Managing Change and Innovation SWH

LEARNING OUTLINE Follow this Learning Outline as you read and study this chapter. Forces for Change Define organizational change. Discuss the external and internal forces for change. Contrast internal and external change agents. SWH

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. Two Views of the Change Process Contrast the calm waters and white-water rapids metaphors of change. Explain Lewin’s three-step model of the change process. Discuss the environment that managers face today. SWH

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. Managing Change Explain how managers might change structure, technology, and people. Explain why people resist change and how resistance might be managed. SWH

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. Stimulating Innovation Explain why innovation isn’t just creativity. Explain the systems view of innovation. Describe the structural, cultural, and human resources variables that are necessary for innovation. Explain what idea champions are and why they’re important to innovation. SWH

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. Contemporary Issues in Managing Change Explain why changing organizational culture is so difficult and how managers can do it. Describe employee stress and how managers can help employees deal with it. Discuss what it takes to make change happen successfully. SWH

Managing change is an integral part of every manager’s job What Is Change? Organizational Change Any alterations in the people, structure, or technology of an organization Characteristics of Change Is constant yet varies in degree and direction Produces uncertainty yet is not completely unpredictable Creates both threats and opportunities Managing change is an integral part of every manager’s job Organizational change is defined as any alteration in people, structure, or technology. Change is ever present in organizations and cannot be eliminated. Instead, we need to look at the key issues related to managing change. There are external and internal forces that create the need for change. SWH

Forces for Change External forces Internal Forces Marketplace Governmental laws and regulations Technology Labour markets Economic changes Internal Forces Changes in organizational strategy Workforce changes New equipment Employee attitudes External forces that create the need for change come from various sources. 1. The marketplace 2. Government laws and regulations 3. Technology 4. Labour markets 5. Economic changes Internal forces tend to originate primarily from the internal operations of the organization or from the impact of external changes. 1. Changes in strategy 2. Changes in the workforce 3. New equipment 4. Changes in employee attitudes SWH

The Manager as Change Agent Change Agents People who act as catalysts and assume the responsibility for changing process Types of Change Agents Managers: internal entrepreneurs Nonmanagers: change specialists Outside consultants: change implementation experts Change requires a catalyst. The manager may act as a change agent, which is an individual who acts as a catalyst and manages the change process. SWH

Change Process Viewpoints The Calm Waters Metaphor Lewin: a break in the organization’s equilibrium state Unfreezing the status quo Changing to a new state Refreezing to make the change permanent White-water Rapids Metaphor The lack of environmental stability and predictability requires that managers and organizations continually adapt (manage change actively) to survive Two very different metaphors can be used to describe the change process. The calm waters metaphor characterizes the process of change as being like a ship crossing a calm sea. It’s best illustrated by Lewin’s three-step process for change (see Exhibit 16.1). a. Unfreezing the equilibrium is the first step. This can be accomplished in one of three ways. 1) Increasing driving forces, which direct behaviour away from the status quo. 2) Decreasing restraining forces, which hinder movement from the existing equilibrium. 3) Combining the two approaches. b. The next step is to implement the change itself. c. The final step is to refreeze the situation. The white-water rapids metaphor describes change that takes place in uncertain and dynamic environments. If we put the two views in perspective, we must note that not every manager faces a world of constant and chaotic change. However, the number of managers who don’t face this type of environment is dwindling fast! SWH

The Change Process Unfreezing Refreezing Changing Up until the late 1980s, the calm waters metaphor was pretty descriptive of the situation that managers faced. It’s best illustrated by Kurt Lewin’s three-step description of the change process (see Exhibit 16.1). SWH

Three Categories of Change Work specialization, departmentalization, chain of command, span of control, centralization, formalization, job redesign, or actual structural design T echnology Work processes, methods, and equipment People Attitudes, expectations, perceptions, and behaviour Structure The manager’s options for change essentially fall into three categories: structure, technology, and people (see Exhibit 16.2). 1. Changing Structure a. Managers can alter one or more of the structural components such as work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. b. Changing Structure—the design of the organizational structure can be changed to meet new demands. 2. Changing Technology. a. Competitive factors or new innovations often require introduction of new equipment, tools, or operating methods. b. Automation is a technological change that replaces certain tasks done by people with machines. c. Computerization has probably been the most visible technological change in recent years. 3. Changing People. Attitudes, expectations, perceptions, and behaviours. Exhibit 16.3 provides descriptions of the most popular Organization Development (OD) approaches. a. Organizational development focuses on techniques or programs to change people and the nature and quality of interpersonal work relationships. SWH

