Change Management

In an environment of increased dynamism and competition, the ability of an organisation to change and adapt is more important than perhaps ever before. Whilst some organisations continue to prosper despite such difficult conditions, firms including Google, Apple and Toyota continue to go from strength to strength. The differentiating factor in this instance is widely considered to be how such organisations manage change in light of what Hayes (2014) refers to as a world of ‘new technology, blurred organisational boundaries, and an increasingly globalised workforce’ (p. 9). Organisational change is the one constant, which organisations must face and the consequences of not adapting or managing the change process can be detrimental, or event fatal to a firm’s success. As a result, there is a need for firms to place importance on the management of change in an effective and sustainable fashion.

What is change management?

The meaning of the term change management stems from the idea that whilst change is varied and dynamic, it can be managed to promote sustainable and positive change. Change management is a broad term, which encompasses any approach to aiding an organisations ability to manage the change process in either a steady or transformational manner. Offering a wide range of tools, techniques and processes, some of which are explored within this chapter, change management adopts a practical outlook to incorporate the use of tools into the transitioning process of the firm. Such tools may be prescriptive or may be diagnostic in nature. Formally, change management can be defined as ‘the process, tools and techniques to manage the people side of change to achieve the required business outcome’ (Creasey, 2009: 2). Processes of change management include the need to plan for change, manage change and then reinforce change and such processes are supported by a wide range of tools including communication, coaching, training and the identification of prescriptive change models including that of Kotter’s eight-step change model (1996).

Major types of change

The phrase organisational change is largely attributed to a significant type of change, which could be for example restructuring, entering a new market or developing a new product. Whilst change may take place at the organisational wide level, it must also be recognised that change can take place in various subsystems, which evolve and may influence organisational practice. Across the literature a strong consensus exists that successful organisational change must be associated with some form of cultural change. A change of culture in itself is an example of organisational wide change.

Transformational versus Incremental Change

In order to define transformational change there is a need to focus upon the underlying concepts of Change, Transition and Transformation.

Transformational

Eisenbach, Watson and Pillai (1999: 80) define change as ‘a situational phenomenon that may sometimes be temporary’. Change in itself encompasses some form of newness and in the case of transformational change this change is rapid and often dramatic in nature. As a result of this rapid nature often organisations do not have the time to implement a transition which is sustainable. Transformational change is a unique type of change which requires attention due to the power of such transformational change and yet its potential to trigger decline. Transformational change requires a great commitment and it requires shaping the organisation in a radical fashion. Rather than an incremental, steady approach to change, transformational change is quick, rapid and often highly dramatic in nature. As a result, there is a great sense of urgency surrounding this type of organisational change.

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Incremental

Incremental change moves away from large scale, rapid change and instead promotes small, gradual changes, which might be steady and thus sustainable in nature. This type of incremental change is regularly associated with sustainable and effective change (Hayes, 2014). Companies such as Apple and Virgin employ incremental change and do so to inspire their approach to innovation and development within the company. If incremental change is employed then the time can be taken to involve employees and adopt a more bottom up approach to change.

Incremental versus transformational change: 2 case studies

Incremental change at Toyota

At Toyota the motto of continuous change is regularly preached with a focus on employee driven innovation/decision-making teams. Groups of employees are encouraged within Toyota to work together to share new ideas and to stimulate success. Such ideas are then once a month presented back to the top management team with the intention of ensuring an alignment between the visions created at the top of the firm and the operationalization of change at the bottom. The focus on continuous improvement stems back from the cultural dynamics of the organisation where they believe small incremental changes are more powerful than radical moves. This type of change has resulted in Toyota reporting record breaking profits in the late 2000s.

Transformational change at Marks and Spencer

During the 1990s Marks and Spencer were the queen of the high street and experienced great success. However, as competition heightened, the firm failed to respond and this resulted in a period of decline in the late 1990s. This decline at the time was largely attributed to the inward looking nature of the top management team, which was made up of family members. Marks and Spencer had continued to do what they do despite the market around them changing and any changes which did take place were contained within certain parts of the organisation. When the time came to take drastic action at the brink of decline, Marks and Spencer had little time to involve their employees and thus had to transform in a top down approach, which fuelled great resistance to the change under the leadership of a new CEO and top management team. Employees vocalised their resistance, spoke to the media and aimed to be as difficult as they could with the change process implemented.

Reflect upon the above case studies, use the following questions to shape your discussions:

  1. Is incremental change always realistic/achievable?
  2. What conditions might stimulate transformational change?

A punctuated equilibrium?

As argued by Gersick (1991) and across the change management literature, organisations may evolve and experience periods of incremental change broken up by more transformational, rapid changes. With this in mind, there must be an understanding that an organisation has to prepare for different types of change and has to be able to do so in a manner which promotes whole hearted upheaval if required. The dominant thought however remains that incremental change is more beneficial to an organisation than rapid, transformational change. This is the case due to the level of employee involvement it encourages and the consistent approach to innovation, punctuated by transformation perhaps encourages sustainability as seen in the below case of Apple.

Incremental change at Apple

Apple achieves success through achieving a punctuated equilibrium state. Revolutions are difficult; and yet, in the instance of Apple, there radical transformation has resulted in a number of industry shaping innovations including the MacBook Air, iPhone and iPod. The organisational culture of Apple supports incremental changes and does so to inspire innovation within the firm. Employees are actively encouraged to share ideas and participate in decision-making processes within the firm. This culture may inspire small innovation and developments in an incremental change but this also results in rapid, transformational changes which are a natural part of the dynamic business environment we live in.

Here, a quote by Gersick (1991: 20) has great relevance:

‘Revolutions are relatively brief periods when a system’s deep structure comes apart leaving it in disarray until the period ends, with the ‘choices’ around which a new deep structure forms. Revolutionary outcomes, based on interactions of system’s historical resources with current events, are not predictable; they may or may not leave a system better off. Revolutions vary in magnitude’.

Review Questions

What do you think are the advantages and disadvantages of transformational and incremental change?

In way ways could incremental change be encouraged within an organisation?

Levinson (1978: 49) ‘the life structure evolves through a relatively orderly sequence….of stable periods and transitional (structure changing) periods’.

Tushman and Romanelli (1985: 71) ‘Organisations evolve through convergent periods punctuated by strategic reorientations (or recreations) which demark and set bearings for the next convergent period’.

Importance of change management

The field of change management has been widely trying to make sense of the value of change and as a result, an effective and sustainable approach to change management has been linked in the literature to a number of outcomes including organisational excellence (Goetsch & Davis, 2014), sustainability (Zuber-skerritt & Louw, 2014) and competitive advantage (Ram, Wu & Tagg, 2014). If change is ill managed then this can have a detrimental impact on the success of an organisation and thus there is a need to focus upon how the benefits of change management can be realised.

To standstill is not an option in a dynamic business environment and therefore the importance of change management is arguably more important than ever. There are plentiful examples of companies who have failed to change and have suffered as a result. One such example is the case of the once phone giant Nokia.

Nokia Case Study: A Failure To Adapt And The Disastrous Consequences Of This.

A once corporate giant Nokia despite success in the 1990s/early 2000s, a failure to change and adapt resulted in the firm retiring from the global phone market in recent years. In the space of less than five years, Nokia went from high success to high failure. The reasons for such failure can be attributed to the following key mistakes:

  1. A failure to develop technological capabilities at the same rate as core competitors including Apple and Samsung.
  2. Failure to convert awareness into action.
  3. Lacked the capacity to change.
  4. A complacent attitude directed towards competitors.

What should Nokia have looked out for or done?

EXAMINED MANAGEMENT PROCESSES

Whilst bureaucracy and structure is needed to get things done within an organisation, at Nokia they should have identified and then removed those processes, which were not adding value or supporting the future direction of the firm. A failure to continually adapt processes and align to change restricted the extent to which the firm were able to be fluid in other processes elsewhere in the firm.

