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How Organizational Change Works
By the end of this session
you will be able to:
Plan stages of a change process and
increase the likelihood of success by
adhering to proven principles of change
management
Management and Strategy Institute
How Organizational Change Works
Change is a process that needs to be handled carefully. It
consists of an organizational restructuring as well as
changing attitudes and behaviors. As with any complex
problem, there are many ways to fail. History is full of case
studies on companies who either failed to change or who
went through a change program and still failed due to bad
execution or bad planning.
Management and Strategy Institute
How Organizational Change Works
In this session, you will learn about one of the most popular
models on how to plan for change step-by-step and learn
how to get the most from it. You will also explore a number
of critical principles and guidelines on change management
that will help increase the likelihood of success.
Management and Strategy Institute
The Frog
A South American tribe had an abundant supply of frogs as
a food source. They experimented first by dropping a frog
into boiling water. The frog jumped out immediately,
spoiling the food!
Management and Strategy Institute
The Frog
The tribe eventually discovered an easier way to deal with
the frogs. They would put them into a pan full of cold water.
They would then place the pan over fire. The water would
heat up gradually and due to frog’s specific physiology,
they got more and more comfortable. This means that the
frogs would simply sit in the pan until boiled!
Management and Strategy Institute
The Frog
This fable by Charles Handy beautifully captures what
change can mean and what happens when one reacts too
slowly to a changing environment.
In short, there are people out there that are about to be
“boiled” alive, though they have no idea that the impending
massive change is coming. They see the slow changing
environment around them and take it at face value.
Let’s see how change can be managed so people don’t
end up with the same fate as the South American frogs.
Management and Strategy Institute
Principles of Effective Change
• “To lead people, walk beside them…
As for the best leaders, the people do not notice
their existence. The next best, the people honour
and praise. The next, the people fear; and the next,
the people hate… When the best leader’s work is
done the people say, “We did it ourselves!”
Lao-Tzu
Change management must follow a predefined well-
thought out strategy. According to Nadler and Tushman
there are a number of principles you need to consider for
effective change (Price 2009). These are as follows:
Management and Strategy Institute
The Vision Principle
“What could we
change”
“What should we
change”
Management and Strategy Institute
The Vision Principle
Change is about going from one state to another. This
requires knowing where you want to go and a vision to get
you there.
As part of communicating the vision you must establish the
need for change. You will need to consider:
• Rationale of change
• Impact on stakeholders
• The values behind the change
• Performance objectives
• Target operational culture
Management and Strategy Institute
The Energy Principle
A successful organization is usually stable. This stability
helps them to handle threats. However, the downside is
that this stability makes them resistive to change. To get
past this resistance, the organization must have energy to
carry out the change. You must work on increasing this
energy by creating a sense of urgency and motivating
people to act.
Management and Strategy Institute
The Diagnosis Principle
Diagnostic thinking means that you need to know the
“what” as well as the “how”. This helps avoiding
organizational mimicry which is copying other
organization’s response to a changing environment without
understanding its relevance to your organization.
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The Centrality Principle
It is absolutely critical to define the position and labelling of
the change accurately so that the change is clear to the
entire organization.
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The Three-Theme Principle
You cannot run and manage several potentially
contradictory changes at once. When bombarded daily with
a variety of changes employees start to become selective
and ignore anything they can get away with. Change must
be focused.
As a general rule, change managers can initiate and
sustain approximately three key themes during a specific
period. You must focus on areas that most people
associate with and have energy to engage in.
Management and Strategy Institute
The Magic Leader Principle
Can create a sense of urgency
Have distinctive behavior
Provides theme consistency
Can exhibit a mix of styles
The Leader-is-Not-Enough PrincipleManagement and Strategy Institute
The Magic Leader Principle
Large scale organizational change can significantly benefit from the existence of a unique leader who can represent, articulate and encourage the change. Such magic leaders have the following qualities:
• Can create a sense of urgency – The magic leader is critical in articulating the need for change and the need to do it sooner
rather than later.
• Have distinctive behavior– The magic leader envisions, energizes and enables the change.
• Provides theme consistency – The magic leader guards the consistency of change.
