1. 1 Lecture 10 COPING WITH CHANGE Confronting the challenges of changes in the external and internal environments. Ensuring effective organizational change The Challenges of Business, Case: IBM Preparing Its Workers for an “On Demand” World Video Clip for Discussion

2. 2 FORCES OF CHANGE Social Economic Competitive Technological Legal Political Organizational HRM Production Administration Marketing & Sales R & D Adapted from Karakowsky, 2007

3. 3 WHY DO ORGANIZATIONS RESIST CHANGE? Focusing on day to day routines and goals can create resistance to change. Change may be required to organizational systems and structures that have been in place for a long time. It also requires individuals to change, the way they do their work and whom they work with as well as reporting systems and roles.

4. 4 WHY DO ORGANIZATIONS RESIST CHANGE? Understanding organizations as ‘machines’ enables us to see why they might be resistant to change Bureaucracies have rigid rules and procedures in place which can create resistance to change. Although they allow for control and some level of security and consistency this can limit creativity and innovation (i.e. change) People can get stuck in ‘cognitive scripts’ which also results in resistance to change.

5. 5 TYPES OF CHANGE Developmental Change: improving on what the business is already doing Transitional Change: replacing existent structures and processes, e.g. mergers, new production creation etc Transformational Change: Future outcomes are uncertain but the organization and employees embark on a period of widespread change

6. 6 METHODS OF CHANGE THEORY E – focuses on formal structural and systemic change Seeks to maximize shareholder value Top-driven – top managers decide on the format and process of change Bonuses, re-engineering, downsizing etc e.g. Scott Paper – loss of 11,000 jobs, divestment of business units, relocation of HQ

7. 7 METHODS OF CHANGE THEORY O: focuses on change in human capability, learning from change Seeks to maximize employee learning & performance Emergent and permeates all levels of the organization Flatter structures, team work, employee ‘buy-in’ e.g. Champion International – high employee involvement, improved relations with unions, skill-based pay system, no layoffs.

8. 8 TRANSFORMATIONAL CHALLENGE AT IBM Louis Gerstner as the ‘change agent’ at IBM Understanding the forces of change - Gerstner as a external recruit, exploring organizational challenges and assumptions The change vision & implementation – making change acceptable to all stakeholders, creating a shared vision for the future, strong leadership, reinforce and institutionalize change

9. 9 TRANSFORMATIONAL CHALLENGE AT IBM Louis Gerstner as the ‘change agent’ at IBM The need for cultural change – move from a paternalistic, cohesive family-oriented organization with lifelong careers to pay-for- performance. Leading change through communication offering a vision with encouragement & support, face to face honest communication and explanation

10. 10 TRANSFORMATIONAL CHALLENGE AT IBM Louis Gerstner as the ‘change agent’ at IBM Reinforcing the change – targeting opinion leaders and those who are resistance to change. Ensuring constant review and assessment of change process. Change as process not an event

11. 11 ORGANIZATIONAL CHANGE & THE LEARNING ORGANIZATION In order for organizations to successfully adapt to change they must adopt openness to learning and thus become learning organizations: A learning organization is “an organization that facilitates the learning of all its members and consciously transforms itself and its context”. It can do this by: Adapting to its environment Learning from its employees and other stakeholders Contributing to the learning of its stakeholders

12. 12 Changing structures in organizations may encourage more learning & hence more change. By presenting challenges to employees we can encourage them to learn and develop e.g. self learning, questioning. They might also be encouraged to focus on their own learning as a key work experience. ORGANIZATIONAL CHANGE & THE LEARNING ORGANIZATION

13. 13 ORGANIZATIONAL CHANGE & THE LEARNING ORGANIZATION An organization would change as a result of learning. Just as an individual changes as a result of their own learning/new knowledge. Organizational learning is the detection and correction of error …where increased learning allows us to see errors and to resolve them. Organizational learning invariably involves double-loop learning rather than single-loop learning

14. 14 SINGLE LOOP LEARNING VS DOUBLE LOOP LEARNING EMPLOYEES ARE STEALING Single loop learning seeks to resolves problems by attending to symptoms e.g. putting locks on doors, more careful monitoring etc

15. 15 EMPLOYEES ARE STEALING DOUBLE LOOP LEARNING seeks to resolves problems by attending to symptoms and root causes It also examines the underlying causes such as organizational policies, employee morale etc…which may require broader changes to the organization. SINGLE LOOP LEARNING VS DOUBLE LOOP LEARNING

16. 16 PARADIGM – a set of beliefs or mental framework for understanding how the world operates Relates to our values and priorities so a change of paradigm or paradigm shift means changing the way in which we view the world and challenging our value systems E.g. the use of technology in banking, the e.g. of the Swiss watch industry, the music industry DOUBLE-LOOP LEARNING & SHIFTING PARADIGMS

17. 17 EMPLOYEES - CHANGE & LEARNING Employees are key stakeholders in organizational learning processes and outcomes Employees also gain from learning and change – adult learning development Involves paradigm shifts and double-loop learning which encourages further change and development

18. 18 ORGANIZATIONS AS INSTITUTIONS & INDIVIDUAL LEARNING AND CHANGE Bureaucracy, roles and individual change – institutionalization of rules and processes (institutional theory) may impeded change and learning Cognitive Scripts (Schema) – mental pictures or ‘recipes’ for how to think and behave. May be difficult to change but they can help to guide behaviour

19. 19 WHY DO PEOPLE RESIST CHANGE? Fear of the unknown Habit Don’t see the need for change Threats to social relationships Economic insecurity

20. 20 CHANGE & TIPPING POINT LEADERSHIP Gladwell’s theory of change as an epidemic, which starts in a very small way and then spreads to wider areas of society Three Rules of Epidemics The Law of the Few - few people have the skills and influence to instigate widespread change The Stickiness Factor – specific ways of making a message for change ‘stick’ so that people accept it The Power of Context – the place where change happens is important and the people in the context can encourage change in small ways

21. 21 MANAGING MERGER CHANGE A merger is when two (or more) organizations come together to form one larger organization Can be very useful for enhancing market strength Encourage diversity and change But: 50% of all mergers fail because of inappropriate change management practices

22. 22 Change Event: M & A Proper Communication of Change Managing Identity Change Managing Culture Change Trust in Leadership Successful Change: Successful M & A MANAGING MERGER CHANGE

23. 23 OVERCOMING RESISTANCE TO CHANGE Communication & Negotiation FACILITATING ORGANIZATIONAL CHANGE Training Employee Involvement Coercion Shift Paradigms / Mental Models Change Cognitive Scripts

24. 24 FOR THE NEXT SESSION THE NEXT SESSION WILL BE A REVIEW TO START YOUR PREPARION/ REVISION FOR THE FINAL EXAM