After reading this article you will learn about:- 1. Meaning of Organisational Change 2. Features of Organisational Change 3. Forces 4. Factors 5. Process 6. Model 7. Types 8. Approaches .
- Meaning of Organisational Change
- Features of Organisational Change
- Forces of Change
- Factors Affecting Organisational Change
- Process of Organisational Change
- Model of Organisational Change(Force Field Analysis)
- Types of Organisational Change
- Approaches to Planned Organisational Change
1. Meaning of Organisational Change:
Organisations change their structures and work environment to remain competitive in the domestic and world markets. The world is constantly changing and so are organisations. Business organisations are open systems.
They continuously interact with the environment and adapt to environmental changes necessary for their survival and growth. Not only should enterprises adapt to the changes, they should also anticipate the changes and incorporate them in their plans and budgets.
Changes are necessary if organisations want to:
(i) Be adaptive to environmental conditions,
(ii) Compete in the domestic and international markets,
(iii) Improve their performance, and
(iv) Enter into mergers and acquisitions.
“Organisation change is any substantive modification to some part of the organisation”. Change may be required for the organisation as a whole or for some part of the organisation; work force, departmentation, span of control, machinery, technology etc.
2. Features of Organisational Change:
Change is characterised by the following features:
1. Movement from one state of balance to another:
Change involves moving from the existing state of balance to a new level of equilibrium. It disturbs the old equilibrium and develops a new equilibrium where new ways of working become part of the system.
2. In whole or parts:
It may involve change in some parts of the organisation (technology, structure or people) or the organisation as a whole. Even if change is introduced in part of the organisation, it affects the entire organisation. Change in one part, for example, technology requires change in learning of people and may be structure to adopt that technology.
The process of change is not restricted to one organisation or one country. It is a worldwide phenomenon. The whole world, all countries, every organisation, its members and all individuals change their pattern of working. However, the nature and magnitude of change is different for different organisations.
4. Responsive to environmental factors:
Change is affected by factors external and internal to the organisations.
5. Continuous process:
Change is not a one-time process. Organisations keep changing their policies to survive and grow in the competitive markets. While some changes are minor and get absorbed in the system through internal adjustments, major changes are introduced through change agents.
6. Essential activity:
Change is not a force that organisations may or may not respond to. If organisations want to survive, change has to be accepted by them. They can, however, plan the change or react to change. The former approach to change is conducive to organisational development and growth.
7. Change agents:
Change is initiated by change agents. Change agents can be internal or external to the organisation. Internal change agents can be top executives of the organisation. External agents are outside experts or advisors appointed by executives to initiate the change process.
3. Forces of Change:
Two forces act on existing state of equilibrium of the organisation.
1. Driving forces:
These forces drive the organisation to initiate the change. They encourage the organisation to accept environmental changes. Need for higher productivity, commitment to work, desire for promotion and career development are the driving forces that encourage people to accept change.
2. Restraining forces:
These forces restrain organisations to accept change. Organisations continue with their current working standards as people resist change. Laziness, habits, precedents, domestic problems and routine nature of work are the restraining forces that discourage people to accept change.
To survive, grow and develop in the industry, firms spurt the driving forces and reduce the restraining forces. This will help them reach a new level of equilibrium which will be favourably accepted by the organisational members.
4. Factors Affecting Organisational Change:
Change is the essence of organisational life. Organisations have to anticipate or respond to change to be successful in the long-run.
The factors that necessitate change fall into two categories:
1. Internal Factors:
Factors internal to organisation are as follows:
Organisations want to perform better, earn more profits for owners (in the form of retained earnings), employees (increase in salary and bonus) and shareholders (increase in dividends). This is possible if they consistently review their policies and reorganize their structures to do better. Change is, therefore, desirable to achieve higher level of efficiency.
People at high managerial posts want to retain control over organisational activities. They have their own philosophies and ways of working. They introduce new organisation designs and control systems which are followed in the organisation.
Dynamic managers introduce change because they want to lead the market. Change in one business forces others to adopt the changes.
(d) Internal pressures:
Attitudes of employees also enforce change. Dissatisfaction with the working conditions, pay structures and inter-personal relationships reflect negative behaviour towards managers which may force employees to change their policies, procedures and strategies. Change is, therefore, enforced to develop cordial relations in the organisation.
(e) Changes in workforce:
Changes in managerial personnel (when new managers join in place of retiring managers) also require the organisation to change its values and philosophies. Changes in operative personnel (new workers who are more educated, skilled and competent) also require the organisation to change its values and beliefs to match those who join the organisation. There may be changes in leadership styles and motivation systems to deal with knowledge workers.
(f) Internal inefficiencies:
Organisations may change their structures because of internal inefficiencies like imbalance between narrow and wide span of management, centralisation and decentralisation, line and staff relationships, internal and external environment, communication systems etc. Improvement in these areas requires changes in organisation structure.
2. External factors:
Survival of organisation depends on its active interaction with the environment. Every organisation affects and is affected by others — be it organisations or suppliers, shareholders, customers, Government or trade unions. Thus, an organisation has to give due consideration to its own goals and also the goals of those external to its working.