• Can exhibit a mix of styles – Magic leaders seem to have the capability to show two simultaneous styles of leadership; on
one hand they can be directive, stubborn and uncompromising. They are determined to achieve the objective of the change and nothing will convince them otherwise. On the other hand, they are open to new ideas, actively encourage open discussions and want to get people involved in the process. In short, great magic leaders seem to have simultaneous autocratic and democratic tendencies which make their roles more effective.
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The Leader-is-Not-Enough Principle
Although a magic leader is essential, by its own is not
enough to sustain a change. Successful change depends
on an army of supporters, helpers and people who believe
and have a stake in the change.
Attempts must be made to broaden the change leadership
beyond one or two people. The change executive team
must possess a consistent shared vision of the change.
Management and Strategy Institute
Who Moved My
Cheese
Management and Strategy Institute
Who Moved My Cheese
In 1998, Spencer Johnson published a motivational book
on change called, “Who Moved My Cheese?” (Spencer
1998). It is a business fable and an allegory. It is an
entertaining read and a popular book. This short book is
highly recommended to anyone who is involved in
managing a change or is subjected to change.
Management and Strategy Institute
Who Moved My Cheese
The story involves four characters, two mice and two little
people (miniature humans), Hem and Haw in a maze, an
allegory for a person’s complex environment.
Management and Strategy Institute
Who Moved My Cheese
The two pairs set off in the maze searching for cheese.
One day, the little people find cheese in a part of the maze
called “Cheese Station C”. They set up a routine to
consume it daily and get accustomed to the existence of
the cheese until one day they discover that there is no
cheese left.
Management and Strategy Institute
Who Moved My Cheese
From this point, the story focuses on how the little people
handle this change and it covers many aspects of handling
change through allegory.
Hem believes that the change is unfair and refuses to do
anything about it. Haw is however eager to go off in the
maze and search for other sources of cheese.
Management and Strategy Institute
Who Moved My Cheese
Eventually, Haw finds a new source of cheese, with more
varieties and in abundance while Hem has refused to move
and look for more cheese.
Haw decides to summarize his thoughts on the wall of this
newfound cheese station:
Management and Strategy Institute
Change Happens
They keep moving the cheese
Anticipate Change
Get ready for the cheese to
move
Monitor Change
Smell the cheese often so you
know when it is getting old
Gra
nd
R
ule
s
Management and Strategy Institute
Adapt to Change Quickly
The quicker you let go of old
cheese, the sooner you can
enjoy new cheese
Change
Move with the cheese
Gra
nd
R
ule
s
Management and Strategy Institute
Enjoy Change!
Savour the adventure and
enjoy the taste of new
cheese!
Be Ready to Change Quickly
and Enjoy it Again
They keep moving the
cheese
Gra
nd
R
ule
s
Management and Strategy Institute
The World is Changing... Fast
Factory
Mass Production
Mass Customization
Management and Strategy Institute
The World is Changing... Fast
We are about to enter the third industrial age. The first
industrial age began with the invention of factory in Britain
in the late 18th century. It was centred on mechanisation of
the textile industry. Rather than producing the textile by
hand in hundreds of weaver’s cottages, it was all brought
under a single cotton mill. The production ramped up and
soon put pressure on many of the traditional producers.
Management and Strategy Institute
The World is Changing... Fast
This led to the first great change in the modern era. People
had to adapt and understand the new trend. From our
position, we can easily see that there was no point for
anyone to resist the change or protest, or even worse, try
to stop it. Many of the advances and the subsequent
prosperity that followed were as a result of this significant
change to industrial production.
Management and Strategy Institute
The World is Changing... Fast
The second industrial revolution started at the beginning of
the 20th century. This is perhaps best symbolized by
Henry Ford’s car production company where he mastered
the moving assembly line. This great era of mass
production led to design and manufacturing of products on
a scale never seen before. This revolution has continued to
this day. Today large range of products are manufactured
and distributed at a huge scale. This makes them
extremely cheap so many people can now afford products
that were once considered luxury.
Management and Strategy Institute
The World is Changing... Fast
This led to the second great change of the modern era.
