Importance of Change Management KARIM Gweta Markosian Karim Camara Renzo Hoogendoorn Sander Zijlmans Vincent Tseng

Agenda Introduction Change Management Models Relation to Adaptive Cycle What is Change Management? Resistance Internal vs. External Change Change Management Models Advantages & disavantages of the different models Common Factors to Successful Change Management Conclusions

Relationship to the Adaptive Cycle Most models have large similarities to the adaptive cycle. Most models (like the Kotter & Lewin model that will be discussed later, have similar steps). Change Management models mention a need to change by getting identifying problems (crisis), identiying how we should change (new combinations) and actually changing (entrepreneurship). From their you get back at the equilibirium. And most change management models start from their again.

Change management is “It’s such a volatile world that the first resolution for any business leader coming into 2012 must be to become change friendly. I can’t think of any sector that could not change massively within the next year.”William Higham, founder of future trends consultancy The Next Big Thing “it is not the strongest species that survive, nor the most intelligent, but the ones who are most responsive to change” Charles Darwin “To cope with a changing world, an entity must develop the capacity of shifting and changing – of developing new skills and attitudes; in short, the capability of learning” A De Gues, The Living Company Importance: Successful adaptatio A change leader sees change as an opportunity. A change leader looks for change, knows how to find the right changes and knows how to make them effective both outside the organisation and inside it.n to change are crucial within an organization An organisation needs to see that its task is to lead change

What is change management? “Change management is a systematic approach to deal with change, both from the perspective of an organization and on the individual level” from online Business Dictionary The most change management models are built to help make the change management more effective

Why are employees resistant to change? 1. Employees were not aware of the underlying business need for change. 2. Lay-offs were announced or feared as part of the change. 3. Employees were unsure if they had the needed skills for success in the future state. 4. Individuals were comfortable with the current state; they wanted to maintain the personal rewards and sense of accomplishment and fulfillment provided by the status quo. 5. Employees felt they were being required to do more with less, or do more for the same pay. Prosci and the Change Management Learning Center are proud to present a tutorial series focused on resistance management.

Internal vs External Change Advantages Internal: Internal change has many advantages for an organization, including increased morale among the employees, a sense of employee empowerment and control and a high likelihood of the change becoming permanent. Because the change originates from the group, it is more easily accepted and becomes the norm. External: While external change is harder to accept than internal change, there are some distinct advantages for external change in an organization. This type of change can help jump start a declining organization and can change its course completely. Another advantage of external organizational change is that many organizations tend to reach a plateau level if left unchanged for too long. People become comfortable in their ways and stop seeking new and better ways to accomplish things.  ADVANTAGE EXTERNAL CHANGE EXAMPLE: One example of this is if a company is bought out by a larger company. This external change can help save the smaller company by looking objectively at the situation and changing when needed.

Internal vs External Change Disadvantages Internal: If a team or organization has a very domineering member, the internal change will often be a result of that single person and will therefore be too single-minded to be good for the organization at large. Additionally, when teams have been working together for too long in the same environment, the group mentality can take over and create unproductive change within the organization.  External: When change is forced on an organization, often the organization will rebel. One of the main disadvantages of externally imposed change is that it is unsuccessful in the long term. Often, external resources can force the change for a while, but when those people move on to different roles, the organization will return to its previous behaviors. Additionally, the change process itself can cause temporary chaos within the organization and actually reduce productivity for a couple of weeks or months.

Benefits of effective change management Returns of investment (ROI) Quality of the outcome achieved Efficiency of resources Return on investment — Economies of scale as the approach to change is re-used for each initiative saving the number of days spent defining a unique approach to each change initiative. — Faster implementation of change as those involved have the confidence to know where to get started, who to involve and can estimate with greater certainty the impact on their workloads and the level of impact in their departments. • Quality of the outcome achieved: — Increased understanding of the impact of the change which ensures that all processes, systems and people that are impacted are consulted, and their requirements incorporated into the change plan. — Appropriate levels of involvement with agreed responsibilities for making the change happen reduces the resistance to change and increases the rate of adoption, leading to greater realisation of benefits. • Efficiency of resources: — Clarifies the roles and responsibilities of all those involved in the change effort, ensuring that those with the most relevant skills and experience are given appropriate activities to manage. — Reduction in the number of ‘failed’ change initiatives and the waste of resources involved in making changes that ‘run out of steam’ or get overtaken by other events which had not been assessed when the change was conceived. — Reduction in the level of activity that is duplication of effort or that is running at cross purposes to other changes being made elsewhere in the organisation. — Enhanced employee morale and a reduction in recruitment and retention costs.

Requirements for becoming a change leader Policies to make the future. Systematic methods to look for and to anticipate change. The right way to introduce change both within and outside the organisation. Policies to balance change and continuity.

