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Lesson#43
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Organization Transformation
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Organization Transformation
The distinguishing features of the revolutionary change efforts
are:
• Change is Triggered by
Environmental and Internal Disruptions
• Change is Systemic and
Revolutionary
• Change Demands a New
Organizing Paradigm
• Change is Driven by
Senior Executives and Line Management.
• Continuous Learning and
Change.
Organization transformations can occur in response to or in
anticipation of major changes in the
organization's environment or technology.
In addition, these changes often are associated with significant
alterations in the firm's business strategy,
which, in turn, may require modifying corporate culture as well
as internal structures and processes to
support the new direction. Such fundamental change entails a new
paradigm for organizing and managing
organizations. It involves qualitatively different ways of
perceiving, thinking, and behaving in organizations.
Movement toward this new way of operating requires top managers
to take an active leadership role. The
change process is characterized by considerable innovation and
learning and continues almost indefinitely
as organization members discover new ways of improving the
organization and adapting it to changing
conditions.
Organization transformation is a recent advance in organization
development, and there is some confusion
about its meaning and definition.
Characteristics of Transformational Change
In the past decade, a large number of organizations radically
altered how they operate and relate to their
environments. Increased foreign competition forced many
industries to downsize and become leaner, more
efficient, and flexible. Deregulation pushed organizations in
the financial services, telecommunications, and
airline industries to rethink business strategies and reshape
how they operate. Public demand for less
government and lowered deficits forced public sector agencies to
streamline operations and to deliver more
for less. Rapid changes in technologies rendered many
organizational practices obsolete, pushing firms to
be continually innovative and nimble.
Organization transformation implies radical changes in how
members perceive, think, and behave at work.
These changes go far beyond making the existing organization
better or fine-tuning the status quo. They
are concerned with fundamentally altering the organizational
assumptions about its functioning and how it
relates to the environment.
Changing these assumptions entails significant shifts in
corporate philosophy and values and in the
numerous structures and organizational arrangements that shape
members' behaviors. Not only is the
magnitude of change greater, but the change fundamentally alters
the qualitative nature of the organization.
Examination of the rapidly growing literature on the topic
suggests, however, the following distinguishing
features of these revolutionary change efforts.
Change is Triggered by Environmental and Internal Disruptions
Organizations are unlikely to undertake transformational change
unless significant reasons to do so emerge.
Power, and expertise are vested in the existing organizational
arrangements, and when faced with problems,
members are more likely to fine-tune those structures than to
alter them drastically. Thus, in most cases,
organizations must experience or anticipate a severe threat to
survival before they will be motivated to
undertake transformational change. Such threats arise when
environmental and internal changes render
existing organizational strategies and designs obsolete. The
changes threaten the very existence of the
organization as it presently is constituted.
Transformational change occurs in response to at least three
kinds of disruption:
1. Industry discontinuities
—sharp
changes in legal, political, economic, and technological conditions
that shift the basis for competition within industries
2. Product life cycle shifts
—changes
in product life cycle that require different business strategies
3. Internal company dynamics
—changes
in size, corporate portfolio strategy, executive turnover, and
the like.
These disruptions severely jolt organizations and push them to
alter business strategy and, in turn, their
mission, values, structure, systems, and procedures.
Change is Systemic and Revolutionary
Transformational change involves reshaping the organization's
culture and design elements. These changes
can be characterized as systemic and revolutionary because the
entire nature of the organization is altered
fundamentally.
Typically driven by senior executives, change may occur rapidly
so that it does not get mired in politics,
individual resistance, and other forms of organizational
inertia. This is particularly pertinent to changing the
different features of the organization, such as structure,
information systems, human resources practices,
and work design. These features tend to reinforce one another,
thus making it difficult to change them in a
piecemeal manner.
They need to be changed together and in a
coordinated fashion so that they can
mutually support each other and the new cultural values and
assumptions. Transformational change,
however, is distinguished from other types of strategic change
by its attention to the people side of the
organization. For a change to be labeled transformational, a
majority of individuals in an organization must
change their behavior.
