
people working in an organization.
“An Organization is a system of consciously coordinated activities or efforts of two or more persons”:- Chester
Barnard, Management Consultant.
It is a consciously coordinated social entity, with a relatively identifiable boundary, that functions on relatively
continuous basis to achieve a common goal.
The key features of an organization can be described as follows:
1. It is a group of people who are organized to achieve a common purpose.
It is an entity, a unit, or an establishment, which utilizes resources to achieve some common purpose.
2. It shows a structure of relationships among members of an enterprise.
3. It is a process that enables people working in an enterprise to relate to tasks and facilities, and helps them
achieve intended goals.
# Organizational Effectiveness:
Effectiveness is the extent to which an activity helps in achieving the long term goals of an organization. Since
effectiveness is measured for specific activities, we can define activity-specific effectiveness as the outcome that
supports the broader goals of an organization. Organizations perform at different levels of effectiveness. Their
growth per year is an indicator of whether they are on a climb or decline. However, organizations in different
sectors vary in the way effectiveness is measured and described.
Both qualitative and quantitative tools are used to measure the overall effectiveness. Behavioral parameters, such as
values, attitudes, skills etc. are measured using qualitative tools where as, Sales, profit, production etc. are
measured by using quantitative tools.
Hence, organizational effectiveness is the extent to which the organization, as a whole, achieves its goals while
optimizing its resources. This depends on the management system, organization structure, degree of inter-personal
skills, positive attitude, technical competencies, group activities etc. which together contribute to the achievement
of organizational goals and objectives.
There are basically three principal approaches in measuring and increasing organizational effectiveness.
a) External Resource Approach: An organization using external resource approach uses technology to
increase its ability to manage and control external stakeholders. Any new technological developments that allow an
organization to improve its services to customers, such as the ability to customize products or to increase products
quality and reliability, increase the organization’s effectiveness.
b) Internal System Approach: An organization taking the internal system approach uses technology to increase
the success of its attempts to innovate, to develop new products, services, and process, and to reduce the time
needed to bring new products to market.
c) Technical Approach: An organization taking the technical approach uses technology to improve efficiency
and reduce costs while simultaneously enhancing the quality and reliability of its products.
# Organizational Environment (Business Environment):
Environment literally means the surroundings, external objects, influences or circumstances under which someone
or something exists. Environment occupies a very significant place in the functioning of an organization. Every
organization is affected by the change in environmental factors as they do exist in the same environment.
Organizational environment consists of the forces and conditions outside the boundaries of a firm. These forces
change overtime and thus present the firm with opportunities and threats that influence its ability to carry out its
operations effectively to attain its objectives. However, these forces differ significantly from organization to
organization, industry to industry and market to market.

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The components of organizational environment can be classified into two broad categories- Internal Environment
and External Environment. The major forces in the organizational environment are shown in the figure below.
I. Internal Environment:
The environmental forces that lie with in the organizational possession is called internal environment. These
environmental forces are controllable to large extent. They pose strength and weakness for an organization. An
organization’s internal environment has the following components.
a) Management/ Managers: The management system, and quality, competency, skill of managers largely
shape the outcomes of an organization. Skillful and competent management is strength where as poor
management is weakness for the organization.
b) Shareholders: Shareholders are the real owners of an organization who have a direct interest in the
performance of the organization. The directors elected by them represent their interest in the board of the
organization which ultimately influence the organization.
c) Structure: Structure is the architecture or framework for organizational roles, hierarchy, relations, authority
and responsibility. It comprises individuals, groups, units, and their interrelationships. The type of structure
and its frequent change also influence the organizational performance.
d) Employees and their unions: Employees are important assets of an organization. Participation and
cooperation with employees is helpful to enhance productivity and attain the desired goals. Similarly,
labour unions (representing the member employees) directly or indirectly work for the welfare of the
labour, which has rich relation with organization decisions.
e) Corporate culture: Corporate culture represents the collective beliefs, values and attitude of the
organizational employees. Both internal and external factors affect an organizational culture.
Organizational culture has a powerful influence on the process of organizational change and decision-
making.
II. External Environment:
The external environment is more complex and difficult to predict. It is that portion of environment which lies
outside the boundary of organization. The external environment can further be classified into two interrelated sub-
categories: general (macro) environment, and task (micro) environment. External environment offers opportunities
and threats caused by the external forces.

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a) General (macro) Environment:
The general environment composed of a set of forces that are outside the organization’s operating system. It affects
the organization and its task environment. It generally includes- political, economic, social, legal, and technological
factors. These are the forces, which are beyond the control of the business firms. The general environment presents
opportunities, threats and constraints for the organization. For a manager, opportunities and threats resulting from
changes in the general environment are often more difficult to identify and respond to them in the task environment.
i) Economic Environment: The economic environment for an organization involves the system of economic
planning and control, fiscal, monitory and industrial policies, the prevailing conditions in the agriculture, industrial
and service sectors and so on. Bad or poor economic conditions make the environment more complex and
manager’s job more difficult and challenging.
ii) Political and Legal Environment:
The political environment refers to the government system, structure composition of bureaucracy, political stability,
government-business relation. The policies the government undertakes regarding distribution of economic
resources, liberalization, framework of rules and regulations, are highly responsible to determine investment
friendly or poor business environment. Government action and decisions, and court decisions regarding encourage,
guide and control business, and consumers, communities and workers actions are also important equally which
shape the business organization’s environment.
iii) Socio-cultural Environment:
Socio-cultural environment comprises of social structural issues (class structure, desires, expectations, beliefs,
customs etc.) and cultural issues (values, norms, behavior patterns etc.). These forces and factors largely affect the
organizational activities directly or indirectly. So, the managers must keep on studying and respond to them.
iv) Technological Environment: Drastic developments in the field of communication, information, and other
technology have been taking place. In this global age, the outcomes of such changes are enormous and equally
advantageous. The changes in this field pose both opportunities and threats for the organizations.
b) Task Environment:
Task environment is also called specific environment that is directly relevant to an organization in achieving its
goals. At any given moment, it is that part of the environment with which management will be concerned because it
is made up of those critical constituencies that can positively or negatively influence the organization’s
effectiveness. It is unequal to each organization and it changes with conditions. Typically, it includes forces such as
customers, suppliers, competitors, government, financial institutions, labour unions, media etc.
i) Customers:
A customer may be an individual, a family, a business house or an institution. They are important in the sense that
an organization exist to serve them. They are not only linked with the organization for the purchase of goods or
services but they are also an important source of ideas, opinions, information, and reactions. Managers, therefore,
must maintain a close relationship with them.
ii) Suppliers:
Suppliers supply the raw materials for the business organization on which it operates. The regular supply of such
materials with good quality at desirable price is very important for the organizations to operate or produce and
deliver quality goods and services effectively. Changes in the nature, numbers or types of any supplier result in
forces that produce opportunities and threats to the organization.
iii) Competitors:
Competition in the market for an organization is inevitable in this age. To take competitive advantages, information
on market behavior and competitors’ strategies is gathered and analyzed to identify future opportunities and threats
for the firm. Managers must work out strategies to deal with the competitors and competing products. Rivalry
relation between competitors is potentially the most threatening force that the managers must deal with.
iv) Labour Unions:
Labour unions who work in the organization and other professional organization may exert pressure to fulfill their
interests. These groups may influence the organization by drawing attention of the politicians, legislators and
media. Sometime they may take the worse path so that strike and violence may take place in the organization.
Progressive managers must understand their desire and employ a participative strategy to build a sound and
constructive relation with them.

