Managing Organization Change

The ability to effectively manage change is an important part of a manager’s conceptual skills.

Organization change is any substantive modification to some part of the organization.

Thus, change can involve virtually any aspect of an organization: work schedules, bases for departmentalization, span of management, machinery, organization design, people themselves, and so on.

It is important to keep in mind that any change in an organization may have effects extending beyond the actual area where the change is implemented.

For example, when Northrop GrummanOpens in new window installed a new automated production system at one of its plans, employees had to be retrained to operate new equipment, the compensation system had to be adjusted to reflect new skill levels, the span of management for supervisors had to be altered, and several jobs needed to be redesigned.

Selection criteria for new employees also were changed, and a new quality control system was needed. As you can see from this example, it is common, and often necessary, for multiple organization change activities to occur simultaneously.

Forces for Change

Why do organizations find change necessary?

The basic reason is that something relevant to the organization either has changed or is likely to change in the foreseeable future. The organization therefore may have little choice but to change as well.

Indeed, a primary reason for the problems that organizations often face is failure to anticipate or respond properly to changing circumstances. The forces that compel change may be external or internal to the organization.

  1.    External Forces

External forces for change derive from the organization’s general and task environments. For example, two energy crises, an aggressive Japanese automobile industry, floating currency exchange rates, and floating international dimension of the general environment — profoundly influenced US automobile companies.

New rules of production and competition forced them to dramatically alter the way they do business.

  • In the political area, new laws, court decisions, and regulations affect organizations.
  • The technological dimension may yield new production techniques that the organization needs to explore.
  • The economic dimension is affected by inflation, the cost of living, and the money supply.
  • The sociocultural dimension, reflecting societal values, determines what kinds of products or services the market will accept.

Because of its proximity to the organization, the task environment is an even more powerful force for change. Competitors influence an organization through their price structures and product lines.

When American AirlinesOpens in new window lowers the prices of its airfares. UnitedOpens in new window and DeltaOpens in new window may have little choice but to follow suit. Because customers determine what products can be sold at what prices, organizations must be concerned with consumer tastes and preferences. Suppliers affect organizations by raising or lowering prices or changing product lines.

Regulators can have dramatic effects on an organization. For example, if OSHAOpens in new window rules that a particular production process is dangerous to workers, it can force a firm to close a plant until it meets higher safety standards. Unions can force change when they have the clout to negotiate for higher wages or if they go on strike.

  1.    Internal Forces

A variety of forces inside the organization may cause change. If top management revises the organization’s strategy, organization change is likely to result.

A decision by an electronics company to enter the home computer market or a decision to increase a ten-year product sales goal by 3 percent would prompt many organization changes.

Other internal forces for change may be reflections of external forces. As sociocultural values shift, for example, workers’ attitudes toward their jobs also may shift — and workers may demand a change in working hours or working conditions. In such a case, even though the force is rooted in the external environment, the organization must respond directly to the internal pressure it generates.

Planned versus Reactive Change

Some change is planned in advance; other change comes about as a reaction to unexpected events.

  • Planned change is change that is designed and implemented in an orderly and timely fashion in anticipation of future events.
  • Reactive change is a piecemeal response to circumstances as they develop.

Because reactive change may be hurried, the potential for poorly conceived and executed change is increased. Planned change usually is preferable to reactive change.

Georgia-PacificOpens in new window, a large forest products business, is an excellent example of a firm that went through a planned and well-managed change process. When A. D. Correll became CEO, he quickly became alarmed at the firm’s high accident rate — nine serious injuries per 100 employees each year, and 26 deaths during the most recent five-year period.

Although the forest products business is inherently dangerous, Correll believed that the accident rate was far too high, and he set out on a major change effort to improve things. He and other top managers developed a multistage change program intended to educate workers about safety, improve safety equipment in the plant, and eliminate a long-standing part of the firm’s culture that made injuries almost a badge of courage.

As a result, Georgia-PacificOpens in new window achieved the best safety record in the industry, with relatively few injuries. On the other hand, CaterpillarOpens in new window was caught flat-footed by a worldwide recession in the construction industry, suffered enormous losses, and took several years to recover.

