Organization Change / Organization Development Professor Alexander Settles Structure should follow strategy • Growth – Concentration – Diversification • Stability – No change • Retrenchment – Turnaround – Divestment – Liquidation Definition of OD Organization Development (OD) is a planned process of change in an organization’s culture through the utilization of behavioral science technology, research, and theory. Definition of OD OD refers to a long-range effort to improve an organization’s problem-solving capabilities and its ability to cope with changes in its external environment with the help of external or internal behavioralscientist consultants. Definition of OD OD is an effort (1) planned, (2) organization-wide, and (3) managed from the top, to (4) increase organization effectiveness and health through (5) planned interventions in the organization’s “processes,” using behavioral science knowledge. Organization Development is... a systemwide application and transfer of behavioral science knowledge to the planned development, improvement, and reinforcement of the strategies, structures, and processes that lead to organization effectiveness. Action Research Model Problem Identification Consultation with a behavioral scientist Data gathering & preliminary diagnosis Feedback to Client Joint diagnosis Joint action planning Action Data gathering after action Positive Model Initiate the Inquiry Inquire into Best Practices Discover Themes Envision a Preferred Future Design and Deliver Ways to Create the Future Comparison of Planned Change Models • Similarities – – – – Change preceded by diagnosis or preparation Apply behavioral science knowledge Stress involvement of organization members Recognize the role of a consultant • Differences – General vs. specific activities – Centrality of consultant role – Problem-solving vs. social constructionism General Model of Planned Change Entering and Contracting Diagnosing Planning and Implementing Change Evaluating and Institutionalizing Change Processes for Planned Organization Change • Process Model – Planned organization change requires a systematic process of movement from one condition to another • Unfreezing – Process by which people become aware of the need for change • Change – Movement from the old way of doing things to a new way • Refreezing – Process of making new behaviors relatively permanent and resistant to further change Process of Organizational Change Processes for Planned Organization Change • The Continuous Change Process Model – Incorporates the forces for change, a problemsolving process, a change agent, and transition management – Takes a top management perspective • Perceives forces and trends that indicate need for change • Determines alternatives for change • Selects the appropriate alternative Continuous Change Process Model of Organization Change Processes for Planned Organization Change • The Continuous Change Process Model – Change agent: a person responsible for managing a change effort • Assists management with problem recognition/definition • Can be involved in generating/evaluating potential action plans • Can be from inside or outside of the organization • Implements the change • Measures, evaluates, controls the desired results – Transition management • Process of systematically planning, organizing, and implementing change OD: Group and Individual Change Team Building Goals To set team goals and priorities To analyze and allocate the way work is performed To examine how a group is working To examine relationships among those doing the work Resistance to Change • The Resistance to Change Paradox – Organizations invite change when change offers competitive advantage – Organizations resist change when change threatens the organization’s structure and control systems – Organizations must balance stability (permanence) with the need to react to external shifts (change) – Resistance can warn of the need to reexamine the need for change Resistance to Change: Sources of Resistance to Change • Organizational Sources • Individual Sources – Overdetermination – Habit – Narrow focus of change – Security – Group inertia – Fear of the unknown – Threatened expertise – Threatened power – Resource allocation changes – Economic factors – Lack of awareness – Social factors Managing Successful Organization Change and Development • Keys to Managing Change in Organizations – Consider international issues – Take a holistic view – Start small – Secure top management support – Encourage participation by those affected by the change – Foster open communication – Reward those who contribute to change Different Types of Planned Change • Magnitude of Change – Incremental – Quantum • Degree of Organization – Over organized – Underorganized • Domestic vs. International Settings Diagnosing Organizational Systems • The key to effective diagnosis is… – Know what to look for at each organizational level – Recognize how the levels affect each other Organization-Level Diagnostic Model Inputs Design Components Outputs Technology Strategy Structure Industry Structure HR Systems Measurement Systems Organization Effectiveness General Environment Organization Environments and Inputs • Environmental Types – – – – General Environment Task Environment and Industry Structure Rate of Change and Complexity Enacted Environment • Environmental Dimensions – Information Uncertainty – Resource Dependency Organization Design Components • Strategy – the way an organization uses its resources (human, economic, or technical) to gain and sustain a competitive advantage • Technology – the way an organization converts inputs into products and services • Structure – how attention and resources are focused on task accomplishment Organization Design Components • Human Resource Systems – the mechanisms for selecting, developing, appraising, and