organizational change
TRANSCRIPT
Organizational Change and Learning
Learning Goals
1. Describe four types of organizational change
2. Explain the planning process for organizationalchange
3. Identify four methods of organizational change
4. Describe how innovation relates to organizationalchange
5. Discuss how learning organizations foster change
Organizational Change
• Organizational change refers to any transformation in the design or functioning of an organization.
(adapted from Figure 12.1)
Transitioning RefreezingUnfreezingUnfreezing
Radical change: organizations make majorinnovations in the ways they do business
Stages of Radical Change*
Incremental change: ongoing process of evolution over time, during which many small adjustments occur routinely
Tempered radicals: people who strive to create radical change but do so by prodding an organization to make many small incremental changes
Total quality management: relies heavily on continuous incremental change
1. Earn credibility first, and then leverage it
2. Gather and accept support from others along the way
3. Develop grass roots initiatives and be willing to share the stage with supporters
4. Chip away at standard operating procedures little by little over time until you achieve real success
5. Accept small changes as making progress
6. Develop your ability to compromise as well as persuade
7. Be persistent
Reactive change: occurs when an organization is forced to adapt or innovate in response to some event in the external or internal environment
Anticipatory change: occurs when managers make organizational modifications based on forecasts of upcoming events or early in the cycle of a new trend
Types of Organizational Change(adapted from Figure 12.2)
RadicalAnticipatory
Change
IncrementalReactiveChange
RadicalReactiveChange
Deg
ree
of C
han
ge
Before Major Shifts inthe Environment
After Major Shifts inthe Environment
Major Transformation
SmallAdjustments Incremental
AnticipatoryChange
Timing of Change
The Process of Organizational Change(adapted from Figure 12.3)
6. AnticipateResistance andTake Action toReduce
6. AnticipateResistance andTake Action toReduce
7. Monitor the Changes
7. Monitor the Changes
1. Assess the Environment1. Assess the Environment
5. Develop andImplement anAction Plan
5. Develop andImplement anAction Plan
2. Determine thePerformanceGap
2. Determine thePerformanceGap
3. DiagnoseOrganizationalProblems
3. DiagnoseOrganizationalProblems
4. Articulate and Communicate a Vision for the Future
4. Articulate and Communicate a Vision for the Future
Start
Fear Vested interests
Misunderstandings Cynicism
Technological Change Organizational Redesign
Job Redesign OrganizationalDevelopment
Technological Change
Involves incremental adjustments or radical innovations that affect workflows, production methods, materials, and information systems
Many new forms of informationtechnology (IT)
IT is enabling real time and any time links between suppliers, producers, distributors, and customers
Involves incremental adjustments or radical innovations focused on realigning departments, changing who makes decisions, and merging or reorganizing departments that sell the organization’s products
Two basic approachesChange organization’s structure, such as from functional
to product departmentalizationChange organization’s processes, such as how customer
complaints are handled
Restructuring: reconfiguring the distribution of authority, responsibility, and control in an organization
Reengineering: radical redesigning of an organization’s functions and business processes
Job Redesign
Modifying specific employee job responsibilities and tasks
Job simplification: the scientific analysis of tasks
Focus on efficient workflow process for employees in a particular job
Frequent use of time and motion studies
Job enrichment: changing job specifications to broaden and add challenge to the tasks required and to increase productivity
Increases interesting and challenging work Increases autonomy and personal freedom
A planned, long-range behavioral science strategy for understanding, changing, and developing an organization’s workforce in order to improve its effectiveness
Focus group discussion: a carefully planned discussion among several employees about a specific topic orissue of interest, which is led by a trained facilitator
Facilitator explains the topic to be discussed, the role of the scribe, and how the organization will use the results of the focus group discussion
Participants come prepared to discuss a specific topic. If confidentiality is a concern, participants are chosen from different units of the organization, not the same work group
Scribe: the person who takes notes about what is said, but not who says it
Facilitator explains the topic to be discussed, the role of the scribe, and how the organization will use the results of the focus group discussion
Participants come prepared to discuss a specific topic. If confidentiality is a concern, participants are chosen from different units of the organization, not the same work group
Scribe: the person who takes notes about what is said, but not who says it
How to Set Up a Focus Group Discussion(adapted from Figure 12.5)
The facilitator explains the topic to be discussed,the role of the scribe, and how the organizationwill use the results of the focus group discussion.
