How Organizational Change Works

How Organizational Change Works

By the end of this session

you will be able to:

Plan stages of a change process and

increase the likelihood of success by

adhering to proven principles of change

management

Management and Strategy Institute


Change is a process that needs to be handled carefully. It

consists of an organizational restructuring as well as

changing attitudes and behaviors. As with any complex

problem, there are many ways to fail. History is full of case

studies on companies who either failed to change or who

went through a change program and still failed due to bad

execution or bad planning.



In this session, you will learn about one of the most popular

models on how to plan for change step-by-step and learn

how to get the most from it. You will also explore a number

of critical principles and guidelines on change management

that will help increase the likelihood of success.


The Frog

A South American tribe had an abundant supply of frogs as

a food source. They experimented first by dropping a frog

into boiling water. The frog jumped out immediately,

spoiling the food!


The Frog

The tribe eventually discovered an easier way to deal with

the frogs. They would put them into a pan full of cold water.

They would then place the pan over fire. The water would

heat up gradually and due to frog’s specific physiology,

they got more and more comfortable. This means that the

frogs would simply sit in the pan until boiled!


The Frog

This fable by Charles Handy beautifully captures what

change can mean and what happens when one reacts too

slowly to a changing environment.

In short, there are people out there that are about to be

“boiled” alive, though they have no idea that the impending

massive change is coming. They see the slow changing

environment around them and take it at face value.

Let’s see how change can be managed so people don’t

end up with the same fate as the South American frogs.


Principles of Effective Change

• “To lead people, walk beside them…

As for the best leaders, the people do not notice

their existence. The next best, the people honour

and praise. The next, the people fear; and the next,

the people hate… When the best leader’s work is

done the people say, “We did it ourselves!”

Lao-Tzu

Change management must follow a predefined well-

thought out strategy. According to Nadler and Tushman

there are a number of principles you need to consider for

effective change (Price 2009). These are as follows:


The Vision Principle

“What could we

change”

“What should we

change”


The Vision Principle

Change is about going from one state to another. This

requires knowing where you want to go and a vision to get

you there.

As part of communicating the vision you must establish the

need for change. You will need to consider:

• Rationale of change

• Impact on stakeholders

• The values behind the change

• Performance objectives

• Target operational culture


The Energy Principle

A successful organization is usually stable. This stability

helps them to handle threats. However, the downside is

that this stability makes them resistive to change. To get

past this resistance, the organization must have energy to

carry out the change. You must work on increasing this

energy by creating a sense of urgency and motivating

people to act.


The Diagnosis Principle

Diagnostic thinking means that you need to know the

“what” as well as the “how”. This helps avoiding

organizational mimicry which is copying other

organization’s response to a changing environment without

understanding its relevance to your organization.


The Centrality Principle

It is absolutely critical to define the position and labelling of

the change accurately so that the change is clear to the

entire organization.


The Three-Theme Principle

You cannot run and manage several potentially

contradictory changes at once. When bombarded daily with

a variety of changes employees start to become selective

and ignore anything they can get away with. Change must

be focused.

As a general rule, change managers can initiate and

sustain approximately three key themes during a specific

period. You must focus on areas that most people

associate with and have energy to engage in.


The Magic Leader Principle

Can create a sense of urgency

Have distinctive behavior

Provides theme consistency

Can exhibit a mix of styles

The Leader-is-Not-Enough PrincipleManagement and Strategy Institute

The Magic Leader Principle

Large scale organizational change can significantly benefit from the existence of a unique leader who can represent, articulate and encourage the change. Such magic leaders have the following qualities:

• Can create a sense of urgency – The magic leader is critical in articulating the need for change and the need to do it sooner

rather than later.

• Have distinctive behavior– The magic leader envisions, energizes and enables the change.

• Provides theme consistency – The magic leader guards the consistency of change.

• Can exhibit a mix of styles – Magic leaders seem to have the capability to show two simultaneous styles of leadership; on

one hand they can be directive, stubborn and uncompromising. They are determined to achieve the objective of the change and nothing will convince them otherwise. On the other hand, they are open to new ideas, actively encourage open discussions and want to get people involved in the process. In short, great magic leaders seem to have simultaneous autocratic and democratic tendencies which make their roles more effective.


The Leader-is-Not-Enough Principle

Although a magic leader is essential, by its own is not

enough to sustain a change. Successful change depends

on an army of supporters, helpers and people who believe

and have a stake in the change.

Attempts must be made to broaden the change leadership

beyond one or two people. The change executive team

must possess a consistent shared vision of the change.