Types of Change People Structural Technological Changing attitudes, expectations, perceptions, and behaviours of the workforce. Structural Changing the organization’s structure or its structural components Technological Adopting new equipment or operating methods that displace old skills and require new ones Automation: replacing certain tasks done by people with machines Computerization The manager’s options for change essentially fall into three categories: structure, technology, and people (see Exhibit 16.2). 1. Changing Structure a. Managers can alter one or more of the structural components, such as work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. b. Changing Structure—the design of the organizational structure can be changed to meet new demands. 2. Changing Technology. a. Competitive factors or new innovations often require introduction of new equipment, tools, or operating methods. b. Automation is a technological change that replaces certain tasks done by people with machines. c. Computerization has probably been the most visible technological change in recent years. 3. Changing people. Attitudes, expectations, perceptions, and behaviours. Exhibit 16.3 provides descriptions of the most popular Organization Development (OD) approaches. SWH

Organizational Development Techniques MORE EFFECTIVE INTERPERSONAL WORK RELATIONSHIPS Process Consultation Survey Feedback Sensitivity Training Intergroup Development Team Building A method of changing behaviour through unstructured group interaction. Activities that help team members learn how each member thinks and works. Changing the attitudes, stereotypes, and perceptions that work groups have about each other. A technique for assessing attitudes and perceptions, identifying discrepancies in these, and resolving the differences by using survey information in feedback groups. An outside consultant helps the manager understand how interpersonal processes are affecting the way work is being done. Organizational Development (OD): focuses on techniques or programs to change people and the nature and quality of interpersonal work relationships. SWH

Managing Resistance to Change Why People Resist Change The ambiguity and uncertainty that change introduces The comfort of old habits A concern over personal loss of status, money, authority, friendships, and personal convenience The perception that change is incompatible with the goals and interests of the organization Resistance to change is well documented. SWH

Helping Employees Accept Change Unfreezing Refreezing Changing • Give reasons. Be empathetic. Communicate clearly. Show top management’s support. Publicize successes. Make midcourse corrections. Help employees deal with stress. Explain the benefits. Identify a champion. Get input from employees. Watch timing. Maintain job security. Provide training. Proceed at a manageable pace. Resistance will be lower if managers involve people in the change, offer training where needed, and are open to revisions once the changes have been implemented. SWH

Stimulating Innovation Creativity The ability to combine ideas in a unique way or to make an unusual association Innovation Turning the outcomes of the creative process into useful products, services, or work methods Innovation is important to organizational success in the marketplace. A. There is a difference between creativity and innovation. 1. Creativity is the ability to combine ideas in a unique way or to make unusual associations between ideas. 2. Innovation is the process of taking a creative idea and turning it into a useful product, service, or method of operation. SWH

Systems View of Innovation Inputs Creative individuals, groups, organizations Transformation Creative environment, process, situation Outputs Innovative product(s), work methods We see from Exhibit 16.5 that getting the desired outputs (innovative products) involves both the inputs and the transformation of those inputs. Inputs include creative individuals and groups within the organization. Source: Adapted from R.W. Woodman, J.E. Sawyer, and R.W. Griffin, “Toward a Theory of Organizational Creativity,” Academy of Management Review, April 1993, p. 309. SWH

Innovation Variables STIMULATE INNOVATION Structural Variables • Organic Structures Abundant Resources High Interunit Communication Minimal Time Pressure Work and Nonwork Support Human Resource Variables High Commitment to Training and Development High Job Security Creative People Cultural Variables Acceptance of Ambiguity Tolerance of the Impractical Low External Controls Tolerance of Risks Tolerance of Conflict Focus on Ends Open-System Focus Positive Feedback Innovation Variables Three sets of variables have been found to stimulate innovation: structural variables, cultural variables, and human resources variables (see Exhibit 16.6). SWH

Creating the “Right” Environment for Innovation Structural Variables Adopt an organic structure Make available plentiful resources Engage in frequent interunit communication Minimize extreme time pressures on creative activities Provide explicit support for creativity How can managers foster innovation? By using the systems model, we can see how to foster innovation (see Exhibit 16.5). Three sets of variables have been found to stimulate innovation: structural variables, cultural variables, and human resources variables (see Exhibit 16.6). 1. Structural Variables. Structural variables can be summarized as follows: a. Organic structures positively influence innovation. b. The easy availability of organizational resources provides a critical building block for innovation. c. Frequent interunit communication helps break down barriers to innovation. SWH

Creating the “Right” Environment for Innovation (cont’d) Cultural Variables Accept ambiguity Tolerate the impractical Have low external controls Tolerate risk taking Tolerate conflict Focus on ends rather than means Develop an open-system focus Provide positive feedback Cultural variables show that an innovative culture is likely to be characterized by the following: a. Acceptance of ambiguity b. Tolerance of the impractical c. Low external controls d. Tolerance of risk e. Tolerance of conflict f. Focus on ends rather than means g. Open-system focus h. Positive feedback SWH