Some change management models In order to manage change, several models have been developed. We will take a look at some of the most used models. Each approach has its pros and cons, however their is no framework that is "best" in all situations. McKinsey 7-S Model Lewin's Change Management Model Kotter's Eight Step Change Model Nielsen (2008) quoted that organizational change is complex. Even little changes are not easy to undertake. Nielsen, J.F., (2008), “Models of Change and the Adoption of Web Technologies: Encapsulating Participation,” Journal of Applie d Behavioral Science 2008; 44; 263

McKinsey change management model Advantages: There are four main benefits of the McKinsey 7-S Model: It is an effective way to diagnose and understand the organization; it is a guide for organizational change; it is a combination of both rational and emotional constituents; and all parts are interrelated, so all portions must be addressed and focused on (12Manage, 2007). Disadvantages: One major disadvantage is that when one of the parts is changed, all parts change because they are all interrelated (12Manage, 2007). Another major disadvantage is that this model ignores differences (Morgan, n.d.). After five years many of the companies that used this model fell from the top (Morgan, n.d.).

McKinsey change management model SHARED VALUES: called "super ordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic STRATEGY: the plan devised to maintain and build competitive advantage over the competition. STRUCTURE: the way the organization is structured and who reports to whom STAFF: the employees and their general capabilities SYSTEMS: the daily activities and procedures that staff members engage in to get the job done SKILLS: the actual skills and competencies of the employees working for the company. STYLE: the style of leadership adopted.

Advantages/disadvantages of Mckinsey’s model All parts are interrelated, so all portions must be addressed and focused on (12Manage, 2007) It is an effective way to diagnose and understand the organization It is a guide for organizational change Disadvantages: When one of the parts is changed, all parts change because they are all interrelated (12Manage, 2007). The model is complex. This model ignores differences (Morgan, n.d.). After five years many of the companies that used this model fell from the top (Morgan, n.d.). Companies using this model have been known to have a higher incidence of failure.

Link to the Adaptive cycle While it might not look straightforward, the McKinsey 7-S model can be linked to the adaptive cycle in our opinion. This will be explained with an example and the following image. Within the Equilibrium phase of the Adaptive Cycle we can argue that the all the elements of the McKinsey 7-S model are aligned with each other, for that reason they are all green-colored. When we shift to the Crisis phase, there will be uncertainty and not all the elements will be aligned (red-colored). The company for example has to change their strategy and become more innovative, but they might lack the skills to do become more innovative. In this case, the elements ‘strategy’ and ‘skills’ are not aligned anymore with the rest of the elements. From there, we move to the Exploring phase. There are some ideas that might help us align the elements (orange-colored) again but there is still some uncertainty so the elements are not green yet. In the Entrepreneurship phase we are looking at how these ideas can be implemented to achieve our ‘alignment’ goal again. If we are able to reach to goal, eventually, all the element will be aligned again and we will be back at the Equilibrium phase.

Lewin’s change management model Kurt Lewin developed in the year 1947 a change management theory and a change management model. The change management model of Lewin is one of the most commonly applied models within the field of change management. The change management model consists of four phases. These phases are the Unfreeze phase, the Change or Transition phase and the Freeze or Refreeze phase. During the Unfreeze phase, the employees within the organization are recognizing that change is becoming necessary. Within this phase the organization is getting ready to change. In order to prepare for the change, the organization is creating the environment to change and the necessary steps are taken to inform and involve the employees with the change plans. During the Change phase or sometimes referred to as the Transition phase, the organization is in the process of changing to a new way of being. This phase is usually a very difficult phase for the employees of the organization. The reason is that learning to behave differently or to change is usually associated with resistance, which is based on fear. Usually one refers to the fear of the unknown. Providing support to the employees is thus very important during the Change phase. The employees have then the opportunity and the time to learn and understand the changes that are made within the organization. Support can be given in the form of education, coaching and training. During the Freeze phase or sometimes referred to as the Refreeze phase the organization is starting to establish stability. The changes have been implemented, accepted and have become the new standard within the organization.

Lewin’s change management model Unfreeze: Getting ready to change, understanding that change is necessary & moving out of the comfort zone Change (transition): Moving to a new way of being, people are fearful and unsure, support is important -> training, coaching, and expecting mistakes as part of the process Refreeze: Establishing stability, changes are accepted and become the new norm, new relationships and routines are created First, Unfreeze -which involves reducing the forces that are maintaining the existing situation or status-quo of the organization by either increasing the driving forces, decreasing restraining forces or combination of both. Second; Change – Which involves movement of the target system to the desired state of equilibrium and intervene in the system to develop new behaviors, values and attitudes by making changes to either the organization structures or processes. Third, refreeze – which is needed to sustain the change that has taken place by reinforcing new patterns and institutionalizing them through formal and informal mechanisms (Kritsonis: 2005).