Now companies and organizations had to adjust to
compete with mass production. If they did not join, they
risked ending up producing lower quality products at much
higher prices which could not possibly compete with the
cheap mass manufactured products produced in ever more
sophisticated and streamlined factories.
Management and Strategy Institute
The World is Changing... Fast
All signs seem to suggest that we are entering the third
industrial revolution, this time as a result of the digital
revolution. In short, manufacturing and services are going
digital. There are a number of exciting technologies that
are converging; novel and exotic materials, real-time
software, ubiquitous access to networks, advanced
robotics, web-based services, social networks and 3D
printing.
Management and Strategy Institute
The World is Changing... Fast
In contrast with the second industrial revolution where the
focus was on mass producing an identical product and
reducing its cost of production through economy of scale,
the third revolution seems to be about mass customization.
Management and Strategy Institute
The World is Changing... Fast
Companies are now gearing up towards production of
products based on specific customer demands. The
demands are channelled through sophisticated networks,
connecting customers to designers, factories, suppliers and
to logistics services. There has already been great
progress in some of these areas. For example a customer
can go to a particular manufacturer’s websites, choose the
exact components of a laptop and customize it based on
his needs.
Management and Strategy Institute
The World is Changing... Fast
He can then order it through the manufacturer avoiding the
middleman. The order then goes through a complex maze
of supply-chain processes and on-demand manufacturing
before being assembled in a factory which covers the
customer’s particular area and finally it gets shipped.
Management and Strategy Institute
The World is Changing... Fast
A more disruptive revolution is perhaps centred on 3D
printing where the possibilities seem to be endless and
hugely revolutionary. Imagine downloading a design from
the net and getting the widget printed in your 3D printer
machine. You could order spare parts of old products and
you could order them even if you are in a remote location.
All you need is net access, a 3D printer and required
materials. But above all, you can get precisely what you
want as you can customise the design to your specific
needs down to the smallest details.
Management and Strategy Institute
The World is Changing... Fast
This will also revolutionize the assembly line. It will
become more flexible, more customizable, require less
labour to run and hence more efficient. It may no longer be
critical to operate these factories in low-wage countries and
so this trend may lead to another significant change for
factory locations globally.
Management and Strategy Institute
The World is Changing... Fast
Even companies that provide services are getting affected
by the trend towards mass customization. Everywhere you
look, you will see companies offering more choices and
options to address every need. In turn customers are
becoming more expectant and want more customization.
Management and Strategy Institute
The World is Changing... Fast
What should the companies do to survive in this world?
Would 3D printing or other technologies be as significant
and disruptive as we think? What is the impact of
ubiquitous access to the net along with sophisticated
smartphones?
Management and Strategy Institute
The World is Changing... Fast
What would be the effect of augmented reality when you
see the world through a digital contact lens with
superimposed live content on everything you see? How
would the governments respond to make their countries
more competitive and cater for the social aspects of the
new change from job losses to factory relocations, to
changes in transport demand, to handling copyrights, to
real-state and so on?
Management and Strategy Institute
Managing Resistance
By the end of this session
you will be able to:
Understand why people are afraid of
change and use behavioral techniques to
overcome their resistance to change
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Why People Resist Change
“You can’t teach an
old dog new tricks.”
“From the frying
pan into the fire.”
“Let sleeping dogs
lie.”Management and Strategy Institute
Why People Resist Change
No matter how you approach the implementation of change
there are always some people that resist it. There are fears
associated with change and people are susceptible to react
to it rather than comply. Hence, handling resistance to
change is a critical part of any change management
program and must be planned for before any change
campaign commences. In this session, you will learn about
these fears and learn about strategies that can be
employed to handle them.
Management and Strategy Institute
Why People Resist Change
It is natural for people to feel skeptical about change.
Various sources contribute to this fear. Identifying them
can help you to consider these fears when designing the
change management process and address them in due
course.
Sources of fear can be categorized as the following:
Management and Strategy Institute
Fears of Change
Fear of Reorganization
Fear of LossFear of
Implications
Fear of Uselessness
Fear of Loss of Control
Fear of Direct Change
Fear of Losing Face
Fear of Surprise
Fear of the Unknown
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Why People Resist Change
• Fear of reorganization. Disturbs the status quo and
gets people out of their comfort zones.