Long-term studies of organizational evolution underscore the
revolutionary nature of transformational
change. They suggest that organizations typically move through
relatively long periods of smooth growth
and operation. These periods of convergence or evolution are
characterized by incremental changes. At
times, however, most organizations experience severe external or
internal disruptions that render existing
organizational arrangements ineffective. Successful firms
respond to these threats to survival by
transforming themselves to fit the new conditions. These periods
of total system and quantum changes
represent abrupt shifts in the organization's structure,
culture, and processes. If successful, the shifts enable
the organization to experience another long period of smooth
functioning until the next disruption signals
the need for drastic change.
These studies of organization evolution and revolution point to
the benefits of implementing
transformational change as rapidly as possible. The faster the
organization can respond to disruptions, the
quicker it can attain the benefits of operating in a new way.
Rapid change enables the organization to reach
a period of smooth growth and functioning sooner, thus providing
it with a competitive advantage over
those firms that change more slowly.
Change Demands a New Organizing Paradigm
Organizations undertaking transformational change are, by
definition, involved in second-order or gamma
types of change. Gamma change involves discontinuous shifts in
mental or organizational frameworks.
Creative metaphors, such as "organization learning" or
"continuous improvement," often are used to help
members visualize the new paradigm. During the 1980s, increases
in technological change, concern for
quality, and worker participation led to at least one shift in
organizing paradigm. Characterized as the
transition from a "control-based" to a "commitment-based"
organization, the features of the new paradigm
included leaner, more flexible structures; information and
decision making pushed down to the lowest
levels; decentralized teams and business units accountable for
specific products, services, or customers; and
participative management and teamwork. This new organizing
paradigm is well suited to changing
conditions.
Change is Driven by Senior Executives and Line Management
A key feature of organization transformation is the active role
of senior executives and line managers in all
phases of the change process. They are responsible for the
strategic direction and operation of the
organization and actively lead the transformation. They decide
when to initiate transformational change,
what the change should be, how it should be implemented, and who
should be responsible for directing it.
Because existing executives may lack the talent, energy, and
commitment to undertake these tasks, they may
be replaced by outsiders who are recruited to lead the change.
Research on transformational change
suggests that externally recruited executives are three times
more likely to initiate such change than are
existing executive teams.
The critical role of executive leadership in transformational
change is clearly emerging. Three key roles for
executive leadership of such change are:
1. Envisioning.
Executives must articulate a clear and credible vision of the new strategic
orientation. They
also must set new and difficult standards for performance, and
generate pride in past accomplishments and
enthusiasm for the new strategy.
Executives must:
– articulate a clear and
credible vision of the new strategic orientation,
– set new and difficult
standards for performance,
– generate pride in past
accomplishments, and
– enthusiasm for the new
strategy.
Sharing the Vision
The development of a vision is an important element in
organizational and cultural change. Many
management theorists feel that vision is the very essence of
leadership. Any attempt at changing a culture
should begin with a clear vision of the new strategy and what it
will take to make it work. Organizations are
driven by a vision, not by directives from the chain of command.
Vision is “a mental image of a possible and desirable future of
the organization… that articulates a view of
a realistic, credible, attractive future for the organization.
An effective vision should be challenging,
inspiring, and aimed at empowering people at all levels.
The fact of the matter is that the fast food employee flipping
burgers and waiting on the customer is the
one who ultimately carries out the vision, not the owner and
management team at the headquarters.
Developing a shared vision involves several stages:
–
Share the
vision.
People will buy into a clear
challenging vision that has meaning for
them and will improve society.
–
Empower the
individual.
People need to feel they
have a stake in the outcome and have
participated in defining the vision. The idea is to have
individual purposes congruent with
the organization’s vision.
–
Develop Trust.
An effective vision must set goals for
challenging performance, but must
allow people to “buy in” to the vision and provide feedback on
performance.
–
Reward
performance
. High performers need to
be recognized. This element also
includes support for taking risk, providing the freedom to fail,
and pushing decisionmaking
information downward to the lower levels.
Figure 55
2. Energizing.
Executives must demonstrate personal excitement for the changes and model the
behaviors that are expected of others. They must communicate
examples of early success to mobilize
energy for change.
3. Enabling.
Executives must provide the resources necessary for undertaking significant
change and use
rewards to reinforce new behaviors. Leaders also must build an
effective top-management team to manage
the new organization and develop management practices to support
the change process.
If the system rewards the old culture, old practices, then it
won’t make sense for people to change. This, of
course, includes pay and promotion, but other incentives as
well.
For example, a TV manufacturing company rewards top performers
by putting them on an “elite badge”
project team. At a computer company, awards & recognition were
used to gain employee involvement, and
people were willing to work extra hours to bring out products.
They wore T-shirts with mottos that
celebrated their dedication, like “working ninety hours a week
and loving it.”
Leaders also must build an effective top-management team to
manage the new organization and develop
management practices to support the change process.
Continuous Learning and Change
Transformational change requires considerable innovation and
learning. Organizational members must
learn how to enact the new behaviors required to implement new
strategic directions. This typically is a
continuous learning process of trying new behaviors, assessing
their consequences, and modifying them if
necessary. Because members usually must learn qualitatively
different ways of perceiving, thinking, and
behaving, the learning process is likely to be substantial and
to involve much unlearning. It is directed by a
vision of the future organization and by the values and norms
needed to support it. Learning occurs at all
levels of the organization, from senior executives to
lower-level employees.
Because the environment itself is likely to be changing during
the change process, transformational change
rarely has a delimited timeframe but is likely to persist as
long as the firm needs to adapt to change.
Learning how to manage change in a continuous manner can help
the organization keep pace with a dynamic
environment. It can provide the built-in capacity to fit the
organization continually to its
environment.
Three kinds of Interventions
1. Culture change
2. Self-design
3. Organization learning and knowledge management.
It describes activities directed at changing the basic character
or culture of the organization.
Culture Change
Figure 56
Despite the increased attention and research devoted to
corporate culture, there is still some confusion
about what the term culture really means when applied to
organizations. Examination of the different
definitions suggests that organization culture is the pattern of
basic assumptions, values, norms, and
artifacts shared by organization members. These shared meanings
help members make sense out of
everyday life in the organization. The meanings signal how work
is to be done and evaluated, and how
employees are to relate to each other and to significant others,
such as customers, suppliers, and
government agencies.
Levels of Organizational Culture
As shown below, organization culture includes four major
elements existing at different levels of awareness:
1. Artifacts.
2. Norms
3. Values
4. Basic Assumptions
Figure 57
Case: The Action Company
The “Action Company” is a rapidly growing high high-technology
manufacturing concern with low
turnover and intense history. A visitor to the Company would
note the open landscape architecture; a high
degree of informality; frenetic activity all around; an obvious
lack of status symbol, such as parking spaces
or executive dinning rooms; and a sense of high energy and
emotional evolvement of people staying late
and expressing excitement about the importance of their work.
If one asks about the various norms, one is told that the
company is in a rapidly growing high-technology
field where hard work, innovation, and rapid solutions to things
are important and where it is essential for
everyone to contribute at their maximum capacity. New employees
are carefully screened; and when an
employee fails, he or she is simply assigned to another task,
not fired or punished in any personal way.
The next-deeper level of awareness includes values about what
ought to be in organizations. Values tell
members what is important in the organization and what deserves
their attention.
Values
Basic
Assumptions
Norms
Artifacts
An organization’s culture may be described by a set of core
values that include:
•
Individual
autonomy
. The degree of
responsibility, independence, and opportunities for
exercising initiative for members of the organization.
•
Sensitivity to
the needs of customers and employees
.
The degree of responsiveness to
changing needs.
•
Support
.
The degree of assistance provided by managers.
•
Interest in
having employees initiate new ideas
.
The degree to which employees are
encouraged and empowered to come up with better quality and
productivity suggestions.
•
Openness of
available communication channel
. The
degree of freedom of communication
between members and teams and levels.
•
Risk behavior
.
The degree to which members are encouraged to be aggressive, innovative, and
risk-taking.
By combining these values a composite picture of the
organization’s culture is formed. The culture
becomes the basis for the shared understanding that members have
about the organization, how things are
done, and the way they are supposed to behave.
The company operates on several critical and coordinated basic
assumptions: (a) Individuals are assumed to
be the source of all innovation and productivity. (b) It is
assumed that truth can only be determined by
pitting fully involved individuals against each other to debate
ideas until only one idea survives; and it is
further assumed that ideas will not be implemented unless
everyone involved in implementation has been
convinced through the debate of the validity of the idea; (c)
Paradoxically, it is also assumed that every
individual must think for himself or herself and “do the right
thing” even if that means disobeying one’s
boss or violating a policy. (d) What makes it possible for
people to live in this high conflict environment is
the assumption that the company members are one big family who
will take care of each other and protect
each other even if some members make mistakes or have bad ideas.
