EMBA 2 Revised

8/3/2019 EMBA 2 Revised

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Organisational Change

Chapter 2The Nature of Change


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Introduction

The chapter:

Discusses a number of frameworks for

categorising change. Explains why, in order to be effective, it

is necessary to understand thedifferences between various types ofchange.

O


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ObjectivesTo:

Emphasise the complex nature of organisationalchange;

Describe and discuss the multi-dimensionalnature of organisational change;

Analyse change situations in order to chooseappropriate methods of managing and

implementing change; Recognise that there are limitations to the

common-sense approach to managing changethat assumes that change can be planned as alogical. Step by step, sequence of activities.

This because of cultural, political andleadership dynamics.

B k d A d fi i i f


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Background: A definition of strategy

Strategy is:

the directionand scopeof an organisation over thelong termwhich achieves advantagefor theorganisation through its configuration of resourceswithin a changing environmentto meet the needs

of marketsand to fulfill stakeholderexpectations.

Source: Johnson, G. & Scholes, K. (1993) Exploring Corporate Strategy, London, Prentice Hall, p. 10.


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Environmental turbulence Ansoff & McDonnel (1990)(recap)

Level 1. Predictable

Level 2. Forecastable by extrapolation Level 3. Predictable threats & opportunities

Level 4. Partially predictable opportunities

Level 5. Unpredictable surprises

Strebel (1996) Weak forces

Moderate forces

Strong forces

Stacey (1996) (recap) Close to certainty

Far from certainty

V i i f h ( i )


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Varieties of change (overview) Grundy (1993)

Smooth incremental

Bumpy incremental

Discontinuous

Tushman et al (1986)

Converging (fine-tuning)

Converging (incremental)

Discontinuous or frame-breaking

Dunphy & Stace (1993)

Fine tuning

Incremental adjustment

Modular transformation

Corporate transformation

V i i f h (G d )


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Varieties of change (Grundy)

Smooth incremental evolves slowly, in a

systematic and predictable way. Bumpy incremental periods of relative quiet

interrupted by sudden bursts in the rate of

change (e.g. re-organisations).

Discontinuousdivergent breakpoint,changes involving crisis, breakthrough,response to high turbulence.

M j T f Ch (G d )


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Major Types of Change (Grundy)

Rate

ofchange

Time

Discontinuous

Bumpy incremental

Smooth incremental

Source: Grundy, T. (1993) Implementing Strategic Change, Kogan Page, p. 25

V i ti f h (T h t l)


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Varieties of change (Tushman et al)

Converging (fine-tuning) - trying to do betterwhat is already being done well.

Converging (incremental adaptation) - smallchanges in response to small shifts in theenvironment.

Discontinuous or frame-breaking major,

rapid (spread over 18-24 months) andrevolutionary changes in strategy, structure,people & processes in order to meet radicallynew or different circumstances. Also termedupheaval.Most organisations follow a pattern of

convergence/upheaval cycles. This pattern canapply at all levels (department, unit, corporation).

P f F b ki Ch


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Pressures for Frame-breaking Change

Industry discontinuities, e.g. sharp changes in

the legal, political or technological conditions

which shift the basis of competition Product life-cycle shifts, i.e. strategic change

to fit the next stage of the cycle

Internal dynamics, e.g. new managementteam, with different strategy preferences

Examples of Frame breaking Change


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Examples of Frame-breaking Change

Change of mission or core

values

Power shifts, resource re-allocation

Total reorganization

New workflow procedures New CEO coming from

outside

Scale of change (1) (Dunphy & Stace)


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1. 1. Fine Tuning. At departmental level.

Making re-alignments to ensure thatthere is a match between strategy,structure, people and processes.

2. 2. Incremental Adjustment. Bit by bit changes to match the

changing environment.

Minor modifications to strategies orstructures..



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3. Modular Transformation. Major realignment of one or more

departments or divisions. Downsizing, re-engineering.

4. Corporate Transformation

(frame-breaking effecting the wholeorganisation). As described earlier as discontinuous or

frame-breaking change.