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v) Financial Institutions:
Financial institutions provide financial services to the organizations to meet their long term as well as short term
needs. The terms and conditions of loans and advances, and the quality of their services have an impact on the
performance of an organization.
# Managing in a Changing Global Environment (Contemporary issues and challenges of management):
Globalization implies an integration of world economies. It includes a rapid increase in the movement of goods,
services, and capital across national borders. It is related to increase in the significance of individual business that
operates in a range of countries. Increasingly, these businesses see the world as a single market.
Mangers must have the insight to see and understand the emerging organizational challenges. Several challenges
confront managers today. These challenges are arising mainly from the significant changes in the outside world.
We are faced with more turbulent economic periods. Managers face a more restless workforce, more domestic and
international competition, and declining industrial performance. They must, therefore, have the skill to diagnose the
environment, analyze competitors’ actions, compete in international market, and manage the organizational change.
The managers’ task today, is to respond to emerging issues and challenges.
Following are the key issues or challenges for managers in this globalized age.
a) Workforce diversity:
Organizations are becoming more heterogeneous in terms of gender race, ethnicity, and other backgrounds due to
globalization. The participation of women and minorities in the workforce has been increasing. It will continue to
increase in the years to come. Managers should realize that employees come to work with their cultural values and
lifestyle preferences. The challenge for managers, therefore, is to become more accommodating to diverse groups
of people. Conflicts are more apparent today. Consensus is more difficult to achieve because of the diverse
backgrounds of employees.
Managers, therefore, will need to shift their approaches and philosophy to workforce management. They should
recognize the differences among employees and respond to them in ways that will ensure employee commitment.
Diversity, if managed positively, can increase creativity and innovation in organizations.
b) Empowerment:
Organizations are becoming more and more participative these days. The role differences between the managers
and workers have narrowed down considerably. Decision making is being pushed down to the operating level.
Workers are now given freedom to make choice about schedules, procedures and solving work related problems.
Managers are going considerably further by allowing employees full control of their work. More information is
provided to employees to make them aware of the problems and prospects of their organization. Thus, managers are
engaged in empowering employees. Various methods of empowerment ranging from simple participation to self-
managed work teams have now been practiced in organizations.
c) Technological Advancement:
The modern business is characterized by newer and ever-changing technological perspective. Technological
changes such as advances in computers and other electronic data processing equipment have changed the whole
system of decision-making. Faster processing of information in material handling, storage, and transportation has
enabled the managers to make products available to customers at right time, in the right place, and in relatively
good condition. Managers must, therefore, have proper understanding of these aspects.
Technology management has now emerged as an important and crucial management process in the modern
business organizations to cope with technological change and match the competitive market.
d) Innovation and Change:
The taste and preference of customers regarding goods and services, an organization offers, have been changing.
Hence, organizations must pay attention to innovation and change. Products or services need continuous
improvement, upgradation, and modification. In order to beat competitors in the market place, managers must flow
innovative products and services. The challenge for mangers is to stimulate employee creativity and wide
participation and support for continuous innovation and change.

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e) Ethics and Social Responsibility:
Ethics refers a code of conduct through which managerial activities are guided. Today, in most societies codes of
ethics have been prescribed for business. Violence of these codes by organizations could be costly for itself.
Similarly, as a member of a society, an organization should be responsible regarding social issues. Today,
organizations are expected to contribute to the society as a whole. Environmental issues regarding discharge of
waste, air and noise pollution are the matters for public attention. Therefore, social responsibilities and ethical
issues are handled and managed by managers, which is really a challenging task for them.
f) Corporate Governance:
Corporate governance is concerned with the issues such as; fairness, accountability, responsibility, and
transparency in the organizations. Today, it has been realized by the managers that corporate governance is an
essential tool for improving performance. The stakeholders (shareholders, customers, government, society,
employees, other institutions) have a demand of accountable and transparent management in the organizations.
Their expectations would obviously create the challenge in this competitive global age.
# Organizational Stakeholders:
Organization exist because of their ability to create value and acceptable outcomes for various groups of
stakeholders, people who have an interest, claim or stake in the organization, in what it does and in how well it
performs. In general, stakeholders are motivated to participative in an organization if they receive inducements that
exceed the value of the contributions they are require to make. Inducements are rewards such as money, power, and
organizational status. Contributions are the skills, knowledge, and expertise that organizations require of their
members during task performance.
There are two main groups of organizational stakeholders: inside stakeholders and outside stakeholders. The
inducements and contributions of each group are visualized in the table below.
Stakeholders Contributions to the Organization Inducement to contribute
Inside Stakeholders:
Shareholders Money and Capital Dividends and Wealth maximization
Managers Knowledge, Skill and Expertise Salaries, bonuses, status and power
Employees/Workforce Skill and Expertise Wages, bonuses, job security and
promotion
Outside Stakeholders:
Customers Revenue by making expenditure in
goods and services
Quality goods and services with
desirable price
Suppliers High quality inputs (raw materials
and accessories)
Revenue from purchase of Inputs
Government Rules and Business Environment Tax revenue and fair operation
Labour Unions Fair collective bargaining Participations and employee welfare
Society Social infrastructure, loyalty and
reputation
Employment, Social welfare and
pride
# Managerial Ethics:
Ethics are moral principles or beliefs about what is right or wrong. These beliefs guide individuals in dealings with
other individuals and groups (stakeholders) and provide a basis for deciding whether a particular decision or
behavior is right and proper. Managerial ethics is a code of conduct through which managerial activities are guided.
Ethics helps managers determine moral responses to situations in which the best course of action is unclear. Ethics
guide managers in their decisions about what to do in various situations. Ethics also help managers decide how best
to respond to the interests of various organizational stakeholders.
Sometimes, making a decision is easy because some obvious standards, value or norm of behavior applies. In other
cases, mangers have trouble deciding what to do and experience an ethical dilemma when comparing the competing
claims or rights of various stakeholders. It is very difficult to make decisions in some cases. For example: whether a
manager is to allow its representative to pay bribes to government officials in foreign counties where corruption is
common way of doing business. In this situation managers are in a difficult situation because they have to balance
their interest and interest of the organization against the interest of other stakeholders.

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Following an ethical rule avoids expending time and effort in deciding what is right thing to do. Thus reduce
transaction cost between people, that is, the cost of monitoring, negotiating and enforcing agreements with other
people. Ethics is also helpful equally to create a good reputation, because, people want to deal with those
organizations operating with high ethical standards. Organizational ethics is also equally important to satisfy and
make the managers and employees feel pride and valuable.
In sum, acting ethically promotes the good of a society, and the well-being of its members. More value is created in
societies where people follow ethical rules, and where criminal and unethical behaviors are prevented by law and
by custom and practice from emerging.
# Creating Ethical Organization:
There are many ways in which managers can create organizational ethics. As a leader (figurehead), a manager can
promote morale values that result in specific ethical rules and norms that people use to make decisions. An
organization can encourage people to act ethically by putting in place incentives for ethical behavior and
disincentives to punish those who behave unethically. As a liaison or spokesperson, a manager can inform
prospective customers and other stakeholders about the organization’s ethical values and demonstrate those values
through behavior toward stakeholders – such as by being honest and acknowledging errors. Following are the
commonly used methods to ethical organization.
a) Designing an ethical structure and control system:
Managers can design an organizational structure that reduces the incentives for people to behave unethically. The
creation of authority relationships and rules that promote ethical behavior and punish unethical acts will encourage
members to behave in socially responsible way. Ethical values flow from the top of the organization but are
strengthened or weakened by the design of the organizational structure.
b) Creating ethical culture:
The values, rules, and norms that define an organization’s ethical position are part of its culture. The behavior of
top managers strongly influences organizational culture. An ethical culture is most likely to emerge if top managers
are ethical, and an unethical culture can become an ethical one if top-management team is changed. The creation of
an ethical corporate culture requires commitment at all levels of an organization, from the top to down.
c) Supporting the interest of stakeholders:
The interest of internal and external stakeholder is also helpful to create ethical organization. The owners do not
want to hold stocks in companies that engage in socially questionable activities. So, the owners representing in the
board of directors try to create organizational discipline. Pressure form outside stakeholders can also promote
ethical organizational behavior. The government and its agencies, industry councils and regulatory bodies and
consumer watchdog groups play a role in establishing the ethical rules that organizations should follow when doing
business.
# Sources of Environmental Uncertainty:
The forces in the environment cause uncertainty for organizations and make it more difficult for managers to
manage. The set of forces that cause problems, increases uncertainty and affect the complexity, dynamism and
richness of the environment. As these forces cause the environment to become more complex, less stable, and
poorer, the level of uncertainty increases.
a) Environmental complexity:
The presence of number of forces, their strength and interconnections determines the level of complexity in an
organization’s environment. The greater the number and the greater the difference between them, more complex
and uncertain is the environment and more difficult to predict and control.
b) Environmental Dynamism:
How frequently the forces in the environment change also contribute to the environmental uncertainty. An
environment is stable if the forces affect the supply of the resources in a predictable way. An environment is
unstable and dynamic if an organization cannot predict the way in which the forces will change over time. An