The scribe takes notes about what is said, but not who says it.
The participants come prepared to discuss a specific topic.If confidentiality is a concern, participants are chosen fromdifferent units of the organization, not the same work group.
Organization Development (OD) (cont’d)
Survey feedback: a process that allows managers and employees to report their thoughts and feelings about the organization and to learn about how others think and feel about their own behaviors
Feedback obtained by means of a questionnaire developed and distributed to employees, who complete it and turn it in anonymously
Content of questionnaire depends on areas of most concern
Feedback obtained by means of a questionnaire developed and distributed to employees, who complete it and turn it in anonymously
Content of questionnaire depends on areas of most concern Questionnaire
Organization Development (OD) (cont’d)
Team building: process that develops the ability of team members to collaborate effectively so they can perform the tasks assigned to them
Often emphasizes developing a group climate that is safe
Openness can be risky, but promotes creativity and effective problem solving
Often emphasizes developing a group climate that is safe
Openness can be risky, but promotes creativity and effective problem solving
Major organizational change is a complex process
Typically involves a combination of methods
Example: purchasing and installing enterprise resource planning [ERP] software
Role of Innovation in OrganizationalChange
Role of Innovation in OrganizationalChange
Innovation: the discovery, identification and diagnosis of unusual and ambiguous problems and/or the development of unique or creative solutions
Innovation: the discovery, identification and diagnosis of unusual and ambiguous problems and/or the development of unique or creative solutions
Strategic importance of innovation Strategic importance of innovation
Critical in dynamic, changing environments
Organizations can rest on prior success
Complacency is deadly
Critical in dynamic, changing environments
Organizations can rest on prior success
Complacency is deadly
Technical innovation: creation of new goods and services
Process innovation: creating a new way of producing, selling, and/or distributing an existing good or service
Administrative innovation: creating a new organization design that better supports the creation, production, and delivery of goods and services
FosterWorkforce Resilience
Provide aSupport System for
Innovation
Develop a Learning Environment andLearning Orientation among Employees
Learning organization: has both the drive and the capabilities to modify or transform itself and improve its performance continuously
Learning organization: has both the drive and the capabilities to modify or transform itself and improve its performance continuously
Learns from past experiences Learns from customers Learns from various parts of the
organization Learns from other organizations
Learns from past experiences Learns from customers Learns from various parts of the
organization Learns from other organizations
OrganicOrganization
Design
OrganicOrganization
Design
Shared Leadership
Customer-FocusedStrategy
Customer-FocusedStrategy
Culture of InnovationCulture of Innovation
IntensiveUse of
Information
IntensiveUse of
Information
TheLearning
Organization
Characteristics of a Learning Organization: SnapshotCharacteristics of a Learning Organization: Snapshot
“We all make mistakes. It’s not as though at any time, Dell doesn’t have some part of its business that’s not working for us as it should. But we have a culture of continuous improvement. We train employees to constantly ask themselves, ‘How do we grow faster? How do we lower our cost structure? How do we improve service for customers?’”
Michael Dell, Chairman and Cofounder, Dell Computer
PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama
Strategic Strategic ManagementManagementCompetitiveness and Globalization: Competitiveness and Globalization: Concepts and CasesConcepts and Cases Michael A. Hitt • R. Duane Ireland • Robert E. Hoskisson
Seventh edition
STRATEGICACTIONS:STRATEGYIMPLEMENTATION
STRATEGICACTIONS:STRATEGYIMPLEMENTATION
© 2007 Thomson/South-Western.© 2007 Thomson/South-Western.All rights reserved.All rights reserved.