Who Moved My

Cheese


Who Moved My Cheese

In 1998, Spencer Johnson published a motivational book

on change called, “Who Moved My Cheese?” (Spencer

1998). It is a business fable and an allegory. It is an

entertaining read and a popular book. This short book is

highly recommended to anyone who is involved in

managing a change or is subjected to change.


http://www.amazon.com/Who-Moved-My-Cheese-Amazing/dp/0399144463/ref=sr_1_1?ie=UTF8&qid=1410532552&sr=8-1&keywords=who+moved+my+cheese

Who Moved My Cheese

The story involves four characters, two mice and two little

people (miniature humans), Hem and Haw in a maze, an

allegory for a person’s complex environment.


Who Moved My Cheese

The two pairs set off in the maze searching for cheese.

One day, the little people find cheese in a part of the maze

called “Cheese Station C”. They set up a routine to

consume it daily and get accustomed to the existence of

the cheese until one day they discover that there is no

cheese left.


Who Moved My Cheese

From this point, the story focuses on how the little people

handle this change and it covers many aspects of handling

change through allegory.

Hem believes that the change is unfair and refuses to do

anything about it. Haw is however eager to go off in the

maze and search for other sources of cheese.


Who Moved My Cheese

Eventually, Haw finds a new source of cheese, with more

varieties and in abundance while Hem has refused to move

and look for more cheese.

Haw decides to summarize his thoughts on the wall of this

newfound cheese station:


Change Happens

They keep moving the cheese

Anticipate Change

Get ready for the cheese to

move

Monitor Change

Smell the cheese often so you

know when it is getting old

Gra

nd

R

ule

s


Adapt to Change Quickly

The quicker you let go of old

cheese, the sooner you can

enjoy new cheese

Change

Move with the cheese

Gra

nd

R

ule

s


Enjoy Change!

Savour the adventure and

enjoy the taste of new

cheese!

Be Ready to Change Quickly

and Enjoy it Again

They keep moving the

cheese

Gra

nd

R

ule

s


The World is Changing... Fast

Factory

Mass Production

Mass Customization



We are about to enter the third industrial age. The first

industrial age began with the invention of factory in Britain

in the late 18th century. It was centred on mechanisation of

the textile industry. Rather than producing the textile by

hand in hundreds of weaver’s cottages, it was all brought

under a single cotton mill. The production ramped up and

soon put pressure on many of the traditional producers.



This led to the first great change in the modern era. People

had to adapt and understand the new trend. From our

position, we can easily see that there was no point for

anyone to resist the change or protest, or even worse, try

to stop it. Many of the advances and the subsequent

prosperity that followed were as a result of this significant

change to industrial production.



The second industrial revolution started at the beginning of

the 20th century. This is perhaps best symbolized by

Henry Ford’s car production company where he mastered

the moving assembly line. This great era of mass

production led to design and manufacturing of products on

a scale never seen before. This revolution has continued to

this day. Today large range of products are manufactured

and distributed at a huge scale. This makes them

extremely cheap so many people can now afford products

that were once considered luxury.



This led to the second great change of the modern era.

Now companies and organizations had to adjust to

compete with mass production. If they did not join, they

risked ending up producing lower quality products at much

higher prices which could not possibly compete with the

cheap mass manufactured products produced in ever more

sophisticated and streamlined factories.



All signs seem to suggest that we are entering the third

industrial revolution, this time as a result of the digital

revolution. In short, manufacturing and services are going

digital. There are a number of exciting technologies that

are converging; novel and exotic materials, real-time

software, ubiquitous access to networks, advanced

robotics, web-based services, social networks and 3D

printing.



In contrast with the second industrial revolution where the

focus was on mass producing an identical product and

reducing its cost of production through economy of scale,

the third revolution seems to be about mass customization.



Companies are now gearing up towards production of

products based on specific customer demands. The

demands are channelled through sophisticated networks,

connecting customers to designers, factories, suppliers and

to logistics services. There has already been great

progress in some of these areas. For example a customer

can go to a particular manufacturer’s websites, choose the

exact components of a laptop and customize it based on

his needs.



He can then order it through the manufacturer avoiding the

middleman. The order then goes through a complex maze

of supply-chain processes and on-demand manufacturing

before being assembled in a factory which covers the

customer’s particular area and finally it gets shipped.



A more disruptive revolution is perhaps centred on 3D

printing where the possibilities seem to be endless and

hugely revolutionary. Imagine downloading a design from

the net and getting the widget printed in your 3D printer

machine. You could order spare parts of old products and

you could order them even if you are in a remote location.