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organization in a dynamic, unstable environment will see ways to make to the environment more predictable and
thereby lessens the organization’s uncertainty about environment.
c) Environmental Richness:
Environmental richness refers the amount of resources available to support an organization’s domain. In rich
environment, resources are plentiful and uncertainty is low because organizations need not compete for resources.
Basically there are two reasons for poor environment.
i) The organization is located in a poor country or poor site of a country
ii) There is high level of competition, and organizations fight for resources
In poor environments, organizations have to battle to attract customers or obtain the best inputs. The result of these
battles is greater uncertainty for the organizations. The poorer the environment, the more difficult the problems
organizations face in managing resource transactions.
# Interorganizational Strategies for Managing Resource Dependencies:
Organizations are dependent on their environment for resources they need to survive and grow. The supply of
resources, however, is dependent on the complexity, dynamism, and richness of the environment. Organizations
attempt to manage their transactions with the environment to ensure access to the resources on which they depend.
To reduce uncertainty, an organization needs to devise interorganizational strategies to manage the resource
interdependence in the specific and general environment. In the specific environment, an organization needs to
manage its relationships with forces such as suppliers, unions, and consumer interest groups. Following are the
most commonly used strategies by the organizations in this regard.
a) Long-Term Contracts:
Long-term contract involves a contract between two or more organizations to carry-out future transactions with
certainty. The purpose of these contracts is usually to reduce cost by sharing resources or by sharing risk of
research and development, marketing, construction, and other activities. Contracts are the least formal type of
alliance because no ties link the organizations apart from the agreement set forth in the contract.
b) Strategic alliance:
A strategic alliance is an agreement that commits two or more organizations to share their resources to develop
joint new business opportunities (joint ventures). Joint ventures are the most formal of the strategic alliance because
the participants are bounded by formal legal agreement that spells out their rights and responsibilities.
c) Minority Ownership:
Ownership is a more formal linkage than other contracts. Minority ownership makes organizations extremely
interdependent, and that interdependence forges strong cooperative bonds.
The Japanese system of “Keiretsu” shows how minority ownership network operates. Keiretsu is a group of
organizations, each of which owns shares in the other organizations in the group, and all of which work together to
further the group’s interests.
d) Merger and takeover:
An organization some times takes over another organization or one organization gets merged with another
organization. As a result of a merger or takeover, resource exchanges occur within one organization rather than
between organizations, and an organization can no longer be held hostage by a powerful supplier or by a powerful
customer.
e) Collusion and cartels:
Collusion is a secret agreement among competitors to share information for a deceitful or illegal purpose.
Organizations collude in order to reduce the competitive uncertainty they experience. Similarly, a cartel is an
association of firms that explicitly agrees to coordinate activities. Cartel and collusion increase the stability and
richness of an organization’s environment and reduces the complexity of relations among competitors.

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Part II: Organizational Change
# Concept:
Organization change is the process of adopting new idea or behavior by an organization. It involves alteration of the
component/s (people, structure, or technology) of an organization. It is thus, a way of modifying an existing
organization. It is a process of moving from a present state through a transitional state to a future state.
Organizational change is a planned effort to improve a business’s capacity to get work done and better serve its
market. Organizational change is basically about people. Real change happens when people realize that a new
methodology, process or technology makes them more productive, more efficient or better able to serve the
customers needs. Organizations can only institute a change program when employees who are involved in the
program understand and have confidence in its value.
Change management is the process of continually renewing an organization's direction, structure, and capabilities to
serve the ever-changing needs of external and internal stakeholders. Mastering strategies for managing change is
more important today since the rate of change is greater than at anytime in history. The marketplace is changing
overnight. Organizational alliances and structures are shifting rapidly. Everything in the organization is open to
scrutiny. Basic operating assumptions are questioned. Traditions are challenged. The risk of failure is greater than
ever before and the tension within the workforce is great and needs constant attention.
Managers, at one point or another, will have to changes in some aspects of their organization. They have to
coordinate the process of planning and implementing change in their organizations in such a way as to minimize
employee resistance and cost to the organizations. When organizational change is well planned and implemented, it
helps organization better achieve its goals effectively and survive continuously. Hence, change can produce many
benefits, including improved competitiveness, better financial performance, and higher levels of customer and
employee satisfaction, if managed well.
# Forces for Change:
The organizational environment is constantly changing, and an organization must adapt to these changes in order to
survive. There are many forces in the environment which have impact on an organization and recognizing and
responding to these forces is very important to remain competitive and surviving. Following are the major forces
that make an organization to change.
a) Declining effectiveness:
An organization that experiences continuous loss or declining performance undoubtedly motivates to do some
corrective action in it. Cost reduction, alteration in the roles and duties, participation etc. can be undertaken to get
improved from the problem.
b) Organizational crisis:
Crisis in the resources can also cause an organization to alter its business. The resignation of a key decision maker
is another crisis that causes the organization to rethink the composition of its management team and its role in the
organization. Similarly, new appointment of chief executive after crisis may lead to change in every aspect of the
organization.
c) Competition:
Organizations are constantly striving to achieve a competitive advantage. Competition is a force for change because
unless an organization matches or surpasses its competitors in efficiency, quality, or its capability to innovate new
or improved goods or services it will not survive in the market. The adaptation of new skills or technology to be
competitive usually brings a change to task relationships as workers learn new skills or techniques to operate the
new technology.
d) Economic and political force:
Economic and political forces are general environmental forces that largely and continually affect an organization’s
operation. Economic status of a state and political system and stability are factors responsible to create business
environment. Change in such factors leads to change in the functioning of business organization.
e) Globalization:
Multinational and transnational organizations are heavily emerging as a result of globalization. Domestic
organizations need to change their organizational structures to allow expansion into foreign markets, need to adopt

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a new and adoptive management style to operate and manage globally. Many organizations are pursuing joint
ventures with organizations from other countries.
f) Ethics:
In the face of increasing government, political, and social demands for more responsible and honest corporate
behavior, organizations need to take steps to promote ethical behavior. Conflicts are apparent in un-ethical
organization today. Organizations need to make changes to allow managers and workers at all level to respond
unethical behavior so that they can move quickly to eliminate such behavior and protect the general interest of its
members and customers.
# Forces for Resistance to Change:
Resistance to change is an obstacle to make change in an organization. It is the action taken by individuals and
groups when they perceive that is occurring as a threat to them. Resistance to change can also be a source of
functional conflict. With every major or minor change, resistance typically occurs. The major forces that produce
resistance include:
a) Traditional mechanistic structure:
Traditional mechanistic structure is characterized by a tall hierarchy, centralized decision making, and the
standardization of behavior through rules and procedures. Mechanistic structures are more resistant to change.
People who work within a mechanistic structure are expected to act in certain ways and do not develop the capacity
to adjust their behavior to changing conditions.
b) Organizational culture:
The values and norms in an organization’s culture can be another source of resistance to change. Just as role
relationships result in a series of stable expectations between people, so values and norms cause people to behave in
a predictable ways. Sometimes, values and norms are so strong that even when the environment is changing and it
clear that a new strategy is needed, managers cannot change because they are committed to the ways presently do
business.
c) Differences in functional orientation:
Differences in the functional orientation are major impediments to change and a source of organizational inertia.
Different functions and divisions often see the source of a problem differently because they see an issue or problem
differently from their own interest and viewpoint.
d) Traditions:
The traditions are established in the organization with a long history. Change implies uncertainty, and uncertainty is
uncomforting. There is resistance to trying a new approach as people unknown and have fear that they will not be
able to supply the required technology and skills.
e) Individual resistance:
There are several reasons why individuals within an organization may be inclined to resist changes. Individual tend
to resist change feeling uncertain and insecure about out outcomes will be. Workers might be given new tasks.
Roles relationships may be reorganized. Some workers might loose their jobs. Some people might benefit at the
expense of others. Absenteeism and turnover may increase as change takes place, workers may become
uncooperative, attempts to delay and slow the change process, and otherwise passively resist the change.
f) Group resistance:
There are formal and informal groups in an organization to carryout different jobs. The characteristics of these
groups can produce resistance to change. A change may alter task and role relationships in a group, it disrupts
group norms and the informal expectations that group members have of one another. As a result, members of a
group may resist change because a whole new set of norms may have to be developed to meet the needs of the new
situation. Group cohesiveness, the attractiveness of a group to its members, also produces the resistance.
# Types or Forms of Organizational Change:
There are several types of change that managers can adopt to help their organizations achieve desired future states.
In general, types of change fall into two broad categories: Evolutionary Change and Revolutionary Change.
a) Evolutionary Change:
Evolutionary change is gradual, incremental, and narrowly focused. Evolutionary change involves not a drastic or
sudden altering of the basic nature of the organization’s strategy and structure but a constant attempt to improve,
adapt, and adjust strategy and structure incrementally to accommodate to changes taking place in the environment.

