Transcript Slide 1

Chapter 1
Organizational
Change
Rupak Rauniar, Organizational Change
Learning Objectives
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Identify the role of strategic renewal in
propelling change.
Focus on the behavioral aspect of
organizational change.
Analyze the dynamics of motivating
employees to alter their behaviors.
Differentiate the three faces of change.
Understand the source of both employee
resistance to and support for change.
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Change implementation: actions taken
by organizational leaders in order to support
strategic renewal and maintain outstanding
performance in a dynamic environment.
Strategic renewal: change in an
organization’s strategy through a process of
creating new products, services, capabilities,
and knowledge bases.
Rupak Rauniar, Organizational Change
Examples of Strategic
Responsiveness
Company
Altered Strategy
Enron
Move from energy production
to energy trading
GE
Move from commodity business to high
value-added products and services
IBM
Move from product to
service/consulting company
Marks and
Spencer
Move from a department store appealing to
traditional, conservative adult British shoppers
to a store appealing to young, trendy shoppers
Rupak Rauniar, Organizational Change
Examples of Strategic
Responsiveness (continued)
Company
Altered Strategy
Renault
Move from French-based to internationally
focused automobile company
Walgreens
Move from store-based chain in order to
capture growing Internet business
Facebook
Move from restricted, college campus-only
social network to become a “universal
utility” open to everyone
Rupak Rauniar, Organizational Change
Strategic Renewal and
Organizational Change
Shifting Competitive
Environment
Organizational
Change
Strategic
Renewal
New
Opportunities
Altering Behavior
Patterns of
Employees
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Organizational capabilities: the
collective talents and skills of a firm’s
employees.
Business model: the way in which an
organization generates profitable
revenues.
Rupak Rauniar, Organizational Change
Examples of Novel Business
Models
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Starbucks offered high-priced coffee specialty
drinks in a relaxed environment
Amazon sold books on-line
Southwest Airlines provided an air service that
competed with bus service and driving
Dell built computers to customer specifications
Zara placed low-cost, high-fashion items on shelves
with incredible speed
YouTube revolutionized the creation and
distribution of video
Facebook integrated web-based interconnectivity
with traditional school-based yearbooks
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Behavioral change: alterations in
employee behavior in order to enable
the organization to meet the demands
of its strategy while achieving and
sustaining outstanding performance.
Behavior: the enactment of roles,
responsibilities, and relationships by
employees within an organization.
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Organizational context: the setting
and circumstances in which employees
work.
“Organizational culture and values,
the behaviors of leaders, as well as
rules and procedures to define a
context that shapes how employees
enact their roles, responsibilities,
and relationships.”
Rupak Rauniar, Organizational Change
Sources of Behavior
Individual
Organizational
Characteristics
Context
Behavior
Organizational change seeks to
create long-term, sustainable
alterations in employee behaviors.
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Resistance: efforts exerted by
employees either overtly or covertly to
maintain the status quo.
“Employee response to change runs across a
broad spectrum, ranging from commitment at one
end to aggressive resistance” on the other. Each
of these reactions to change helps shape the
behavior of individuals and, ultimately, the
success of a change effort.”
Rupak Rauniar, Organizational Change
Underlying Causes of Resistance
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Individuals may be satisfied with the status
quo. Because their needs are being met, they may
view any potential change as negative.
Individuals may view change as a threat, fearing it
will adversely affect them in some significant way.
Individuals may understand that change brings both
benefits and costs, but feel that the costs far
outweigh the benefits.
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Individuals may view change as potentially positive,
but may still resist because they believe that the
organization’s management is mishandling the
change process.
Individuals may believe in the change effort, but
still believe that the change is not likely to
succeed.
Rupak Rauniar, Organizational Change
Management’s Role in Creating
Resistance
Text in this color
Resistance
Cause
Satisfied with status quo
Employees not included
Change is perceived as threat
Employees see little opportunity to
get required skills
Cost outweighs benefits
Inadequate articulation of goals
Belief that management is
mishandling the process
Employees’ voice and interest not
being included
Employees doubt success
Past change efforts lack sustained
success
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Participation: the process of allowing
employees a voice in work-related
decisions.
“By diagnosing problems, understanding their
importance, and being part of the process of
formulating solutions, people develop a
psychological sense of ownership over the outcome.
That ownership now creates in employees the
heightened motivation to implement change in order
to achieve desired goals.”
Rupak Rauniar, Organizational Change
Key Understandings about
Resistance and Participation
Imposing change from above
can lead to employee
resistance.
and
A participative process can
help build support for change
efforts.
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Turnaround: an attempt to improve the
immediate financial position of an
organization by focusing on the income
statement and the balance sheet.
Techniques and tools: organizational
processes, mechanics, and other interactions
intended to produce a product or service.
Rupak Rauniar, Organizational Change
Three Faces of Change
Type
Target
Rationale
Turnaround
Internal resources
Improve short-term
bottom-line
performance
Tools and
techniques
Processes
Increase internal
efficiency
Transformation
Behaviors
Enhance human
capabilities
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Outsourcing: a deliberate decision to
farm out certain value chain activities
to external specialists and/or strategic
allies.
“By moving low-value and routine
technology jobs to overseas
companies, companies can focus its
core activities on ‘the higher-value
portions of their industry.’ ”
Rupak Rauniar, Organizational Change
Reasons Companies Outsource
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Outsourcing saves money by
shipping jobs to lower-paid workers.
Outsourcing enables companies to
concentrate on core competencies.
Outsourcing offers a hedge against
shifting technologies and customer
preferences by lowering fixed costs
and building flexibility.
Rupak Rauniar, Organizational Change
Caution about Outsourcing
While outsourcing is a technique with
important turnaround (i.e., cost-savings)
implications…
Be careful!
If not applied carefully, it can undermine
motivation and disrupt important linkages
and relationships.
Rupak Rauniar, Organizational Change
Building a Vocabulary
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Trigger event: a shift in the
environment that precipitates a need
for organizational change.
“Trigger events…are so named because their magnitude and
potential for organizational as well as personal impact set into
motion a series of mental shifts as individuals strive to
understand and redefine a situation. By their very nature, they
unbalance established routines and evoke conscious thought
on the part of organizational members. They stir up feelings
and emotions that come to affect people’s reactions to the
change. In short, trigger events bring people’s mindsets into
the arena of change.”
Rupak Rauniar, Organizational Change
Examples of Trigger Events
Company
Altered
Strategy
Trigger Events
Enron
Move from energy production
to energy trading
New leader (Jeff Skilling)
Desire for new business
model
GE
Move from commodity
business to high
value-added products and
services
Recession in 1990s
New leader (Jack Welch)
IBM
Move from product to
service/consulting company
Declining performance
New competitors
New Leader (L. Gerstner)
Marks and
Spencer
Move from a department
store appealing to traditional,
conservative adult British
shoppers to a store appealing
to young, trendy shoppers
New competitor (Zara)
Fragmenting of retail
business model
Rupak Rauniar, Organizational Change
Examples of Trigger Events
(continued)
Company
Altered
Strategy
Trigger Events
Renault
Move from French-based
to internationally focused
automobile company
Stagnant market
New leader (Carlos Ghosn)
Walgreens
Move from store-based
chain in order to capture
growing Internet business
New technology
(Internet)
Facebook
Move from restricted,
college campus-only
social network to become
a “universal utility” open
to everyone
Increase customer base
Outmaneuver competitor
(MySpace)
Rupak Rauniar, Organizational Change