Had managers at CaterpillarOpens in new window anticipated the need for change earlier, they might have been able to respond more quickly. Similarly, the importance of approaching change from a planned perspective is reinforced by the frequency of organization change.

Most companies or divisions of large companies implemented some form of moderate change at least every year and one or more major changes every four to five years. Managers who sit back and respond only when they have to are likely to spend a lot of time hastily changing and re-changing things. A more effective approach is to anticipate forces urging change and plan ahead to deal with them.

The Lewin Change Model

Kurt LewinOpens in new window, a notable organizational theorist, suggested that every change requires three steps.

The first step is unfreezing — individuals who will be affected by the impending change must be led to recognize why the change is necessary. Next, the change itself is implemented.

Finally, refreezing involves reinforcing and supporting the change so that it becomes a part of the system. For example, one of the changes Caterpillar faced in response to the recession noted earlier involved a massive workforce reduction.

The first step (unfreezing) was convincing the United Auto WorkersOpens in new window to support the reduction because of its importance to long-term effectiveness. After this unfreezing was accomplished, 30,000 jobs were eliminated (implementation).

Then Caterpillar worked to improve its damaged relationship with its workers (refreezing) by guaranteeing future pay hikes and promising no more cutbacks. As interesting as Lewin’s model is, however, lacks operational specificity. Thus, a more comprehensive perspective often is needed.

A Comprehensive Approach to Change

The comprehensive approach to change takes a systems view and delineate a series of specific steps that often leads to successful change. This expanded model is illustrated in Figure X-1.

Figure X-1 | The Comprehensive Approach to Change Figure X-1 | The Comprehensive Approach to Change
  • The first step is to recognize the need for change. Reactive change might be triggered by employee complaints, declines in productivity or turnover, court injunctions, sales slumps, or labor strikes.

    Recognition may simply be managers’ awareness that change in a certain area is inevitable. For example, managers may be aware of the general frequency of organizational change undertaken by most organizations and recognize that their organization should follow the same pattern.

    The immediate stimulus might be the result of a forecast indicating new market potential, the accumulation of a cash surplus for possible investment, or an opportunity to achieve and capitalize on a major technological breakthrough. Managers also might initiate change today because indicators suggest that it will be necessary in the near future.
  • Managers must next set goals for the change. To increase market share, to enter new markets, to restore employee morale, to settle a strike, and to identify investment opportunities all might be goals for change.
  • Third, managers must diagnose what brought on the need for change. Turnover, for example, might be caused by low pay, poor working conditions, poor supervisors, or employee dissatisfaction. Thus, although turnover may be the immediate stimulus for change, managers must understand its causes to make the right changes.
  • The next step is to select a change technique that will accomplish the intended goals. If turnover is caused by low pay, a new reward system may be needed. If the cause is poor supervision, supervisors may need interpersonal skills training.
  • After the appropriate technique has been chosen, its implementation must be planned. Issues to consider include the costs of the change, its effects on other areas of the organization, and the degree of employee participation appropriate for the situation.
  • If the change is implemented as planned, the results should then be evaluated. If the change was intended to reduce turnover, managers must check turnover after the change has been in effect for a while. If turnover is still too high, further changes may be necessary.

Understanding Resistance to Change

Another element in the effective management of change is understanding the resistance that often accompanies change. Managers need to know why people resist change and what can be done about their resistance.

When WestinghouseOpens in new window first provided all of its managers with personal computers, most people responded favorably. One manager, however, resisted the change to the point where he began leaving work every day at noon! It was some time before he began staying in the office all day again. Such resistance is common for a variety of reasons.

  1.    Uncertainty

Perhaps the biggest cause of employee resistance to change is uncertainty. In the face of impending change, employees may become anxious and nervous. They may worry about their ability to meet new job demands, they may simply dislike ambiguity.

NabiscoOpens in new window was once the target of an extended and confusing takeover battle, and during the entire time, employees were nervous about the impending change.

The Wall Street Journal described them this way: “Many are angry at their leaders and fearful for their jobs. They are swapping rumors and spinning scenarios for the ultimate outcome of the battle for the tobacco and food giant. Headquarters staffers in Atlanta know so little about what’s happening in New York that some call their office ‘the mushroom complex,’ where they are kept in the dark.”

  1.    Threatened Self-Interests

Many impending changes threaten the self-interests of some managers within the organization. A change might diminish their power or influence within the company, so they fight it. Managers at SearsOpens in new window once developed a plan calling for a new type of store. The new stores would be somewhat smaller than a typical Sears store and would not be located in large shopping malls.

Instead, they would be located in smaller strip centers. They would carry clothes and other “soft goods,” but not hardware, appliances, furniture, or automotive products. When executives in charge of the excluded product lines heard about the plan, they raised such strong objections that the plan was cancelled.

  1.    Different Perceptions

A third reason that people resist change is due to different perceptions. A manager may make a decision and recommend a plan for change on the basis of his or her own assessment of a situation.

Others in the organization may resist the change because they do not agree with the manager’s assessment or they perceive the situation differently.

Executives at 7-ElevenOpens in new window battled this problem as they attempted to enact a major organizational change. The corporation wanted to take its convenience stores a bit “upscale” and begin selling fancy fresh foods to go, the newest hardcover novels, some gourmet products, and higher quality coffee. But many franchisees balked because they saw this move as taking the firm away from its core blue-collar customers.

  1.    Feelings of Loss

Many changes involve altering work arrangements in ways that disrupt existing social networks.

Because social relationships are important, most people resist any change that might adversely affect those relationships. Other intangibles threatened by change include power, status, security, familiarity with existing procedures, and self-confidence.

Overcoming Resistance to Change

Of course, a manager should not give up in the face of resistance to change. Although there are no sure-fire cures, there are several techniques that at least have the potential to overcome resistance.

  1.    Participation

Participation is often the most effective technique for overcoming resistance to change. Employees who participate in planning and implementing a change are better able to understand why it is needed. Uncertainty is reduced, and self-interests and social relationships are less threatened.

Having had an opportunity to express their ideas and assume the perspectives of others, employees are more likely to accept the change gracefully.

A classic study of participation monitored the introduction of a change in production methods among four groups in a Virginia pajama factory. ‘The two groups that fully participated in planning and implementing the change improved significantly in their productivity and satisfaction, relative to the two groups that did not participate.

As another example, the 3M CompanyOpens in new window recently attributed several million dollars in cost savings to employee participation in several organization change activities.

  1.    Education and Communication

Educating employees about the need for and the expected results of an impending change should reduce their resistance. If open communication is established and maintained during the change process, uncertainty can be minimized.

CaterpillarOpens in new window used these methods during many of its cutbacks to reduce resistance. First, it educated UAW representativesOpens in new window about the need for and potential value of the planned changes. Then management told all employees what was happening, when it would happen, and how it would affect them individually.

  1.    Facilitation

Several facilitation procedures also are advisable. For instance, making only necessary changes, announcing those changes well in advance, and allowing time for people to adjust to new ways of doing things can help reduce resistance to change.

One manager at a Prudential regional office spent several months systematically planning a change in work procedures and job design. He then became too impatient and came in over the weekend with a work crew to rearrange the office layout. When employees walked in on Monday morning and saw what he had done, they were hostile, anxious, and resentful. What was a promising change became a disaster, and the manager had to scrap the entire plan.

  1.    Force-Field Analysis

Although force-field analysisOpens in new window may sound like something out of a Star Trek movie, it can help overcome resistance to change. In almost any change situation, forces are acting for and against the change.

To facilitate the change, managers start by listing each set of forces and then trying to tip the balance so that the forces facilitating the change outweigh those hindering the change. It is especially important to try to remove or at least minimize some of the forces acting against the change.

Suppose, for example, that General Motors is considering a plant closing as part of a change. Three factors are reinforcing the change: GM needs to cut costs; it has excess capacity; and the plant has outmoded production facilities.

At the same time, there is resistance from the UAW, concern for workers being put out of their jobs, and a feeling that the plant might be needed again in the future.

GM might start by convincing the UAW that the closing is necessary by presenting profit and loss figures. It could then offer relocation and retraining to displaced workers. Finally, it might shut down the plant and put it in “mothballs” so that it can be renovated later. The three major factors hindering the change are thus eliminated or reduced in importance.

See Also:
    Research data for this work have been adapted from the manual:
  1. Management Skills: Assessment and Development By Ricky Griffin, David Van Fleet.