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Change is accelerating
Power shifting from sellers to buyers
The power of the Internet
Unlimited substitution over competition
Leadership and management domain is worldwide now
Knowledge age
New world
Rapidly Changing World
Allowing Too Much Complacency
Failing to Create Sufficiently Powerful Guiding Coalition
Understanding the Power of Vision
Undercommunicating the Vision by a Factor of 10 (or 100, or even 1,000)
Permitting Obstacles to Block the New Vision
Failure to Create Short-Term Wins
Declaring Victory Too Soon
Neglecting to Anchor Changes Firmly in the Corporate Culture
Why Firms Fail
Consequences of Errors
New Strategies aren’t implemented well
Acquisitions don’t achieve expected synergies
Reengineering takes too long and costs too much
Downsizing doesn’t get costs under control
Quality programs don’t deliver hoped-for-results
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Technological Change
• Faster and better communication•Faster and better transportation•More information networks connecting people globally
Forces driving the need for major change
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Technological Change
International Economic
Integration
• Faster and better communication•Faster and better transportation•More information networks connecting people globally
• Fewer tariffs (GATT)•Currencies linked via floating exchange rates•More global capital flows
Forces driving the need for major change
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Technological Change
International Economic
Integration
Maturation of markets in developed countries
• Faster and better communication•Faster and better transportation•More information networks connecting people globally
• Fewer tariffs (GATT)•Currencies linked via floating exchange rates•More global capital flows
• Slower domestic growth•More aggressive exporters•More deregulation
Forces driving the need for major change
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Technological Change
International Economic
Integration
Maturation of markets in developed countries
Fall of communist and
socialist regimes
• Faster and better communication•Faster and better transportation•More information networks connecting people globally
• Fewer tariffs (GATT)•Currencies linked via floating exchange rates•More global capital flows
• Slower domestic growth•More aggressive exporters•More deregulation
•More countries linked to the capitalist system•More privatization
Forces driving the need for major change
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Forces driving the need for major change
The Globalization of Markets and Competition
More Hazards
• More competition• Increased speed
More Opportunities
• Bigger markets• Fewer barriers
More Large-scale change in organizations
To avoid hazards and/or capitalize on opportunities, firms must become stronger competitors. Typical transformation methods include:
• Reengineering Mergers and acquisitions
• Restructuring Strategic change• Quality programs Cultural change
Establishing a Sense of UrgencyEstablishing a Sense of Urgency
Creating the Guiding Coalition Creating the Guiding Coalition
Developing a Vision and StrategyDeveloping a Vision and Strategy
Communicating the Change Vision Communicating the Change Vision
Empowering Broad-based ActionEmpowering Broad-based Action
Generating Short-term WinsGenerating Short-term Wins
Consolidating Gains and Producing More Change
Consolidating Gains and Producing More Change
Anchoring New Approaches in the Culture
Anchoring New Approaches in the Culture
Kotter’s Eight-Stage Change Process
Management
The process of achieving organizational goals by engaging in the four major functions of planning, organizing,
leading, and controlling.
It characterizes the process of planning, leading, and directing all or part of an organization, through the deployment or manipulation
of resources
The process of achieving organizational goals by engaging in the four major functions of planning, organizing,
leading, and controlling.
It characterizes the process of planning, leading, and directing all or part of an organization, through the deployment or manipulation
of resources
Leadership
Leadership is the ability to influence others towards the achievement of goals
Leadership is the ability to influence others towards the achievement of goals
ManagementManagement LeadershipLeadership• Planning and budgeting• Organizing and staffing• Controlling and problem solving
• Establishing direction• Aligning people• Motivating and inspiring
Management vs. Leadership
• Produces a degree of predictability and order
and has the potential to consistently produce the
Short-term results expected by various stakeholders
(e.g. for customers, always being on time, for
Stock-holders, being on budget)
• Produces a degree of predictability and order
and has the potential to consistently produce the
Short-term results expected by various stakeholders
(e.g. for customers, always being on time, for
Stock-holders, being on budget)
• Produces change, often to a dramatic degree,
and has the potential to produce extremely
useful change ((e.g. new products that customers
want, new approaches to labor relations that help
make a firm more competitive)
• Produces change, often to a dramatic degree,
and has the potential to produce extremely
useful change ((e.g. new products that customers
want, new approaches to labor relations that help
make a firm more competitive)
Management aims to give consistency and order to organizations
Management aims to give consistency and order to organizations
Leadership seeks to provide constructive and adaptive change
Leadership seeks to provide constructive and adaptive change
Management is directed toward coordinating
activities in order to get the job done
Management is directed toward coordinating
activities in order to get the job done
Leadership is concerned with the process of
developing mutual purposes.