In order to survive in the changing environment, organisations have to change their production process, labour-management relations, departmental functions etc. in response to changes in technological, political, economic factors etc.
Some of the external factors which affect change are as follows:
(a) Market factors:
Organisations operate in the volatile markets. Various market forces related to buyers and competitors affect competitive position of the organisation and promote changes to remain competitive in the market. Factors related to buyers are demand, changes in consumer tastes and preferences, income of consumers etc. and those related to competitors are policies of competitors, better products and suppliers etc. New companies promote diversification, product deletion, disinvestment, core competence to gain distinctive advantage etc.
(b) Economic factors:
Changes in economic conditions; exchange rate and interest rate fluctuations, fiscal and monetary policies, inflation and cost of living necessitate changes in the organisational policies.
(c) Social factors:
The norms for pollution, safety and working conditions, health consciousness, geographical movement of workers, their age composition, education etc. are the social factors that necessitate changes in the organisational policies. Organisations are the creations of society and have to take care of social factors in making adjustments in their plans, policies and procedures.
(d) Technological factors:
The modern world is facing constantly changing technology, information systems, computerisation and decision support systems. If organisations fail to update their technology and management information system, they will not be able to survive in the market.
(e) Political factors:
Business enterprises and Government actively interact with each other. Changes in government policies with respect to taxation and corporate governance, new laws and court decisions require the organisations to change their policies according to these regulations.
(f) Natural factors:
Natural calamities like floods and earthquakes also require changes in the policies of the organisation. Organisations are open social systems and cannot ignore the impact of their operations on the society. Social responsibilities are part of the organisational operations which change according to needs of the environment. Providing medicines, clothes, food and monetary help may not be part of organisation’s social agenda but natural factors may require it to do so; not only from the point of view of ethics but also its survival.
(g) Educational factors:
Educated employees, shareholders, labour unions, customers and suppliers require organisations to change their structures to come up to their expectations. New employees, new managerial personnel, new suppliers with different educational levels and backgrounds necessitate organisations to change their policies to accommodate them.
(h) Global factors:
Globalisation and liberalisation require changes in the policies of organisations to compete with multinational corporations operating in the home country and the host country. Companies of different countries have different cultural and social values. Since they interact with each other in the globalized world, changes have to be made in the organisational processes to be interactive with each other.
5. Process of Organisational Change:
Kurt Lewin observed that people generally do not accept change and if they accept it, they tend to revert to the original behaviour after some time. To make change have lasting impact, it should become part of their attitudes and value system. Lewin suggested a three step model to initiate change in organisations and behaviour of individuals and groups.
The following steps are involved in the change process:
Unfreezing makes the need for change inevitable to members so that they become ready to accept the change. It develops in people a belief that present system of working is undesirable and change is desirable. It motivates people to move from the old and traditional ways to new and modern ways of working. The driving forces overpower the restraining forces and people, therefore, do not resist change. They welcome change and participate in its implementation.
People analyse the present situation, discuss the problems and recognise the need for change. It infers that their current thinking is unfrozen, conventional methods of working are discarded and new methods appropriate to the environmental demands are adopted.
Resistance to change is eliminated amongst members by:
(a) Building trust and confidence,
(b) Enhancing motivation,
(c) Improving communication, and
(d) Participative decision making.
Unfreezing in the change process “generates self-doubt and provides a means of remedying the situation.”
2. Changing or Moving:
Once people are ready to accept the change, change is initiated by learning new ways of doing things. New information is collected, new concepts are developed, members are trained to implement the concepts and present perspectives and attitudes are changed.
New behaviour is promoted, new beliefs and new attitudes are developed and the existing value system is changed. Members identify themselves with the changed value systems and internalise them by changing their behavioural norms. Thus, changes are introduced and people adjust their behaviour to the changed norms.
Driving people to change their behaviour and attitude can take two forms:
Managers announce change, failing which, members are subjected to threats, punishments and penalties. This change does not have lasting impact and, therefore, has to be closely monitored.
People are motivated to feel the need for change and accept it as a positive force that coordinates individual goals with organisational goals.
This change is permanent in nature. It can be brought by:
(i) Delegating responsibilities to subordinates.
(ii) Developing two-way relationship between the change agent (the person who initiates the change) and the persons who will be affected by change. Change is implemented by subordinates and suggestions to change agents are respected by them.
Though change is desirable, people generally resist change. Despite learning new ways of doing things, they tend to revert to old behaviour after working in the changed environment for some time. Refreezing attempts to make change permanent till there is need to reintroduce change.
“It means locking the new behaviour pattern into place by means of supporting or reinforcing mechanisms, so that it becomes the new norm.” People realise that change will affect their future behaviour. Reinforcement of behaviour is, therefore, the aim of refreezing.
This can be done in the following ways:
(a) Managers motivate the subordinates to accept change as a permanent feature by relating changed behaviour with reward system.
(b) Managers understand the needs of people and relate them with organisational needs. Fulfillment of organisational goals is viewed as a means of fulfilling individual goals.