NARROW AND FINANCIAL METRICS

Whilst financial metrics are needed and often inextricably linked with performance, Nokia implemented a metric system, which was too narrow in nature. As a result of this narrow focus the firm failed to consider their competitors until it was too late. It can be argued that Nokia defined their market too narrowly and therefore left themselves vulnerable to the competitive actions of other firms including Google and Apple.

DISCONNECTED STAFF

In order for change to happen and be developed within the firm employees at the bottom of the organisation have to be able to have a voice and communicate this upwards within the firm. However, at Nokia this was not the case with a top-heavy hierarchy and little room for employee involvement. This is interestingly worlds apart from the way in which both Google and Apple operate (two of Nokia’s core competitors at the time).

LACK OF DIVERSITY

The top management team at Nokia were all from Finland and were all from similar backgrounds. This lack of diversity at the top of the firm can be positioned as having hindered the firm’s ability to adapt to the changing and dynamic business environment.

ENCOURAGE MISTAKES AND LEARN FROM FAILURE

Those organisational cultures, which are widely advocated for the promotion of change, are largely attributed to be cultures, which encourage risks and encourage a system of trial and error. The intolerance of failure at Nokia naturally developed a culture, which was afraid to try anything new.

SOMETHING TO THINK ABOUT ON YOUR OWN OR IN PAIRS

Rewind back to 2000, would changes to the top management team alone have been enough to have avoided failure?

How can you encourage employee involvement throughout a company to improve a culture of change? Brainstorm your ideas.

The power of transformational leadership

Tied up with any discussion of the importance of change management is the association between leadership and change management. In light of Gill (2002) questioning the extent to which one should consider ‘change management or change leadership’ (p.307) it is possible to argue that whilst change must be well managed it must also be supported by an effective and often visionary leader within the firm. Change management is underpinned by leadership and by its very definition; change management requires the development of a new system which must be aligned to the style enacted by the leader (Eisenbach, Eatson & Pillai, 1999).

Transformational leadership is the leadership style most positively attributed to effective change management processes. At the heart of the transformational leadership paradigm is the need for leaders to act in a manner, which encourages and inspires others to collectively be involved to achieve the vision of the organisation (Bass & Riggio, 2006).

Pause for a Moment

Can you think of any leaders you would describe as a transformational leader?

Based on the leadership chapter - what are the qualities of a transformational leader?

Challenges to Change Management

Theories of Change Management

Many theories of change management exist and a great array of change management theories can be used to guide the very process of change. Whilst some theories act as a diagnostic tool, others offer a more prescriptive approach to change which draws on guidelines and steps to be taken. Over time change theories have evolved and developed and this evolution has taken place as thoughts surrounding what promotes or encourages change have themselves change. In addition to this, many of the challenges now being faced by organisations differ greatly to the times of stability experienced some 20/30 years ago. In particular, one such dominant change relates to technological change and the power of the Internet.

CHANGE MANAGEMENT THEORIES

Theory 1: Kotter’s eight-step change model

In 1996, Kotter introduced an 8-stage change model to deal with transformational change. The eight steps overlap in nature and support the need to create a climate for change, engaging and enabling the organisation to implement change through a sustainable approach. Importantly, as depicted in the work of Kotter there is a need to promote a sustainable approach to change in light of the majority of change initiatives failing or reverting back to the status quo.

From the experience of Kotter and the many change examples he reflects upon in his publication ‘leading change’ successful change occurs when there is a focus on the eight-steps presented below:

Creating the climate for change

Step 1: ‘Establish a sense of urgency’.

The creation of an effective and sustainable climate for change is important. Many change initiatives may fail as a result of a firm lacking the interest to follow through with the change or failing to create an effective and urgent approach to change. As a result, the first step aligns to the need to create the urgency for change to take place. Kotter argues that change should be exciting and organisations should ‘craft and use a significant opportunity as a means for exciting people to sign up to change their organisation’. This sense of urgency therefore promotes a need to encourage individuals to get on board with the change procedure. In order to establish a sense of urgency, Kotter notes the need to:

  • Create a catalyst for change; what is promoting the change, articulate this within the firm.
  • Consider potential opportunities and also challenges.
  • Examine and conduct a realistic examination of competition.

