Organizational change occurs when a company makes a transition from its current state to some desired future state. Managing organizational change is the process of planning and implementing change in organizations in such a way as to minimize employee resistance and cost to the organization, while also maximizing the effectiveness of the change effort.
Today's business environment requires companies to undergo changes almost constantly if they are to remain competitive. Factors such as globalization of markets and rapidly evolving technology force businesses to respond in order to survive. Such changes may be relatively minor—as in the case of installing a new software program—or quite major—as in the case of refocusing an overall marketing strategy. "Organizations must change because their environments change, " according to Thomas S. Bateman and Carl P. Zeithaml in their book Management: Function and Strategy. "Today, businesses are bombarded by incredibly high rates of change from a frustratingly large number of sources…. Insidepressures come from top managers and lower-level employees who push for change. Outside pressures come from changes in the legal, competitive, technological, and economic environments."
Organizational change initiatives often arise out of problems faced by a company. In some cases, however, companies are encouraged to change for other, more positive reasons. "Change commonly occurs because the organization experiences some difficulty, " Bateman and Zeithaml wrote. "But sometimes the most constructive change takes place not because of problems but because of opportunities." The authors used the term "performance gap" to describe the difference between a company's actual performance and the performance of which it is capable. Recognition of a performance gap often provides the impetus for change, as companies strive to improve their performance to expected levels. This sort of gap is also where many entrepreneurs find opportunities to begin new businesses.
Unfortunately, as Rick Mauer noted in an article for HR Focus, statistics show that many organizational change efforts fail. For example, 50 percent of quality improvement programs fail to meet their goals, and 30 percent of process reengineering efforts are unsuccessful. The most common reason that change efforts fail is that they encounter resistance from employees. Change appears threatening to many people, which makes it difficult to gain their support and commitment to implementing changes. Consequently, the ability to manage change effectively is a highly sought-after skill in managers. Companies need people who can contribute positively to their inevitable change efforts.
Bateman and Zeithaml identified four major areas of organizational change: strategy, technology, structure, and people. All four areas are related, and companies often must institute changes in the other areas when they attempt to change one area. The first area, strategy changes, can take place on a large scale—for example, when a company shifts its resources to enter a new line of business—or on a small scale—for example, when a company makes productivity improvements in order to reduce costs. There are three basic stages for a company making a strategic change:1) realizing that the current strategy is no longer suitable for the company's situation; 2) establishing a vision for the company's future direction; and 3) implementing the change and setting up new systems to support it.
Technological changes are often introduced as components of larger strategic changes, although they sometimes take place on their own. An important aspect of changing technology is determining who in the organization will be threatened by the change. To be successful, a technology change must be incorporated into the company's overall systems, and a management structure must be created to support it. Structural changes can also occur due to strategic changes—as in the case where a company decides to acquire another business and must integrate it—as well as due to operational changes or changes in managerial style. For example, a company that wished to implement more participative decision making might need to change its hierarchical structure.
People changes can become necessary due to other changes, or sometimes companies simply seek to change workers' attitudes and behaviors in order to increase their effectiveness. "Attempting a strategic change, introducing a new technology, and other changes in the work environment may affect people's attitudes (sometimes in a negative way), " Bateman and Zeithaml wrote. "But management frequently initiates programs with a conscious goal of directly and positively changing the people themselves." In any case, people changes can be the most difficult and important part of the overall change process. The science of organization development was created to deal with changing people on the job through techniques such as education and training, team building, and career planning.
A manager trying to implement a change, no matter how small, should expect to encounter some resistance from within the organization. Resistance to change is a normal reaction from people who have become accustomed to a certain way of doing things. Of course, certain situations or tactics can increase resistance. "Individuals, groups, and organizations must be motivated to change. But if people perceive no performance gap or if they consider the gap un-important, they will not have this motivation. Moreover, they will resist changes that others try to introduce, " Bateman and Zeithaml explained.
The authors outlined a number of common reasons that people tend to resist change. These include: inertia, or the tendency of people to become comfortable with the status quo; timing, as when change efforts are introduced at a time when workers are busy or have a bad relationship with management; surprise, because people's reflex is to resist when they must deal with a sudden, radical change; or peer pressure, which may cause a group to resist due to anti-management feelings even if individual members do not oppose the change. Resistance can also grow out of people's perceptions of how the change will affect them personally. They may resist because they fear that they will lose their jobs or their status, because they do not understand the purpose of the change, or simply because they have a different perspective on the change than management.
Fortunately, Bateman and Zeithaml noted, there are a number of steps managers can take to help overcome resistance to change. One proven method is education and communication. Employees can be informed about both the nature of the change and the logic behind it before it takes place through reports, memos, group presentations, or individual discussions. Another important component of overcoming resistance is inviting employee participation and involvement in both the design and implementation phases of the change effort. "People who are involved in decisions understand them better and are more committed to them, " Bateman and Zeithaml explained. Another possible approach to managing resistance to change is through facilitation and support. Managers should be sure to provide employees with the resources they need to make the change, be supportive of their efforts, listen to their problems with empathy, and accept that their performance level may drop initially.
Some companies manage to overcome resistance to change through negotiation and rewards. They offer employees concrete incentives to ensure their cooperation. Other companies resort to manipulation, or using subtle tactics such as giving a resistance leader a prominent position in the change effort. A final option is coercion, which involves punishing people who resist or using force to ensure their cooperation. Although this method can be useful when speed is of the essence, it can have lingering negative effects on the company. Of course, no method is appropriate to every situation, and a number of different methods may be combined as needed. As Bateman and Zeithaml stated, "Effective change managers are familiar with the various approaches and capable of flexibly applying them according to the situation."
Managing change effectively requires moving the organization from its current state to a future desired state at minimal cost to the organization. Bateman and Zeithaml identified three steps for managers to follow in implementing organizational change:
"Successfully changing an enterprise requires wisdom, prescience, energy, persistence, communication, education, training, resources, patience, timing, and the right incentives, " John S. McCallum wrote in the Ivey Business Journal. "Successfully leading and managing change is and will continue to be a front-burner responsibility for executives. Prospects are grim for enterprises that either cannot or will not change. Indeed, no industry member is quite so welcome as the one that steadfastly refuses to keep up."
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