1.5 Change & the Management of Change

HIGHER LEVEL (HL)

Introduction to Change & the Management of Change

• The rate of change is accelerating and no business is immune: there are new markets, new products and services, new production methods, new social values and new technologies.

• Every change is a challenge to the management of a business.

• There are thousands of books on change and its management, which clearly reflects a desire by senior management to have some methods to avoid the quicksand of a dynamic business environment.

Causes of Change

• Where does the impetus for organizational change come from?

• The simple answer is that drivers for change come from both from the internal and external environment.

• Effective managers understand that change in the strategic environment is a continuous process and that successful businesses are those than anticipate and plan for change.

• Therefore, managing change is about the long term survival of the business.

Causes of Change

• Organizational change is especially necessary when external environments are uncertain, complex, and dynamic.

• Significant and or rapid change may require an organization to reconsider its structure, purpose, mission and culture.

• The implementation of strategic change is clearly a period of significant danger for any business.

EXTERNAL DRIVERS OF CHANGE

The external environment is in a state of constant flux. External factors driving change include:

• Globalization• New Technologies• Demographic Changes• Social & Cultural Change• Changes in Legislation• Economic Trends• Competition

EXTERNAL DRIVERS OF CHANGEGlobalization

• Globalization brings significant opportunities in terms of larger markets and growth possibilities.

• Global markets are converging, offering organizations the opportunity to produce standardized products and to benefit from economies of scale.

• However, globalization also brings threats from greater international competition, and affects the range of goods and services that must be offered.

EXTERNAL DRIVERS OF CHANGEGlobalization

• Different nationalities and cultures will have different tastes, preferences and buying habits.

• Businesses will have be increasingly aware of, and responsive to, the growing and evolving needs of emerging economies, such as China, India an the countries of Eastern Europe.

EXTERNAL DRIVERS OF CHANGEGlobalization

Challenges• MNCs are faced with a wider range of HR issues,

including differences in the skills, attitudes and needs of their workforces worldwide.

• As a business grows internationally there are more communication problems and it is difficult to maintain a common purpose.

• The challenge of expansion has intensified as more business functions are outsourced often overseas.

EXTERNAL DRIVERS OF CHANGENew Technologies

• The rate of technological change is accelerating as new technologies emerge and computer power and speed increases exponentially.

• In organizational terms, the introduction of new technologies has allowed increasing decentralization and downsizing, with power shifting away from the centre to the local or regional offices.

• As a result organizational structures have flattened requiring employees to develop new skills and take on extra responsibilities.

• The outcome is that power often shifts from centralized functions to local operating units, challenging the management function as well.

• Technological change affects all business functions from marketing to production.

EXTERNAL DRIVERS OF CHANGEDemographic Change

• Changes in the size and structure of the population affect a business in two significant ways – the nature and needs of employees change as do the needs and wants of consumers.

• Most developed countries are facing up to an ageing population, which may cause skill shortages.

• This requires changes to recruitment, training and retention policies.

• Working patterns are being reassessed and, as consequence, more flexible working practices are being introduced.

• Demographic changes affect consumption patterns and purchase behaviour. This is already noticeable in growing markets catering for older age groups.

EXTERNAL DRIVERS OF CHANGESocial & Cultural Change

• Over time, consumer behaviour attitudes and expectations change.

• For instance, in most developed countries the majority of women have jobs

• Increased migration also changes the social and cultural mix of a country and the nature of demand.

• Fusions of different cultures, religions and ethnic groups provide new market opportunities. This is noticeable in the food, entertainment and clothing sectors.

EXTERNAL DRIVERS OF CHANGEChange in Legislation

• Government legislation can force changes in business practice and activity.

• In many countries laws on health and safety, working hours and discrimination have effected both working conditions and nature of the workplace.

• Consumer protection laws can force business to change the way they market and sell their products or services.

EXTERNAL DRIVERS OF CHANGEEconomic Trends

• Changes in the economic cycle will have significant effects on business activity.

• As organizations and countries have become more interdependent, crisis like the US “credit crunch” in 2008 have had global effect, causing worldwide recession.

EXTERNAL DRIVERS OF CHANGECompetition

• In highly competitive markets, innovation and change initiated by one business will trigger a response from the competition to protect market share.

• Eg In the game console market, each manufacturer attempts to gain competitive advantage over it rivals by frequently upgrading the functionality of its products.

• Additions like broadband access, Blue-ray disc players, wireless controllers and portable models force other manufactures to introduce updated models with similar, or improved, features.

INTERNAL DRIVERS OF CHANGE

The internal resources of a business are constantly changing and management will need to respond to these. Internal factors driving change include:• Changes in Human Resources and skill levels• New Management approaches• Changes in Employee’s expectations, motivation and

behaviour.• New Product Development• Financial Requirements & Availability of Funds

INTERNAL DRIVERS OF CHANGENew Management Approaches

• The turnover of senior managers in most business fields is becoming more rapid.

• The desire for quick success is encouraging businesses to consider changing their management teams rather than waiting for improvements.

• This is particularly evident in sport, which has become “big business”.

• Eg: Soccer Club directors see managers as expendable and in times of failure prefer to sack their off-field staff rather than the players, who are perhaps scarcer in supply.

INTERNAL DRIVERS OF CHANGEChanges in employees, expectations, motivation

and behaviour

• In most organizations, the “job for life” is gone.• Very few organizations reward loyalty and, in

return, employees are more fickle, moving between jobs more quickly and staying in positions for shorter periods.

• In economic boom periods, the bargaining position of skilled employees is stronger and managers will have to review and modify remuneration packages more often to retain their better staff.

INTERNAL DRIVERS OF CHANGENew Product Development

• The introduction of new products and services will require changes in the nature or an organizations production and marketing approaches.

• New products may require increased automation of production and new services may require different ways of selling.

• The target markets for new products may not be the same.

INTERNAL DRIVERS OF CHANGEFinancial Requirements & Availability of Funds

• Changes in goods and services will require additional investment and cash flow that a business may not have.

• Businesses will have to raise new funds through loans, share issues or integration with other organizations.

RESISTANCE TO CHANGE

• Individuals react very differently to change.• Some people embrace change as it provides variety,

opportunity and excitement. • As the pace of social and economic change has

accelerated it has become an accepted part of many working environments.

• However, there are individuals who fear change and resist it.

• This may be a rational reaction, because change can have negative consequences even if its beneficial for the organization.

RESISTANCE TO CHANGE

• Change may involve higher workloads and longer hours, relocation, the breaking up of working groups and possible redundancy.

• Periods of stability create a sense of familiarity and therefore a feeling of security.

• When employees are confronted with change, that is perceived as being “enforced” they can become emotional.

Why do employees resist change?Personal Reasons

• Fear of the unknown• A Risk-Adverse personality.• Dislike of the person making the change or

supicion of the motives.• Lack of skills to cope with new demands.• Proposed changes to working hours that to

lead to a reduction in personal flexibility.

Why do employees resist change?Explanation & Communication

Explanation and communication of change can Lead to people resisting change, for example when:• The justification of the change is unclear • The value of the change to the stakeholder is

not identified and communicated in a simple manner.

• The stakeholder is not involved in the decision making process.

Why do employees resist change?Social Aspects

• Concerns that the change breaks up existing teams and friendship groups.

• Lack of confidence dealing with new colleagues and systems.

Why do employees resist change?Financial Reasons

• Fear of redundancy or worse payment terms, eg: less chance of overtime.

• Possible additional costs, for example relocation and transport or childcare.

FORCE FIELD ANALYSIS

• In 1969, Kurt Lewin developed force field analysis, a graphical tool that can guide change and help identify priorities for action.

• Individuals or teams can use this tool. • Lewin identified what he called a “problem situation” where

there is a difference between the way things are and the way the organization wants them to be.

• The principle of force field analysis is that at any given time a problem situation may exist, because counterbalancing forces are keeping it that way.

• These are: driving forces for changes restraining forces for change.

FORCE FIELD ANALYSIS

Driving Forces for Change• Forces that initiate a change and keep it going,

eg: new competition, cash flow crisis, rising costs.

Restraining Forces for Change• Forces that decrease the driving forces, for

example apathy, lack of finance, or poor motivation.

FORCE FIELD ANALYSIS

• Forces does not imply physical pressure, but refers to the broad range of internal and external influences at a particular time.

• Equilibrium is reached when the sum of the driving forces equals the sum of the restraining forces.

• In essence, the technique is a specialized method of weighing pros and cons.

• By carrying out the analysis in a meeting or a series of meetings, the team leading change identifies factors driving and restraining change and rates the importance of each.

FORCE FIELD ANALYSISDrawing the Force Field Diagram

• To support the analysis, a force field diagram is drawn with a line representing each change force.

• The change force is then given a weighting to show how important it is.

• This is done by simply placing a number next to the force or by varying the length of each line with its perceived importance; more important being longer.

DiagramAnalysis

In this diagram the restraining forces are stronger in total, so there would be no change unless restraining forces could be reduced or driving forces increased. This means that a manager desiring change has to increase the drivers or reduce the registers to change.

FORCE FIELD ANALYSISPurpose of the Force Field Diagram

• The force field diagram helps the decision maker to weigh the importance of change factors and decide whether a plan is worth implementing by:

investigating the balance of power involved in an issue.

identifying the key individuals affected by the change

identifying supporters and opponents of change. examining how to strengthen forces supporting a

decision, while reducing the impact of opposition.

FORCE FIELD ANALYSISHow to increase the drivers of change?

• One potential method to increase the drivers of change is to push the change by autocratic leadership.

• However, this may only lead to an acceptance of change in the short term.

• In the long run autocratic leadership may lower motivation and productivity and increase staff turnover.