Step 2: The formation of a powerful coalition

Supporting the ability to create a sense of urgency, the organisation have to focus upon bringing the right people together and making sure that a guiding coalition is developed and built. In order to form a powerful coalition, emphasis is placed on the importance of developing a group who have the power to lead the change and can develop strategies, which highlight the overall vision of the firm. It is important that a clear understanding of the change is developed here.

Step 3: Create a vision of change

Organisations have to create a vision of change and to do so may have to ask themselves a series of questions including:

What is our vision?

Where do we want to be in the future?

What change do we need to carry out to achieve this vision?

What is the direction of our change?

Creating a vision that can be widely communicated is needed and yet a difficulty can result here particularly if transformational change into the unknown takes place. A vision however has to come first to inspire change and to ensure people buy into the change promoted. Such a vision therefore has to be innovative and passionate in nature.

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Step 4: Communicate the vision

Once the vision is established, this vision has to be established and widely communicated. Containment to certain parts of the organisation must be avoided and instead emphasis has to be placed on ensuring all employees are involved in the wider change process. This links to the powerful coalition being developed who have to be consistent in their message. Here the following is important:

  • Use a wide range of channels of communication but keep the communication consistent.
  • Set and lead by example at the top of the organisation

Step 5: Focus upon empowering others to act on the change vision employed.

Empowerment as part of the change process has long been noted as a fundamental determinant of organisational change and its subsequent success. In particular, a bottom up approach to change can be used to encourage and empower in a manner which allows individuals to act on the vision created. To do this, it is paramount that the organisation:

  • Remove obstacles
  • Change the structures which impede the development of change within the organisation
  • Encourage risk taking and the ability to learn from mistakes (see Nokia example above).

Step 6: Plan for and develop a culture, which creates visible short-term wins.

As part of the 8-step change model, Kotter highlights the need to ensure short-term wins to maintain momentum and encourage motivation of those involved. As part of this, there is a need to encourage and reward those employees involved in the change process. Short-term wins can often be an important motivator.

Step 7: Build and maintain change within the organisation

Kotter argues that many change projects fail because once a change is implemented the organisation stops focusing upon that change. Victory must therefore not be declared early and instead change should be viewed in an incremental, continuous manner. This aligns in turn to the thinking of Kaizen, which promotes the importance of continuous learning and improvement within the organisation. Here, the following is important:

  • After each success examine and analyse what went right and what areas could be improved. Reflection offers an opportunity to move forward.
  • Set goals to focus upon the change process
  • Include continuous improvement in the culture of the organisation.

Step 8: Make the change stick

Any change employed has to become institutionalised within the organisation and in order to do this attention has to be directed towards making the change stick. New changes have to become a central part of the organisation and the values of change have to be reflected in day-to-day work moving forward. Talking about progress and success stories is important and any new change ideals need to be reflected in new individuals hired into the organisation.

Advantages and Disadvantages of Kotter’s theory

It is possible to list a number of advantages and disadvantages of Kotter’s model above.

Advantages

  • A step-by-step model which is easy to follow.
  • The inclusion of clear steps at each stage, which provide change managers which advice as to how to follow the process, outlined.
  • Focus on preparing for change and not the actual change process.
  • Supports the need for employees to buy in and be involved in the change.

Disadvantages

  • Steps must be followed in sequence and cannot be skipped.
  • Doesn't fully recognise the time needed for each stage.
  • Despite promoting employee involvement the model is largely top down.
  • Fails to truly draw on the emotional and complex nature of change

Theory 2: Lewin’s change process

UNFREEZING

In the 1940s Kurt Lewin designed a change model, which is considered, to be one of the cornerstones of the very foundations change management is built upon. Kurt Lewin presented a model of change which comprises the three steps: unfreezing, changing and re-freezing. This high level approach to change is intended to shape the overall change process in a way which encourages the change process to be seamless in nature.