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Hence, Evolutionary change is accomplished gradually and incrementally in every aspects of an organization.
There are three instruments (forms) of evolutionary change.
i) Socio-technical System Theory:
Socio-technical theory proposes the importance of changing role and task or technical relationships to increase
organizational effectiveness. It emerged from a study of changing work practices in British coal mining industry.
Socio-technical system theory argues that managers need to fit the workings of an organization’s technical and
social systems. A poor fit between an organization’s technology and social system leads to failure, but close fit
leads to success. This theory argues that when managers change task and role relationships, they must recognize the
need to adjust the technical and social system gradually so that group norms and cohesiveness are not disrupted.
Managers need to be sensitive to the fact that the way they structure the work process affects the way people and
group behave. Indeed, Socio-technical system is that method of change where new technology and way of doing
business is supported by participative shared social system.
This theory emphasizes the team works which are empowered to monitor and control important aspects of their
own performance. Team based system will promote the development of values and norms that will boost efficiency
and product quality.
ii) Total Quality Management (TQM):
Total quality management is an ongoing and constant effort by all of an organization’s functions to find new ways
to improve the quality of the organization’s goods and services. TQM leads to continuous, incremental change, and
all functions are expected to cooperate with each other to improve quality. Total Quality Management is a
comprehensive and structured approach to organizational management that seeks to improve the quality of products
and services through ongoing refinements in response to continuous feedback. TQM requirements may be defined
separately for a particular organization or may be in adherence to established standards.
More and more organizations are employing the continuous, incremental type of change that results from the
implementation of TQM programs. Changing cross-functional relationship to help improve quality is very
important in TQM. Members of the different functions work together to find new ways to reduce the number of
inputs needed. Hence, the changes associated with TQM are change in task, role and group relationships.
iii) Flexible Work Teams:
Flexible work teams is a participative approach in the era of evolutionary change. A flexible work team is a group
of workers who assume responsibility for performing all the operations necessary for completing a specified stage
in the manufacturing process. It is an important method to change employees’ attitudes and behavior. A worker first
develops the skills needed to accomplish one task and overtime is trained to perform other tasks. Each worker can
substitute for any other workers. As the demand for components or finished products rises or falls, flexible workers
can be transferred to the task most needed by the organization. As a result, the organization is able to respond
quickly to changes in its environment.
Flexible work teams approach is followed by the principal – “Generalization”. Performing more than one task also
cuts down on repetition, boredom, and fatigue and rises workers’ incentives to improve product quality. When
workers learn one another’s tasks, they also learn how the different tasks relate to each other. This understanding
often leads to new ways of combining tasks to make the manufacturing process more efficient and less costly.
b) Revolutionary Change:
Some organizations may need to make major changes quickly. They do not want to take time to setup and
implement programs that foster evolutionary change. Faced with drastic, unexpected changes in the environment
(for example, a new technological breakthrough) or with impending disaster resulting from years of inaction and
neglect, an organization needs to act quickly and decisively, the change takes place in this form is said to be a
revolutionary change. Hence, revolutionary change is a rapid, dramatic, and broadly focused. It involves a bold
attempt to quickly find new ways to be effective. It is likely to result in a radical shift in ways of doing things, new
goals, and a new structure. The three important instruments (forms) of revolutionary change are:

4
i) Reengineering:
In an organizational setting reengineering has been used to refer to the process by which managers redesign how
tasks are bundled into roles and functions to improve organizational effectiveness. It is fundamental rethinking and
radical redesign of business process to achieve dramatic improvements in critical contemporary measures of
performance such as cost, quality, service, and speed. Reengineering involves going the root of every step in work
process to identify a better way to coordinate and integrate the activities necessary to provide customers with goods
and services. Instead of focusing on an organization’s functions, the managers of a reengineered organization focus
on business process. Processes, not organizations, are the object of reengineering. Companies don’t reengineer their
sales or manufacturing departments; they reengineer the work the people in those departments.
Reengineering deliberately ignore the existing arrangement of task, roles, and work activities. They start the
reengineering process focusing customers with the aim of providing best quality products at lowest cost. The major
guidelines for performing reengineering successfully are:
a) Organize around outcomes, not task. Where possible, organize works so that one person or one function can
perform all the activities necessary to complete the process, thus avoiding the needs for transfer between functions.
b) Involve the people who are concerned stakeholders of the process, to make necessary rules and arrangements.
c) Decentralize decision making to the point where the decision is made. Allow the people on the spot to decide
how best to respond to specific problems that arise.
ii) Restructuring:
Restructuring refers to the process by which managers change task and authority relationships and redesign
organizational structure and culture to improve organizational effectiveness. The move from a functional to some
form of divisional structure or either form represents one of the most common kinds of restructuring effort. In the
course of time, as the environment changes, and as the organization’s strategy changes, managers must analyze how
well their structure fits them. In a new context, there might be a better way of grouping the products they now make
to serve the customers needs and wants.
A very popular restructuring in recent years is downsizing, the process by which managers streamline the
organizational hierarchy and layoff managers and workers to reduce bureaucratic costs. The drive to reduce
bureaucratic costs is often a response to increase competitive pressures in the environment as companies fight to
increase their performance. The wave of mergers and acquisitions that has occurred in many industries such as
telecommunications, banking and other industries has also resulted in downsizing because merged companies
typically requires fewer managers. Often, after one industry company downsizes, other industry companies are
forced to examine their own structures to search out inefficiencies; thus downsizing wave take place across
companies in an authority. Similarly, the other reasons to downsize include; decline in the demand, loss of market
share, inefficient tall structure, high operating cost etc.
iii) Innovation:
If the organizations are to avoid being left behind in the competitive race to produce new goods and services, they
must take steps to introduce new products or develop new technologies to produce those products reliably at a low
cost. Innovation is the successful use of skills and resources to create new technologies or new goods and services
so that an organization can change and better respond to the needs of customers.
The taste and preference of customers regarding goods and services, an organization offers, have been changing.
Hence, organizations must pay attention to innovation. Products or services need continuous improvement,
upgradation, and modification. In order to beat competitors in the market place, managers must flow innovative
products and services.
Although innovation brings about change, it is also associated with a high level of risk because the outcomes of
research and development activities are often uncertain.
# Process of Planned Organizational Change (Change Process):
Organizational change is a well-known phenomenon; in order to survive organizations have to adapt themselves
regularly to be able to meet the demands of the changing environment. In dealing with organizational change it is
important to consider the need and results of organizational change as well as the dynamics of change processes.

5
Conceptions of planned change have tended to focus on how change can be implemented in organizations. Called
“theories of changing,” these frameworks describe the activities that must take place to initiate and carry out
successful organizational change. Lewin’s change model and the action research model have received widespread
attention in organizational development (OD) and serve as the primary basis for a general model of planned change.
However, due to current conditions, these management models can not be considered as a panacea, they must be
adapted constantly, being revised in order to lead, finally, the successful implementation of the changes initiated.
a) Lewin’s Change Model: German-American psychologist
Generally, managers anticipate change and prepare a strategy to respond to it. Kurt Lewin, a social psychologist,
suggested that efforts to bring about planned change in organizations should approach change as a multi-stage
process. He developed the “Field Force Analysis Model” to help us understand how the change process works. This
model emphasizes that effective change occurs by unfreezing the current situation, moving to a desired condition,
and then refreezing the system so that it remains in this desired state. The planned change is thus made up of three
steps: Unfreezing, Change, and Refreezing.
a) Unfreezing:
It is the first stage of change process. It is a process by which people become aware of the need for change. The key
factor in unfreezing is making employees understand the importance of a change and how their jobs will be affected
by it. Unfreezing starts from the members’ understanding of the organizational crisis or vision that motivates them
to change, normally, unfreezing will go through three stages. First of all, there must be enough information
indicating that the current organizational condition is not ideal. Secondly, this information has to be related to the
important goal of the organization, thus elicits members’ anxious feeling. Finally, a solution has to be proposed that
will reduce the members’ insecure feeling and resistance to change.
b) Change (Transition/movement):
Once you have unfrozen the people, the next question is how you keep them going. Kurt Lewin was aware that
change is not an event, but rather a process. He called that process a transition. Transition is the inner movement or
journey we make in reaction to a change. This second stage occurs as we make the changes that are needed. People
are 'unfrozen' and moving towards a new way of being. It is said this stage is often the hardest as people are unsure
or even fearful. This is not an easy time as people are learning about the changes and need to be given time to
understand and work with them. Support is really important here and can be in the form of training, coaching, and
expecting mistakes as part of the process.
Using role models and allowing people to develop their own solutions also help to make the changes. It's also really
useful to keep communicating a clear picture of the desired change and the benefits to people so they don't lose
sight of where they are heading.
c) Refreezing:
Refreezing is the third of Lewin's change transition stages, where people are taken from a state of being in
transition and moved to a stable and productive state. Kurt Lewin refers to this stage as freezing although a lot of
people refer to it as 'refreezing'. As the name suggests this stage is about establishing stability once the changes
have been made. The changes are accepted and become the new norm. People form new relationships and become
comfortable with their routines. This can take time.
Freezing is to stabilize the change achieved in moving stage. The individual, the department, and the organization,
all have an inertial way of thinking and doing, so that the change achieved in moving state will return to the
previous stage if freezing is not done. Form new rules, regulate members’ new behavior directly, reinforce
appropriate responses, are all possible ways to internalize the new value or behavior into the organizational culture.
b) Action Research Model:
Action research is a strategy for generating and acquiring knowledge that managers can use to define an
organization’s desired future state and to plan a change program that allows the organization to reach the state. The
UNFREEZING CHNAGE
(TRANSITION)
REFREEZING