Leadership is concerned with the process of
developing mutual purposes.
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Management vs. Leadership -1
Management relies more on a one-way authority relationship
Management relies more on a one-way authority relationship
Leadership relies more on a multidirectional influence
relationship
Leadership relies more on a multidirectional influence
relationship
Managers are people who do things right
Managers are people who do things right
Leaders are people who do theright things
Leaders are people who do theright things
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Management vs. Leadership -2
ADAPTING
DIAGNOSIS
COMMUNICATING
McGraw-Hill/Irwin ©2006 The McGraw-Hill Companies, Inc. All rights reserved.
Three Competencies of Leadership
The Need forManagement Skills
ManagerialSkills and
Life Success
ManagerialSkills and
Hiring
ManagerialSkills in theNew Work
Environment
Need for Management Skills
Knowing How to Learn
Reading
Writing
Mathematics
Listening
Oral Communication
Problem Solving
Creative Thinking
Self-Confidence
Motivational Goal Setting
Personal and Career Development
Interpersonal Skills
Negotiation
Teamwork
Organizational Effectiveness
Leadership
16 Basic Skills Employees Need
Demand forManagerial
Skills
Entrepreneurship
Downsizing andDelayering
Job Enrichmentand Empowerment
Self-ManagedWork Teams
Hiring for theSecond Job
Growth inManagement Positions
Managerial Skills in the New Work Environment
Conceptual
Conceptual
Conceptual
Human
Human
Human
Technical
Technical
Technical
Top-Level Managers
Middle-LevelManagers
First-Level Managers
Managerial Skills
21
Time
Activity
• industry evolution• diffusion of innovation
tipping points
FAST
SLOW
SLOW
Rate of Change is not Constant
23
The gradualist paradigm posits that an organization:
changes and develops though a continuous process of incremental adjustment,
these adjustments (changes) accumulate over time to ensure that the organisation is always aligned with its external environment.
Gradualist Paradigm
24
While a process of continuous gradual adjustment might be the ideal, evidence suggests that most organisations experience change as a discontinuous process often referred to as a pattern of punctuated equilibrium.
Degree of change
time
Discontinuous change
Long periods of equilibrium during which there is little change
Punctuated by short periods of radical (discontinuous) change
Punctuated Equilibrium
25
Intensity of change
time
Continuous and discontinuous change can be viewed from the perspective of the intensity of change
26
Intensity of change
Continuous change involves a stream of low intensity changes that (according to the gradualist paradigm) can accumulate to
transform the organization.
27
Intensity of change
Discontinuous change involves ‘doing things differently or doing different things’Incremental change
involves ‘doing things better’
Dropouts Dropouts Dropouts
Punctuated equilibrium involves long periods of low intensity incremental changes punctuated by
short bursts of high intensity discontinuous change
28
This is the dominant pattern of change because a number of factors act to limit the degree of change that occurs in the periods of low intensity
change
equilibrium : periods of low intensity change
Punctuated equilibrium is the dominant pattern of change
Many people are reluctant to change because:
FEAR (they prefer the status quo to an uncertain future; they anticipate that the cost of changing might outweigh
the benefits)
29
Why is it so hard to change?
30
• Persistent deep structures are the fundamental choices that determine an organization’s pattern of activity.
Football analogyThe rules of the game represent deep structures – taken for granted and difficult to change.
The game-in-play describes activity in periods of equilibrium when the coach and players can make changes that will affect team performance but not the rules of the game.
Why is it so hard to change?
31
• Tight and loose coupling
Football analogy
It would be difficult for one team to modify the rules. A football club is tightly coupled with the other clubs that play in the same
league
Forces for inertia are strongest when a group, department or organisation is part of a network of tightly coupled mutual
dependencies
Why is it so hard to change?