All you need is net access, a 3D printer and required

materials. But above all, you can get precisely what you

want as you can customise the design to your specific

needs down to the smallest details.



This will also revolutionize the assembly line. It will

become more flexible, more customizable, require less

labour to run and hence more efficient. It may no longer be

critical to operate these factories in low-wage countries and

so this trend may lead to another significant change for

factory locations globally.



Even companies that provide services are getting affected

by the trend towards mass customization. Everywhere you

look, you will see companies offering more choices and

options to address every need. In turn customers are

becoming more expectant and want more customization.



What should the companies do to survive in this world?

Would 3D printing or other technologies be as significant

and disruptive as we think? What is the impact of

ubiquitous access to the net along with sophisticated

smartphones?



What would be the effect of augmented reality when you

see the world through a digital contact lens with

superimposed live content on everything you see? How

would the governments respond to make their countries

more competitive and cater for the social aspects of the

new change from job losses to factory relocations, to

changes in transport demand, to handling copyrights, to

real-state and so on?


Managing Resistance



Understand why people are afraid of

change and use behavioral techniques to

overcome their resistance to change


Why People Resist Change

“You can’t teach an

old dog new tricks.”

“From the frying

pan into the fire.”

“Let sleeping dogs

lie.”Management and Strategy Institute


No matter how you approach the implementation of change

there are always some people that resist it. There are fears

associated with change and people are susceptible to react

to it rather than comply. Hence, handling resistance to

change is a critical part of any change management

program and must be planned for before any change

campaign commences. In this session, you will learn about

these fears and learn about strategies that can be

employed to handle them.



It is natural for people to feel skeptical about change.

Various sources contribute to this fear. Identifying them

can help you to consider these fears when designing the

change management process and address them in due

course.

Sources of fear can be categorized as the following:


Fears of Change

Fear of Reorganization

Fear of LossFear of

Implications

Fear of Uselessness

Fear of Loss of Control

Fear of Direct Change

Fear of Losing Face

Fear of Surprise

Fear of the Unknown



• Fear of reorganization. Disturbs the status quo and

gets people out of their comfort zones.

• Fear of loss. Desire not to lose something of value.

• Fear of implications. Misunderstanding of the change

and its implications. It is effectively fear of “walking off a

cliff while blindfolded.”

• Fear of uselessness. Belief that the change does not

make sense for the organization.

• Fear of loss of control. Change is exciting when it is

carried out by us but threatening when it is done to us.



• Fear of direct change. Some individuals have low tolerance to change.

• Fear of losing face. Belief that by going with the new change, they are accepting that their previous decisions and processes were wrong. They resist change to remain consistent with the past.

• Fear of surprise. When change is suddenly announced, most people are so shocked that they would rather resist the change or undermine it than to accept it.

• Fear of the unknown. People are afraid of what will happen if they go through change. One of your aims should be to make the status quo appear more dangerous than launching to the unknown.


How to Deal With Resistance

Organizations often underestimate the variety of ways that

people react to change and resist it. They also seem to be

aware of only a few methods to handle this resistance

(mainly directly) or are simply unaware of the drawbacks of

methods they currently use or have used in the past.


Stakeholder Engagement

When going through change, it is important to gain the

support of key stakeholders. Research shows that if a

significant percentage (about 75%) of top management is

not involved or convinced of the change, the change is

likely to fail.



As a result you will need to get the commitment of

stakeholders (managers, investors, creditors, employees)

in the process of change. However, stakeholders are not

all equal and should not be treated uniformly. At times, you

may need to focus on different types to strengthen support

or to eliminate resistance.



The following matrix shows the relationship between power

and interest of stakeholders in contrast with change. As

you can see most of the focus should be on Q1 as they are

powerful stakeholders that once convinced can join the

cause and support it.



It is important to remember that stakeholder positions are

not fixed and change over time. Your strategy needs to

address this change and constantly adapt so you can stay

ahead in the game. If you lose powerful stakeholders, they

can cause all sorts of issues by attempting to block the

change or undermine the change effort.



Q1

Lobby & Raise Interest

Q2

Seek Commitment and

Contribution

Q3

Harmless at Present

Q4

Be Careful not to Alienate

Interest HIGHLOW

HIG

HLO

WPower



Quiz

Click the Quiz button to edit this object

How to Manage Change



Identify skill gaps and required

infrastructural changes through a

structured approach



• “Change is hard because people overestimate the

value of what they have and underestimate the value

of what they may gain by giving that up.”