6
techniques and practices of action research, developed by experts, help managers to stabilize change and move to
the desired future sate.
The classic action research model focuses on planned change as a cyclical process in which initial research about
the organization provides information to guide subsequent action. Then the results of the action are assessed to
provide further information to guide further action, and so on. This iterative cycle of research and action involves
considerable collaboration among organization members and OD practitioners. It places heavy emphasis on data
gathering and diagnosis prior to action planning and implementation, as well as careful evaluation of results after
action is taken. Following are major steps involved in action research.
a) Diagnosing the Organization:
In the first step in action research managers are required to recognize the existence of a problem that needs to be
solved and acknowledge that some type of change is needed to solve it. In general, reorganization of the needs for
change arises because somebody in the organization perceives a gap between desired performance and actual
performance. Customers’ complaints about the quality of goods and services, decline in performance level and
profit, employees’ turnovers, etc. can be the problems in the organization. In this stage managers need to analyze
what is going on and why problems are occurring.
Managers have to carefully collect information about the organization to diagnose the problem correctly and get
employees committed to the change process. At this early stage of action research it is important for managers to
collect information from people at all levels in the organization and outsiders such as customers and suppliers.
Questionnaire surveys given to employees, customers, and suppliers or interviews may be taken to gather
information to correctly diagnose the organizational present state.
b) Determining the desired future state:
After identification of the present state, the next step is to identify where the organization needs to be – its desired
future state. It involves a complex planning process, as a manager work out various alternative course of action that
could move the organization to where they would like to be and determine what type of change to implement.
Identifying the desired future sate involves deciding what the organization’s structure (functional or cross-
functional) and strategy should be.

7
c) Implementing action:
Implementation action is the third step of action research. It is a three step process. Firstly, managers need to
identify possible impediments to change that they will encounter as they go about making changes. Managers must
anticipate the obstacles they will encounter when they unfreeze the organization and make the changes. Functional
managers, for example, are likely to strongly resist efforts to the change the company because the change will
reduce their power and prestige in the organization. Mangers need to find ways to minimize control and co-operate
resistance to change. They also need to devise strategies to bring organizational members on the board and foster
their commitment to the process.
The second step in implementing action is deciding who will be responsible for actually making the changes and
controlling the change process. For this purpose outside consultants (experts) or managers from within
organizations can be employed. Many consultants specialize in certain types of organizational change, such as
restructuring, reengineering, or implementing total quality management, which is advantageous to implement
change.
The third step in implementing action is deciding which specific change strategy will be most effective. Basically,
top-down change strategy and bottom-up change strategy are used in the course of implementing change.
 Top-down change: Top-down change is a change which is implemented by managers at a high level in
the organization. The result of radical organizational restructuring and reengineering is top-down change.
Top level managers in the organization decide to make a change and implement it. The managers choose
to manage and solve problems as they arise at the divisional, functional or individual levels.
 Bottom-up change: Bottom-up change is that change that is implemented by employees at low levels in
the organization and gradually rises until it is felt through out organization. Lower level employees at all
levels are involved in the change process, to obtain their input and lessen their resistance. Bottom-up
change process facilitates employees’ participation and thus reduces resistance.
d) Evaluating the action:
The fourth step in the action research is evaluating the action that has been taken and assessing the degree to which
the changes have accomplished the desired objectives. The best way to evaluate the change process is to develop
measures or criteria that allow managers to assess whether the organization has reached its desired objectives.
Different techniques (cost comparison, employees’ satisfaction, and customers’ satisfaction level before after
change) are used to evaluate the result of change.
Assessing the impact of change is not easy since the effects of change may emerge slowly. The action research
process takes several years to complete.
e) Institutionalizing action research:
The need to make change is so vital in today’s quickly changing environment that organizations must
institutionalize action research. Institutionalizing involves making a required habit or norm adopted by every
members of an organization. Because change is so difficult and requires so much thought and effort to implement,
members at all levels of the organization must be rewarded for being part of successful change efforts. Effective
institutionalization makes all the stakeholders learn and sustain desired behaviors.

8
# Organizational Transformations: Birth, Growth, Decline and Death (Organizational Life Cycle):
Organizational transformation through different stages is represented by a model of organizational life cycle.
Organizational life cycle (OLC) is a model that proposes that businesses, over time, progress through a fairly
predictable sequence of developmental stages. This model is linked to the study of organizational growth and
development. It is based on a biological metaphor of living organisms, which have a regular pattern of
development: birth, growth, maturity, decline, and death. Likewise, the OLC of businesses has been conceived of as
generally having four or five stages of development: birth (start-up), growth, maturity, and decline. Organizations
pass through these stages at different rates. Some organizations go directly from birth to death with out enjoying
any growth stage; other may spend a long time in the growth stage. The organizational life-cycle model has been
figured out here.
The way an
organization can change in response to the problems it confronts determines where and when it will go on to the
next stage in the life cycle and survive and prosper or fail and die.
A) Organizational birth:
Organizations are born when individuals, (entrepreneurs), recognize and take advantages of opportunities to the use
of their skills and competencies to create value for the customers. This stage is associated with failure because new
organizations experience the liability of newness (the danger of failure associated with being first in the
environment). Organizations are fragile as they lack formal structure. Everything is done on trial and error basis.
During the birth sage, organizations accumulate capital, hire workers, and start developing their products or
services. Toward the end of this stage, companies often experience explosive growth and begin to hire new
employees rapidly, because business opportunities exceed infrastructure and resources.
# A population Ecology Model of Organization Birth:
Population ecology model seeks to explain the factors affecting the rate at which new organizations are born and
die in a population of existing environment. Population of organizations comprises the organizations that are
competing for the same set of resources in the environment. According to this model, the availability of resources
determines the number of organizations in a population. Population ecology model assumes that growth in the
number of organizational births in a new environment is rapid at first as new organizations are founded to take
advantages of new environmental resources (customers).
This model argues that there are two basic reasons for rapid birth rate of organization.

9
i) Knowledge and skill: As new organizations are founded, there is an increase in the knowledge and
skills available to generate similar organizations. Many new organizations are founded by
entrepreneurs who leave existing companies to set up their own organizations.
ii) Role model: When new organization is founded and survives, it provides a role model for others. The
success of a new organization makes it relatively easy for promoters to found similar new
organizations, because success confers legitimacy.
Once an environment is populated with a number of successful organizations, the organizational birth rate tapers-
off (decreases). According to this model, there are also two factors to decrease the organizational birth rate.
i) First mover advantages: The births rates declines, as the availability of resources (customers,
geographical location, preferences) for the late entrants diminishes.
ii) Difficult competition: Difficulty of competing with existing organizations for resources leads to
decrease in birth rate of organizations. Potential promoters are discouraged by the existing
organizations as the large numbers of organizations are already competing for resources.
# Strategies for organizational survival:
Population ecology model suggests two sets of strategies that organizations can use to gain access to resources and
enhance their chances of survival in the environment.
i) r-strategy versus k-strategy:
Organizations that follow r-strategy are founded early in a new environment (they are early entrants) where as,
k-strategy following organizations founded later (they are late entrants). The advantage of r-strategy is that an
organization obtains first mover advantages and has first pick of the resources in the environment. As a result,
the organization is usually able to grow rapidly and develop skills and procedures that increase the chance of
surviving and prospering. Organizations that follow a k-strategy are usually established in other environment
and wait to enter in the industry until the uncertainty in the environment is reduced and correct way to compete
is apparent. These organizations then take the skills they have established to in other environments and use
them to develop effective procedure that allow them to compete with and often dominate organizations
following r-strategy.
ii) Specialist strategy versus Generalist strategy:
Organizations following specialist strategy (specialist) concentrate their skills to pursue a narrow range of
resources in a single niche. On the other hand, generalist organizations spread their skills thinly to compete for
a broad range of resources in many niches.
By focusing their activities in one niche, specialists develop core competencies that allow them to out perform
generalist in the niche. Specialists are likely to offer customers much better services than the service offered by
generalist. They may be able to develop superior products because they invest all their resources in a narrow
range of products.
Generalist can often compete specialist when there is a considerable uncertainty in the environment and when
resources are changing so that niches emerge and disappear continually. Generalist can survive in an uncertain
environment because they have spread their resources thinly. If one niche disappears they still have others to
operate.
B) Organizational growth:
After surviving in the birth stage of organizational lifecycle, organizations increase their control over resources by
growing and becoming larger. In this stage organizations develop value-creation skills and competencies that allow
them to acquire additional resources. Growth allows an organization to increase its division of labor and
specialization and thus develop a competitive advantage. An organization that is able to acquire adequate resources
is likely to generate surplus resources that allow it grow further. Overtime, organizations thus transform
themselves. They become something very different than they were when they started. In this stage organizations
increase their ability to grow and survive in a competitive environment by becoming legitimate in the eye of
stakeholders.
In the growth stage, organizations may copy one another’s strategies, structures, and cultures and try to adopt
certain behaviors because they believe that doing so will increase their chances of survival. These activities lead to
organizational isomorphism. Organizational isomorphism is the act of making similar to other organizations by
imitating. There are three major form of organizational isomorphism.
a) Coercive isomorphism:

10
When an organization adopts certain norms because of pressure exerted by other organizations and by society, such
practice is said to be coercive isomorphism. Coercive isomorphism takes place when an organization largely
depends on the act of other organizations. Coercive isomorphism also results when organizations are forced to
adopt non-discriminatory, equitable hiring practices because they are made mandatory by law.
b) Mimetic isomorphism:
Isomorphism is said to be mimetic when organizations intentionally imitate and copy another’s to increase
legitimacy. A new organization is especially likely to imitate the structure and process of successful organizations
to ensure success in uncertain environment. Mimetic isomorphism involves imitating other organizations’ structure,
strategy, culture, technology etc. that will allow surviving.
c) Normative isomorphism:
Organizations may acquire norms and values in several ways. Managers and employees often move from one
organizations to another and bring with in them the norms, values of former employers. Many organizations recruit
managers from large organizations to acquire a good business idea. Organizations also indirectly acquire norms and
values through industry, trade, and professional association. These ways of getting business ideas, norms and values
is said to be normative isomorphism.
# Greiner’s model of organizational growth:
It is believed that organizations encounter a predictable series of problems that must be managed if organizations
are to grow and survive in a competitive environment. Greiner’s model proposes that an organization passes
through five sequential growth stages during the course of organizational evolution and that each ends in a crisis
due to a major problem that organization encounters. To advance from one stage to the next, an organization must
successfully change itself and solve the organizational problems associated with each crisis. Greiner’s model of
organization change has illustrated in the given figure.
i)
Phase 1: Growth through creativity and crisis of leadership: After an organization gets birth, it starts to grow
through creativity and vision. Entrepreneurs develop the skills and abilities to create and introduce new products for
new market. As the organization grows, the founding entrepreneurs confront the task of having to manage the
organization, and they discover that management is a very different process. Thus, after securing a niche, the
founding entrepreneurs are faced with the task of managing their organization, a task to which they are often not

11
really suited and for which they lack the skills. When an entrepreneur takes control of management of the
organization, significant problems arises that eventually leads to a crisis of leadership.
ii) Phase 2: Growth through direction and crisis of autonomy: The crisis of leadership ends with the recruitment
of strong top-management team to lead the organization. The new top level management chooses an organization
strategy and designs a structure and culture that allow the organization to meet its goal effectively. The structure
designed by top managers and imposed on the organization centralizes decision making and limits the freedom of
experiment, take risk and employ self senses. The centralized authority, formalized decision making often leads to
another crisis. This situation leads to frustration and dissatisfaction which leads to departure of employees, reduce
performance level, and also creates new competitors in the industry. Hence, a crisis of autonomy is realized.
iii) Phase 3: Growth through delegation and crisis of control: To solve the crisis of autonomy and grow further,
organizations must delegate authority to lower level managers in all functions and divisions and link their
contributions. In this stage, more autonomy and responsibility are given to managers at all levels and functions.
Growth through delegation allows each department or division to expand to meet its own needs and goals, and
organizational growth brings a new crisis. Explosive and excessive growth can cause top managers to feel that they
have lost control of the company as a whole. Thus, when top managers compete with functional managers or
corporate level managers compete with divisional managers for control of organizational resources, the result leads
to a crisis of control.
iv) Phase 4: Growth through coordination and crisis of red tapes/staffs: In order to fill the crisis of control, top
managements take on the role of coordinating different divisions and motivating divisional managers. At this stage
the organization is too large that coordination is most that facilitates international cooperation between divisions
and countries. Companies also implement systems of co-ordination to enable their various business units and
departments to work together. These efforts, however, tend to cause an influx of red tape. Coordination techniques
such as product groups, formal planning processes, and corporate staff become, over time, a bureaucratic system
that causes delays in decision making and a reduction in innovation. At this stage, companies may become too large
and diversified to function effectively with inflexible regulations and dense bureaucracy.
v) Phase 5: Growth through collaboration and un-known crisis: The way to solve the crisis of red tape and push
the organization up the growth, collaboration is essential. Companies must emphasize growth through
collaboration, which includes using teams, empowering workers, removing red tape, reducing corporate staff,
simplifying formal systems, increasing conferences and educational programs, and introducing more sophisticated
information systems. Because decline and closure is likely if companies proceed in the same direction as in the
maturity stage, they must adopt these kinds of policies and implement these kinds of changes to ward-off shrinking
sales and employee apathy.
Greiner’s model shows organizations continuing to grow through collaborations until they encounter some new,
unnamed crisis, but it is possible that organization’s growth path leads down ultimately. Hence, the next stage in the
life cycle is not continued growth but organizational decline.
C) Organizational decline and death:
Greiner’s model suggest that organizations at all stages of growth encounter problems (crisis) that will lead to
organizational decline if the organization fails to manage them. Managers must have ability to identify and solve
organizational crisis so that they can maintain organizational growth. But if they lack the ability, motivation and
desire to manage such issues at some point organizations die due to organizational inertia and environmental
changes. In other words, the main cause of organizational decline and finally death are: organizational inertia and
environmental change.
i) Organizational inertia:
Organizational inertia is a force inside the organization that produce resistant to change. Organizations are subject
to considerable inertia, which prevents them from adopting and changing. Following are the major organizational
forces responsible for producing inertia.

12
a) Traditional mechanistic structure
b) Overly bureaucratic culture
c) Differences in functional orientation
d) Management tradition
e) Individuals and groups
ii) Changes in environment:
Environmental changes also largely affect an organization’s ability to obtain scarce resources which finally lead to
organizational decline. The major sources of uncertainty in the environment are complexity, the number of different
forces that an organization has to manage (dynamism, degree of change in the environmental forces, richness, the
amount of resources available etc.) The greater amount of uncertainty, the larger the chance of an organization to
decline. Management inability to adopt and respond to the change in the environment may not survive in the market
so far.
The combination of uncertain, changing environment and organizational inertia makes it difficult for the top
management to anticipate the need for change and to manage the way organizations change and adapt to the
environment and make organization surviving and growth.
# Strategies for Organizational Change: (Directive Strategy, Expert Strategy, Negotiation Strategy,
Educative Strategy and Participative Strategy)
Organizational change is an important issue in organizations. It is actually a process in which an organization
optimizes performance as it works toward its ideal state. Organizational change occurs as a reaction to an ever-
changing environment, a response to a current crisis situation, or is triggered by a leader. Successful organizational
change is not merely a process of adjustment, but also requires sufficient managing capabilities.
Strategy refers to the organization’s long term goals and the steps and resources needed to be considered in its
decision-making. The strategy for managing organizational change can be divided into: Directive Strategy, Expert
Strategy, Negotiation Strategy, Educative Strategy, and Participative Strategy. These strategies have their own
value and implications.
1. Directive strategy: This strategy highlights the manager's right to manage change and the use of authority
to impose change with little or no involvement of other people. The advantage of the directive approach is that
change can be undertaken quickly. However, the disadvantage of this approach is that it does not take into
consideration the views, or feelings, of those involved in, or affected by, the imposed change. This approach may
lead to valuable information and ideas being missed and there is usually strong resentment from staff when changes
are imposed rather than discussed and agreed.
2. Expert strategy: This approach sees the management of change as a problem solving process that needs to
be resolved by an expert. This approach is mainly applied to more technical problems, such as the introduction of a
new learner management system, and will normally be led by a specialist project team or senior manager. There is
likely to be little involvement with those affected by the change. The advantages to using this strategy is that
experts play a major role in the solution and the solution can be implemented quickly as a small number of 'experts'
are involved. Again, there are some issues in relation to this strategy as those affected may have different views
than those of the expert and may not appreciate the solution being imposed or the outcomes of the changes made.
3. Negotiating strategy: This approach highlights the willingness on the part of senior managers to negotiate
and bargain in order to effect change. Senior managers must also accept that adjustments and concessions may need
to be made in order to implement change. This approach acknowledges that those affected by change have the right
to have a say in what changes are made, how they are implemented and the expected outcomes. The disadvantage
to this approach is that it takes more time to effect change, the outcomes cannot be predicted and the changes made
may not fulfill the total expectations of the managers affecting the change. The advantage is that individuals will
feel involved in the change and be more supportive of the changes made.