• Pressure to deliver short term results
This pressure:
directs managers’ attention towards improving internal alignment in order to increase efficiency.
diverts their attention away from external alignment.
32
structure
technology systems
people
All three factors (fear of change, persistent deep structures and the pressure to deliver short term results) combine to inhibit change and promote strategic drift.
The organization does not change fast enough or in the ways that will ensure that it remains aligned with its external environment.
Why is it so hard to change?
33
Eventually this misalignment with the external environment reaches a
point where major change (radical transformation) is precipitated.
The trigger for discontinuous change
34
Romanelli and Tushman examined the life histories of 25
minicomputer producers and found a pattern of discontinuous,
episodic change
changes in strategy, structure and power-distribution were clustered in time - the pattern of change predicted by the punctuated equilibrium model
changes were not spread over relatively long periods of time as predicted by the gradualist paradigm.
Evidence supporting the theory of punctuated equilibrium
35
Improvisation that leads to a continuous modification of existing work practices
Continuously adaptive organizations experience the kind of continuous change described by
the gradualist paradigm
This requires organizations to engage in repeated patterns of:
Learning and new insights which facilitate changes in the way the organization responds to problems and opportunities
Translation that involves the editing and imitation of ideas as they travel through the organization
36
But the evidence suggests that most organisations, if they survive long enough, will experience change as a pattern of punctuated equilibrium
There are three exceptions:
37
1. The small minority of “learning organizations” that do manage to
continuously adapt through ongoing processes of improvisation and learning
2. Companies operating in niche markets or in slow moving sectors where they
have not yet encountered the kind of environmental change that requires them
to transform their deep structures.
3. Organizations that are able to continue functioning without transforming
themselves because they have sufficient ‘fat’ to absorb the inefficiencies
associated with misalignment.
38
Combining notions of continuous and discontinuous change
with the way an organisation responds to change (proactive
or reactive) provides a useful typology for classifying types
of change
A Typology of Change
39
-
Proactive(Anticipatory)
Reactive
Incremental(doing things better)
Transformational/discontinuous(doing things differently or doing different things)
1. Fine Tuning
Citibank
2. AdaptationOther banks reaction
to Citibank’s move
3. Re-orientation
Nestle – 1980s
4. Re-creation
Asda – 1990s
A Typology of Change
40
1. Focus for change effort
2. Locus for change: who will manage the process?
3. Sequence of steps in the change process
4. Role of change agent
Implications of these different types of change for change management practice
41
With incremental change the aim is to improve the alignment between existing organizational components in order to ‘do things better’
TaskStructure Culture
People
With discontinuous/transformational change the aim is to seek a new configuration of organizational components that are aligned to external circumstances. The outcome may be that the firm ‘does things differently’ or ‘does different things’
TaskStructure Culture
People
OUTPUTSrequired by external
stakeholders
INPUTSrequired to support the transformed business
1. Focus for change efforts
42
Discontinuous change is more intense than
incremental change, and reactive change tends
to be more intense than anticipatory change
Most intense
Least intense
Re-creation
Re-orientation
Adaptation
Tuning
The intensity of change (indicated by the stress, dislocation and trauma associate with
change) affects the point in the organization where the leadership for change is located.
2. Locus for change
43
Low intensity change
High intensity change
Executive led change
Change through delegation(Project managers and external consultants)
Change through normal management processes
2. Locus for change - Example
44
Change typically involves a three step process that follows the sequence:
UNFREEZE
MOVE
REFREEZE
1. Unfreezing the restraining forces that maintain the status quo
2. Moving the organisation to a new state
3. Refreezing to consolidate the change
3. Sequence of change
45
FREEZE
REBALANCE
UNFREEZE
Freezing in order to take stock, identify patterns and highlight what is happening
Rebalancing – reinterpreting history, identifying and amplifying best practice and re-sequencing patterns
Unfreezing to enable patterns of activity to resume with fewer blockages.
3. Sequence of change - Example
46
With discontinuous/transformational change the role of the change agent is to be the
prime mover who initiates and manages a process of planned change
With rapid continuous change the role of the change agent is to help others make
sense of the change dynamics already under way
4. Role of Change Agent