The first step of Lewin’s model is the unfreezing stage where there is a need to prepare the organisation to change. This stage in the change process can be particularly difficult if the organisation is set in its way and has deeply rooted routines in place, which naturally reinforce the status quo. People may be carrying out tasks within the firm due to habit and actions may be taking place within the firm without anybody questioning their relevance. As a result, unfreezing requires the organisation to encourage employees to gain perspective to question the importance of their job role and the actions taken. In doing so, this requires individuals to unlearn certain things and undo their bad habits.

CHANGE

Once the organisation has been unfrozen and is ready for the change to take place, implementation must then take place and the change must be actioned within the organisation. Change can start once employees and the organisation as a whole are receptive to the idea. This change process may take a great deal of time and like the unfreezing stage cannot be rushed. Attention has to be directed towards treating any change like an investment to ensure that the change is implemented successfully. Here the above framework of Kotter’s 8-step change model becomes invaluable and should support this stage.

It is during this stage that challenges can ensue and such challenges are discussed in the next section of this chapter.

REFREEZING

The refreezing stage is essential to ensure the sustainability of any change process. This stage is sometimes referred to as the making it stick change where change needs to stick to be permanent in the organisation. Lewin notes:

A change towards a higher level of group performance is frequently short lived, after a ‘shot in the arm’, group life soon returns to the previous level. This indicates that it does not suffice to define the objective of planned change in group performance as the reaching of a different level. Permanency of the new level, or permanency for a desired period, should be included in the objective’ (Lewin, 1947: 3).

Advantages and Disadvantages of Lewin’s approach

One of the central advantages of the work employed by Lewin is that it has enabled a visual summary of the change process. This illustrative model in turn allows for a consideration of qualitative factors to think about the factors, which might impede/hinder at different points of the three stages identified by Lewin.

There are also a number of disadvantages with Lewin’s model and as such this model is regularly used alongside another model including that of Kotter’s work. As it stands Lewin’s model can be considered to be highly rational and plan orientated and this in itself does not align to the complex and messy nature of organisational change, as we know it. What Lewin’s model fails to appreciate are the challenges of organisational change, which largely entails the people nature of organisational change

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Challenges to change management

The anticipation of issues and challenges related to change management is important and fundamental to ensure the sustainability or success of any change project. There are many reasons why change fails and some of the reasons are listed below for your reference:

  • The change vision employed was not realistic in relation to how things worked or how things were really occurring within the organisation.
  • Change required was not fully understood nor given the correct level of attention.
  • People involved in the change project did not believe in the change or see its value.
  • Resistance to change was not dealt with within the company
  • Leadership did not convey the urgency of change (aligned with Kotter’s principles).

There are a wide range of barriers, which can influence the eventual success of any change employed, and many of these relate to people issues within the organisation. For example; there may be a lack of consensus within the organisation or a great deal of employee resistance. People issues are considered to be more prevalent during those change initiatives, which are time short including transformational/radical types of change.

Resistance to Change

Resistance to change is often a natural response to change and one of the key roles of a change manager is to overcome or weaken the potential for resistance to occur and impact the development of the change. Resistance to change can take a great range of forms including reduction in output, increased turnover, arguments, strikes and vocal expressions as to why the change will not work.

