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Chapter 4

MHR 650 Chapter Notes - Chapter 4: John Sculley, Apple Inc., Chaos Theory

Human Resources
Course Code
MHR 650
Frank Miller

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Chapter 4: What Changes in Organizations
Types of Changes
1. First-order change: incremental change, maintains and develops the organization
a. Tuning (anticipatory and incremental) incremental changes are made that anticipate changes to the external environment. These
changes involve adjustment or modification to enable a better fit between the organization and the environment
b. Adaption (reactive and incremental) eg. Catch-up response of other New York banks to install ATM machines following Citibank’s lead
- E.g. continuous and smaller changes to the structure of an organisation
2. Second-order change: transformational, fundamentally changes the way an organization functions at its core
a. Reorientation (anticipatory and discontinuous) involves “frame bending”, major modification of the organization but by building on past
strengths and history
b. Re-creation (reactive and discontinuous) involves “frame breaking”, major upheaval where the organization breaks with past practices
and directions
- Palmer and Dunford found eight commonly occurring recommendations for major organizational change in order to cope with
hypercompetitive business environments:
o Delayering reducing the number of vertical levels in the organization
o Networks/alliances involving internal and external strategic collaboration
o Outsourcing of activities in which the organization has no distinctive competence
o Disaggregation breaking up the organization into smaller business units
o Empowerment introduction of mechanisms to provide employees with the authority, resources, and encouragement to take actions
o Flexible work groups for specific purposes that are disbanded or reformed upon completion of the task
o Short-term staffing in which people are contracted to the organization for a short period of time to work on specific issues/tasks
o Reduction of internal and external boundaries to encourage communication and resource sharing
Three Types of Transformational Change
o Type 1 occurs when an organization moves from an entrepreneurial to professional management structure (eg. Apple Computers from an
entrepreneurial company under found Steve Jobs to larger professional company under John Sculley
o Type 2 involves the revitalization of already-established companies. The organization remains in the same market but focuses on how to
rebuild itself in order to operate more effectively (eg. Canada computers faced changing environment in customer needs, so they
downsized, lowered production costs and placed more emphasis on teamwork)
o Type 3 involves visionary change in which the organization fundamentally changes the business in which it is involved (eg. Starbucks
from a local roaster to string of national company owned coffee retail stores, did not initially sell coffee as a drink)
Key Factors Influencing
Design of
Transformation Types
Type 1: Entrepreneurial to
Professional Management
Type 2: Revitalization
Type 3: Business Vision
Growth in markets and competition
Major change in environment
May or may not involve
environmental change
Business Concept
No transformation
No transformation
Major transformation
Building Blocks of
Organizational Success
Changing culture, management, and
operational systems
Change needed in markets, services,
resources, operational and
measurement systems, and culture
Change in markets, services,
resources, operational and
measurement systems, and culture
Organizational Size
Associated with rapid growth
Usually change, including downsizing
May involve size change
Between 1st & 2nd Order Change
1. Mid-range Changes
a. High inertia can result when the change is perceived as unnecessary, there being little gap between current identity and the one that is
implied in the change
b. High stress can result when the change is perceived as unattainable and the gap is too wide between the current organizational identity
and the one that will occur as a result of the change
- Overcomes inertia but is not revolutionary
- Avoids the alarming implications of large scale change
- Designed to destroy outdated aspects of the organization’s old identity while simultaneously building on other, still relevant, elements
2. Punctuated Equilibrium
- Long periods of stability followed by short bursts of change and instability
3. Robust Transformation
- Considers environmental conditions as being temporary and requiring robust responses including the enactment of new capabilities
Implication for Change Manager
Image of Managing Change
Care needs to be taken in assuming that types of
organizational changes can be neatly categorized
as small, adaptive, and incremental compared to
those that are large and transformational.
Interpreter: The change manager as interpreter
image reminds us that whether a change is adaptive,
reactive, or transforming will depend upon the
perspective of the person doing the considering
Multiple types of changes simultaneously should
also be considered. In addition, some changes
require other changes nested under them in
order for another change to proceed.
Navigator: when implementing multiple changes,
there is likely to be contact with different groups that
will require negotiation and navigation through a
range of issuesnot all of which they will be able to
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