Managing Strategic Change: Building Learning Organizations Chapter 13 Managing Strategic Change: Building Learning Organizations by Robert Pitts & David Lei Slides prepared by John P. Orr Cameron University Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

What you will learn… Why companies need to think about change Slide 1 of 2 Why companies need to think about change The concept of a learning organization The key practices found in learning organizations Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

What you will learn… Slide 2 of 2 Why static organizations have difficulty in responding to change The steps senior managers use in dealing with resistance to change Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Learning at Sony Resource allocation Extensive decentralization Bias against specialists Frequent rotation of staff Multiple experiments Balance of psychological and monetary rewards Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Change and Learning Learning Organizations Static Organizations Firms that view change as a positive opportunity to learn and create new sources of competitive advantage Static Organizations Firms that have adapted extremely well to a particular environment but lack the ability to respond quickly to change Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Characteristics of the Learning Organization Frequent rotation of managers Continual training of personnel Decentralization of decision making Encouragement of multiple experiments High tolerance for failure Openness and diversity of viewpoints Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ex. 13-1. Management Practices of Learning Organizations Continual Training High Tolerance of Failure Decentralization Openness & Diversity of Ideas Frequent Rotation of Managers Multiple Experiments Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Implementing Change in Static Organizations Resistance to change in static organizations Change steps From static to learning organization Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ex. 13-3. Common Reasons for Organizational Resistance to Change Lack of awareness of need to change Lack of interest in opportunity for change Incompatibility of change with existing views or interests Fear of cannibalization Fear of personal loss Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ex. 13-4. Key Steps to Implement Strategic Change Sense the need for strategic change Build awareness of the need to change and learn Foster debate Create consensus Assign responsibility Allocate resources Act quickly Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Static to Learning Boundaryless Organization An organization design in which people can easily share information, resources, and skills across departments and divisions. SBU 3 SBU 2 Sales Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ex. 13-5. Corporate Transformations: Making General Electric Boundaryless Slide 1 of 2 1980 1986 GE vulnerable to change Slow growth Average earnings High divisional walls Lots of protected turf Resistance to change Reduce number of peripheral businesses Sell nonperforming assets Break down strong SBU lines Delayer management hierarchies Adopt new rewards system Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ex. 13-5. Corporate Transformations: Making General Electric Boundaryless Slide 2 of 2 1988-1992 1994 Form strategic alliances “Work Out” Team with suppliers/ customers Share knowledge and skills across GE’s SBUs Promote those who take risks Invest in streamlines product development Reduce SBU walls even more Invest in Asia/Europe Foster continual training and development Encourage best practices and benchmarking Promote common vision Hire people with entrepreneurial tendencies “Six Sigma” Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ethical Dimension Diversity and Knowledge Base Operations increase in global scope Corporations search world for cutting-edge skills Ways to increase interchange Use Internet pathways Tap ideas of people from multiple cultures Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Tapping Worldwide Talent AT&T Hewlett-Packard Intel Microsoft Sun Microsystems Texas Instruments Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

Ethical Dimension Helping Employees Cope with Change Change often most difficult for senior employees Options for AT&T top management Fire obsolete employees, risk damaging morale Retrain senior employees, despite expense Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.