A contemporary research study found thatmost organisations have been undergoingtypes 3 & 4 change.

Environmental conditions and types of change


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Environmental conditions and types of change

ENVIRONMENTAL FORCES FOR

CHANGE

TYPES OF CHANGE

Ansoff andMcDonnell (1990)

Strebel(1996)

Stacey(1996)

Tushman et al.(1988)

Dunphy &Stace (1993)

Grundy(1993)

Stacey(1996)

Predictable

Forecastable byextrapolation

Predictable threatsand opportunities

Partially predictableopportunities

Unpredictablesurprises

Weak

Moderate

Strong

Close tocertainty

Close tocertainty

Far fromcertainty

Converging(fine-tuning)

Converging(incremental)

Discontinuousor frame-breaking

Fine-tuning

Incrementaladjustment

Modulartransformation

Corporate

transformation

Smoothincremental

Bumpyincremental

Discontinuous

Closed

Contained

Open-ended

Phases of Emergent Versus


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Phases of Emergent VersusPlanned Change (1)

Fine tuning and incremental

change are usually also seen asemergent, unfolding as ithappens.

The organisation, an open system,engages naturally in emergentchange as it tries to maintainequilibrium with its changing

environment.



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However, organizations that rely

only on making emergent changemay ignore warning signs of theneed for more radical forms ofchange, and the organisation willsuffer strategic drift, i.e. thestrategy and perceptions of theorganisation will become less and

less in tune with the environment.



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Some theorists argue that

PLANNED CHANGE that is alsoframe-breaking may then benecessary as a drastic remedy tobring the organization back tohealth.

Logical Incrementalism (1)


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Quinn does not agree that

change is eitheremergentorplanned. Quinn believes thatalthough managers may have anidea of the destination, they donot really plan change in bigchunks.



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Logical Incrementalism (2) Quinn says that managers:

Are flexible about how to get to thedestination.

Arrive at strategic change throughnegotiation with stakeholders.

Allow strategic change to evolveincrementally, although this is not piece-meal

or haphazard because it is based on agreedpurposes and involves constant critical re-assessment.

The planned change processinvolves

opportunist learning as it goes along. Logical instrumentalism is both emergent and

planned.

Predictable Change (1)


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Some theorists think that changemight be neither wholly emergent norwholly planned.Instead, change may reflect theorganisations LIFE-CYCLE.

Greiner identifies 4 stages or 5phases through which organisationsgo as they grow and develop.



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Each of Greiners stages contains acrisis period.Stage 1 is entrepreneurial - survival

oriented.

Stage 2 is collective - based on division

of labour.Stage 3 is formalised- based on

bureaucracy.

Stage 4 is elaborated - based on

problem oriented teams.

Stages of organisational growth


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Phase 1

Entrepreneurial

Phase 2

Direction

Pahse 3

Delegation

Phase 4

Co-ordination

Phase 5

Collaboration

Structure *Informal *Functional

*Centralized

*Hierarchical

*Top down

*Decentralized

*Bottom up

*Staff functions

*SBUs

*Decentralized

*Units merged

into product

groups

*Matrix-type

structure

Systems *Immediate response

to customer

feedback

*Standards

*Cost centres

*Budget

*Salary

systems

*Profit centres

*Bonuses

*Management by

exception

*Formal planning

procedures

*Investment

centres

*Tight

expenditure

controls

*Simplified and

integrated

information systems

Styles/

people

*Individualistic

*Creative

*Entrepreneurial*Ownership

*Strong

directive

*Full delegation

and autonomy

*Watchdog *Team-oriented

*Interpersonal skills

at a premium*Innovative

*Educational bias

Strengths *Fun

*Market response

*Efficient *High management

motivation

*More efficient

allocation of

corporate and

local resources

*Greater spontaneity

*Flexible and

behaviourial

approach

Crisis Point *Crisis of leadership *Crisis of

autonomy

*Crisis of control *Crisis of red tape ?

