Chapter 10 – Confronting Changing Contexts
Forces for Change
Internal and External
Organizations are open systems that are in continual interaction with their
Success and survival require organizations to continually develop a ―fit‖ with
their dynamic and evolving environment.
The success of any organization depends on the capability to maintain stable and
reproducible organizational processes and outcomes.
1. Economic Changes
Organizations must adapt to changing economic conditions.
Downsizings are more likely to occur in lean times than in rich.
Organizational expansion cannot occur in an economic vacuum.
Improving the organization.
2. Competitive Changes
the organizational skills and capabilities needed to survive and grow change in
Organizations must adapt to change as competition evolves in markets from
fragmented and fast growing to concentrated and declining.
competition, both domestic and foreign, certainly has demanded an
acceleration in innovation among firms in many industries.
Organizations, to compete effectively, must continually create new and better
methods of serving customers.
3. Technological Change
Technological is both a continuously changing variable and one that permits and
demands organizational change.
Technology has been a double-edged sword for business—brining both benefits
It can create new industries and destroy old ones.
Benefits from technology have also included the ability to gain more flexibility in
work arrangements such as the practice of telework.
4. Labour Force Changes
Business must understand and respond to changing demographics in the working
o Eg: diversity in our work force is reflected in the growing presence of
Organizations need to understand how relationships with the labour pool can change over time.
many businesses need to consider how labour or union demands can impact
corporate policy and decision-making.
5. Global Changes
Tremendous growth of ―borderless‖ corporations.
The increasing ability of multinational corporations to move freely across borders
and set up business just about anywhere reflects the title ―borderless corporation.‖
o Ex: goods can be designed in one country and raw material obtained from
a second country
6. Legal/Political Changes
Deregulation and privatization are clear examples of the importance of
considering governmental changes on business strategy.
Are legal regulations facilitating, or restricting, certain strategies? The legal
environment of business can dictate changes in how business competes, as well as
what services it offers and how they can be offered.
7. Societal Changes
Business must respond to society: consumers‘ tastes change for example, and
business must adapt to such changes.
the types of organizations that service societal demands can change.
The aging population suggests greater emphasis needs to be placed on such
industries as the health care sector.
The increasing education level of the workforce has also generated changes to the
nature of work.
Why do organizations resist change?
Focusing on day to day routines and goals can create resistance to change. Change
may be required to organizational systems and structures that have been in place
for a long time.
It also requires individuals to change, the way they do their work and whom they
work with as well as reporting systems and roles.
Bureaucracies have rigid rules and procedures in place which can create
resistance to change. Although they allow for control and some level of security
and consistency this can limit creativity and innovation (i.e. change).
Types of Organizational Change
Organizations may confront three fundamentally different types of change:
developmental, transitional and transformational
1. Developmental Change
This type of change attempts to improve upon what the business is currently
doing, rather than creating something completely new.
This includes the improvement of existing skulls, processes, methods,
performance standards or conditions.
2. Transitional Change
This type of change actually replaces what already exists with something
completely new and requires the organization to depart from old methods of
operating while the new state is being established.
o The two factors that largely distinguish transitional from
It is possible to determine the final destination or state in detail
before the transition change is implemented. This permits the
change to be managed.
Transitional change largely impacts employees only at the
levels of skills and actions, but not at the more personal levels
of mindset, behavior and culture.
3. Transformational Change
This type of change is far more challenging to manage compared to the other
types of change for at least two reasons.
First, the future state or destination cause by the change is unknown when the
the final state is determined through trial and error as new information is
transformational change cannot be managed with predetermined, time-bound
or ―linear‖ plans.
the actual change process only really emerges, somewhat unpredictably, as the
change is implemented
Methods of Change
THEORY E focuses on formal structural and systemic change.
o Goal: Seeks to maximize shareholder value
o Focus: top managers decide on the format and process of
emphasize structure and systems
o Planning: programmatic, top driven
o Mechanisms: rely on mechanisms such as performance bonuses, personal
reduction, asset sales, strategic re-ordering of business units
o E.g. Scott Paper – loss of 11,000 jobs, divestment of business units,
relocation of HQ
o Goal: develop organization capabilities,
o Focus: develop an organizational culture that supports learning and high
performance employee base
o Planning: emergent, participative
o Mechanisms: requires flatter structure, increased bonds between
organization and employee; contingent on employee commitment to the change
E.g. Champion International – high employee involvement, improved
relations with unions, skill-based pay system, no layoffs.
Methods and Strategies for Managing Change
1. Understanding the Forces for Change
At a time when the external marketplace was changing rapidly, IBM had not
realized that its customers, technology and competitors had changed; nor had
it adapted to meet those changes
2. The Change Vision and Implementation
Gestner had to develop and implement a program what would be accepted and
adopted by the stakeholders (employees, customers and shareholders).
Analyze the organization and its need for change