Figure 58
Cultural Context
Researchers have proposed that applying OD in different
countries requires a "context-based" approach to
planned change. This involves fitting the change process to the
organization's cultural context, including
the values held by members in the particular country or region.
These beliefs inform people about which
behaviors are important and acceptable in their culture.
Cultural values play a major role in shaping the
customs and practices that occur within organizations as well,
influencing how members react to
phenomena having to do with power, conflict, ambiguity, time,
and change.
Individual is source of
good ideas
Truth is discovered through
debate and testing
We are one family
who will take care
of each other
Every person must
think for himself
or herself and
“do the right thing”
There is a growing body of knowledge about cultural diversity
and its effect on organizational and
management practices. Researchers have identified five key
values that describe national cultures and
influence organizational customs: context orientation, power
distance, uncertainty avoidance, achievement
orientation, and individualism (Table 24).
Context Orientation
This value describes how information is conveyed and time is
valued in a culture. In low-context cultures,
such as Scandinavia and the United States, information is
communicated in words and phrases. By using
more specific words, more meaning is expressed. In addition,
time is viewed as discrete and linear—as
something that can be spent, used, saved, or wasted.
In high-context cultures, on the other hand, the communication
"medium reflects the message more than
the words, and time is a fluid and flexible concept. For
example, social cues in Japan and Venezuela provide
as much, if not more, information about a particular situation
than do words alone.
Organizations in high-context cultures emphasize ceremony and
ritual. How one behaves is an important
signal of support and compliance with the way things are done.
Structures are less formal in high-context
cultures; there are few written policies and procedures to guide
behavior.
Because high-context cultures view time as fluid, punctuality
for appointments is less a priority than is
maintaining relationships.
Table 24
Power
Distance
This value concerns the way people view authority, status
differences, and influence patterns. People in
high power distance regions, such as Latin America and Eastern
Europe, tend to favor unequal
distributions of power and influence, and consequently
autocratic and paternalistic decision-making
practices are accepted. Organizations in high power distance
cultures tend to be highly centralized with
several hierarchical levels and a large proportion of
supervisory personnel. Subordinates in these
organizations represent a lower social class. They expect to be
supervised closely and believe that power
holders are entitled to special privileges. Such practices would
be inappropriate in low power distance
regions, such as Scandinavia, where participative decision
making and egalitarian methods prevail.
Uncertainty Avoidance
This value reflects a preference for conservative practices and
familiar and predictable situations. People in
high uncertainty avoidance regions, such as Asia, prefer stable
routines, resist change, and act to maintain
the status quo. They do not like conflict and believe that
company rules should not be broken. In regions
where uncertainty avoidance is low, such as in many European
countries, ambiguity is less threatening.
Organizations in these cultures tend to favor fewer rules,
higher levels of participation in decision making,
more organic structures, and more risk taking.
Achievement Orientation
This value concerns the extent to which the culture favors the
acquisition of power and resources.
Employees from achievement-oriented cultures, such as Asia and
Latin America, place a high value on
career advancement, freedom, and salary growth. Organizations in
these cultures pursue aggressive goals
and have high levels of stress and conflict. Organizational
success is measured in terms of size, growth, and
speed. On the other hand, workers in cultures where achievement
is less of a driving value, such as those in
Scandinavia, prize the social aspects of work including working
conditions and supervision, and typically
favor opportunities to learn and grow at work.
Individualism
This value is concerned with looking out for oneself as opposed
to one's group or organization. In high
individualism cultures, such as the United States and Canada,
personal initiative and competitiveness are
valued strongly. Organizations in individualistic cultures often
have high turnover rates and individual
rather than group decision-making processes. Employee
empowerment is supported when members
believe that it improves the probability of personal gain. These
cultures encourage personal initiative,
competitiveness, and individual autonomy. Conversely, in low
individualism countries, such as Taiwan,
Japan, and Peru, allegiance to one's group is paramount.
Organizations operating in these cultures tend to
favor cooperation among employees and loyalty to the company.
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