McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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1 Organizational Change McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2 Organizational Change at Ford Ford Motor Co. CEO Alan Mulally successfully transformed the troubled automaker by having a compelling vision and applying several other organizational change practices. 15-2

3 Lewin s Force Field Analysis Model Developed by Kurt Lewin Driving forces Push organizations toward change External forces or leader s vision Restraining forces Resistance to change -- employee behaviors that block the change process Restraining Forces Driving Forces 15-3

4 Force Field Analysis Model Desired Conditions Restraining Forces Restraining Forces Restraining Forces Driving Forces Current Conditions Driving Forces Driving Forces Before Change During Change After Change 15-4

5 Not Hoppy About Change Mina Ishiwatari (front left) wanted to improve Hoppy drink s brand image, but most staff resisted these changes. I tried to take a new marketing approach to change the image of Hoppy... but no one would listen to me. Ishiwatari s persistence improved Hoppy s popularity in Tokyo with limited support or budget. 15-5

6 Restraining Forces (Resistance to Change) Many forms of resistance e.g., complaints, absenteeism, passive noncompliance View resistance as a resource 1. Symptoms of deeper problems in the change process 2. A form of constructive conflict -- may improve decisions in the change process 3. A form of voice helps procedural justice 15-6

7 Why People Resist Change 1. Direct costs Losing something of value due to change 2. Saving face Not invented here syndrome 3. Fear of the unknown Risk of personal loss Concern about being unable to adjust 15-7

8 Why People Resist Change (con t) 4. Breaking routines Cost of moving away from our comfort zones Requires time/effort to learn new routines 5. Incongruent team dynamics Norms contrary to the desired change 6. Incongruent organizational systems Systems/structures reinforce status quo Career, reward, power, communication systems 15-8

9 Creating an Urgency for Change Inform employees about driving forces Most difficult when organization is doing well Customer-driven change Adverse consequences for firm Human element energizes employees Sometimes need to create urgency to change without external drivers Requires persuasive influence Use positive vision rather than threats 15-9

10 Minimizing Resistance to Change Communication Learning Involvement Stress Mgt Highest priority and first strategy for change Generates urgency to change Reduces uncertainty (fear of unknown) Problems -- time consuming and costly Negotiation Coercion 15-10

11 Minimizing Resistance to Change Communication Learning Involvement Stress Mgt Provides new knowledge/skills Includes coaching and other forms of learning Helps break old routines and adopt new roles Problems -- potentially time consuming and costly Negotiation Coercion 15-11

12 Minimizing Resistance to Change Communication Learning Involvement Stress Mgt Negotiation Employees participate in change process Helps saving face and reducing fear of unknown Includes task forces, future search events Problems -- time-consuming, potential conflict Coercion 15-12

13 Minimizing Resistance to Change Communication Learning Involvement Stress Mgt Negotiation Coercion When communication, learning, and involvement are not enough to minimize stress Potential benefits More motivation to change Less fear of unknown Fewer direct costs Problems -- time-consuming, expensive, doesn t help everyone 15-13

14 Minimizing Resistance to Change Communication Learning Involvement Stress Mgt Negotiation Coercion Influence by exchange -- reduces direct costs May be necessary when people clearly lose something and won t otherwise support change Problems Expensive Gains compliance, not commitment 15-14

15 Minimizing Resistance to Change Communication Learning Involvement Stress Mgt Negotiation Coercion When all else fails Assertive influence Radical form of unlearning Problems Reduces trust May create more subtle resistance Encourage politics to protect job 15-15

16 Refreezing the Desired Conditions Ray Davis, Umpqua Bank We tend to revert to previous behaviors and practices, unless systems and structures hold (refreeze) the desired changes. Even when we want to change, and do change, we tend to relax and the rubber band snaps us back into our comfort zones. (Ray Davis, CEO, Umpqua Bank) 15-16

17 Change Agents Change agent -- anyone who possesses enough knowledge and power to guide and facilitate the change effort Involves transformational leadership Develop the change vision Communicate the vision Model the vision Build commitment to the vision 15-17

18 Strategic Vision & Change Need a vision of the desired future state Identifies critical success factors for change Minimizes employee fear of the unknown Clarifies role perceptions 15-18