Creating the “Right” Environment for Innovation (cont’d) Human Resource Variables Actively promote training and development to keep employees’ skills current Offer high job security to encourage risk taking Encourage individuals to be “champions” of change Human resources variables are indicative of the important role that people play in innovative organizations. a. Innovative organizations actively promote the training and development of their employees so their knowledge remains current. b. Innovative organizations offer employees high job security. c. Innovative organizations encourage individuals to become idea champions—individuals who actively and enthusiastically support a new idea, build support, overcome resistance, and ensure that the innovation is implemented. SWH

Issues in Managing Change Changing Organizational Cultures Cultures are naturally resistant to change Conditions that help cultural change: Dramatic crisis Change of leadership Young, flexible, and small organization Weak organizational culture 1. Culture Is Resistant to Change. a. Consists of relatively stable and permanent characteristics b. Takes a long time to form c. Strong cultures have highly committed people 2. What Might Facilitate Cultural Change? a. Dramatic crisis occurs b. Leadership changes hands c. Organization is young and small d. The culture is weak 3. How Can Cultural Change be Accomplished? The Tips for Managers on page 503 outlines strategies for managing cultural change. SWH

Tips for Managers: Strategies for Managing Cultural Change Set the tone through management behaviour. Managers, particularly top management, need to be positive role models. Create new stories, symbols, and rituals to replace those currently in vogue. Select, promote, and support employees who adopt the new values that are sought. Redesign socialization processes to align with the new values. SWH

Tips for Managers: Strategies for Managing Cultural Change (cont’d) Change the reward system to encourage acceptance of a new set of values. Replace unwritten norms with formal rules and regulations that are tightly enforced. Shake up current subcultures through transfers, job rotation, and/or terminations. Work to get peer-group consensus through employee participation and creation of a climate with a high level of trust. SWH

Issues in Managing Change (cont’d) Handling Employee Stress Stress The physical and psychological tension an individual feels when confronted with extraordinary demands, constraints, or opportunities and their associated importance and uncertainties Functional Stress Stress that has a positive effect on performance Stress is the physical and psychological tension individuals feel when they’re facing or experiencing extraordinary demands, constraints, or opportunities and for which the outcome is perceived to be both uncertain and important. SWH

Causes of Stress Exhibit 16.7 shows that stress may be related to the organization or in personal factors. SWH

Symptoms of Stress PHYSICAL PSYCHOLOGICAL SYMPTOMS OF STRESS BEHAVIOURAL PSYCHOLOGICAL Job-related dissatisfaction, tension, anxiety, irritability, boredom, and procrastination Changes in productivity, absenteeism, job turnover, changes in eating habits, increased smoking or consumption of alcohol, rapid speech, fidgeting, sleep disorders Changes in metabolism, increased heart and breathing rates, raised blood pressure, headaches, and potential of heart attacks An employee who experiences symptoms of stress may become depressed, accident prone, or argumentative. Exhibit 16.8 groups stress under three categories: physical, psychological, and behavioural. SWH

Issues in Managing Change (cont’d) Reducing Stress Engage in proper employee selection Match employees’ abilities to job requirements Use realistic job previews to reduce ambiguity Improve organizational communications Develop a performance planning program Use job redesign Provide a counselling program Offer time planning management assistance Sponsor wellness programs Employee selection, RJP, MBO, and job redesign are all methods of reducing stress in the organization. SWH

Mistakes Managers Make When Leading Change Unfreezing Refreezing Changing • Not communicating a sense of urgency Not forming a guiding coalition Quitting before change is finished Not making changes part of the organizational culture Not creating a vision Not communicating the vision Not empowering others to act on the vision Not planning for and creating short-term wins Professor John Kotter of the Harvard Business School identifies a number of places where managers make mistakes when leading change. These are illustrated in Exhibit 16.9. SWH

Issues in Managing Change (cont’d) Making Change Happen Successfully Embrace change Explain why change is necessary Communicate constantly and honestly Encourage employee participation Encourage employee flexibility Remove those who resist and cannot be changed Making Change Happen Successfully. 1. Ready the organization for change. Become a change-capable organization. Exhibit 16.9 summarizes the characteristics. 2. Managers must recognize the important role they play in the change process. 3. Get all organizational members involved. SWH

Characteristics of Change-Capable Organizations Link the present and the future Make learning a way of life Actively support and encourage day-to-day improvements and changes Ensure diverse teams Encourage mavericks Shelter breakthroughs Integrate technology Build and deepen trust Exhibit 16–10 summarizes the characteristics of organizations that are ready for change. SWH