Principles of Change Management

Reading material Books: Understanding Organization by Charles Handy, published in 1976 Gods of Management by Charles Handy in 1995 Organization Culture and Leadership by Edgar Schein Change Management: A Guide to Effective Implementation, by Robert Paton & Mc Calman

Why Change Management?

The basic goal of strategic management process is to make fundamental changes in how business is conducted in order to help cope with a new, more challenging market environment.

The only certainty in business today is change

Why Change Management?

A companys management must be ready to push for change in the strategy and organization architecture so that it can adapt, survive, and prosper when facing a new competitive reality.

What is the nature of organizational change?

Planned change Occurs as a result of specific efforts of a change agent. Direct response to perception of a performance gap.
Unplanned change Occurs spontaneously or randomly and without benefit of a change agents attention. Acting immediately is the appropriate response goal

What is the nature of organizational change?

External forces for change: Global economy and market competition Local economic conditions Government laws and regulations Technological developments Market trends Social forces

What is the nature of organizational change?

Internal forces for change: Arise when change in one part of the organizational system creates the need for change in another part of the system. May be in response to one or more external forces.

What is the nature of organizational change?

Organizational targets for change: Tasks People Culture Technology Structure

Change Management Process

Key issues: The change process goes through a series of phases that, in total, usually require a considerable length of time. Skipping steps creates only the illusion of speed and never produces a satisfying result. The critical mistakes in any of the phases can have a devastating impact, slowing momentum and negating hard-won gains.

Criteria for Successful Change Process

(Richard Beckhard and Reuben Harris)

Current State (A)

Transition State (C)

Future State
(B)

The organization is moved from the current state to the future state in which the design is actually installed or implemented. The functioning of the organization design in the future state meets expectations, or works as planed. The transition is accomplished without undue cost to the organization. The transition is accomplished without undue cost to individual organization members.

Change Management Process by Christensen, Marx and Stevenson

The first step of any change must be to assess the level of agreement in the organization along two critical dimensions: 1. The extent to which people agree on what they want results, values and priorities, and which trade-offs they are willing to make in order to achieve those results.
2. The extent to which people agree on cause and effect - which actions will lead to the desired outcome?

Change Management Process by Christensen, Marx and Stevenson

Four potential scenarios:

1. Organizations in which the employees share hopes for what they will gain from being part of the organization even though each might have a different view of what actions will be required to fulfill those hopes. 2. Employees with little passion for the goals of the organization but are willing to follow the procedures if they agree that those actions will produce the needed results.

Change Management Process

Four potential scenarios:

3. Organizations in which the employees agree on what they want and how to get there these organizations cultures are highly resistant to change. 4.The employees do not agree either on what they want or on how the world works.

Change Management Process by Christensen, Marx and Stevenson

In order to choose the right tools to foster cooperation, managers must assess where their organization lies. The authors group the tools of cooperation into four major categories: power, management, leadership and culture

Change Management Process: tools for cooperation

Power tools:
Force, coercion and threats.

These are the only tools that will elicit cooperation when members of an organization share little consensus on either dimension of the agreement. These may include: negotiation, strategic planning & financial incentives.

Change Management Process: tools for cooperation

Management tools:
Coordination and processes including training, standard operating procedures and measurement systems. For these work group members who agree on cause and effect but not necessarily on what they want from their participation in the organization

Change Management Process: tools for cooperation

Leadership tools:
These are results orientated rather than process orientated and can elicit cooperation as long as there is a high level of consensus that a change is consistent with the reason employees have chosen to work in the enterprise, even if consensus is low on how to achieve change want from their participation in the organization

Change Management Process: tools for cooperation

Culture tools:
In organizations with a deep consensus on priorities etc, employees will cooperate almost automatically to continue in the same direction. In organizations with strong cultures, people instinctively prioritize similar options. Organizations with strong cultures can in many ways be self managing. However, this strength may make them highly resistant to change.

Change Management Process Procter & Gamble case:

In 1999 Procter & Gambles Durk Jager, a highly regarded insider who had recently been promoted to CEO, announced Organization 2005, a restructuring program that promised to change P&Gs culture. However, not everyone at P&G agreed that such sweeping change was necessary OR that the way to achieve it was to reduce investments in the companys core brands in order to fund radical, new products. The organization rebelled, and Jager was forced to resign only 17 months after taking the helm.

The reason of failure was that Jager didnt induce P&G employees to cooperatea requirement of all change campaigns.

1. Establishing a Sense of Urgency:

The reasons for the failure:

Executives underestimate how hard it can be to drive people out of their comfort zones. Executives grossly overestimate how successful they have already been in increasing urgency. Executives lack patience: "Enough with the preliminaries; let's get on with it. Executives become paralyzed by the downside possibilities. A paralyzed senior management often comes from having too many managers and not enough leaders.

Eight Steps to Transforming Your Organization

2. Forming a Powerful Guiding Coalition:

Assembling a group with enough power to lead the change effort

Encouraging the group to work together as a team

2. Forming a Powerful Guiding Coalition:

The reasons for the failure:
Executives underestimate the difficulties of producing change and thus the importance of a powerful guiding coalition. Executives have no history of teamwork at the top and therefore undervalue the importance of this type of coalition. Executives expect the team to be led by a staff executive instead of a key line manager. The groups without strong line leadership never achieve the power that is required.