Advantages/disadvantages of Lewin’s model It is a simple and easily understood model for change this model has fewer steps The model is done through steps; this is an efficient model that is used today (Mind Tools, 2007; Syque, 2007). Disadvantages: At the refreezing period, many people are worried that another change is coming, so they are in change shock (Syque, 2007). This change shock causes employees to not be as efficient or effective in their jobs (Syque, 2007). Refreeze phase – change is continuous, change may occur within weeks, no time to settle down Advantages of the model The change model of Lewin is a simple and easily understood model for change. The Lewin model has a fewer steps that have to be followed. The Lewin model is done through steps and thus can be considered as an efficient model that is used within the field of change management (Mind Tools, 2007; Syque, 2007).   Disadvantages of the model During the Refreezing phase, many employees are worried that another change is coming, so they are in a change shock (Syque, 2007). This change shock causes employees to not be as efficient or effective regarding their jobs (Syque, 2007). There is some criticism regarding the Refreeze phase. Organizational change is continuous and change may occur within several weeks. There is thus no time to settle down into confortable routines.

Link to the Adaptive cycle The change management model of Lewin (1947) and the Adaptive Cycle model of Abcouwer et al. (2012) have some similarities. However, these similarities are made in a straightforward manner. The Crisis quadrant of the Adaptive Cycle model refers to that the organization’s equilibrium is disturbed and the organization has difficulties finding new balances again. During the Unfreeze phase of the Lewin change model, the organization has recognized the need for change. One may argue that the Crisis quadrant of the Adaptive Cycle model and the Unfreeze phase of the change model of Lewin resemble in this manner. The New Combinations quadrant and the Entrepreneurship quadrant of the Adaptive Cycle Model can be compared to the Change phase of Lewin’s change model. The characteristics of the New Combinations quadrant and the Entrepreneurship quadrant of the Adaptive Cycle Model are similar compared to the Change phase of Lewin’s change model. It’s all about the change process and finding a new way of being. The Equilibrium quadrant of the Adaptive Cycle Model and the Refreeze phase of the Lewin change model have similar characteristics as well, since it is all about accepting the new changes and establishing stability.

Kotter’s change management model One advantage is that this is a step by step model, which is easy to follow. Another is that it does not focus on the change itself, but rather the acceptance and preparedness for this change, which makes it an easier transition. One disadvantage is that you cannot skip any steps or the change process will completely fail. As with the other two models, change still takes time with this one too.

Advantages/disadvantages of Kotter’s model This is a step by step model, which is easy to follow. It does not focus on the change itself, but rather on the acceptance and preparedness for the change which leads to an easier transition. Disadvantages: It is a top-down model and opportunities can be missed, because not everyone is involved in co-creation of the vision. You cannot skip a step because the change process will then completely fail. As with the other two models, change still takes a lot of time. While you should not skip steps, some steps are not required or useful as stated in literatuer. Replacement of major software for example is often irreverisble, and therefore steps 7 and 8 of the model might not be relevant. [Steven H. Appelbaum, Sally Habashy, Jean-Luc Malo, Hisham Shafiq, (2012),"Back to the future: revisiting Kotter's 1996 change model", Journal of Management Development, Vol. 31 Iss: 8 pp. 764 - 782]

Link to the Adaptive cycle The 8 steps of Kotter’s model can be linked with the adaptive cycle. The 8 steps start at the end of the Crisis phase and end just before entering the Equilibrium phase. When in a crisis situation, it’s necessary to change. The first step of Kotter’s model is when you go from the Crisis to New Combinations phase. Step 2 till 5 of Kotter’s model can all be placed in the New combinations phase of the adaptive cycle. The last 3 steps fit in the Entrepreneurship phase. You can say that organizations can use the 8 steps of Kotter to come out of the crisis and go to the Equilibrium phase.

Common Factors to Successful Change Management Planning: Develop and document the objectives that need to be achieved with the change and the means to achieve it. Defined Governance: Establish appropriate organisational structures, roles and responsibilities for the change that engage stakeholders and support the change effort. Committed Leadership: Ongoing commitment at the top and across the organisation to guide organisational behaviour. Informed Stakeholders: Encourage stakeholder participation and commitment to the change by employ open and consultative communication approaches that will create awareness and understanding of the change throughout the organisation. Aligned Workforce: Identify the human impacts of the change and develop plans to align the workforce in order to support the changing organisation. The extent to which each of these five factors is exhibited in successful change projects will vary depending on the nature of the change involved.

Conclusions Change management is of strategic importance and companies cannot exist without it. Their ability to change and adapt quickly brings enormous market advantages. Each change management model has it’s pros and cons, however none of the models is the "best" in all situations. Most change management models are made to help the change management be more effective. Common factors to successful change management include planning, committed leadership, aligned workforce, informed stakeholders and defined governance. Change management is of strategic importance, and companies cannot exist without it. Their ability to change and adapt quickly brings enormous market advantages.

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