Organization Change / Organization Development Professor Alexander Settles

Structure should follow strategy Growth Concentration Diversification Stability No change Retrenchment Turnaround Divestment Liquidation

Definition of OD Organization Development (OD) is a planned process of change in an organization’s culture through the utilization of behavioral science technology, research, and theory.

Definition of OD OD refers to a long-range effort to improve an organization’s problem-solving capabilities and its ability to cope with changes in its external environment with the help of external or internal behavioral-scientist consultants.

Definition of OD OD is an effort (1) planned, (2) organization-wide, and (3) managed from the top, to (4) increase organization effectiveness and health through (5) planned interventions in the organization’s “processes,” using behavioral science knowledge.

Organization Development is... a systemwide application and transfer of behavioral science knowledge to the planned development, improvement, and reinforcement of the strategies, structures, and processes that lead to organization effectiveness.

Action Research Model Problem Identification Joint diagnosis Consultation with a behavioral scientist Joint action planning Data gathering & preliminary diagnosis Action Data gathering after action Feedback to Client

Positive Model Design and Deliver Ways to Create the Future Initiate the Inquiry Inquire into Best Practices Discover Themes Envision a Preferred Future Design and Deliver Ways to Create the Future

Comparison of Planned Change Models Similarities Change preceded by diagnosis or preparation Apply behavioral science knowledge Stress involvement of organization members Recognize the role of a consultant Differences General vs. specific activities Centrality of consultant role Problem-solving vs. social constructionism

General Model of Planned Change Planning and Implementing Change Evaluating and Institutionalizing Change Entering and Contracting Diagnosing

Processes for Planned Organization Change Process Model Planned organization change requires a systematic process of movement from one condition to another Unfreezing Process by which people become aware of the need for change Change Movement from the old way of doing things to a new way Refreezing Process of making new behaviors relatively permanent and resistant to further change

Process of Organizational Change

Processes for Planned Organization Change The Continuous Change Process Model Incorporates the forces for change, a problem-solving process, a change agent, and transition management Takes a top management perspective Perceives forces and trends that indicate need for change Determines alternatives for change Selects the appropriate alternative

Continuous Change Process Model of Organization Change

Processes for Planned Organization Change The Continuous Change Process Model Change agent: a person responsible for managing a change effort Assists management with problem recognition/definition Can be involved in generating/evaluating potential action plans Can be from inside or outside of the organization Implements the change Measures, evaluates, controls the desired results Transition management Process of systematically planning, organizing, and implementing change

OD: Group and Individual Change To set team goals and priorities To examine relationships among those doing the work To analyze and allocate the way work is performed To examine how a group is working Team Building Goals

Resistance to Change The Resistance to Change Paradox Organizations invite change when change offers competitive advantage Organizations resist change when change threatens the organization’s structure and control systems Organizations must balance stability (permanence) with the need to react to external shifts (change) Resistance can warn of the need to reexamine the need for change

Resistance to Change: Sources of Resistance to Change Organizational Sources Overdetermination Narrow focus of change Group inertia Threatened expertise Threatened power Resource allocation changes Individual Sources Habit Security Economic factors Fear of the unknown Lack of awareness Social factors

Managing Successful Organization Change and Development Keys to Managing Change in Organizations Consider international issues Take a holistic view Start small Secure top management support Encourage participation by those affected by the change Foster open communication Reward those who contribute to change

Different Types of Planned Change Magnitude of Change Incremental Quantum Degree of Organization Over organized Underorganized Domestic vs. International Settings

Diagnosing Organizational Systems The key to effective diagnosis is… Know what to look for at each organizational level Recognize how the levels affect each other

Organization-Level Diagnostic Model Inputs Design Components Outputs General Environment Industry Structure Technology Strategy Structure HR Measurement Systems Systems Effectiveness Organization Culture

Organization Environments and Inputs Environmental Types General Environment Task Environment and Industry Structure Rate of Change and Complexity Enacted Environment Environmental Dimensions Information Uncertainty Resource Dependency

Organization Design Components Strategy the way an organization uses its resources (human, economic, or technical) to gain and sustain a competitive advantage Technology the way an organization converts inputs into products and services Structure how attention and resources are focused on task accomplishment

Organization Design Components Human Resource Systems the mechanisms for selecting, developing, appraising, and rewarding organization members Measurement Systems methods of gathering, assessing, and disseminating information on the activities of groups and individuals in organizations

Organization Design Components Organization Culture The basic assumptions, values, and norms shared by organization members Represents both an “outcome” of organization design and a “foundation” or “constraint” to change