Eight Steps to Transforming Your Organization

3. Creating a Vision:

Creating a vision to help direct the change effort

Developing strategies for achieving that vision

3. Creating a Vision:
The reasons for the failure:
Without a sensible vision, a transformation effort can easily dissolve into a list of confusing and incompatible projects that can take the organization in the wrong direction or nowhere at all. Without a sound vision, the reengineering projects in the departments, the cultural change project in the sales force will not add up in a meaningful way.

3. Creating a Vision:
A useful rule: If you can't communicate the vision to someone in five minutes or less and get a reaction that signifies both understanding and interest, you are not yet done with this phase of the transformation process.

Eight Steps to Transforming Your Organization

4. Communicating the Vision:
Using every vehicle possible to communicate the new vision and strategies

Teaching new behaviors by the example of the guiding coalition

4. Communicating the Vision:

The reasons for the failure:
Without credible communication, and a lot of it, the hearts and minds of the troops are never captured.
Without gaining understanding and support transformation will fall, especially when downsizing is a part of the vision. For this reason, successful visions usually include new growth possibilities and the commitment to treat fairly anyone who is laid off.

4. Communicating the Vision:

In 1993 The Wyatt Company conducted research on 531 United States organizations undergoing major restructuring. In answer to the question "If you could go back and change one thing, what would it be?" the most frequent answer was "The way I communicated with my employees".

4. Communicating the Vision:

Recommendations by Larkin TJ, Larkin S.:
Communicate only facts, stop trying to communicate values (the only effective way to communicate a value is to act in accordance with it and give others the incentive to do the same). Do not rely on videos, publications, or large meetings. Do not let very senior managers introduce the change to frontline employees-use frontline supervisors. Acknowledge the critical importance of face to face communications.

Eight Steps to Transforming Your Organization

5. Removing Obstacles to the New Vision:

Changing systems or structures that seriously undermine the vision

Encouraging risk taking and nontraditional ideas, activities, and actions

5. Removing Obstacles to the New Vision

The reasons for the failure:
Sometimes the obstacle is the organizational structure: narrow job categories can seriously undermine efforts to increase productivity or make it very difficult, even to think about customers.

Sometimes compensation or performance-appraisal systems make people choose between the new vision and their own self-interest. Worst of all are bosses who refuse to change and who make demands that are inconsistent with the overall effort.

Eight Steps to Transforming Your Organization

6. Planning for and Creating Short-Term Wins : Planning for visible performance improvements Creating those improvements

Recognizing and rewarding employees involved in the improvements

6. Planning for and Creating ShortTerm Wins :

The reasons for the failure:
Most people won't go on the long march unless they see compelling evidence within 12 to 24 months that the journey is producing expected results. Without short-term wins, too many people give up or actively join the ranks of those people who have been resisting change.

Eight Steps to Transforming Your Organization

7. Consolidating Improvements and Producing Still More Change: Using increased credibility to change systems, structures, and policies that don't fit the vision. Hiring, promoting, and developing employees who can implement the vision Reinvigorating the process with new projects, themes, and change agents

7. Consolidating Improvements and Producing Still More Change:

The reasons for the failure:
After a few years of hard work, managers may be tempted to declare victory with the first clear performance improvement. Until changes sink deeply into a company's culture, a process that can take five to ten years, new approaches are fragile and subject to regression.

7. Consolidating Improvements and Producing Still More Change:

In one of the most successful transformations that J.P.Kotter ever seen, he quantified the amount of change that occurred each year over a seven-year period.
On a scale of one (low) to ten (high), year one received a two, year two a four, year three a three, year four a seven, year five an eight, year six a four, and year seven a two. The peak came in year five, fully 36 months after the first set of visible wins.

Eight Steps to Transforming Your Organization

8. Institutionalizing change in corporate culture:

Articulating the connections between the new behaviors and corporate success

Developing the means to ensure leadership development and succession

8. Institutionalizing change in corporate culture:

Factors are particularly important in institutionalizing change in corporate culture: A conscious attempt to show people how the new approaches, behaviors, and attitudes have helped improve performance. Helping people see the right connections requires communication. It is taking sufficient time to make sure that the next generation of top management really does personify the new approach. If the requirements for promotion don't change, renewal rarely lasts.

Why Do Employees Resist Change?

Managers and employees view change differently:
Both groups know that vision and leadership drive successful change. Top-level managers see change as an opportunity to strengthen the business by aligning operations with strategy, to take on new professional challenges and risks, and to advance their careers. For many employees, however, including middle managers, change is neither sought after nor welcomed. It is disruptive and intrusive. It upsets the balance.

Why Do Employees Resist Change?

Paradox of change is that during a time of change trust is the most difficult to establish. If the organization is in the middle of change effort, lack of trust automatically emerges as a serious barrier. Trust in time of change is based on two things: predictability and capability. Staff want to know that a process which is about to begin has a predictable, known route, and that they will be treated fairly. They also want to think that those in charge are capable of delivering what they promise.

Methods for dealing with resistance to change:

Education and communication
Participation and involvement

Facilitation and support

Facilitation and agreement

Manipulation and co-optation

Explicit and implicit coercion

Why Change?

It is better to be 80% correct and make change happen than to be 100% correct after opportunity has passed.