Managing Change and Organizational Learning Chapter Sixteen Managing Change and Organizational Learning McGraw-Hill/Irwin Copyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved.

After reading the material in this chapter, you should be able to: Discuss the external and internal forces that can create the need for organizational change. Describe Lewin’s change model and the systems model of change. Explain Kotter’s eight steps for leading organizational change.

After reading the material in this chapter, you should be able to: Review the 11 reasons employees resist change. Identify alternative strategies for overcoming resistance to change. Discuss the process organizations use to build their learning capabilities.

Forces of Change External forces for change Internal forces for change originate outside the organization Internal forces for change originate inside the organization.

External Forces Demographic characteristics Technological advancements Customer and market changes Social and political pressures

Internal Forces Low job satisfaction High turnover Conflict Management pressure Organizational culture

Question? ABC Trucking, conducted an analysis of employee job satisfaction and turnover, and concluded that its turnover rate was 48%. This was primarily attributed to job dissatisfaction by employees. This represents a(n) ______ for ABC. External force for change Social and political pressure Technological advancements Internal force for change The correct answer is “D” – internal force for change AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  401

Lewin’s Change Model Unfreezing Focus is to create the motivation to change Begin by disconfirming the usefulness or appropriateness of employees’ present behaviors or attitudes

Lewin’s Change Model Benchmarking process by which a company compares its performance with that of high-performing companies

Question? Fredfirst, a securities trading company, regularly compares its performance with that of high performing organizations in the industry, such as Merrill Lynch. This process is described as Change. Refreezing. Benchmarking. A strategic plan The correct answer is “C” – benchmarking. AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  402

Lewin’s Change Model Changing Organizational change can be aimed at improvement or growth, or it can focus on solving a problem such as poor customer service or low productivity Can be targeted at different levels in an organization

Lewin’s Change Model Refreezing Change is stabilized by helping employees integrate the changed behavior or attitude into their normal way of doing things Giving employees the chance to exhibit new behaviors, which are then reinforced

A Systems Model of Change Systems Approach Based on the premise that any change, no matter how large or small, has a cascading effect throughout an organization Takes a “big picture” perspective of organizational change

A Systems Model of Change Mission statement summarizes why an organization exists Strategic plan long-term plan outlining actions needed to achieve desired results Target elements of change components of an organization that may be changed

Target Elements of Change Organizational arrangements Social factors Methods People

A Systems Model of Change Figure 16-1

Applying the Systems Model of Change Aid during the strategic planning process Using the model as a diagnostic framework to determine the causes of an organizational problem and to propose solutions

Steps to Leading Organizational Change Table 16-1

Question? Dale needs to change the manufacturing processes of his firm. This will cause many changes to his labor force. He shares a compelling reason to his employees. Which step is this in leading change? Generate short term wins Develop a vision and strategy Establish a sense of urgency Create a guiding coalition The correct answer is “C”. See previous slide.

Creating Change Through Organization Development a set of techniques or tools that are used to implement organizational change Involves profound change Value loaded Diagnostic/prescription cycle Process oriented

Some OD Interventions for Implementing Change Table 16-2

OD Research and Practical Implications Planned organizational change works Change programs are more successful when they are geared toward meeting both short-term and long-term results Organizational change is more likely to succeed when top management is truly committed to the change program Effectiveness of OD interventions is affected by cross-cultural considerations

Why People Resist Change in the Workplace Resistance to change emotional or behavioral response to real or imagined work changes

Why People Resist Change in the Workplace An individual’s predisposition toward change Surprise and fear of the unknown Climate of mistrust Fear of failure Loss of status and/or job security Peer pressure

Question? Jamie is not directly affected by the change introduced in her company, but she is actively resisting it to protect the interests of her friends. This describes which reason for resistance to change? Surprise and fear of the unknown Personality conflicts Peer pressure Lack of tact The correct answer is “C” – peer pressure. AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  411

Why People Resist Change in the Workplace Disruption of cultural traditions and/or group relationships Personality conflicts Lack of tact and/or poor timing Nonreinforcing reward systems Past success

Overcoming Resistance to Change Commitment to change a mind-set of doing whatever it takes to effectively implement change

Overcoming Resistance to Change Provide as much information as possible to employees about the change Inform employees about the rationale for the change Conduct meetings to address employee’s concerns Provide employees the opportunity to discuss how the proposed change might affect them

Six Strategies for Overcoming Resistance to Change Table 16-3

Creating a Learning Organization proactively creates, acquires, and transfers knowledge throughout the organization

Building an Organization’s Learning Capability Figure 16-2

Building an Organization’s Learning Capability Learning capabilities set of core competencies and internal processes that enable an organization to adapt to its environment

Building an Organization’s Learning Capability Facilitating factors represent the internal structure and processes that affect how easy or hard it is for learning to occur and the amount of effective learning that takes place

Factors that Facilitate Organizational Learning Insert new Table 16-4

Learning Modes Learning modes various ways in which organizations attempt to create and maximize their learning

Six Dominant Modes of Learning Analytical learning Synthetic learning Experimental learning Interactive learning Structural learning Institutional learning

Question? Grant learns through systematic gathering of information. He is a(n) __________ learner. Analytic Synthetic Experimental Interactive The correct answer is “A” – analytic. See previous slide.