Outputs Organization Performance Productivity Stakeholder Satisfaction e.g., profits, profitability, stock price Productivity e.g., cost/employee, cost/unit, error rates, quality Stakeholder Satisfaction e.g., market share, employee satisfaction, regulation compliance

Group-Level Diagnostic Model Inputs Design Components Outputs Organization Design Goal Clarity Task Group Structure Functioning Group Performance Composition Norms Group Effectiveness

Group-Level Design Components Goal Clarity extent to which group understands its objectives Task Structure the way the group’s work is designed Team Functioning the quality of group dynamics among members Group Composition the characteristics of group members Performance Norms the unwritten rules that govern behavior

Group-Level Outputs Product or Service Quality Productivity e.g., cost/member, number of decisions Team Cohesiveness e.g., commitment to group and organization Work Satisfaction

Possible Effects of Feedback What is the direction of the feedback? Feedback occurs No Change NO Is the energy created by the feedback? YES Energy to use data to identify and solve problems What is the direction of the feedback? Energy to deny or fight data Do structures and processes turn energy into action? Failure, frustration, no change NO Anxiety, resistance, no change YES Change

The Design of Effective Interventions Contingencies Related to the Change Situation Readiness for Change Capability to Change Cultural Context Capabilities of the Change Agent

The Design of Effective Interventions Contingencies Related to the Target of Change Strategic Issues Technology and structure issues Human resources issues Human process issues

Intervention Overview Human Process Interventions Technostructural Interventions Human Resources Management Interventions Strategic Interventions

Human Process Interventions Process Consultation and Team Building Third-party Interventions (Conflict Resolution) Organization Confrontation Meeting Intergroup Relationships Large-group Interventions

Technostructural Interventions Structural Design Downsizing Reengineering Parallel Structures High Involvement Organizations Total Quality Management Work Design

Human Resources Management Interventions Goal Setting Performance Appraisal Reward Systems Coaching and Mentoring Career Planning and Development Management and Leadership Managing Work Force Diversity Employee Wellness Programs

Strategic Interventions Transformational Change Integrated Strategic Change Organization Design Culture Change Continuous Change Mergers and Acquisitions Alliances and Networks

Strategic Interventions Transorganizational Change Self-designing Organizations Organization Learning and Knowledge Management Built to Change Organizations

Change Management Activities Motivating Change Creating Vision Effective Change Management Developing Political Support Managing the Transition Sustaining Momentum

Motivating Change Creating Readiness for Change Sensitize the organization to pressures for change Identify gaps between actual and desired states Convey credible positive expectations for change Overcoming Resistance to Change Provide empathy and support Communicate Involve members in planning and decision making

Creating a Vision Discover and Describe the Organization’s Core Ideology What are the core values that inform members what is important in the organization? What is the organization’s core purpose or reason for being? Construct the Envisioned Future What are the bold and valued outcomes? What is the desired future state?

Developing Political Support Assess Change Agent Power Identify Key Stakeholders Influence Stakeholders

Change as a Transition State Desired Future State Current State Transition State

Implementation and Evaluation Feedback Diagnosis Design and Implementation of Interventions Implementation of Intervention Implementation Feedback Evaluation Feedback Clarify Intention Plan for Next Steps Measures of the Intervention and Immediate Effects Measure of Long-term Effects Alternative Interventions

Institutionalization Framework Organization Characteristics Indicators of Institutionalization Institutionalization Processes Intervention Characteristics

Organization Characteristics Congruence Extent to which an intervention supports or aligns with the current environment, strategic orientation, or other changes taking place Stability of Environment and Technology Unionization

Intervention Characteristics Goal Specificity Programmability Level of Change Target Internal Support Sponsor

Institutionalization Processes Socialization Commitment Reward Allocation Diffusion Sensing and Calibration

Indicators of Institutionalization Knowledge Performance Preferences Normative Consensus Value Consensus

Contingencies Influencing Structural Design Environment Worldwide Operations Organization Size Structural Design Organization Goals Technology

The Downsizing Process Clarify the organization’s strategy Assess downsizing options and make relevant choices Implement the changes Address the needs of survivors and those who leave Follow through with growth plans

Downsizing Tactics

The Reengineering Process Prepare the organization Specify the organization’s strategy and objectives Fundamentally rethink the way work gets done Identify and analyze core business processes Define performance objectives Design new processes Restructure the organization around the new business processes.

