Leadership & Organizational Change

In today’s increasingly versatile and competitive environment, leaders and their organizations are facing a dynamic, fast moving, and volatile environment with technological trends, rapid social changes, growing changes in consumer demands, globalization, and economic changes. Change is a reality! Successful leaders (and their organizations) of the future will be those who invest the time in developing their skills in leading change.

Defining the Nature of the Change Process

Organization change is any substantive modification to some part of the organization. It involves movement from the present state of the organization to some future state. The future state may be a new strategy for the organization, changes in the organization’s culture, introduction of new technology, and so on. Change can involve virtually any aspect of an organization including from a broad perspective things like strategy, structure, technology, talent management, and culture; or expressed in another way in work schedules, departmentalization, span of management, equipment or machinery, organizational design and specific work processes, and employee recruitment, selection, training/development, and performance appraisal. It is important to keep in mind that any particular change in an organization may have ripple effects. For example, when an organization installed a new computerized production system at one of its plants, employees were required to learn to operate the new equipment, the compensation system was adjusted to reflect those newly acquired skills, the leader’s span of management was altered, several related jobs were redesigned, the criteria for selecting new employees were changed, and a new quality control systems was implemented.

Forces of Change

Organizations, as a system, depend on many interdependent forces which influence their day-to-day functioning, strategic decisions, and future action plans for facing the competitive challenge successfully. Forces for change often differ greatly, and to help make sense of the variety they can be categorized into external and internal forces.

External Forces

Organizations cannot function in a vacuum—they need to be aware of and respond to events and trends in the outside world. External forces for change originate outside the organization. Such forces often apply to a leader’s organization and its competitors or even entire industries. External forces therefore can dramatically affect why an organization exists, as well as which markets it participates in and how. For instance, external changes can either present new opportunities for organizations to realize and group (e.g., smartphones for consumers and Apple’s iPhone), or they can cause the ultimate demise or failure of a business (e.g., smartphoens for consumers and Blackberry). Several key external forces for change are: demographic characteristics, technological advancements, shareholder, customer and market changes, and social and political pressures.

1. Demographic characteristics.

Leaders and their organizations need to adapt to demographic changes such as aging and increasing diversified customer populations. To deal with these changes, some organizations are changing their benefits and aspects of the work environment in order to attract, motivate, and retain diverse employees by ensuring fair treatment for people regardless of age, religion, sexual orientations, gender, or race and ethnicity. Many organizations are also changing the way in which they design and market their products and services and design their store layouts based on generational differences to appeal to a variety of different consumers.

1. Technological advancements.

Technology is not just computer technology, it is any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product. Technology is a common and often cost-effective tool for improving productivity, competitiveness, and customer service. The rapid rise of and continuous innovation in computer and wireless technology means that organizations must move equally fast to complete.

Technological advancements and innovations in communication and computer technology, have revolutionized the organizational functioning by facilitating newer ways of working and added a newer range of products/services thus creating a need for developing a framework for managing change effectively and proactively responding to the challenges as a result of these changes due to the technological forces. Many organizations now use social networks to market their products, build awareness of their brands, and connect more fully with their consumers. As in the past, advancements in the technological field will continue to greatly contribute to the overall organization’s success or failure in the competitive environment.

1. Shareholder, customer, and market changes.

Shareholders have become more involved with pressing for organizational change in response to ethical lapses from senior management and anger over executives’ compensation packages. Customers also are increasingly sophisticated and demand organizations with whom they do business to deliver higher value products and services. If they don’t get what they want, then they will shop elsewhere.

Social media has given customers a platform for sharing their opinions in ways that organizations have never had to deal with before. This has led to more organizations seeking customer feedback about a wide range of issues in order to attract and retain customers because “turning a potential negative into visible positive sentiment is social media’s biggest advantage.”

Negative feedback from customers that has the potential to reach countless others online can immediately influence sales, and it can also enhance or damage the organization’s reputation in the long term. For example, customer comments on review sites like TripAdvisor and Yelp can help or hurt restaurants, tourist attractions, and hotels. Organizations that listen to their customers and keep up with the evolving market landscape are more likely to succeed than those who don’t.

1. Social and political forces

These forces are created by social and political events. Social events can create great pressures and social values are changing. Consumers are interested in buying environmentally safe products that have been manufactured in an ethical manner, and many organizations have adapted their practices to cater to these values. Organizations have gone “green,” looking for ways to use less energy themselves and to sell products that consume less energy and are safer to use.

Organizations can also be subject to political pressures, and organizations must often comply with new regulations or adapt to existing ones. Political events, such as wars and unrest in different parts of the world also create substantial change. Governments can apply political pressures that can force or block changes. Government forces can, for example, come in the form of deregulation, foreign exchange, antitrust laws, and protectionism.

Internal Forces

Although it is essential that leaders and their organizations respond to external forces, it is just as important to look inside the organization at the internal forces at play. Internal forces for change come from inside the organization. These forces may be subtle such as low job satisfaction, or can manifest in outward signs, such as low productivity, conflict, or strikes. Internal forces for change come from both human resource problems and managerial behaviors and decisions.

Leaders and their organizations must address internal problems as soon as they arise and strive to build a positive working environment based on mutual respect, teamwork, and collaboration. Leadership change (i.e., human resource problems and prospects), organizational restructuring, and intrapreneurship are some examples of the internal forces that affect organizations.

1. Leadership change (i.e. human resource problems or prospects).

These problems stem from employee perceptions about how they are treated and the match between individual and organization needs and desires. New CEOs or executives can have a significant impact on an organization’s culture and strategy. When new CEOs take charge they often bring their own people. It is not unusual for members of the G-suite to be gone within a year of a new chief executive taking the reins. Unusual or high levels of absenteeism and turnover also represent forces for change.

1. Human resources concerns.

Is there a gap between employees’ needs and desires and the organization’s needs and desires? Job dissatisfaction—as expressed through high absenteeism and turnover—can be a major signal of the need for change. Organizations may respond by addressing job design, reducing employees’ role conflict, and dealing with work overload, to mention a few matters.

1. Leader’s behavior.

Excessive conflict between leaders and employees or between an organization and its customers is another indicator that change is needed. Perhaps there is a personality conflict, so that an employee transfer may be needed. Or perhaps some interpersonal training required.

1. Organizational restructuring.

There may be instances when organizations need to change their organization structure as well as its overall design in order to adapt to new strategies, new product lines, or global expansion. Structural changes can be regarded as a strategic move on the part of the organization to improve profitability and for achieving a cost advantage.

Three General Types of Change: One View

One of the ways a leader can change is to view change as either planned or unplanned. There are other ways to distinguish the types of change which is the focus of this section.

Organizational change can also be viewed as administrative or technological, however, in either case it can be adaptive, innovative, or radically innovative, depending on (a) the degree of complexity, cost, and uncertainty; and (b) its potential for generating employee resistance.

1. Adaptive Change

Adaptive change is the reintroduction of a familiar practice—the implementation of a kind of change that has already been experienced within the same organization. This form of change is lowest in complexity, cost, and uncertainty. Allowing the market research group to operate on flex-time, after allowing the sales group to do so, is an example of adapting the scheduling practices in one group based on those in another. Adaptive changes are not particularly threatening to employees because they are at least somewhat familiar and thus will create the least resistance.

1. Innovative Change

Innovative change is the introduction of a practice that is new to the organization. This form of change is characterized by moderating complexity, cost, and uncertainty. It is therefore apt to trigger some fear and resistance among employees. If competitors, for example, in an organization’s industry utilize shared office space, but a leader’s organization hasn’t, then doing so qualifies as innovative changes. Innovative changes bring more uncertainty and cause more concern than adaptive changes.

1. Radically Innovative Change

Radically innovative change introduces a practice that is new to the industry. Because it is the most complex, costly and uncertain, it may be extremely threatening to a leader’s confidence and employees’ job security and may well tear at the fabric of the organization. The introduction of the sharing economy has been a radical change for many industries, such as transportation (Uber and Lyft) and housing (Airbnb).

1. Transformational Change

Transformational changes are those leaders make to completely reshape the organization or business strategy and processes, often resulting in a shift in work culture. These changes may be a response to extreme or unexpected market changes. Transformational change can produce fear, doubt, and insecurity in employees, and needs to be managed, very well. Examples of transformational change include:

• implementing major strategic and cultural changes,
• adopting radically different technologies,
• making significant operating changes to meet new supply and demand, and
• reforming product and service offerings to meet unexpected competition and dramatic reductions in revenue.

Transformational changes will usually involve both transitional and developmental change—where organizations recognize that they need to overhaul the way they do business. When making transformational changes, it is crucial that leaders

• develop and communicate a well-defined strategy that explains the approaches they are taking to change and the goals they are setting,
• continually reinforce their rational for the changes,

• An apology is a public acknowledgment of responsibility for the trust violation as well as an expression of remorse, guilt, and repentance for the damage.
• The other response is to explicitly disavow that the trust violation actually occurred, declaring it false. However, the result of the two tactics will have substantially different results for the new leader and his or her organization depending on the type and severity of the infraction.