13
4. Educative strategy: This approach involves changing people's values and beliefs, 'winning hearts and
minds', in order for them to fully support the changes being made and move toward the development of a shared set
of organizational values that individuals are willing, and able to support. A mixture of activities will be used;
persuasion; education; training and selection, led by consultants, specialists and in-house experts. Again, the
disadvantage of this approach is that it takes longer to implement. The advantage is that individuals within the
organization will have positive commitment to the changes being made.
5. Participative strategy: This strategy stresses the full involvement of all of those involved, and affected by,
the anticipated changes. Although driven by senior managers the process will be less management dominated and
driven more by groups or individuals within the organization. The views of all will be taken into account before
changes are made. Outside consultants and experts can be used to facilitate the process but they will not make any
decisions as to the outcomes. The main disadvantages of this process are the length of time taken before any
changes are made, it can be more costly due to the number of meetings that take place, the payment of
consultants/experts over a longer time period and the outcomes cannot be predicted. However, the benefits of this
approach are that any changes made are more likely to be supported due to the involvement of all those affected,
the commitment of individuals and groups within the organization will increase as those individuals and groups feel
ownership over the changes being implemented. The organization and individuals also have the opportunity to learn
from this experience and will know more about the organization and how it functions, thus increasing their skills,
knowledge and effectiveness to the organization.

- Dharma Pd. Paudel
1 Kantipur Valley College
Part – III: Organizational Decision Making in Changing Environment
# Organizational Decision Making:
Decision making is an act of making a choice to solve confronting problems. In an organization,
individuals, especially managers have to make decisions to choose an action from among alternative
course of actions. Organizational decision making is the process of responding to a problem by
searching for and selecting a solution or course of action that will create value (importance) for
organizational stakeholders. Whether the problem is to find the best inputs, to decide which
technology to use, to identify right way to provide a service to customers, or to figure out how to deal
with a competitor, in each case managers must decide what to do. Organizational decisions for which
mangers are responsible to make an optimal choice fall into two broad categories:
I) Programmed Decisions (routine)
II) Non-programmed Decisions (non-routine)
I) Programmed Decisions:
Programmed decisions are repetitive and routine in nature. They are bind by rules, routines, and
standard operating procedures. Many of the routines and procedures for selecting an appropriate
solution are formalized in an organization’s rules and standard operating procedures and the values
and norms of its culture. Middle and lower level managers are involved in making routine decisions
at operating levels. For example; hiring policy, purchasing decision, production and selling decisions
etc. are routine in nature.
II) Non-programmed Decisions:
Non-programmed decisions are completely un-structured and novel. No, rules, routines or standard
operating procedures can be developed to handle them. Solutions must be worked out as problems
arise. Non-programmed decisions require much more search activity and judgmental skills. For
example; continues experiments for research and development, creation of an organizations strategy
and structure etc. involve non-programmed decisions. Non-programmed decision force managers to
rely on judgment, intuition, and creativity to solve organizational problems as they cannot rely on
rules and procedures. Non-programmed decisions lead to the creation of a new set of rules and
procedures that would allow other members to make appropriate programmed decisions.
Programmed decision making help an organization to increase efficiency, and reduce costs, provides
stability and increase predictability. Where as, non-programmed decision making allows the
organization to change and adapt to its environment and generate new ways of behaving.
# Models of Organizational Decision making:
There are different models for making organizational decisions. Early models consider decision
making as a rational process in which managers make decisions to adjust perfectly to the
environment. However, modern models recognize that decision making is an inherently uncertain
process in which managers give solutions.
1) The Rational Model: (Ralph Tyler (1950): an American educator)
Decision making is a straight forward three step process, according to this model. It involves:
identifying and defining the problems, generate alternative solutions to the problem and select
solution and implement it.

- Dharma Pd. Paudel
Stage – I: Managers identify problems that need to be solved. Managers spend a great deal of time
and effort analyzing all aspects of their organization’s specific and general environments to identify
conditions or problems that call for new action. In other words, they most analyze the environment
and recognize opportunities and threats it presents.
Stage – II: Managers collectively or individually seek to design and develop a list of alternative
solutions and course of actions to the problems they have identified. They study ways to take
advantage of the organization’s skills and resources to respond to opportunities and threats.
Stage – III: Managers compare the possible consequences of each alternative and decide which course
of action offers the best solution to the problem they identified in stage 1.
In a predictable idle state, managers can conduct such a business as stated. The rational model ignores
the ambiguity and uncertainty that typically increase the complexity in decision making. It is based on
the following assumptions, which the researchers have criticized.
1) The assumption that the decision makers have all the information they need
2) The assumption that decision makers (managers) are smart and capable
3) The assumptions that decision makers agree about what they need to be done (same
preference)
2) The Carnegie Model (developed by a group of experts from industry, government, and the
Software Engineering Institute (SEI) at Carnegie Mellon University in Pittsburgh):
Carnegie model is a progressive approach over rational model in organizational decision making. In
an attempt to describe the realities of the decision-making process more accurately researchers
introduced into decision-making theory a new set of assumptions: Satisfying, Bounded Rationality
and Organizational Coalitions.
Carnegie model advocates that information is very limited, decision making is costly, it is affected by
preferences and values of decision makers, solution is chosen by compromise, bargaining, and
accommodation between organizational coalitions and solution chosen is satisfactory for the
organization. The core assumptions involved are:
a) Satisfying: Instead of searching for all possible solutions to a problem, as the rational
suggests, managers resort to satisfying i.e. they decide on certain criteria that they will use to
evaluate possible acceptable solutions. The criteria automatically limit the set of possible
alternatives. The manager then select one alternative form the range of alternatives that that
they have generated. Thus it involves a much less costly information search and puts far less
of a burden on managers than does the rational model.
b) Bounded by Rationality: The rational model assumes that managers possess the intellectual
capacity to evaluate all possible alternatives. The Carnegie model assumes that managers are
limited by bounded rationality – a limited capacity to process information. Thus, Carnegie
model recognizes that much of decision making is subject to and relies on manager’s prior
experience, beliefs and intuitions.
Stage-I:
Identify and
define problem
Stage-II:
Generate alternative
solution to the problem
Stage-III:
Select solution
and implement it

- Dharma Pd. Paudel
c) Organizational Coalitions: Unlike the assumption of same preference among different
managers and stakeholders regarding the evaluation of alternatives in the same way, the
Carnegie model explicitly recognizes that the preferences and values of managers differ and
the conflict between managers and other stakeholders is inevitable. Carnegie model views an
organization as a coalition of different interests, in which decision making takes place by
compromise, bargaining, and negotiation between managers and other stakeholders.
3) The Incrementalist model:
According to incrementalist model of organizational decision making, managers select the alternative
course of action that are only slightly, or incrementally different from those used in the past thus
lessening their chance of making mistakes. In other words new decisions are made in an incremental
structure. This model implies that mangers rarely make major decisions that are radically different
from decisions they have made before. Managers correct or avoid mistakes through a succession of
incremental changes, which may lead to completely new course of action. The major three stages
involved in this model are:
a) Identification stage: In identification stage, managers develop routines to recognize problems
and understand what is happening to the organization.
b) Development stage: In this stage, they search for and design alternatives to solve the problems
they have identified.
c) Selection stage: In the selection stage, managers use an incremental selection process –
judgment and intuition, bargaining and other methods to reach a final decision.
The incrementalist model works best in a relatively stable environment where managers can
accurately predict movements and trends. In an environment that changes suddenly or abruptly, the
incrementalist approach might prevent managers from changing quickly enough to meet new
conditions.
4) The Unstructured Model (developed by Henry Mintzberg and his colleagues):
The unstructured model of organizational decision making describes how decision making takes place
when uncertainty is high. This model argues that decision making is not linear, sequential process but
a process that may evolve unpredictably in an unstructured way. Decision making may be constantly
interrupted because uncertainty in the environment alters managers’ interpretations of a problem. The
managers must then generate new solutions and find new strategies that help the organization adapt to
and modify its environment.
This model emphasizes the unstructured nature of decision making: Managers make decisions in a
haphazard, intuitive way, and uncertainty force them to constantly adjust and find new ways to
behave in the constantly changing situation. The organization tries to make the best decisions it can,
but uncertainty force it to adopt an unstructured way of making decisions. Thus the unstructured
model tries to explain how organizations make the non-programmed decisions.
5) The Garbage Can Model (Dr. Michael D. Cohen (22 March 1945 - 2 February 2013 – professor
in University of Michigan):
The extreme level of unstructured decision making process is represented by the Garbage Can model.
This model turns the decision making process around and argues that organizations are likely to start
making decisions from the solution side rather than problem side. In other words, decision makers
may pose solutions to problems that do not exist; hence they create a problem that they can solve with
solutions that are already available.