Characteristics of Reengineered Organizations Work units change from functional departments to process teams Jobs change from simple tasks to multidimensional work People’s roles change from controlled to empowered The focus of performance measures and compensation shifts from activities to results. Organization structures change from hierarchical to flat Managers change from supervisors to coaches; executives change from scorekeepers to leaders

Characteristics of Transformational Change Triggered by Environmental and Internal Disruptions Aimed at Competitive Advantage Systemic and Revolutionary Change Demands a New Organizing Paradigm Driven by Senior Executives and Line Management Involves Significant Learning

Integrated Strategic Change (ISC) is a deliberate coordinated process that leads to gradually or radically systemic realignments between the environment and a firm’s strategic orientation resulting in improvement in performance and effectiveness.

The Integrated Strategic Change Process Strategy S1 Strategy S2 Strategic Change Plan Organization O1 Organization O2 Implementation Strategic Analysis Strategic Choice

ISC Application Stages Strategic Analysis Assess the readiness for change and top management’s ability to carry out change Diagnose the Current Strategic Orientation Strategic Choice Top management determines the content of the strategic change Designing the Strategic Change Plan Development of a comprehensive agenda to achieve the change Implementing the Strategic Change Plan

Organizational Design Conceptual Framework Strategy Structure Work Design Human Resources Practices Management and Information Systems Key Point Fit, Congruence, Alignment among Organizational Elements

Organization Design Model Organization Strategy Strategic Fit Organization Design Structure Management and Information Systems Design Fit Work Design Human Resource Practices

Organization Designs

Organization Design Application Stages Clarifying the Design Focus Create the overall framework, begins with examining strategy and objectives and determining organization capabilities needed Designing the Organization Results in an overall design for the organization, detailed designs for the components, and preliminary plans for how to implement Implementing the Design Puts the new structures, practices and systems into place, draws heavily leading and managing change methods

The Concept of Organization Culture Artifacts Norms Values Basic Assumptions

Diagnosing Organization Culture Behavioral Approach Pattern of behaviors (artifacts) most related to performance Competing Values Approach Pattern of values emphasis characterizing the organization Deep Assumptions Approach Pattern of unexamined assumptions that solve internal integration and external adaptation problems well enough to be taught to others

Competing Values Approach Flexibility & Discretion Clan Adhocracy External Focus & Differentiation Internal Focus & Integration Hierarchy Market Stability & Control

Culture Change Application Stages Establish a clear strategic vision Get top-management commitment Model culture change at the highest level Modify the organization to support change Select and socialize newcomers; downsize deviants Develop ethical and legal sensitivity

Self-Designing Organizations Systemic change process altering most features of the organization Process is ongoing, never finished—continuous improvement and change Learning as You Go—on-site innovation Need support of multiple stakeholders All levels of the organization adopt new strategies and change behaviors

Organization Learning & Knowledge Management Organization Learning interventions emphasize the structures and social processes that enable employees and teams to learn and share knowledge Knowledge Learning focuses on the tools and techniques that enable organizations to collect, organize, and translate information into useful knowledge

Organization Learning: An Integrative Framework Knowledge Management Competitive Strategy Organization Characteristics Organization Learning Processes Organization Knowledge Organization Performance Structure Information Systems HR Practices Culture Leadership Discovery Invention Production Generalization Tacit Explicit

Characteristics of a Learning Organization Structures emphasize teamwork, information sharing, empowerment Information systems facilitate rapid acquisition and sharing of complex information to manage knowledge for competitive advantage Human resources reinforce new skills and knowledge Organization culture encourages innovation Leaders model openness and freedom to try new things while communicating a compelling vision

Organization Learning Processes Single loop learning Most common form of learning Aimed at adapting and improving the status quo Double loop learning Generative learning Questions and changes existing assumptions and conditions Deuterolearning Learning how to learn Learning how to improve single and double loop learning

Knowledge and Performance Organization knowledge must be relevant and applied effectively to the competitive strategy Link organization learning processes to organization performance Growing emphasis on the value of intellectual assets and services

Knowledge Management Interventions Generating Knowledge Identify knowledge for competitive strategy Develop ways to acquire or create that knowledge Organizing Knowledge Put knowledge into a usable form Codification and Personalization Distributing Knowledge Making knowledge easy to access, use & reuse

Built-To-Change Organizations Organizations are designed with the ability to change constantly to create the best sustainable source of competitive advantage. Organizations operate in complex and rapidly changing environments

Built to Change Application Stages Create a Change-Friendly Identity Pursue Proximity Build an Orchestration Capability Establish Strategic Adjustment a Normal Condition Seek Virtuous Spirals

Application Stages for Transorganizational Development Identification Convention Organization Evaluation Who should belong to the transorganizational System (TS)? Relevant skills, knowledge, and resources Key stakeholders How to organize for task performance? Communication Leadership Policies and procedures Should a TS be created? Costs and benefits Task perceptions How is the TS performing? Performance outcomes Quality of interaction Member satisfaction

Mergers and Acquisitions Merger - the integration of two previously independent organizations into a completely new organization Acquisition - the purchase of one organization by another for integration into the acquiring organization. Distinct from transorganizational systems, such as alliances and networks, because at least one of the organizations ceases to exist.