It has been suggested that to initiate trust, we must be worthy of it and that restoring corporate trust is not rocket science, but companies must earn it by finding a blend of ability, kindness and integrity. Trustworthiness, in turn, consists of three main characteristics:

1. technical competence to perform a task reliably (ability),
2. having benign motives (benevolence), and
3. acting according to acceptable principles such as fairness and honesty (integrity).

Violations of trust from competence and integrity infractions are important to immediately correct. Organizations are much more likely to admit competence violations as they are considered more likely to admit competence violations as they are considered more controllable through training, hiring, firing, or simple error correction. However, integrity violations are quite problematic, as “a single act of dishonesty will cause trustors to conclude that the trustee is inherently dishonest.”

Even a trivial or inconsequential act can bring the entire character of the organization or individual into question. For example, though most integrity violations are usually perpetrated by a single individual or small group of individuals colluding in an organization, the potential exists for the entire organization to be blamed for the damage. When leaders or organizations take on the responsibility of repairing or restoring trust, they must

• be willing to invest time and energy into the repair process,
• perceive that the short- and/or long-term benefits to be derived from the relationship are highly valued—that is, the payoff is “worth” the investment of additional energy, and
• perceive that the benefits to be derived are preferred relative to options for having those needs satisfied in an alternative manner.

Once both parties have determined that the relationship is worth saving, either at the individual or organizational level, the parties must engage in reciprocal trust repair.

• The first step is to recognize the trust violation has occurred, acknowledging it so both parties are operating with the same information. As a trust violation might have occurred inadvertently, by mutually recognizing that the damage was done, the parties can make the choice to move forwards.

• The second step is to determine what actions caused the destruction of trust and take blame for the action. Because the victim is already aware of the ethical misconduct or data breach, the challenge is for the perpetrator to own the blame. Once blame is accepted,
• the third step is to “admit that the event was ‘destructive’ of trust” is necessary. If the guilty party admits the action destroyed trust, he or she demonstrates to the victim(s) that their experiences and losses matter. This process usually demands full disclosure as well as a discussion of the events and the cognitive and emotional results of the betrayal.
• The fourth and final step is for the offender to accept full responsibility for their actions as well as the consequences of the breach of trust. Whether intentional or not, if the victim believes to have been wronged, then, trust has been broken. During this process, the victim also engages in the same discussion and works with the perpetrator to find common ground to rebuild trust. The victim can then allow the offender to begin to repair the trust by offering some element of forgiveness to the apologetic guilty party.

Apologizing for a mistake is a clear behavioral correction but is often rather difficult to execute. When making an apology for wrongdoing, leaders and their organization, for example, are admitting its failure and making the implicit promise that the violation of trust will not be repeated.

Apologizing is the most important step to reconciliation as it demonstrates an understanding of the perspective and plight of the victim and a willingness to remedy the damage caused by the offending party.

Others have also outlined a process that begins with acknowledging the violation, determining the cause of the violation while admitting guilt, admitting and agreeing that the act was indeed destructive, and accepting the responsibility for the consequences of the violation.

This strategy provides no intent to correct behavior and raises serious subsequent concerns about ethics and trustworthiness. By denying the infraction, the perpetrators is concealing the original transgression and committing a supplementary trust violation.

This strategy likely causes added harm, reputational damage, and financial loss to the organization because it indicates the full intent of the individual or organization to further deceive the injured party and possibly the public.

To substantiate organizational trustworthiness, new leaders must ensure their organizations exhibit competence, quality assurance, interactional courtesy, procedural fairness, responsibility to inform, legal compliance.

Organizations must maintain a high level of competence to achieve sufficient results that adhere to the mission and maintain clear standards of quality to assure that competence is publicly and continually achieved.

Stakeholders cannot be assured or trust that the entity is fulfilling its obligations to its employees, creditors, or stakeholders without organizational proficiency and quality controls. Procedural fairness demands that all relevant stakeholders have the opportunity to participate in the organization with all matters of impartiality and openness.

Adhering to the responsibility to inform, leaders should make sure their organizations provide all relevant information about organizational performance and expectations. New leaders and their organizations also must express confidence and trustworthiness by operating with financial balance to fulfill their missions and commitments without waste while adhering to all rules, regulations, and laws governing the organization at the local, state, and federal level.