rewarding organization members • Measurement Systems – methods of gathering, assessing, and disseminating information on the activities of groups and individuals in organizations Organization Design Components • Organization Culture – The basic assumptions, values, and norms shared by organization members – Represents both an “outcome” of organization design and a “foundation” or “constraint” to change Outputs • Organization Performance – e.g., profits, profitability, stock price • Productivity – e.g., cost/employee, cost/unit, error rates, quality • Stakeholder Satisfaction – e.g., market share, employee satisfaction, regulation compliance Group-Level Diagnostic Model Inputs Design Components Outputs Goal Clarity Organization Design Task Structure Group Composition Group Functioning Performance Norms Group Effectiveness Group-Level Design Components • Goal Clarity – extent to which group understands its objectives • Task Structure – the way the group’s work is designed • Team Functioning – the quality of group dynamics among members • Group Composition – the characteristics of group members • Performance Norms – the unwritten rules that govern behavior Group-Level Outputs • Product or Service Quality • Productivity – e.g., cost/member, number of decisions • Team Cohesiveness – e.g., commitment to group and organization • Work Satisfaction Possible Effects of Feedback Feedback occurs No Change Energy to deny or fight data Anxiety, resistance, no change NO Is the energy created by the feedback? Energy to use data to identify and solve problems YES What is the direction of the feedback? Failure, frustration, no change NO Do structures and processes turn energy into action? YES Change The Design of Effective Interventions • Contingencies Related to the Change Situation • • • • Readiness for Change Capability to Change Cultural Context Capabilities of the Change Agent The Design of Effective Interventions • Contingencies Related to the Target of Change • • • • Strategic Issues Technology and structure issues Human resources issues Human process issues Intervention Overview • Human Process Interventions • Technostructural Interventions • Human Resources Management Interventions • Strategic Interventions Human Process Interventions • Process Consultation and Team Building • Third-party Interventions (Conflict Resolution) • Organization Confrontation Meeting • Intergroup Relationships • Large-group Interventions Technostructural Interventions • Structural Design • Downsizing • Reengineering • Parallel Structures • High Involvement Organizations • Total Quality Management • Work Design Human Resources Management Interventions • Goal Setting • Performance Appraisal • Reward Systems • Coaching and Mentoring • Career Planning and Development • Management and Leadership • Managing Work Force Diversity • Employee Wellness Programs Strategic Interventions • Transformational Change – Integrated Strategic Change – Organization Design – Culture Change • Continuous Change – Mergers and Acquisitions – Alliances and Networks Strategic Interventions • Transorganizational Change – Self-designing Organizations – Organization Learning and Knowledge Management – Built to Change Organizations Change Management Activities Motivating Change Creating Vision Developing Political Support Managing the Transition Sustaining Momentum Effective Change Management Motivating Change • Creating Readiness for Change – Sensitize the organization to pressures for change – Identify gaps between actual and desired states – Convey credible positive expectations for change • Overcoming Resistance to Change – Provide empathy and support – Communicate – Involve members in planning and decision making Creating a Vision • Discover and Describe the Organization’s Core Ideology – What are the core values that inform members what is important in the organization? – What is the organization’s core purpose or reason for being? • Construct the Envisioned Future – What are the bold and valued outcomes? – What is the desired future state? Developing Political Support • Assess Change Agent Power • Identify Key Stakeholders • Influence Stakeholders Change as a Transition State Current State Transition State Desired Future State Implementation and Evaluation Feedback Diagnosis Design and Implementation of Interventions Alternative Interventions Implementation of Intervention Clarify Intention Plan for Next Steps Implementation Feedback Evaluation Feedback Measures of the Intervention and Immediate Effects Measure of Long-term Effects Institutionalization Framework Organization Characteristics Institutionalization Processes Intervention Characteristics Indicators of Institutionalization Organization Characteristics • Congruence – Extent to which an intervention supports or aligns with the current environment, strategic orientation, or other changes taking place • Stability of Environment and Technology • Unionization Intervention Characteristics • • • • • Goal Specificity Programmability Level of Change Target Internal Support Sponsor Institutionalization Processes • • • • • Socialization Commitment Reward Allocation Diffusion Sensing and Calibration Indicators of Institutionalization • Knowledge • Performance • Preferences • Normative Consensus • Value Consensus Contingencies Influencing Structural Design Environment Organization Size Technology Structural Design Worldwide Operations Organization Goals The Downsizing Process • Clarify the organization’s strategy • Assess downsizing options and make relevant choices • Implement the changes • Address the needs of survivors and those who leave • Follow through with growth plans Downsizing Tactics Tactic Workforce Reduction Characteristics  Reduces headcount  Short-term focus  Fosters transition  Attrition  Retirement/buyout  Layoffs  Changes  Eliminate functions, Organization organization Redesign  Medium-term focus  Fosters transition & transformation Systemic Examples  Changes culture  Long-term focus  Fosters transformation layers, products  Merge units  Redesign tasks  Change responsibilities  Foster continuous improvement  Downsizing is normal The Reengineering Process • Prepare the organization • Specify the organization’s strategy and objectives • Fundamentally rethink the way work gets done – Identify and analyze core business processes – Define performance objectives – Design new processes • Restructure the organization around the new business processes. Characteristics of Reengineered Organizations  Work units change from functional departments to process teams  Jobs change from simple tasks to multidimensional work  People’s roles change from controlled to empowered  The focus of performance measures and compensation shifts from activities to results.  Organization structures change from hierarchical to flat  Managers change from supervisors to coaches; executives change from scorekeepers to leaders Characteristics of Transformational Change • Triggered by Environmental and Internal Disruptions • Aimed at Competitive Advantage • Systemic and Revolutionary Change • Demands a New Organizing Paradigm • Driven by Senior Executives and Line Management • Involves Significant Learning Integrated Strategic Change (ISC) Integrated Strategic Change ……… is a deliberate coordinated process that leads to gradually or radically systemic realignments between the environment and a firm’s strategic orientation resulting in improvement in performance and effectiveness. The Integrated Strategic Change Process Strategy S1 Organization O1 Strategic Analysis Strategic Change Plan Implementation Strategy S2 Organization O2 Strategic Choice ISC Application Stages • Strategic Analysis – Assess the readiness for change and top management’s ability to carry out change – Diagnose the Current Strategic Orientation • Strategic Choice – Top management determines the content of the strategic change • Designing the Strategic Change Plan – Development of a comprehensive agenda to achieve the change • Implementing the Strategic Change Plan Organizational Design Conceptual Framework • • • • • Strategy Structure Work Design Human Resources Practices Management and Information Systems Key Point • Fit, Congruence, Alignment among Organizational Elements Organization Design Model Organization Strategy Strategic Fit Organization Design Management and Information Systems Structure Design Fit Human Resource Practices Work Design Organization Designs Organization Design Application Stages • Clarifying the Design Focus – Create the overall framework, begins with examining strategy and objectives and determining organization capabilities needed • Designing the Organization – Results in an overall design for the organization, detailed designs for the components, and preliminary plans for how to implement • Implementing the Design – Puts the new structures, practices and systems into place, draws heavily leading and managing change methods The Concept of Organization Culture Artifacts Norms Values Basic Assumptions Diagnosing Organization Culture • Behavioral Approach – Pattern of behaviors (artifacts) most related to performance • Competing Values Approach – Pattern of values emphasis characterizing the organization • Deep Assumptions Approach – Pattern of unexamined assumptions that solve internal integration and external adaptation problems well enough to be taught to others Competing Values Approach Internal Focus & Integration Flexibility & Discretion Clan Adhocracy Hierarchy Market Stability & Control Culture Change Application Stages • • • • • Establish a clear strategic vision Get top-management commitment Model culture change at the highest level Modify the organization to support change Select and socialize newcomers; downsize deviants • Develop ethical and legal sensitivity Self-Designing Organizations • Systemic change process altering most features of the organization • Process is ongoing, never finished— continuous improvement and change • Learning as You Go—on-site innovation • Need support of multiple stakeholders • All levels of the organization adopt new strategies and change behaviors Organization Learning & Knowledge Management • Organization Learning interventions emphasize the structures and social processes that enable employees and teams to learn and share knowledge • Knowledge Learning focuses on the tools and techniques that enable organizations to collect, organize, and translate information into useful knowledge Organization Learning: An Integrative Framework Organization Learning Knowledge Management Competitive Strategy Organization Characteristics Organization Learning Processes Organization Knowledge Structure Information Systems HR Practices Culture Leadership Discovery Invention Production Generalization Tacit Explicit Organization Performance Characteristics of a Learning Organization • Structures emphasize teamwork, information sharing, empowerment • Information systems facilitate rapid acquisition and sharing of complex information to manage knowledge for competitive advantage • Human resources reinforce new skills and knowledge • Organization culture encourages innovation • Leaders model openness and freedom to try new things while communicating a compelling vision Organization Learning Processes • Single loop learning – Most common form of learning – Aimed at adapting and improving the status quo • Double loop learning – Generative learning – Questions and changes existing assumptions and conditions • Deuterolearning – Learning how to learn – Learning how to improve single and double loop learning Knowledge and Performance • Organization knowledge must be relevant and applied effectively