Chapter 15
Organization Transformation
and Strategic Change
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 1
Learning Objectives (part 1 of 2)
• Identify and define organization
transformation.
• Understand basic strategy-culture
matrix and other approaches to
changing culture.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 2
Learning Objectives (part 2 of 2)
• Recognize importance of corporate
culture and its relation to strategy.
• Experience these concepts in
management simulation.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 3
Strategy and Transformation
• Success can work against a company
when it looses touch with customers.
• Radical changes may be only choice for
organization in desperate need of
change.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 4
Organizational Transformation
(part 1 of 3)
• OT refers to drastic changes in:
– How organization functions.
– How it relates to environment.
• OD strategies represent more gradual
approaches to strategic change.
• OT approaches are drastic and abrupt
change.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 5
Organizational Transformation
(part 2 of 3)
• OT may or may not be developmental.
• OT tends to use directive, not
participative, approaches to change.
• Usually top-down, top-management
driven.
• OT shaped by use of power rather than
collaboration.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 6
Organizational Transformation
(part 3 of 3)
• Requires:
– Shared vision.
– Willingness to clean house.
– Restructure.
– Tackle many problems.
• Due to immediate threat, this may be
only way for organization to survive.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 7
Large-Scale
Change Strategies
• Incremental.
– Long-term planned change.
– Relies upon collaboration.
• Transformative.
– Immediate, drastic change.
– Uses directive methods.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 8
Large-Scale Change Model
Model based on 3 key dimensions.
1. Time frame of change—short or long.
2. Level of support of organizational culture.
3. Degree of discontinuity with environment.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 9
Figure 15.2
Strategies for Planned Change
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 10
Four Change Strategies (part 1 of 2)
1. Participative evolution.
– Incremental and anticipates change.
– Support of culture through collaborative
means.
2. Charismatic transformation.
– Radical change in short time with support
of culture.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 11
Four Change Strategies (part 2 of 2)
3. Forced evolution.
– Incremental adjustments over longer
period without support of culture.
4. Dictatorial transformation.
– Used in times of crisis.
– Major restructuring running counter to
internal culture.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 12
Results of OT
• OT may be best or only way to bring
back an organization under immediate
threat.
• OT more likely to be used by externally
recruited managers.
• OT is risky and outcome is uncertain.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 13
The Corporate Culture
• System of shared values held by
members that distinguishes one
organization from another.
• CEO and managers’ actions, not words,
produce culture.
• A culture is organization’s major
strength when consistent with
strategies.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 14
Strategy-Culture Fit
• Strategy:
– Course of action used to achieve
objectives.
– Relates resources of organization to
opportunities in environment.
• Culture:
– Set of values for setting priorities.
– Critical factor in implementation of strategy.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 15
Core Characteristics of
Culture
•
•
•
•
•
•
Individual autonomy.
Sensitivity to customers and employees.
Managers provide support and assistance.
Employees initiate new ideas.
Openness of communication channels.
Risk-seeking encouraged.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 16
Sharing the Vision
• Management theorists feel vision is
essence of leadership.
• Vision involves several stages.
– Share the vision.
– Empower the individual.
– Develop trust.
– Reward performance.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 17
Figure 15.3
Sharing the Vision
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 18
Strong Versus Weak Cultures
• Strong culture.
– Basic values intensely held and widely
shared.
• Weak culture.
– May be seen in young company or one
with high turnover.
• Culture is product of key components.
– Structure, systems, people, and style.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 19
Figure 15.4
Relative Strength of Cultures
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 20
Strategy-Culture Matrix (part 1 of 4)
Four basic alternatives in determining
strategy changes:
1. Manage change (manageable risk).
– Change important and compatible with
culture.
– Use cultural reinforcement as strategies.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 21
Strategy-Culture Matrix (part 2 of 4)
2. Reinforce culture (negligible risk).
– Forge vision that emphasizes shared
values.
– Reinforce existing culture.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 22
Strategy-Culture Matrix (part 3 of 4)
3. Manage around culture (manageable
risk).
– Change important and incompatible with
present culture.
– Reinforce value system, reshuffle power,
use leverage in the organization.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 23
Strategy-Culture Matrix (part 4 of 4)
4. Change strategy to fit culture
(unacceptable risk).
– Change important but incompatible with
culture.
– Changing culture is explosive, long-term
process that may be impossible.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 24
Figure 15.5
Strategy-Culture Matrix
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 25
Strategic Change
Management
•
•
Seeks to align organization’s strategy,
structure, and human resources to fit
environment.
Parts of system in perpetual
interaction with environment.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 26
Organizations Composed of 3
Systems
• Technical - solve production problems.
• Political - solve allocation problems of
resources and power.
• Cultural - solve value/belief problems.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 27
Figure 15.6
Environmental Forces and Organizational
Systems
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 28
Three Steps to Strategic
Change
Step 1: Develop image of desired
organization.
Step 2: Separate systems and intervene
separately in each one.
Step 3: Plan for reconnecting three
systems.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 29
Reasons for Large-Scale
Cultural Changes
• Company has strong values that do not fit
changing environment.
• Industry competitive and changes quickly.
• Company mediocre or worse.
• Firm about to join ranks of very largest.
• Firm small but growing rapidly.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 30
Cautions in Cultural Change
• Cultural change can be difficult and time
consuming.
• Should be attempted only after lessdifficult solutions have been ruled out.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 31
OD Application
Transformation at Home
Depot
• Home Depot is number-one homeimprovement retail chain in U.S.
• It had unstructured and entrepreneurial
culture.
• Competitor Lowe’s began taking market
share.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 32
• Nardelli was brought in as CEO to turn
around dysfunctional culture.
• Nardelli brought in new top
management team.
• Lacked support from lower levels.
• Changes resulted in unintended
consequences.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 33
• Culture became one of revolt.
• Innovation and sense of ownership
declined.
• When market share declined more,
board replaced Nardelli with Ellison.
• Ellison has made methodical and longrange changes.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 34
Key Words And Concepts
• Culture.
– Reflects organization’s past and is rooted
in firm’s history.
• Incremental approach.
– Long-term planned change that relies on
collaboration.
• Organization transformation (OT).
– Drastic, abrupt change to structure,
management, and culture.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 35
• Strategic change management.
– Focus on alignment with strategy,
structure, and human resources systems.
• Strategy.
– Course of action used to achieve major
objectives.
• Strategy-culture matrix.
– Assess readiness of culture for strategic
changes.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 36
• Technical, political, and cultural
systems.
– Organizational systems of strategic change
management model.
• Transformational change.
– Immediate drastic change accomplished by
directive methods.
• Vision.
– Mental image of a possible and desirable
future state of organization.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 37
OD Skills Simulation 15.1
The GenTech Company
• Purpose.
– To experience and observe how
information affects strategic decision
making.
– To develop strategy and culture in an
organization.
– To receive feedback on your risk-taking
level.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 38
Preparations for Next Chapter
• Read Chapter 16.
• Complete the Profile Survey and Profile
Form in Simulation 16.1, Part A, Step 1.
• Complete Step 1 of OD Skills
Simulation 16.2.
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 39
An Experiential Approach to Organization Development 8 th edition
Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 15
Slide 40