19 Social Networks and Viral Change Change agents need a guiding coalition Representative across the firm Influence leaders respected Viral change Information seeded to a few people is transmitted to others based on patterns of friendship Relies on social networks -- high trust, referent power Change also occurs through behavior observation 15-19

20 Diffusion of Change Begin change as pilot projects Effective diffusion considers MARS model Motivation Pilot project employees rewarded; motivate others to adopt pilot project Ability Train employees to adopt pilot project Role perceptions Translate pilot project to new situations Situational factors Provide resources to implement pilot project elsewhere 15-20

21 Action Research Approach Action orientation and research orientation Action to achieve the goal of change Research testing application of concepts Action research principles 1. Open systems perspective 2. Highly participative process 3. Data-driven, problem-oriented process 15-21

22 Action Research Process Form clientconsultant relations Diagnose need for change Introduce intervention Evaluate/ stabilize change Disengage consultant s services 15-22

23 Appreciative Inquiry Approach Frames change around positive and possible future, rather than traditional problem focus. 1. Positive principle focus on opportunities, not problems 2. Constructionist principle conversations shape reality 3. Simultaneity principle inquiry and change are simultaneous 4. Poetic principle we can choose how to perceive events and situations 5. Anticipatory principle people are motivated by desirable visions of the future 15-23

24 Four-D Model of Appreciative Inquiry Discovery Dreaming Designing Delivering Discovering the best of what is Forming ideas about what might be Engaging in dialogue about what should be Developing objectives about what will be 15-24

25 Large Group Interventions Future search, open space, and other interventions that involve the whole system Large group sessions May last a few days High involvement with minimal structure Limitations of large group interventions Limited opportunity to contribute Risk that a few people will dominate Focus on common ground may hide differences Generates high expectations about ideal future 15-25

26 Parallel Learning Structure Approach Highly participative social structures Members representative across the formal hierarchy Sufficiently free from firm s constraints Develop solutions for organizational change which are then applied back into the larger organization 15-26

27 Cross-Cultural and Ethical Concerns with Managing Change Cross-Cultural Concerns Linear and open conflict assumptions different from values in some cultures Ethical Concerns Privacy rights of individuals Management power Individuals self-esteem 15-27

28 Organizations are About People Take away my people, but leave my factories, and soon grass will grow on the factory floors. Take away my factories, but leave my people, and soon we will have a new and better factory. Andrew Carnegie ( ) 15-28

29 Organizational Change

30 Discussion of Team Exercise 15.2 Strategic Change Incidents

31 Scenario #1: Latté Troubles Refers to Starbucks, which suffered from the financial downturn and competition, resulting in closing 900 stores and laying off staff. Chairman Howard Schultz lamented that aggressive growth had led to a watering down of the Starbucks experience. Shultz stepped back into the CEO role with an agenda for change

32 Starbucks Change Strategy Schultz publicly apologized to employees for letting our people down ; stated his commitment to transform the company. Sought customer feedback. Specially trained employees ( idea partners ) hosted conversations and act as advocates for customers suggestions. Introduced new products and quality control processes. Empowered employees to design better Starbucks experience

33 Scenario #2: Greener Telco Scenario #2 refers to Bell Canada s Zero Waste program, which successfully changed employee behavior by altering the causes of those behaviors. Pilot project in Toronto 12 floor building of 1000 staff reduced waste from 1800 lb per day to just 75 lb per day within 3 years. Courtesy of Bell Canada 15-33

34 Bell Canada s Change Strategy Relied on the MARS model to alter behavior: Motivation -- employee involvement, respected steering committee (photo) Ability -- taught paper reduction, , food disposal Role perceptions made waste reduction salient (everyone s job) through banners, training Situation -- created barriers to wasteful behavior (e.g. Coffee mugs, removed garbage bins) Courtesy of Bell Canada 15-34

35 Scenario #3: Go Forward Airline Scenario #3 refers to Continental Airline s Go Forward change strategy, which catapulted the company from worst to first within a couple of years

36 Continental Airlines Change Strategy Communicate, communicate, communicate Introduced 15 performance measures Established stretch goals (repainting planes in 6 months) Replaced 50 of 61 executives Rewarded new goals (on-time arrival, stock price) Customers as drivers of change 15-36