to the competitive strategy • Link organization learning processes to organization performance • Growing emphasis on the value of intellectual assets and services Knowledge Management Interventions • Generating Knowledge – Identify knowledge for competitive strategy – Develop ways to acquire or create that knowledge • Organizing Knowledge – Put knowledge into a usable form – Codification and Personalization • Distributing Knowledge – Making knowledge easy to access, use & reuse Built-To-Change Organizations • Organizations are designed with the ability to change constantly to create the best sustainable source of competitive advantage. • Organizations operate in complex and rapidly changing environments Built to Change Application Stages • • • • Create a Change-Friendly Identity Pursue Proximity Build an Orchestration Capability Establish Strategic Adjustment a Normal Condition • Seek Virtuous Spirals Application Stages for Transorganizational Development Identification Convention Organization Who should belong to the transorganizational System (TS)? • Relevant skills, knowledge, and resources • Key stakeholders Should a TS be created? • Costs and benefits • Task perceptions How to organize for task performance? • Communication • Leadership • Policies and procedures Evaluation How is the TS performing? • Performance outcomes • Quality of interaction • Member satisfaction 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. Merger and Acquisition Rationale • Diversification • Vertical integration • Gaining access to global markets, technology, or other resources • Achieving operational efficiencies, improved innovation, or resource sharing 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 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 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 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 Cultural Context for Change • • • • • Context Orientation Power Distance Uncertainty Avoidance Achievement Orientation Individualism Context • The extent to which meaning in communication is carried in the words • Organizations in high context cultures tend to value ceremony and ritual, the structure is less formal, there are fewer written policies, and people are often late for appointments Power Distance • Extent to which members of a society accept that status and power are distributed unequally in an organization • Organizations in these cultures tend to be autocratic, possess clear status differences, and have little employee participation Uncertainty Avoidance • The extent to which members of a society tolerate the unfamiliar and unpredictable • Organizations in these cultures tend to value experts, prefer clear roles, avoid conflict, and resist change Achievement Orientation • The extent to which people in a society value assertiveness and the acquisition of material goods • Organizations in these cultures tend to associate achievement with wealth and recognition, value decisiveness, and gender roles are clearly differentiated. Individualism • The extent to which people in a society believe they should be responsible for themselves and their immediate family • Organizations in these cultures tend to encourage personal initiative, value time and autonomy, accept competition, and autonomy is highly valued International Strategic Orientation • Characteristics of the International Design – Sell existing products/services to nondomestic markets – Goals of increased foreign revenues • Implementing the International Orientation – OD facilitates extending the existing strategy into the new market – Cross-cultural training and strategic planning The Global Strategic Orientation • Characteristics of the Global Design – Centralized with a global product structure – Goals of efficiency through volume • Implementing the Global Orientation – OD supports career planning, role clarification, employee involvement, conflict management and senior management team building to help achieve improved operational efficiency – OD helps the organization transition to global integration from local responsiveness The Multinational Strategic Orientation • Characteristics of the Multinational Design – Operate a decentralized organization – Goals of local responsiveness through specialization • Implementing the Multinational Orientation – OD helps with intergroup relations, local management selection and team building – OD facilitates management development, reward systems, and strategic alliances Transnational Strategic Orientation • Characteristics of the Transnational Design – Tailored products – Goals of learning and responsiveness through integrations • Implementing the Transnational Orientation – Extensive selection and rotation – Acquire cultural knowledge and develop intergroup relations – Build corporate vision Global Social Change Organizations      Their primary task is a commitment to serve as an agent of change in the creation of environmentally and socially sustainable world futures They have discovered and mobilized innovative socialorganizational architectures They hold values of empowerment in the accomplishment of their global change mission They are globally-locally linked in structure, membership, or partnership and thereby exist as entities beyond the nationstate They are multi-organizational and often cross-sectoral Application Stages of Global Social Change Organizations • Build the local organization – Using values to create the vision – Recognizing that internal conflict is often a function of external conditions – Understanding the problems of success • Create horizontal linkages – Build a network of local organizations with similar views and objectives • Develop vertical linkages – Create channels of communication and influence upward to governmental and policy-level, decision-making processes