• James Belasco and Ralph Stayer, Flight of the Buffalo



As you have seen so far, going through a change process

requires structure. This session presents various areas of

change management, planning change management and

how to identify skill gaps in order to provide appropriate

support for staff.


The Three Components

When managing change you need to consider three critical

areas:


The Three Components

• What do you want to achieve as a result of change?

Outcome

• What strategy do you need to follow to achieve this goal?

Infrastructure

• What resources do you need to achieve this change?

Resources


• What do you expect to change?

– Expected structural changes

– Expected cultural changes

• What are the benefits of these changes?

• What are the success criteria?

• What is the process to achieve the change?

Outcome


Infrastructure

Next, you need to consider all the infrastructural changes.

Effectively this leads to your strategy in implementing the

change to achieve your outcome. Use the following

guidelines to maximise the likelihood of your success.


Use early and open communication

Understand who knows what

Set correct pace

Use workshops

Carry out surveys

Infrastructure


Provide management training

Use project-based approach

Use external support

Monitor and control

Infrastructure


Infrastructure

• Use early and open communication. The process

must be transparent. Getting employees involvement

and participation can help the process significantly.

• Understand who knows what. Managers who initiate

change often assume that they have all the relevant

information required to carry out the change and those

who will be affected by it have access to the same facts.

In reality, it is likely that neither is true. This information

disparity is a great source of miscommunication and

potential resistance to change.


Infrastructure

• Set correct pace. Employees don’t have a responsibility

to manage change. The responsibility rests with

executive management and the team in charge of the

change. They must manage change in a way that

employees can cope with.

• Use workshops. This allows you to reach collective

agreement and develop shared policies and approaches

towards the desired change.


Infrastructure

• Carry out surveys. This allows you to receive feedback

and take steps to reassure staff, correct

misunderstandings and build trust. Use anonymous

surveys to allow people to talk freely.

• Provide management training. Management is

essential to the change process. They must be able to

understand, empathize and facilitate the process. If they

appear rigid and strict in following a policy set in stone,

the people are likely to resist and resent the change.


Infrastructure

• Use project-based approach. Research shows that it is

more effective to manage the process of change as a

project. The project would then have an established

target, clear objectives, known resource requirements

and a specific schedule to follow. This creates order and

clarity which improves the likelihood of success. It will

also make it easier to coordinate activities between

various members of the change management team.

• Use external support. Always consider using external

consultants to improve the process of change.


Infrastructure

• Monitor and control. Without performance

management you wouldn’t know if the changes are

making any difference. You need to identify people,

processes and systems that contributed to positive

change and improved productivity. You can then reward

them or use them to guide others. A common way to do

this is by using the 360 degree feedback analysis to

collect employees’ views of change and the impact on

their performance.


Resources

Once you have identified your outcome and your strategy,

you need to consider resources that are required to carry

out the change. Implementing change costs a lot of time

and money. So you will need to have a clear

understanding before embarking on it. The most significant

resource required for change management is the impact on

senior management’s time.


Resources

This can easily dictate how and when you can start the

change program so the management is ready and

wholeheartedly behind it. For a successful execution,

consider the following:


• Impact on senior management’s time?

• Monetary resources are required?

• Impact on business objectives?

• Disrupted systems?

• Replacement equipment/man power/services?

• Information?

Resources


Skill Management

If you are following aspects of Theory O described earlier

and intend to change the organizational culture, you would

need to focus mainly on training staff. Behaviors can be

changed through training. Use a skill matrix to identify

areas that need improvement. Focus your training on

these areas and skills.


Skill Management

STEP 1: Define Skill Level


Skill

RateSkill Level Definition Experience Knowledge Qualifications

1 TraineeHelp others under

guidance and learn on

the job

No current direct

experience

Theory and

conceptual familiarity

Informal, self-thoughts

and introductory

2 AnalystPerform and execute

while under guidance

Limited experience.

Involvement in small

projects.

General knowledgeEntry level

qualification

3 SeniorExecute and perform

without the need for

guidance

Practical real-world

application

Applied knowledge.

Completed projects.

Advanced

qualifications

4 ExpertSpecialist knowledge

and can advise others

on related subjects

Extensive and

competitive practical

experience

Abundant and

judgemental

Qualified and can

teach others


Step 2: Develop a Skills Profile for Each

Employee

Design a questionnaire or use in-house online systems to

capture employees’ competencies.