• Fear of loss. Desire not to lose something of value.
• Fear of implications. Misunderstanding of the change
and its implications. It is effectively fear of “walking off a
cliff while blindfolded.”
• Fear of uselessness. Belief that the change does not
make sense for the organization.
• Fear of loss of control. Change is exciting when it is
carried out by us but threatening when it is done to us.
Management and Strategy Institute
Why People Resist Change
• Fear of direct change. Some individuals have low tolerance to change.
• Fear of losing face. Belief that by going with the new change, they are accepting that their previous decisions and processes were wrong. They resist change to remain consistent with the past.
• Fear of surprise. When change is suddenly announced, most people are so shocked that they would rather resist the change or undermine it than to accept it.
• Fear of the unknown. People are afraid of what will happen if they go through change. One of your aims should be to make the status quo appear more dangerous than launching to the unknown.
Management and Strategy Institute
How to Deal With Resistance
Organizations often underestimate the variety of ways that
people react to change and resist it. They also seem to be
aware of only a few methods to handle this resistance
(mainly directly) or are simply unaware of the drawbacks of
methods they currently use or have used in the past.
Management and Strategy Institute
Stakeholder Engagement
When going through change, it is important to gain the
support of key stakeholders. Research shows that if a
significant percentage (about 75%) of top management is
not involved or convinced of the change, the change is
likely to fail.
Management and Strategy Institute
Stakeholder Engagement
As a result you will need to get the commitment of
stakeholders (managers, investors, creditors, employees)
in the process of change. However, stakeholders are not
all equal and should not be treated uniformly. At times, you
may need to focus on different types to strengthen support
or to eliminate resistance.
Management and Strategy Institute
Stakeholder Engagement
The following matrix shows the relationship between power
and interest of stakeholders in contrast with change. As
you can see most of the focus should be on Q1 as they are
powerful stakeholders that once convinced can join the
cause and support it.
Management and Strategy Institute
Stakeholder Engagement
It is important to remember that stakeholder positions are
not fixed and change over time. Your strategy needs to
address this change and constantly adapt so you can stay
ahead in the game. If you lose powerful stakeholders, they
can cause all sorts of issues by attempting to block the
change or undermine the change effort.
Management and Strategy Institute
Stakeholder Engagement
Q1
Lobby & Raise Interest
Q2
Seek Commitment and
Contribution
Q3
Harmless at Present
Q4
Be Careful not to Alienate
Interest HIGHLOW
HIG
HLO
WPower
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Management and Strategy Institute
Quiz
Click the Quiz button to edit this object
How to Manage Change
By the end of this session
you will be able to:
Identify skill gaps and required
infrastructural changes through a
structured approach
Management and Strategy Institute
How to Manage Change
• “Change is hard because people overestimate the
value of what they have and underestimate the value
of what they may gain by giving that up.”
• James Belasco and Ralph Stayer, Flight of the Buffalo
Management and Strategy Institute
How to Manage Change
As you have seen so far, going through a change process
requires structure. This session presents various areas of
change management, planning change management and
how to identify skill gaps in order to provide appropriate
support for staff.
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The Three Components
When managing change you need to consider three critical
areas:
Management and Strategy Institute
The Three Components
• What do you want to achieve as a result of change?
Outcome
• What strategy do you need to follow to achieve this goal?
Infrastructure
• What resources do you need to achieve this change?
Resources
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• What do you expect to change?
– Expected structural changes
– Expected cultural changes
• What are the benefits of these changes?
• What are the success criteria?
• What is the process to achieve the change?
Outcome
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Infrastructure
Next, you need to consider all the infrastructural changes.
Effectively this leads to your strategy in implementing the
change to achieve your outcome. Use the following
guidelines to maximise the likelihood of your success.
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Use early and open communication
Understand who knows what
Set correct pace
Use workshops
Carry out surveys
Infrastructure
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Provide management training
Use project-based approach
Use external support
Monitor and control
Infrastructure
Management and Strategy Institute
Infrastructure
• Use early and open communication. The process
must be transparent. Getting employees involvement
and participation can help the process significantly.