- Dharma Pd. Paudel
Under garbage can model, decision making arises in the following ways:
a) An organization has a set of solutions, or skills with which it can solve certain problems
b) Mangers create problems or decision making opportunities in the way that the skills and
solutions they possess can be used
c) The solutions they possess are used to solve the problems and taken the advantage of
superiority
In an organization different coalitions of managers may champion different alternatives and compete
for resources to implement their own chosen solutions. Thus, decision making becomes like a
“garbage can” in which problems, solutions, and the preference of different individuals and coalitions
all mix and contend with one another for organizational attention and action.
# Organizational Learning:
Organizational learning is the process by which an organization gains new knowledge about its
environment, goals, and processes. It is an important process that helps managers to make better non-
programmed decisions – decisions that allow adopting to modify and change the environment to
increase an organization’s chances of survival. It is the process through which managers seek to
improve organization members’ desire and ability to understand and manage organization and its
environment so that they make decisions that continuously raise organizational effectiveness. Hence,
Organizational learning can be defined as a relatively permanent change in behavior that occurs as a
result of experience.
Organizational learning is vital process today for organizations to manage because of rapid pace of
change affecting every organization. Organizations are racing to develop new and improved core
competences and fighting to respond to the low-cost competitive challenges. They are searching for
every opportunity to use advanced materials, technology and information system to more effectively
pursue their strategies and manage their structures. For these said purposes, they must learn new ways
to operate more efficiently if they are to survive. Hence, managers must understand how
organizational learning occurs and the factors that can promote and impede it.
There are two principal types of organizational learning that can be pursued: Exploration and
Exploitation.
a) Exploration:
Exploration involves organizational members searching for and experimenting with new kinds or
forms of organizational activities and procedures to increase effectiveness. Learning that involves
exploration might involve finding new ways of managing the environment – such as experimenting
with the use of strategic alliances and network organizations – or inventing new kinds of
organizational structure for managing organizational resources – such as product team structure and
cross-functional terms. Hence, it is revolutionary in nature.
b) Exploitation:
Exploitation involves organizational members learning ways to refine and improve existing
organizational activities and procedures in order to increase effectiveness. Learning that involves
exploitation might involving implementing a total quality management program to promote the
continuous refinement existing operating procedures, or developing an improved set of rules to
perform specific kinds of functional activities effectively. Hence, it is more evolutionary in nature.

- Dharma Pd. Paudel
# Levels of Organizational Learning:
In order to create a learning organization, managers generally need to create learning at four levels in
an organization.
a) Individual level learning:
At the individual level managers need to use their effort to facilitate the learning of new skills, norms,
and values so that individual can increase their own personal skills and abilities and thereby help
build the organization’s core competencies. Organizations should empower individuals and allow
them to experiment and create and explore what they want. The goal is to give employees the
opportunities to develop an intense appreciation for their work that may lead to distinct competence
for the organization. A learning organization can encourage employees to form complex mental
models and develop a sense of personal mastery by providing them with the opportunity to assume
more responsibility for their decisions. This can be done in variety of ways, such as; providing cross
training, redesigning the job, reengineering etc. which may increase the level of organizational
learning as the worker finds new ways to get the job done.
b) Group level learning:
At group level, managers need to encourage learning by promoting the use of various kinds of groups
– such as self managed groups, cross-functional teams – so that individuals can share or pool their
skills and abilities to solve problems. Group is helpful to join individual efforts and create synergy
(the whole is more than the sum of individual) – which can enhance organizational effectiveness.
Many scholars have argued that team learning is important than individual learning because most
important decisions are made in subunits such as groups, functions, and divisions. Hence, creation of
empowered work teams can take over full responsibility for measuring, monitoring and controlling
their own behavior to find ways continuously to increase performance.
c) Organizational level learning:
At the organizational level, managers can promote organizational learning through the way of
creating an organization’s structure and culture. Organization’s structure can be designed to inhibit or
facilitate intergroup communication and problem solving. Both mechanistic and organic structures
encourage different approaches to learning. The design of a mechanistic structure seems likely to
facilitate exploitive learning where as the design of an organic structure seems more likely to
facilitate explorative learning. Similarly, organizational culture is equally influencing factor for
learning. An adoptive culture of an organization promote higher learning because managers can
quickly introduce in a new way the organization operate that allow the organization to adapt to
change occurring in the environment.
d) Inter-organizational level learning:
A linkage between organization leads to inter-organizational level learning. At this level learning
organizations can improve their effectiveness by copying and imitating each others’ distinctive
competencies. The mimetic, coercive and normative processes encourage organizations to learn from
each other in order to increase their legitimacy and also increase their effectiveness. Organizations
can also encourage explorative and exploitive learning by cooperating with their suppliers and
distributors to find new and improved ways of handling inputs and outputs.
By encouraging and promoting organizational learning at each of these four levels – by looking at
organizational learning as a system – managers can create a learning organizations that facilitate a
quick response to the changes in the environment that are constantly taking place around it.

- Dharma Pd. Paudel
There are several factors that inhibit learning and lead to organizational inertia. If an organization
achieves success, the successful standards and procedures, fear of unknown, cognitive structure,
cognitive dissonance, illusion of control, frequency and repetitiveness, motivation level, learning
context etc. are common factors affecting learning and make an organization passive in learning and
acquiring knowledge. Following are the major reasons to affecting learning.
1. Cognitive structure
2. Cognitive dissonance
3. Illusion of control
4. Frequency and repetitiveness
5. Individual motivation
6. Learning context
7. Role of instructors and learners in the learning-scenario and how technology changes these
roles
# Knowledge Management and Information Technology:
Knowledge management was initially defined as the process of applying a systematic approach to the
capture, structuring, management, and dissemination of knowledge throughout an organization to
work faster, reuse best practices, and reduce cost. Knowledge management is a kind of IT-enabled
organizational relationship that has important implications for both organizational learning and
decision making. IT-enabled organizational structure allows for new kinds of tasks and job reporting
relationships among electronically connected people that promote superior communication and
coordination. It involves sharing and integrating of expertise within and between functions and
divisions through real-time interconnected information technology. The most important benefit from
utilizing knowledge management system is the development of synergies between people and groups
which may result in competitive advantage in the form of product or service differentiation. Unlike
more rigid bureaucratic organizing methods, IT-enabled organizations can respond more quickly to
changing environmental conditions such as increased global competition.
Basically, there are two approaches for knowledge management.
a) Codification Approach:
With a codification approach, knowledge (idea) is carefully collected, analyzed, and stored in
database where it can be retrieved easily by users who input organization-specific commands and
key-words (codes). Essentially, codification approach results in collection of standardized
organization best practices and rules that can be drawn upon by anyone who needs them. It is a form
of bureaucratic control that can result in major gains in technical efficiency and allow an organization
better manage its environment. It opens up the possibility of achieving scale in knowledge reuse and
thus growing the business.
b) Personalization Approach:
In a personalization approach, information systems are designed to show employees who in the
organization might possess the knowledge they might need or who might have confronted a similar
problem in the past. It involves dialogue between individuals rather than knowledge stored in the
database. Information is transfer through one-to-one conversation. It involves developing a network
for linking people so that tacit knowledge can be shared person-to-person. It is an approach to provide
analytically rigorous advice on high level strategic problems by channeling individual expertise.

- Dharma Pd. Paudel
# How firms manage their knowledge?
Codification Personalization
 Provides high quality, reliable and fact
information using codified knowledge.
 Provides analytically rigorous advice on
high level strategic problems by
channeling individual expertise.
 Investment in once in knowledge assets;
reuse it many times.
 Charge high fees for high customized
solution to unique problems
 Develop an electronic document system
that codifies stores, disseminates, and
allows reuse of knowledge (people-to-
people).
 Develop network for linking people so
that tacit knowledge can be shared (person
to person).
 Invest heavily in IT. The goal is to
connect people with reusable codified
knowledge.
 Invest moderately in IT. The goal is to
facilitate conversation and exchange of
tacit knowledge.
# Innovation:
Innovation is the process by which organizations use their resources and competencies to develop
new or improved goods and services or to develop new production and operating system so that they
can better respond to the needs of their customers and other stakeholders. Although innovation brings
about change, it is also associated with a high level or risk because the outcomes of research and
development activities are often uncertain. Changes in technology are at the heart of the innovation
process, and at present the world is characterized by a rapid rate of technological change.
Generally speaking, there are two types of innovation brought by technological change.
a) Quantum innovations
b) Incremental innovations
a) Quantum innovations:
New products or operating systems that incorporate a quantum technological improvement are
referred to as quantum innovations. Quantum technological change refers to a fundamental shift in
technology that revolutionizes products or the way in which they are produced. The introduction of
Intel’s 4004 Microprocessor, the first “computer on a chip” is an example of quantum product
innovation.
c) Incremental innovations:
Incremental innovations refer to the change brought by an incremental technological change.
Incremental change represents that technological change which involves a refinement of some base
technology. Flexible manufacturing, use of TQM are examples of incremental innovations.
# Methods for Managing Innovation:
There are several methods that can be used to manage innovation in an organizational setting. These
methods also serve to overcome the resistance to the change. Following are the most widely used
methods to raise the level of both quantum and incremental innovation.
a) Project Management:
A project is a subunit whose goal centers on developing the products or service on time, within
budget, and in conformance with predetermined performance standard. Project management enables
the process of leading and controlling the project so that it results in the effective creation of new or

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