• A better alternative could be to reduce opposition to change by offering additional incentives or by better communication of the benefits of the change.

THE CHANGING PRIORITIES OF BUSINESS

• Modern businesses are responding to change in the external and internal environment by examining and changing some of the fundamentals of their operations, leading to change priorities.

Market Research• It is becoming more important to carry out

market research to identify changing trends that will impact on the business and its products or services.

THE CHANGING PRIORITIES OF BUSINESS

Quality Issues• There is increasingly emphasis on quality as a

method of creating competitive advantage or maintaining a position in a market.

• Quality assurance at all levels and benchmarking against key competitors have become vital to survival.

THE CHANGING PRIORITIES OF BUSINESS

Product Life Cycles• Product Life cycles are getting shorter, requiring greater

focus on innovation and R&D and to keep one step ahead of the market. Business wants a first mover advantage.

Flexible Workforces & Work Practices• Flexible workforces and working practices are being

created. • This has an impact on recruitment and training.• More part time and temporary staff are also a key

feature.

MANAGING CHANGE

• Most organizations work in situations where the plan, implement and manage change in a fast-moving environment.

• Excellent leadership is about understanding when environmental change requires organizational change and when it doesn’t.

Three Key Questions Associated with Business Change

• Is the change anticipated or unanticipated? • Have managers planned for

change?• To what extent is the change

controllable by the business?

Anticipated Change

• If change is anticipated it can be planned for, making management of the process more effective.• Organizations can then produce

corporate plans and budgets to support the changes and individual employees know their role in the process.

Unanticipated Change

• Unanticipated change can be disruptive to the business and result in change leading the business, rather than the business initiating change.

• At worst, the business may move into a period of crisis management.

Key Elements for Successful Change Management

• Management theorists such as Mintzberg and Peters have explored planning issues in dynamic markets.

• Their belief is that the formalized planning approaches used in the past have little benefit in modern markets, where change can make the best-laid plans obsolete.

• Mintzberg has talked about strategy that emerges from constant evaluation of the external environment

Key Elements for Successful Change Management:

Planning in a Broad Sense not a Meticulous Plan• Only planning in a broad sense for the long-run.• Managers should prepare a strategic vision, not a

meticulous plan.• In fast-moving environments, detailed five year plans

are out of date almost as soon as they are written. • Organizations should focus more on establishing and

measuring immediate actions, rather than preparing detailed medium term to long term plans.

Key Elements for Successful Change Management:

Communication for Quick Decision Making• Developing channels of communication that

allow immediate review and quick decision making.

• Those directly affected by the decisions must be part of the decision-making process, enabling their input to be gained, their approval obtained and their commitment secured.

Key Elements for Successful Change Management:

Power to Managers at the Local Level• Delegating responsibility and power to

managers operating at a local level.• By empowering local teams, decisions can be

made that address local issues and are far more immediate.

Managers Open to Change• Creating a climate that embraces change by

appointing managers who are open to new and creative solutions.

Key Elements for Successful Change Management:

• Whenever an organization imposes new things on people, there will always be difficulties.

• Participation, involvement and open, early, full communication are vital factors when introducing change.

• Change management entails thoughtful planning and sensitive implementation and extensive consultation with the people affected by the changes.

• If change is forced on people, problems frequently arise.

Key Elements for Successful Change Management

•Change must be realistic, achievable and measurable.

Three Key Questions to consider before starting the change process:

• What do we want to achieve with this change and how will we know that the change has been achieved?

• Who is affected by this change and how will they react to it?

• How much of this change can be achieved by the organizational itself, and what parts of the change will require external help?

JOHN KOTTERS’S MODEL FOR UNDERSTANDING & MANAGING CHANGE

There are eight key steps:1. Increase Urgency• Inspire people to move. Make objective real

and relevant.2. Build the Guiding Team• Get the right people in place with the right

emotional commitment, and the right mix of skills and skill levels.

JOHN KOTTERS’S MODEL FOR UNDERSTANDING & MANAGING CHANGE

3. Get the Vision Right • Get the team to establish a simple vision and

strategy. Focus on emotional and creative aspects necessary to elicit the change.

4. Communicate for buy-in • Involve as many people as possible,

communicate the essentials, simply and appeal and respond to people’s needs.

JOHN KOTTERS’S MODEL FOR UNDERSTANDING & MANAGING CHANGE

5. Empower Action• Remove obstacles, enable constructive feedback

and lots of support from leaders – reward and recognize progress and achievements.

6. Create Short Term Wins• Set Aims that are easy to achieve in bit size

chunks. Have manageable numbers of initiatives. Finish current stages before starting new ones.

JOHN KOTTERS’S MODEL FOR UNDERSTANDING & MANAGING CHANGE

7. Don’t let up• Foster and encourage determination and

persistence about ongoing change, encourage ongoing progress reporting, highlight achievements and future milestones.

8. Make change stick• Reinforce the value of successful change via

recruitment, promotion and new change leaders. • Weave change into culture.

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