1. Lecture 3 Why Organizations Change
Change Management
Lecture 3
Why Organizations Change

2. Why change?
Change is a risky activity – many organizational changes fail or do not realize their intended outcomes.
This raises the question of why the desire to change is so prevalent?
Pressure to change comes from:
External, environmental pressures
Internal, organizational pressures

3. Images of pressure for change
How does a:
Director
Navigator
Caretaker
Coach
Interpreter
Nurturer
understand why organizations need to change?

4. External, environmental pressures
Examples
Description
Fashion
pressures
Boeing Co.
(copying GE)
This is based on mimetic isomorphism – imitating companies that are legitimate and successful
Mandated
Chevron Texaco
(diversity suit)
This is based on coercive isomorphism – when change is demanded by outside sources.
Geopolitical pressures 3M
(EU creation)
This is when global developments impact an organization’s survival or profitability

5. External, environmental pressures
Examples
Description
Market decline pressures
AOL Time Warner
(dialup decline)
When current markets that the organization operates in begin to decline there is pressure to find newer, more viable markets.
Hypercompetition pressures
Gateway
(Dell threat)
This affects the way organizations respond to their consumers and their competitors to cater for the increasingly rapid pace of business.
Reputation and credibility pressures
Walt Disney Company
(criticism of board)
In light of recent corporate governance scandals in organizations, the pressure to maintain a good reputation and high level of credibility has increased.

6. Internal organizational pressures
Examples
Description
Growth pressures
Microsoft
(no formal processes)
Existing systems and processes in a smaller organization may no longer be applicable when the size of the organization increases.
Integration and collaboration pressures
EDS
(no common )
Integration and creating economies of scale can lead to pressure for change in organizations.
Identity pressures
Forte Hotel
(own hotels competing)
Creating a common organizational identity and the unified commitment of staff in different areas/departments of an organization may be difficult to manage and may encourage change initiatives.

7. Internal organizational pressures
Examples
Description
New broom pressures
Bank of America
(new CEO)
New authority figures in an organization can herald a new era and often signal a period of significant changes in an organization.
Power and political pressures
IBM
(abolished inner circle)
Power relationships and politicking can change internal processes and decision making. This has significant flow on effects within the organization.

8. Why organizations may not change: Five frictions
Distorted perceptions
Hubris, cognitive biases, constructivism etc.
Dulled motivation
Costs of change, cannibalization costs, cross subsidy comforts
Failed creative response
Speed or complexity or vision is lacking
Political deadlocks
Departmental politics creates blockages
Action disconnects
Leadership inaction
Embedded routines are sticky
Cultural values resist change

9. Questions
To what extent can you identify environmental pressures propelling your organization toward change?
To what extent do you have influence over whether and how to change?
Which of the reasons to avoid change have you experienced or seen?
How easy is it to raise issues in your organization about the rationale for engaging in specific changes? Is there a dominant rationale? Why?
What personal criteria might you adopt for initiating a specific change “for the right reasons”?

10. Case: Chipping away at Intel
What were the different changes at Intel over the first 3 years of Bartlett’s tenure?
Which environmental pressures were experienced by Intel?
Which internal pressures?
Are there other pressures you can identify?
What overall conclusions do you draw about why Barrett made the changes he did? Which issues were dominant? Why?
What pressures might Barrett face in the future?
What advice would you give for how to cope with these change pressures?