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
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