Organizational Change McGraw-Hill/Irwin McShane/Von Glinow OB 5e Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Umpqua Bank’s OrganizationalChange Umpqua Bank has become the largest regional community bank in the Pacific Northwest by applying effective organizational change practices

Lewin’s Force Field Analysis Model Developed by Kurt Lewin Driving forces Push organizations toward change External forces or leader’s vision Restraining forces Resistance to change -- employee behaviors that block the change process Restraining Forces Driving Forces

Force Field Analysis Model Driving Forces Restraining Desired Conditions Driving Forces Restraining Driving Forces Restraining Current Conditions Before Change During Change After Change

Not Hoppy About Change Mina Ishiwatari(front) wanted to improve Hoppy drink’s brand image, but most staff didn’t want to change. “I tried to take a new marketing approach to change the image of Hoppy . . . but no one would listen to me.” She improved Hoppy’s popularity with limited support or budget. Most employees who opposed Ishiwatari’s changes have since left the company.

Restraining Forces (Resistance to Change) Many forms of resistance e.g., complaints, absenteeism, passive noncompliance View resistance as a resource Symptoms of deeper problems in the change process A form of constructive conflict -- may improve decisions in the change process A form of voice – helps procedural justice

Why People Resist Change Direct costs Losing something of value due to change Saving face Accepting change acknowledges own imperfection, past wrongdoing Fear of the unknown Risk of personal loss Concern about being unable to adjust

Why People Resist Change (con’t) Breaking routines Organizational unlearning is part of change process But past practices/habits are valued by employees due to comfort, low cognitive effort Incongruent organizational systems Systems/structures reinforce status quo Career, reward, power, communication systems Incongruent team dynamics Norms contrary to desired change

Creating an Urgency for Change Inform employees about driving forces Most difficult when organization is doing well Customer-driven change Adverse consequences for firm Human element energizes employees Sometimes need to create urgency to change without external drivers Requires persuasive influence Use positive vision rather than threats

Minimizing Resistance to Change Communication Highest priority and first strategy for change Improves urgency to change Reduces uncertainty (fear of unknown) Problems -- time consuming and costly Learning Involvement Stress Mgt Coercion Negotiation

Minimizing Resistance to Change Communication Provides new knowledge/skills Includes coaching and other forms of learning Helps break old routines and adopt new roles Problems -- potentially time consuming and costly Learning Involvement Stress Mgt Negotiation Coercion

Minimizing Resistance to Change Communication Employees participate in change process Helps saving face and reducing fear of unknown Includes task forces, future search events Problems -- time-consuming, potential conflict Learning Involvement Involvement Stress Mgt Negotiation Coercion

Minimizing Resistance to Change Communication When communication, learning, and involvement are not enough to minimize stress Potential benefits More motivation to change Less fear of unknown Fewer direct costs Problems -- time-consuming, expensive, doesn’t help everyone Learning Involvement Stress Mgt Negotiation Coercion

Minimizing Resistance to Change Communication Learning Influence by exchange -- reduces direct costs May be necessary when people clearly lose something and won’t otherwise support change Problems Expensive Gains compliance, not commitment Involvement Stress Mgt Negotiation Coercion

Minimizing Resistance to Change Communication Learning Involvement When all else fails Assertive influence Radical form of “unlearning” Problems Reduces trust May create more subtle resistance Encourage politics to protect job Stress Mgt Negotiation Coercion

Refreezing the Desired Conditions “When you are leading for growth, you know you are going to disrupt comfortable routines and ask for new behavior, new priorities, new skills… Even when we want to change, and do change, we tend to relax and the rubber band snaps us back into our comfort zones.” Ray Davis, CEO, Umpqua Bank

Refreezing the Desired Conditions Realigning organizational systems and team dynamics with the desired changes Alter rewards to reinforce new behaviors Change career paths Revise information systems

Change Agents Change agent -- anyone who possesses enough knowledge and power to guide and facilitate the change effort Engage in transformational leadership Develop the change vision Communicate the vision Act consistently with the vision Build commitment to the vision

Strategic Vision & Change Need a vision of the desired future state Identifies critical success factors for change Minimizes employee fear of the unknown Clarifies role perceptions

Diffusion of Change Begin change as pilot projects Effective diffusion considers MARS model Motivation – pilot project is successful, reward diffusion of pilot project Ability – Train employees to adopt pilot project Role perceptions –Translate pilot project to new situations Situational factors – Provide resources to implement pilot project elsewhere

Action Research Approach Action orientation and research orientation Action – to achieve the goal of change Research – testing application of concepts Action research principles Open systems perspective Highly participative process Data-driven, problem-oriented process

Action Research Process Form client- consultant relations Diagnose need for change Introduce intervention Evaluate/ stabilize change Disengage consultant’s services

BBC Takes the Appreciative Journey To become a more creative organization, the British Broadcasting Company sponsored an appreciative inquiry process of employee consultation, called Just Imagine. “It gave me a powerful mandate for change,” said BBC’s chief executive at the time.

Appreciative Inquiry Approach Frames change around positive and possible future, rather than traditional problem focus. Application of positive organizational behavior

Four-D Model of Appreciative Inquiry Discovery Discovering the best of “what is Dreaming Forming ideas about “what might be” Designing Engaging in dialogue about “what should be” Delivering Developing objectives about “what will be”

Large Group Interventions Future search, open space, and other interventions that involve “the whole system” Large group sessions May last a few days High involvement with minimal structure Limitations of large group interventions Limited opportunity to contribute Risk that a few people will dominate Focus on common ground may hide differences Generates high expectations about ideal future

Parallel Learning Structure Approach Highly participative social structures Members representative across the formal hierarchy Sufficiently free from firm’s constraints Develop solutions for organizational change which are then applied back into the larger organization

Parallel Learning Structures Organization

Cross-Cultural and Ethical Concerns Cross-Cultural Concerns Linear and open conflict assumptions different from values in some cultures Ethical Concerns Privacy rights of individuals Management power Individuals’ self-esteem

Organizations are About People “Take away my people, but leave my factories, and soon grass will grow on the factory floors. Take away my factories, but leave my people, and soon we will have a new and better factory.” Andrew Carnegie (1835-1919) Source: Library of Congress

Discussion of Activity 15.3 Strategic Change Incidents McGraw-Hill/Irwin McShane/Von Glinow OB 5e Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Scenario #1: “Greener Telco” Scenario #1 refers to Bell Canada’s Zero Waste program, which successfully changed employee behaviorby altering the causes of thosebehaviors. Pilot project in Toronto – 12 floor building of 1000 staff reduced waste from 1800 lb per day to just 75 lb per day within 3 years. Courtesy of Bell Canada

Bell Canada’s Change Strategy Relied on the MARS model to alter behavior: Motivation -- employee involvement, respected steering committee (photo) Ability -- taught paper reduction, email, food disposal Role perceptions – learned importance of reducing waste Situation -- created barriers to wasteful behavior, eg. removed garbage bins Courtesy of Bell Canada

Scenario #2: “Go Forward Airline” Scenario #2 refers to Continental Airline’s “Go Forward” change strategy, which catapulted the company “from worst to first” within a couple of years.

Continental Airlines’ Change Strategy Communicate, communicate, communicate Introduced 15 performance measures Established stretch goals (repainting planes in 6 months) Replaced 50 of 61 executives Rewarded new goals (on-time arrival, stock price) Customers as drivers of change

Organizational Change McGraw-Hill/Irwin McShane/Von Glinow OB 5e Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.