Merger and Acquisition Rationale Diversification Vertical integration Gaining access to global markets, technology, or other resources Achieving operational efficiencies, improved innovation, or resource sharing

Merger and Acquisition Application Stages Pre-combination Phase The organization must identify a candidate organization, work with it to gather information about each other, and plan the implementation and integration activities Legal Combination Phase The two organizations settle on the terms of the deal, gain approval from regulatory agencies and shareholders, and file appropriate legal documents Operational Combination Phase Implementing the operational, technical and cultural integration activities

Strategic Alliances When two organizations formally agree to pursue a set of goals There is sharing of resources, intellectual property, people, capital, technology, capabilities or physical assets Common alliances are licensing agreements, franchises, long-term contracts, and joint ventures

Alliance Intervention Application Stages Alliance Strategy Formulation Clarify the business strategy and why an alliance is needed Partner Selection Leverage similarities and differences to create competitive advantage Alliance Structuring and Start-up Build and leverage trust in the relationship Alliance Operation and Adjustment

Network Interventions Involves three or more companies joined together for a common purpose Each organization in the network has goals related to the network as well as those focused on self-interest Characterized by two types of change: creating the initial network (transorganizational development) and managing change within an established network

Cultural Context for Change Context Orientation Power Distance Uncertainty Avoidance Achievement Orientation Individualism

Context The extent to which meaning in communication is carried in the words Organizations in high context cultures tend to value ceremony and ritual, the structure is less formal, there are fewer written policies, and people are often late for appointments

Power Distance Extent to which members of a society accept that status and power are distributed unequally in an organization Organizations in these cultures tend to be autocratic, possess clear status differences, and have little employee participation

Uncertainty Avoidance The extent to which members of a society tolerate the unfamiliar and unpredictable Organizations in these cultures tend to value experts, prefer clear roles, avoid conflict, and resist change

Achievement Orientation The extent to which people in a society value assertiveness and the acquisition of material goods Organizations in these cultures tend to associate achievement with wealth and recognition, value decisiveness, and gender roles are clearly differentiated.

Individualism The extent to which people in a society believe they should be responsible for themselves and their immediate family Organizations in these cultures tend to encourage personal initiative, value time and autonomy, accept competition, and autonomy is highly valued

International Strategic Orientation Characteristics of the International Design Sell existing products/services to nondomestic markets Goals of increased foreign revenues Implementing the International Orientation OD facilitates extending the existing strategy into the new market Cross-cultural training and strategic planning

The Global Strategic Orientation Characteristics of the Global Design Centralized with a global product structure Goals of efficiency through volume Implementing the Global Orientation OD supports career planning, role clarification, employee involvement, conflict management and senior management team building to help achieve improved operational efficiency OD helps the organization transition to global integration from local responsiveness

The Multinational Strategic Orientation Characteristics of the Multinational Design Operate a decentralized organization Goals of local responsiveness through specialization Implementing the Multinational Orientation OD helps with intergroup relations, local management selection and team building OD facilitates management development, reward systems, and strategic alliances

Transnational Strategic Orientation Characteristics of the Transnational Design Tailored products Goals of learning and responsiveness through integrations Implementing the Transnational Orientation Extensive selection and rotation Acquire cultural knowledge and develop intergroup relations Build corporate vision

Global Social Change Organizations Their primary task is a commitment to serve as an agent of change in the creation of environmentally and socially sustainable world futures They have discovered and mobilized innovative social-organizational architectures They hold values of empowerment in the accomplishment of their global change mission They are globally-locally linked in structure, membership, or partnership and thereby exist as entities beyond the nation-state They are multi-organizational and often cross-sectoral

Application Stages of Global Social Change Organizations Build the local organization Using values to create the vision Recognizing that internal conflict is often a function of external conditions Understanding the problems of success Create horizontal linkages Build a network of local organizations with similar views and objectives Develop vertical linkages Create channels of communication and influence upward to governmental and policy-level, decision-making processes