Key Functions in Building a Learning Organization Building a commitment to learning Working to generate ideas with impact Working to generalize ideas with impact Working to Generate Ideas with Impact Implement continuous improvement programs Increase employee competence through training, or buy talent from outside the organization Experiment with new ideas, processes, and structural arrangements Go outside the organization to identify world-class ideas and processes Instill systems thinking throughout the organization Working to Generalize Ideas with Impact Measuring and rewarding learning Increasing open and honest dialog among organizational members Reducing conflict Increasing horizontal and vertical communications Promoting teamwork Rewarding risk taking and innovation Reducing the fear of failure Increasing the sharing of successes, failures, and best practices across organizational members Reducing stressors and frustration Reducing internal competition Increasing cooperation and collaboration Creating a psychologically safe and comforting environment

Supplemental Slides Slides 40-44 contain extra non-text examples to integrate and enhance instructor lectures Slide 40: Change Approaches Slides 41: Rational Approach to Change Slide 42: Emotional Approach to Change Slide 43: Change Management Slide 44: Video discussion slide

Change Approaches Some companies focus on change by making hard economic decisions to improve their profitability like downsizing, layoffs, restructuring – Like Chainsaw Al Dunlap at Scott Paper. His approach at Scott Paper was first and foremost consider your shareholders and do whatever you need to drive the stock price up. He fired thousands of people, sold company assets; and the stock price exploded. He then sold the company to Kimberly-Clark at an inflated price. Within three months, Kimberly-Clark realized that the company wasn’t really worth what they purchased it for. It turned out that none of what Dunlap did was designed to build for the future, only sell off the present in the name of shareholder value. He then attempted to do the same thing at Sunbeam which turned out to be a big failure. This approach to change is likely to only have short-term benefits. Sunbeam had stacked retailers with more inventory than they could sell in a year, creating current sales to the detriment of future earnings.  The highly efficient plants he closed in Mississippi, Tennessee, Texas, and Louisiana were replaced with plants in Mexico, where a less efficient labor force was willing to work for $1 per hour.  And by the time the Sunbeam Board finally fired him, the stock had fallen to $12 a share.  Today it is less than $5 a share. Others take more of an organizational approach to change that focuses on development of the corporate culture, human capabilities, information feedback, etc. (e.g., Denny’s). You’ll recall in our discussion of Denny’s that that change was effective because of the leadership from senior management, socially responsible reasons for change, a thorough and deliberate approach to change through diversity training and accountability. There are some situations where an economic focus is necessary but to do it successfully you have to focus on the organizational “soft” side also. For example, we were hired to facilitate an major change initiative for a collections call center which had economic purposes but instead of just going in and changing everything, we held organizational change sessions with the first-level and group managers to help them and their employees handle this change. Economic focus: Firms value financial return to stockholders using downsizing, layoffs, restructuring. Al “Chainsaw” Dunlap - Scott Paper, Sunbeam Focus on organizational capabilities: Firms value corporate culture, human capabilities, information feedback, measurements. Denny’s approach to achieving court-ordered change

Change Management Read an article on “An Improvisational Model of Change Management”

Video Case: Louisville Slugger – Hillerich & Bradsby What role do information systems play at H&B? What were the internal and external trade-offs between reconfiguring the old information system and designing a new one? Why was the transition to the new system difficult? How could Kotter’s eight steps be used to facilitate such a transition? Why did some people resist change and experience stress? What strategies could H&B have used to overcome resistance to change? H&B had to decide whether to reconfigure the old system or implement a new one. A new system would streamline information flow in sales, supply chain management, accounting, finance, and marketing. However, the new system also caused a decrease in morale and increase in stress as employees struggled to learn the new system and change the way they operated. Kotter’s steps to leading organizational change include establishing a sense of urgency, creating a guiding coalition, developing a vision and strategy, empowering broad-based action, generating short-term wins, consolidating gains, and anchoring new approaches in the organization’s culture. Successful implementation of these steps facilitate organizational change. Surprise and fear of the unknown, fear of failure, and loss of status or job security were likely reasons H&B employees resisted change and experienced stress in the transition process.