What people think they know about themselves or consider

themselves experts in has a tremendous value and can be

used in all sorts of contexts to make informed decisions.



Employee

Of course this can also be used in conjunction with a 360

degrees review to create a good overall picture of an

individual’s abilities both from their point of view and those

of others.

For each skill, ask the employees to rate themselves on

their skills from 1 to 4 using the skill matrix identified in step

1.



Employee

The skills identified can be a set of hard skills and a set of

soft skills. Some examples:

• Hard skills

– Ability to write a computer program in language X

– Ability to work with spread sheets

– Ability to operate the CNC machine

• Soft skills

– Ability to manage a small team

– Ability to chair a project meeting with clients

– Ability to handle customer phone calls



Employee

With soft skills you may have to tone down on qualifications

(as many soft skills are not something that you qualify for)

and instead focus on people’s experience and knowledge

in that skill.



Employee

Another important point is that people’s perception of their

own soft skills can sometimes be warped too positively or

they may not know they have a weakness in a particular

area. In addition to asking them to score themselves on

these skills, you should also carry out a more sophisticated

analysis to rate each employee on a set of soft skills. For

example you can measure their emotional intelligence

using industry standard analysis tools to score them in

various EI competences.


STEP 2: Develop a Skills Profile

Hard Skills Soft Skills

Person

Ability to

write a

computer

program

in

language

X

Ability to

work with

spread

sheets

Ability to

operate

the CNC

machine

Ability to

manage a

small

team

Ability to

chair a

project

meeting

with

clients

Ability to

handle

customer

phone

calls

John 3 4 1 2 1 3

Karen 1 1 1 1 2 4

Fiona 1 3 1 3 2 4

Tom 2 2 4 4 3 3

Jack 4 4 1 3 2 3Management and Strategy Institute

Step 3: Identify Critical Skills

Next, you need to identify skills that are critical to the

success of the organization. These skills must be defined in

line with the change process. Here are some examples:


Step 3: Identify Critical Skills

• New skills because of change. To move to new machinery, you may require staff to have the new skill to operate it.

• New skills to increase efficiency. Suppose there have been customer complaints on handling phone calls. You think this is a critical skill and you want to train staff to be at skills level 3 or 4 on this.

• New transient skills for the change process. You may need specific skills required to go through the change. For example, as part of the change program you need to get staff to use the new contact management software. You will need to port the old contacts to the new system. For this, you will need an IT specialist who can carry out this one-time task. If you don’t want to hire a contractor to do this, you can consider training current IT staff on this specific transient skill.


Step 4: Analyze the Data to Generate

Conclusions

Once you have created the table in Step 3, you should

identify the skill gap. For example, you may realize that 15

of employees have a skill level of 1 or 2 on the ability to

manage a project team meeting and therefore need more

training to become better at this skill.

The results of this step should feed back to your general

change management strategy so the skills gaps you

identify here are consistent with the overall goal.


Step 4: Analyse the Data to Generate

Conclusions

Analyze Skill

Matrix

Identify Skill Gap

Identify Training Needs


Train or Acquire

When you have identified that you have a skill gap in your

organization and want to embark on a change program to

fill the gap, you have generally two options; you can train

your current staff so they can become skilled or you can

recruit more experienced people from the outside of the

organization.

Each solution has its own advantages and disadvantages.


Training Current Staff

Employees know the organization

No induction necessary

The organization knows the employees

Can design effective tailored training

Employees know each other’s strengths

Already part of the network

Established loyalty

AD

VA

NTA

GE

S


Training Current Staff

Resistance to change

Some could be fixed on their old habits and resist change

Focused on old ideas

May lose the opportunity to get fresh new ideasD

ISA

DV

AN

TA

GE

S


Acquiring Staff

Require minimum training

Picked based on required skills

Bring fresh ideas

Can overcome resistance naturally

Can be catalysts

Can be role models

Can show how to move on

AD

VA

NTA

GE

S


Acquiring Staff

Can be expensive

Costly to find the right skills

Can lead to friction

Source of resentment

Need to settle in their new organization

Settling through change can be challenging

Need 2-3 years to establish loyalty

Can leave when a crisis occurs

DIS

AD

VA

NTA

GE

S


Train or Acquire

In practice you can also consider combining these two

approaches to get the best from both. Increasingly, many

organizations also consider using contractors which can

quickly give them a specific skill set and an ability to bring

fresh people into the organizations. Since there is no long

term commitment, this allows employers to manage staff

smoothly once the change program is completed.


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How Organizational Change Works