• Understand who knows what. Managers who initiate
change often assume that they have all the relevant
information required to carry out the change and those
who will be affected by it have access to the same facts.
In reality, it is likely that neither is true. This information
disparity is a great source of miscommunication and
potential resistance to change.
Management and Strategy Institute
Infrastructure
• Set correct pace. Employees don’t have a responsibility
to manage change. The responsibility rests with
executive management and the team in charge of the
change. They must manage change in a way that
employees can cope with.
• Use workshops. This allows you to reach collective
agreement and develop shared policies and approaches
towards the desired change.
Management and Strategy Institute
Infrastructure
• Carry out surveys. This allows you to receive feedback
and take steps to reassure staff, correct
misunderstandings and build trust. Use anonymous
surveys to allow people to talk freely.
• Provide management training. Management is
essential to the change process. They must be able to
understand, empathize and facilitate the process. If they
appear rigid and strict in following a policy set in stone,
the people are likely to resist and resent the change.
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Infrastructure
• Use project-based approach. Research shows that it is
more effective to manage the process of change as a
project. The project would then have an established
target, clear objectives, known resource requirements
and a specific schedule to follow. This creates order and
clarity which improves the likelihood of success. It will
also make it easier to coordinate activities between
various members of the change management team.
• Use external support. Always consider using external
consultants to improve the process of change.
Management and Strategy Institute
Infrastructure
• Monitor and control. Without performance
management you wouldn’t know if the changes are
making any difference. You need to identify people,
processes and systems that contributed to positive
change and improved productivity. You can then reward
them or use them to guide others. A common way to do
this is by using the 360 degree feedback analysis to
collect employees’ views of change and the impact on
their performance.
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Resources
Once you have identified your outcome and your strategy,
you need to consider resources that are required to carry
out the change. Implementing change costs a lot of time
and money. So you will need to have a clear
understanding before embarking on it. The most significant
resource required for change management is the impact on
senior management’s time.
Management and Strategy Institute
Resources
This can easily dictate how and when you can start the
change program so the management is ready and
wholeheartedly behind it. For a successful execution,
consider the following:
Management and Strategy Institute
• Impact on senior management’s time?
• Monetary resources are required?
• Impact on business objectives?
• Disrupted systems?
• Replacement equipment/man power/services?
• Information?
Resources
Management and Strategy Institute
Skill Management
If you are following aspects of Theory O described earlier
and intend to change the organizational culture, you would
need to focus mainly on training staff. Behaviors can be
changed through training. Use a skill matrix to identify
areas that need improvement. Focus your training on
these areas and skills.
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Skill Management
STEP 1: Define Skill Level
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Skill
RateSkill Level Definition Experience Knowledge Qualifications
1 TraineeHelp others under
guidance and learn on
the job
No current direct
experience
Theory and
conceptual familiarity
Informal, self-thoughts
and introductory
2 AnalystPerform and execute
while under guidance
Limited experience.
Involvement in small
projects.
General knowledgeEntry level
qualification
3 SeniorExecute and perform
without the need for
guidance
Practical real-world
application
Applied knowledge.
Completed projects.
Advanced
qualifications
4 ExpertSpecialist knowledge
and can advise others
on related subjects
Extensive and
competitive practical
experience
Abundant and
judgemental
Qualified and can
teach others
Management and Strategy Institute
Step 2: Develop a Skills Profile for Each
Employee
Design a questionnaire or use in-house online systems to
capture employees’ competencies.
What people think they know about themselves or consider
themselves experts in has a tremendous value and can be
used in all sorts of contexts to make informed decisions.
Management and Strategy Institute
Step 2: Develop a Skills Profile for Each
Employee
Of course this can also be used in conjunction with a 360
degrees review to create a good overall picture of an
individual’s abilities both from their point of view and those
of others.
For each skill, ask the employees to rate themselves on
their skills from 1 to 4 using the skill matrix identified in step
1.
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Step 2: Develop a Skills Profile for Each
Employee
The skills identified can be a set of hard skills and a set of
soft skills. Some examples:
• Hard skills
– Ability to write a computer program in language X
– Ability to work with spread sheets
– Ability to operate the CNC machine
• Soft skills
– Ability to manage a small team
– Ability to chair a project meeting with clients
– Ability to handle customer phone calls
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Step 2: Develop a Skills Profile for Each
Employee
With soft skills you may have to tone down on qualifications
(as many soft skills are not something that you qualify for)
and instead focus on people’s experience and knowledge
in that skill.