The main reasons why people resist change are plentiful and listed here are just five of the reasons individuals may resist change within an organisation:

  1. The element of surprise/fear of the unknown. As previously discussed, organisations have a tendency to revert back to the status quo and as a result of this, change can be scary for some. This type of resistance can occur when transformational/radical change takes place due to the inability to give sufficient time to the change process, which often results in a lack of employee involvement. If employees perceive the new change to be negative or see it resulting in job losses, individuals may resist the change as a way of pushing back. Fear of change to a certain extent should be expected and it is up to managers to try and manage this process effectively to minimize concern. Following Kotter’s eight steps is important here with the creation of a vision and coalition important to guide the change.
  2. Not trusting in those in charge of the change or believing in them. For change to be successfully implemented there is often a need for employees to highly respect those involved and as such it may be difficult for a new change manager to build trust in their followers. This lack of trust can in itself result in increased resistance to change.
  3. Loss of control. Coupled with any discussions of change initiatives is often the word control. Any form of efficiencies including downsizing or restructuring may cause fear and this could cause employees to resist by looking for employment elsewhere.
  4. Timing. As previously discussed there are two main dominant forms of change: transformational/radical and more incremental change. If an organisation has to undertake radical change there can be a difficulty in their ability to involve employees, who can further fuel a culture of resistance.
  5. An individual’s tolerance to change. Change is often a very personal thing and this ties into the complexity and at times messiness of change.

Case Study 1

John has recently been appointed the new manager of a city gym and has been advised by shareholders that he has to turn the company around and ensure the gym is in profit within 8 months, no small feat! 1 week into his position and John has outlined a wide range of changes, which need to take place based on his observations of the gym over the past week. He feels like lots need to change and as soon as possible where necessary. John attends a meeting the next week, which he has organised where he communicates his change to his employees but many employees are confused as they have not yet been formally introduced to their new manager and quite simply view him as being isolated from the rest of the company. John feels this resistance too and has asked you as his friend to suggest what he could do to lower this resistance.

  1. What advice would you give to John?
  2. What are the mistakes John has made thus far?
  3. What type of change would you describe this as?

Chapter Summary

This chapter has introduced the meaning of change management and in addition to defining it, it has considered the importance of change management and yet the difficulties which surround it including its inherently complex and messy nature. This chapter has presented two change management theories: Kotter’s eight step change model and Lewin’s change model both of which help to provide tools to managers as to how to manage the change process. Whilst Lewin’s model can be viewed as a high order approach to change management, Kotter’s approach is more prescriptive in nature and seeks to outline the steps necessary to lower and potential challenges/resistance associated with change. As discussed towards the end of the chapter, resistance to change is a natural response to change and is often reinforced by a tendency to revert back to the status quo within an organisation. Reflecting upon the examples provided within this chapter, it is possible to understand that whilst change is not easy it is very much an expected part of every organisations life. In today’s business environment, organisations are increasingly faced with heightened dynamism and turbulence, which require a need to stimulate incremental, and continuous change where possible.

TEST YOUR KNOWLEDGE…

  1. What are the two main types of change?
  2. Can you list 3 ways in which employees may resist change?
  3. Can you list 3 reasons why an employee may resist change?
  4. What is the first stage in Lewin’s model?
  5. What are the advantages of Kotter’s 8-step change process?

References

Bass, B. M., & Riggio, R. E. (2006). Transformational Leadership. 2nd Edition, New Jersey: Lawrence Erlbaum Associates.

Eisenbach, R., Watson, K., & Pillai, R. (1999). Transformational leadership in the context of organizational change. Journal of organizational change management, 12(2), pp. 80-89.

Gersick, C. J. (1991). Revolutionary change theories: A multilevel exploration of the punctuated equilibrium paradigm. Academy of management review, 16(1), pp. 10-36.

Gill, R. (2002). Change management--or change leadership?. Journal of change management, 3(4), pp. 307-318.

Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. London: Pearson.

Hayes, J. (2014). The theory and practice of change management. London: Palgrave Macmillan.

Kotter, J.P (1996) Leading Change. Boston: Harvard University Press.

Ram, J., Wu, M. L., & Tagg, R. (2014). Competitive advantage from ERP projects: Examining the role of key implementation drivers. International Journal of Project Management, 32(4), pp. 663-675.

Zuber-Skerritt, O., & Louw, I. (2014). Academic leadership development programs: a model for sustained institutional change. Journal of Organizational Change Management, 27(6), pp. 1008-1024.


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