CHAPTER 11
Organizational Structure and Controls
11–28
Organizational Structure and Controls
• Organizational structure specifies:
– The firm’s formal reporting relationships, procedures, controls, and authority and decision-making processes
– The work to be done and how to do it, given the firm’s strategy or strategies
• It is critical to match organizational structure to the firm’s strategy.
11–29
Organizational Structure
• Effective structures provide:– Stability
– Flexibility
• Structural stability provides: – The capacity required to consistently and predictably
manage daily work routines
• Structural flexibility provides for:– The opportunity to explore competitive possibilities
– The allocation of resources to activities that shape needed competitive advantages
11–30
Organizational Controls
• Purposes of Organizational Controls:– Guide the use of strategy.
– Indicate how to compare actual results with expected results.
– Suggest corrective actions to take when the difference between actual and expected results is unacceptable.
• Two Types of Organizational Controls– Strategic controls
– Financial controls
11–31
Organizational Controls
• Strategic Controls: Subjective criteria
– Are concerned with examining the fit between:
• What the firm might do (opportunities in its external environment).
• What the firm can do (competitive advantages).
– Evaluate the degree to which the firm focuses on the requirements to implement its strategy.
OrganizationalOrganizationalControlsControls
StrategicStrategicControlsControls
FinancialFinancialControlsControls
11–32
Organizational Controls
• Financial Controls: Objective criteria
– Accounting-based measures include:
• Return on investment
• Return on assets
– Market-based measures include:
• Economic Value Added (EVA)
OrganizationalOrganizationalControlsControls
StrategicStrategicControlsControls
FinancialFinancialControlsControls
11–33
Matching Control to Strategy
• Relative use of controls varies by type of strategy:
– Large diversified firms using a cost leadership strategy emphasize financial controls.
– Companies and business units using a differentiation strategy emphasize strategic controls.
11–34
Relationships between Strategy and Structure
• Strategy and structure have a reciprocal relationship:
– Structure flows from or follows the selection of the firm’s strategy but …
– Once in place, structure can influence current strategic actions as well as choices about future strategies.
11–35
Evolutionary Patterns of Structure and Organizational Structure
• Firms grow in predictable patterns:
– First by volume
– Then by geography
– Then integration (vertical, horizontal)
– And finally through product/business diversification
• A firm’s growth patterns determine its structural form.
11–36
Evolutionary Patterns of Structure and Organizational Structure
(cont’d)
• All organizations require some form of organizational structure to implement and manage their strategies
• Firms frequently alter their structure as they grow in size and complexity
• Three basic structure types:– Simple structure– Functional structure– Multidivisional structure (M-form)
11–37
Strategy and
Structure Growth Pattern
Sales GrowthSales GrowthCoordination and Control ProblemsCoordination and Control Problems
Efficient implementation of Efficient implementation of formulated strategyformulated strategy
Simple StructureSimple Structure
Functional StructureFunctional Structure
Sales GrowthSales GrowthCoordination and Control ProblemsCoordination and Control Problems
Multidivisional StructureMultidivisional Structure
Efficient implementation of Efficient implementation of formulated strategyformulated strategy
11–38
FIGURE 11.1
Strategy and Structure Growth
Pattern
11–39
Strategy and Structure: Simple Structure
• Owner-manager– Makes all major decisions directly.– Monitors all activities.
• Staff– Serves as an extension of the manager’s supervisor
authority.
• Matched with focus strategies and business-level strategies– Commonly complete by offering a single product line
in a single geographic market.
11–40
Simple Structure (cont’d)
• Growth creates:– Complexity– Managerial and structural challenges
• Owner-managers– Commonly lack organizational skills and
experience.– Become ineffective in managing the
specialized and complex tasks involved with multiple organizational functions.