Management and Strategy Institute
Step 2: Develop a Skills Profile for Each
Employee
Another important point is that people’s perception of their
own soft skills can sometimes be warped too positively or
they may not know they have a weakness in a particular
area. In addition to asking them to score themselves on
these skills, you should also carry out a more sophisticated
analysis to rate each employee on a set of soft skills. For
example you can measure their emotional intelligence
using industry standard analysis tools to score them in
various EI competences.
Management and Strategy Institute
STEP 2: Develop a Skills Profile
Hard Skills Soft Skills
Person
Ability to
write a
computer
program
in
language
X
Ability to
work with
spread
sheets
Ability to
operate
the CNC
machine
Ability to
manage a
small
team
Ability to
chair a
project
meeting
with
clients
Ability to
handle
customer
phone
calls
John 3 4 1 2 1 3
Karen 1 1 1 1 2 4
Fiona 1 3 1 3 2 4
Tom 2 2 4 4 3 3
Jack 4 4 1 3 2 3Management and Strategy Institute
Step 3: Identify Critical Skills
Next, you need to identify skills that are critical to the
success of the organization. These skills must be defined in
line with the change process. Here are some examples:
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Step 3: Identify Critical Skills
• New skills because of change. To move to new machinery, you may require staff to have the new skill to operate it.
• New skills to increase efficiency. Suppose there have been customer complaints on handling phone calls. You think this is a critical skill and you want to train staff to be at skills level 3 or 4 on this.
• New transient skills for the change process. You may need specific skills required to go through the change. For example, as part of the change program you need to get staff to use the new contact management software. You will need to port the old contacts to the new system. For this, you will need an IT specialist who can carry out this one-time task. If you don’t want to hire a contractor to do this, you can consider training current IT staff on this specific transient skill.
Management and Strategy Institute
Step 4: Analyze the Data to Generate
Conclusions
Once you have created the table in Step 3, you should
identify the skill gap. For example, you may realize that 15
of employees have a skill level of 1 or 2 on the ability to
manage a project team meeting and therefore need more
training to become better at this skill.
The results of this step should feed back to your general
change management strategy so the skills gaps you
identify here are consistent with the overall goal.
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Step 4: Analyse the Data to Generate
Conclusions
Analyze Skill
Matrix
Identify Skill Gap
Identify Training Needs
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Train or Acquire
When you have identified that you have a skill gap in your
organization and want to embark on a change program to
fill the gap, you have generally two options; you can train
your current staff so they can become skilled or you can
recruit more experienced people from the outside of the
organization.
Each solution has its own advantages and disadvantages.
Management and Strategy Institute
Training Current Staff
Employees know the organization
No induction necessary
The organization knows the employees
Can design effective tailored training
Employees know each other’s strengths
Already part of the network
Established loyalty
AD
VA
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GE
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Management and Strategy Institute
Training Current Staff
Resistance to change
Some could be fixed on their old habits and resist change
Focused on old ideas
May lose the opportunity to get fresh new ideasD
ISA
DV
AN
TA
GE
S
Management and Strategy Institute
Acquiring Staff
Require minimum training
Picked based on required skills
Bring fresh ideas
Can overcome resistance naturally
Can be catalysts
Can be role models
Can show how to move on
AD
VA
NTA
GE
S
Management and Strategy Institute
Acquiring Staff
Can be expensive
Costly to find the right skills
Can lead to friction
Source of resentment
Need to settle in their new organization
Settling through change can be challenging
Need 2-3 years to establish loyalty
Can leave when a crisis occurs
DIS
AD
VA
NTA
GE
S
Management and Strategy Institute
Train or Acquire
In practice you can also consider combining these two
approaches to get the best from both. Increasingly, many
organizations also consider using contractors which can
quickly give them a specific skill set and an ability to bring
fresh people into the organizations. Since there is no long
term commitment, this allows employers to manage staff
smoothly once the change program is completed.
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Continue
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