(c) Managers understand the reasons why people resist change and overcome their resistance.
6. Model of Organisational Change(Force Field Analysis):
Force field analysis helps to introduce change by balancing driving and restraining forces. Driving forces promote change and restraining forces restrain change. Pressure of driving and restraining forces helps organisations reach a new level of equilibrium where changed practices become the new norms unless a change is introduced again.
This is depicted in the following model of change:
Vertical lines indicate strength of a force, driving or restraining. At a point of time, organisation represents a balance of forces opposing and supporting the given system and, therefore, is in a state of relative equilibrium. This state continues unless a change is introduced.
On announcing the change:
1. If driving forces overpower restraining forces, change is implemented.
2. If, however, restraining forces overpower driving forces, change may be postponed.
3. When both the forces are equally powerful, managers push the driving forces and make them overpower the restraining forces.
For example, managers want to increase production for which workers have to work overtime, but restraining forces are more powerful than driving forces. Workers do not agree to work overtime. The organisation, thus, remains in the state of existing equilibrium. This situation is represented on the left hand side of the diagram; left to the point of occurrence of change.
If management wants to introduce change, it has to increase the supporting forces or decrease the restraining forces or influence both. The point at which driving forces overpower restraining forces is the point of occurrence of change. This helps in acceptance of change and its integration into new business practices.
7. Types of Organisational Change:
Effective management depends upon the way managers deal with different types of changes.
There are two types of changes:
1. Reactive change:
It is change in reaction to an event. This change is initiated due to pressures of external forces. Changes are made in response to situations and are primarily unplanned in nature. Managers make quick changes to deal with the problems as they do not have enough time to analyse the situation and prepare a well-conceived plan. Changes are made in response to environmental events, threats and opportunities. For example, if an epidemic calls for immediate supply of drugs by the pharmaceutical industry, it is a reactive change.
2. Planned change:
It is a systematic change, wider in scope than reactive change. It follows a proactive approach to change. Managers increase organisational effectiveness by anticipating the forces causing change and plan ahead to deal with them. They anticipate environmental threats and opportunities and carry out the change process in a phased manner. These changes are important for survival of the firm. They involve huge financial and non-financial resources and are planned in a scientific and systematic manner.
Planned change is “change that involves actions based on a carefully thought-out process for change that anticipates future difficulties, threats and opportunities.” It is “the deliberate design and implementation of a structural innovation, a new policy or goal, or a change in operating philosophy, climate and style. Such changes involve a group of persons, some departments or the whole organisation and are normally related to organisation structure, people and technology”. — John M. Thomas and Warren G. Bennis
8. Approaches to Planned Organisational Change:
Approaches to change refer to elements or components of the organisation subjected to change.
Though change can affect any part of the organisation, following are the three main elements or key areas where changes are introduced:
1. Structural changes:
Organisation structure is the organisation design which defines authority-responsibility relationships, communication systems, centralisation and decentralisation, division of jobs into smaller units and integration of individual and group tasks to achieve the organisational goals. The organisation structure does not remain static. It is dynamic in nature and changes according to requirements of the internal and external environment.
Reorganisation among various work groups may require the organisations to change from:
1. Functional to divisional structure or vice versa,
2. Centralisation to decentralisation and vice versa,
3. Wide span of control to narrow span and vice versa.
A change may be required in the job design, work schedules, communication system or job responsibilities.
The purpose of change in the organisation structure is to improve organisational performance in terms of production, morale, motivation and job satisfaction, both individual and organisational.
2. Technological changes:
Technology refers to tools, equipment’s, processes, knowledge and techniques to produce goods and services. Technological change refers to change in any aspect of technology to improve the goods and services and add new products to the existing line of goods and services.
Technological changes help to compete in the dynamic domestic and international markets. Changes in competitors’ technology, for example, require change in the firm’s technological requirement also. Since technological changes are related to methods of production, they actively involve people at lower levels of the organisation. Changes are initiated at lower levels and sent to upper levels for approval. Structural changes are initiated at upper levels and reported down the hierarchy for implementation.
3. People or human resource changes:
Structural and technological changes focus on task- related activities and relationships to be implemented by the human force. Human resource changes focus on changing the human behaviour, skills, knowledge, attitudes and beliefs to increase organisational performance.
Change in people can be brought in the following ways:
(a) Training and development can improve behavioural skills and knowledge.
(b) Recruitment and selection procedures can be changed to appoint people with desired skills and knowledge to manage the jobs efficiently.
(c) Organisational development techniques can be adopted to change behaviour and attitude of people towards the work environment.
The approaches to organisation change and components involved in the change are shown in the following table:
Relationship amongst different approaches:
Though different approaches focus on different organisational components, actually change in one component affects other key areas also. Change in one component necessitates simultaneous change in other two components.
For example, if a company diversifies operations in new geographical areas, it requires change in structure from functional to market organisation. This may also involve technological changes to improve the quality of goods and services to reach a wider section of consumers. Change in technology and organisation structure require changes in people’s knowledge and skills to cope with the technological developments.
Interdependence or relationship amongst components of the organisation can be related as follows: