Organization Development and Change Chapter Twenty Two: Transorganizational Change Thomas G. Cummings Christopher G. Worley

Learning Objectives for Chapter Twenty Two To understand the rational behind transorganizational interventions To compare and contrast the three types of transorganizational OD interventions: mergers and acquisitions, strategic alliance interventions, and network interventions within each category Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

Transorganizational Rationale Transorganizational strategies allow organizations to perform tasks that are too costly and complicated for single organizations to perform Goods and services are exchanged between organizations and transactions occur Transorganizational strategies work best when transactions occur frequently and are well understood Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

Transorganizational Systems Members maintain their separate organizational identities and goals Tend to be underorganized and member organizations are loosely coupled Different from mergers and acquisitions Network interventions may be appropriate Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

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. Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

Merger and Acquisition Rationale Diversification Vertical integration Gaining access to global markets, technology, or other resources Achieving operational efficiencies, improved innovation, or resource sharing Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

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 Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning 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 Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

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 Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

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 Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

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 Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning

Managing Network Change Create instability in the network Manage the tipping point The Law of the Few: Salespeople, Mavens, Connectors Stickiness The Power of Context Rely on self-organization Cummings & Worley, 9e (c) 2008 South-Western/Cengage Learning