10.1 The Nature of Change in Organizations
Among supertrends shaping the future of business: (1) The marketplace is becoming more segmented and moving toward more niche products. (2) There are more competitors offering targeted products, requiring faster speed-to-market. (3) Some traditional companies may not survive radically innovative change. (4) China, India, and other offshore suppliers are changing the way we work. (5) Knowledge, not information, is becoming the new competitive advantage.
Two types of change are reactive and proactive. Reactive change is making changes in response to problems or opportunities as they arise. Proactive change involves making carefully thought out changes in anticipation of possible or expected problems or opportunities.
Forces for change may consist of forces outside the organization or inside it. (1) External forces consist of four types: demographic characteristics, market changes, technological advancements, and social and political pressures. (2) Internal forces may be of two types: employee problems and managers' behavior.
Four areas in which change is most apt to be needed are people, technology, structure, and strategy. (1) People changes may require changes in perceptions, attitudes, performance, or skills. (2) Technology is any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product. (3) Changing structure may happen when one organization acquires another. (4) Changing strategy may occur because of changes in the marketplace.
10.2 Organization Development: What It Is, What It Can Do
Organization development (OD) is a set of techniques for implementing planned change to make people and organizations more effective. Often OD is put into practice by a change agent, a consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways. OD can be used to manage conflict, revitalize organizations, and adapt to mergers.
The OD process follows a three-step process: (1) Diagnosis attempts to ascertain the problem. (2) Intervention is the attempt to correct the diagnosed problems. (3) Evaluation attempts to find out how well the intervention worked.
Four factors that make OD work successfully are (1) multiple interventions are used; (2) top managers give the OD program their support; (3) goals are geared to both short- and long-term results; and (4) OD is affected by culture.
10.3 Promoting Innovation within the Organization
Innovations may be a product innovation or a process innovation. A product innovation is a change in the appearance or performance of a product or service or the creation of a new one. A process innovation is a change in the way a product or service is conceived, manufactured, or disseminated. Innovations may also be an incremental innovation or a radical innovation. An incremental innovation is the creation of a product, service, or technology that modifies an existing one. A radical innovation is the creation of a product, service, or technology that replaces an existing one.
Four characteristics of innovation are that (1) it is an uncertain business; (2) people closest to the innovation know the most about it, at least initially; (3) it may be controversial; and (4) it can be complex because it may cross organizational boundaries.
Innovation doesn't happen as a matter of course. Three ways to make it happen are to provide the right organizational culture, so that it is viewed as a benefit rather than as a boondoggle; to provide the resources; and to provide the rewards, so that experimentation is reinforced in ways that matter. Three steps for fostering innovation are as follows. (1) Recognize problems and opportunities and devise solutions. (2) Gain allies by communicating your vision. (3) Overcome employee resistance and empower and reward them to achieve progress.
The degree to which employees feel threatened by change depends on whether the change is adaptive, innovative, or radically innovative. Adaptive change, the least threatening, is reintroduction of a familiar practice. Innovative change is the introduction of a practice that is new to the organization. Radically innovative change, the most threatening, involves introducing a practice that is new to the industry.
Ten reasons employees resist change are as follows: (1) individuals' predisposition toward change; (2) surprise and fear of the unknown; (3) climate of mistrust; (4) fear of failure; (5) loss of status or job security; (6) peer pressure; (7) disruption of cultural traditions or group relationships; (8) personality conflicts; (9) lack of tact or poor timing; and (10) nonreinforcing reward systems.
Kurt Lewin's change model has three stages—unfreezing, changing, and refreezing—to explain how to initiate, manage, and stabilize planned change. (1) In the unfreezing stage, managers try to instill in employees the motivation to change. One technique used is benchmarking, a process by which a company compares its performance with that of high-performing organizations. (2) In the changing stage, employees need to be given the tools for change, such as new information. (3) In the refreezing stage, employees need to be helped to integrate the changed attitudes and behavior into their normal behavior.
In a model corresponding with Lewin's, John Kotter's suggests an organization needs to follow eight steps to avoid the eight common errors senior management usually commits. The first four represent unfreezing: establish a sense of urgency, create the guiding coalition, develop a vision and strategy, and communicate the change vision. The next three steps represent the changing stage: empower broad-based action, generate short-term wins, and consolidate gains and produce more change. The last step, corresponding to refreezing, is to anchor new approaches in the organization's culture.