Weaknesses *Founder often

empermentallyunsuited to

managing

*Boss overload

*Unsujited to

diversity*Cumbersome

*Hierarchical

*Doesnt grow

people

*Top managers

lose control asfreeom breeds

parochial attitudes

*Bureaucratic

divisions betweenline/ staff,

headquarters/field

, etc

*psychological

saturation

Source: Clarke, L. (1994) The Essence of Change, Prentice Hall, p.12.

Stages of organisational growth



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Greiners model is potentially useful in

identifying what stage an organization is at,

and therefore what type of change situation itis in and will be in.

The model may therefore help an organisationto plan change and predict the next crisis

point.

Diagnosing Change Situations


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Diagnosing Change Situations

Diagnosis of change situations is not anexact science.

Various diagnostic methods can be usedin combination, e.g. SWOT, PETS, multi-cause diagrams.

Some more methods are now discussed.

Evolutionary Cycle of Competitive Behaviour - 1


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y y p

Strebel has suggested a model that examines

the industry within which the organisation is

located, i.e. the organisations competitiveenvironment.

Two key concepts are:

the evolutionary cycle of competitive behaviour.

breakpoints, when companies must change theirstrategies in response to changes in competitors

behaviour.



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y y p

The cycle involves two main phases.

1. The DIVERGENT PHASE, based oninnovation/variety: beginning whenone organisation discovers a newbusiness opportunity, the industry as a

whole strives to create differentiatedproducts and services that addcustomer value.



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y y p

2. Eventually a breakpoint occurs, as theemphasis shifts to the CONVERGENTPHASE, based on efficiency/survival,

which begins with imitation ofcompetitors best features, and thenleads to an emphasis on reducingcosts. Competitors converge on total

quality management, continualimprovement & re-engineering to cutcosts and maintain market share. Onlythe fittest survive.

3. Then back to 1, as further savings aremarginal.



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y y p

Progressively, with cycle after cycle, industriesdeliver both more customer value throughvarious generations of differentiation (e.g.mobile phone technology) each followed bymore cost reduction. Industries vary according to the relative emphasis on

divergent phases versus convergent phases



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Concern forInnovation &

customer value

Low

CustomerValue

HighCustomer

Value

LowCosts

Delivery of efficiency & cost savings

= breakpointspioneering/

novelty

phase

cost reduction phase

HighCosts

differentiation

phase

cost reduction phase

new

generationof products



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Spotting the breakpoints. Formal Methods include:

Environmental scanning

Benchmarking

Monitoring, data collection and data interpretation Detecting when a new divergent phase is about to begin

is more difficult because the new wave of innovationcannot yet be seen.

Informal methods include:Open-minded attitudes

Cooperation across the organisation

Culture supporting innovation and change

Difficulties and Messes


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Difficulties.

These are characterisedby hard complexity.

There are lots of factorsand variables.

But they can bemeaningfully quantified.

Optimal solutions can bedeveloped.

Messes.

These are characterised bysoft complexity.

Peoples description ofevents is ambiguous.

There are multipleinterpretations andreconstructions of what the

problem is. Stakeholder groups will see

things according to theirstake in the problem.

Thus there are manydifferent ideas about whatkind of solutions theremight be.

Difficult versus messy problems


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DIFFICULTIES - Smaller scale, well-defined, hard complexity, multiple variables, cerebral

BOUNDED

limited

timescalepriorities

clear

limitedapplications

can be treated

as a separate

matter

limited

number of

people involved

know what

needs to be

known

know whatthe problem is

know what

would be a

solution

UNBOUNDED

longer uncertain

timescale priorities called

into question

cant be

disentangled

from its contextmore people

involved

dont know what

needs to be known

uncertain

but greater

implications;

worrying

know what

the problem is

no solutions

MESSY PROBLEMS - bigger, poorly defined, soft complexity, multiple perspectives, emotional

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Concluding Remarks


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Diagnosing necessary change and managing

subsequent change is usually not just amatter of objective calculation.

Soft problems present various emotional andsocial dimensions which demand a broad

range of managerial change competenciesand approaches.

Documents

EMBA 2 Revised