11–41
Strategy and Structure: Functional Structure
• Chief Executive Officer (CEO)– Limited corporate staff
• Functional line managers in dominant organizational areas of:– Production Marketing Engineering
– Accounting R&DHuman resources
• Supports use of business-level strategies and some corporate-level strategies– Single or dominant business with low levels of
diversification
11–42
Functional Structure (cont’d)
• Differences in orientation among organizational functions can:
– Impede communication and coordination.
– Increase the need for CEO to integrate decisions and actions of business functions.
– Facilitate career paths and professional development in specialized functional areas.
– Cause functional-area managers to focus on local versus overall company strategic issues.
11–43
Strategy and Structure: Multidivisional Structure
• Strategic Control– Operating divisions function as separate
businesses or profit centers
• Top corporate officer delegates responsibilities to division managers– For day-to-day operations– For business-unit strategy
• Appropriate as firm grows through diversification
11–44
Multidivisional Structure (cont’d)
• Three Major Benefits– Corporate officers are able to more accurately
monitor the performance of each business, which simplifies the problem of control.
– Facilitates comparisons between divisions, which improves the resource allocation process.
– Stimulates managers of poorly performing divisions to look for ways of improving performance.
11–45
Matching Strategy and Functional Structure
• Different forms of the functional organizational structure are matched to:– Cost leadership strategy– Differentiation strategy– Integrated cost leadership/differentiation strategy
• Differences in these forms are seen in three important structural characteristics:– Specialization (number and types of jobs)– Centralization (decision-making authority)– Formalization (formal rules and work procedures)
11–46
FIGURE 11.2 Functional Structure for Implementation of a Cost Leadership Strategy
Notes:• Operations is the main function• Process engineering is emphasized rather
than new product R&D• Relatively large centralized staff
coordinates functions• Formalized procedures allow for
emergence of a low-cost culture• Overall structure is mechanical; job roles
are highly structured
11–47
Using the Functional Structure to Implement a Cost Leadership Strategy
• Operations is the main function.– Process engineering is emphasized over
research and development.– Large centralized staff oversees activities.– Formalized procedures guide actions.– Structure is mechanical.– Job roles are highly structured.
11–48
FIGURE 11.3 Functional Structure for Implementation of a
Differentiation Strategy
Notes: • Marketing is the main function for keeping track of new product ideas• New product R&D is emphasized• Most functions are decentralized, but R&D and marketing may have centralized staffs that work closely with each other• Formalization is limited so that new product ideas can emerge easily and change is more readily accomplished• Overall structure is organic; job roles are less structured
11–49
Using the Functional Structure to Implement a Differentiation
Strategy
• Marketing is the main function for tracking new product ideas.– New product R&D is emphasized.– Most functions are decentralized.– Formalization is limited to foster change and
promote new ideas.– Overall structure is organic.– Job roles are less structured.
11–50
Using the Functional Structure to Implement the Integrated Cost Leadership/
Differentiation Strategy
• Selling products that create customer value due to:– Their relatively low product cost through an
emphasis on production and process engineering, with infrequent product changes.
– Reasonable sources of differentiation based on new-product R&D are emphasized while production and process engineering are not.
• Used frequently in global economy
11–51
Implementing an Integrated Cost Leadership/Differentiation
Strategy (cont’d)• The integrated form of the functional
structure must have: – Decision-making patterns that are partially
centralized and partially decentralized.– Semi-specialized jobs.– Rules and procedures that allow both formal
and informal job behaviors.
11–52
Corporate-Level Strategies and the Multidivisional Structure
• A firm’s continuing success that leads to:– Product diversification, or– Market diversification, or– Both product and market diversification.
• Increasing diversification creates control problems that the functional structure can’t handle.– Information processing, coordination– Control
11–53
Corporate-Level Strategies and the Multidivisional Structure
• Diversification strategy requires firm to change from functional structure to a multidivisional structure.