Universidad de Manila College of Business Administration

TITLE OF REPORT: Managing Organizational Change

SUBMITTED BY: De Venencia, Jennevie C. Franciloso, Eldie Jr. O. Mangaliman, Cristine B. Reyes, Divina L. Sarte, Benedict C. BM41

SUBMITTED TO: Ms. Faustina E. Tolentino

THE SIGNIFICANCE OF EFFECTIVE CHANGE Changes are initiated from time to time to improve institutional working. The effective and progressive management of change can assist in shaping a future which may better serve the enterprises survival prospects. Significance of Technology during change Technology is manifestation of knowledge and utilization of wisdom. A fruitful technology responds / preserves upcoming change forces and paves way for better changes. Significance of Competition during change The opponent can present passing ambiguity of change as forthcoming crisis through magnifying minor and eye-catching deficiencies, staff or stakeholders may loose interest at crucial moments of change process, effective leadership is earnestly needed at these vital moments otherwise a positive effort may become a crisis due to wrong termination or halfhearted completion of change effort. Significance of Leadership during change Leadership is essential aspect of life. An effective leader becomes great through effective change management, while a weak leader is polished during changes. Leader initiates, sustains, and develops institutions.

THE FEATURES OF ORGANIZATIONS (What Makes Each Organization Unique) 11. Culture of the organization You work differently with your clients organization, depending on the organizations culture. An organizations culture is similar to its overall personality.

12.

Life cycle of the organization The particular life cycle of an organization can make a big

difference in how consulting should be carried out because organizations often operate differently during different life cycle stages. 13. Size of the organization The larger the organization, the sometimes more complex the nature of its issues and the more complex of actions needed to address those issues. 14. Source of the top-level leadership If the source of leadership in an organization is the Board of Directors (it is Board-driven), then you will need to carefully consider the role of the Board in your project. 15. Style of the leadership used by your current client There is a variety of leadership styles, ranging from highly involved to detach. 16. Structure and strategies of the organization The structures are the result of the organizations overall strategies (the principle that form follows function) and the strategies refer to the overall approaches used by the organization to effectively meet the needs of its external environment, especially the needs of its customers and stakeholders. 17. Rate of change in the external environment Often, the faster the rate of change in the external environment, the more that your projects will need to focus on helping your clients to recognize and guide change in their organizations, as well.

THE ORGANIZATIONAL LIFE CYCLE

 Recall the metaphor of the organization as a living organism an open system that interacts with its environment. Like organisms, organizations progress through stages of growth and decline. The speed of progression through the life cycle varies across different types of organizations, but the general pattern tends to hold.

Organizational life cycle (OCL) is a model that proposes that businesses, over time, progress through a fairy predictable sequence of developmental stages. This model is linked to the study of organizational growth and development. It is based on a biological metaphor of living organisms, which have a regular pattern of development: birth, growth, maturity, decline, and death. Likewise, the OLC of businesses has been conceived of as generally having four or five stages of development: start-up, growth, maturity, and decline, with diversification sometimes considered being an additional stage coming between maturity and decline. During the start-up stage, companies accumulate capital, hire workers, and start developing their products or services. Toward the end of this stage, companies often experience explosive growth and begin to hire new employees rapidly, because business opportunities exceed infrastructure and resources. This expansion continues into the growth stage where companies increase their resources and workforces dramatically. The financial situation of companies usually improves during this stage, as company revenues grow and as companies establish strong customer bases. Despite their expansion, companies may still need additional funds to exploit all the available growth opportunities, so many go public at this point, too.

The maturity stage is marked by security and by a slight slowdown. By this stage, companies have amassed assets and solid profits, by becoming established in the market. The primary area of business has become a cash cow because it controls a sizable market share and continuous to yield profits, but experiences slow or stagnant growth. In order to avoid the decline stage, mature companies often take a variety of actions to renew their growth, such as acquiring other companies and expanding product lines. Some business theorists consider the foray into new markets a separate stage, namely, the diversification stage. If companies fail to implement measures to improve growth, they will most likely enter the fourth and final stage of the OLC: decline. In this stage, not only company hiring drops, but also company sales and profits. Furthermore, demand for a companys products or services decreases. To compensate for the decline, companies launch downsizing or reengineering campaigns during this stage. If these efforts do not succeed, however, companies look for a buyer or shut down. As companies progress through the organizational life cycle the criteria for their effectiveness change. Companies tend to change their management styles, reward systems, organization structures, communication and decisionmaking processes, and corporate strategies. As companies mature, they usually strive to become more innovative or they diversify by making acquisitions. Despite the usefulness of this model, business scholars point out that companies do not always develop linearly as the OLC model suggest. Instead, companies may experience little growth initially and then experience decreasing sales, before moving into a stage of growth. Or they may undergo spurts of growth and decline, which makes it difficult to place them in any particular stage. Nevertheless, the model represents general patterns companies experience while developing. Basic Life Cycle Phases Organizational Birth

Entrepreneur established. Organizational Birth

pursues

an

opportunity

struggle

to

become

Founder starts the organization with the help of dedicated followers. Riskiest stage of life cycle where the vast of majority of organizations fail. Must secure the resources necessary to complete against established competitors and survive despite strong barriers to entry into the environment. Being a pioneer in a new firm market is even riskier for a new firm liability of newness. Organizational Growth Struggle for survival and development of competencies. Organizational Growth Successful organizations grow by building on strengths and overcoming obstacles. The organization develops the structures it needs to continue to succeed and addresses the challenges we have talked about. Two theories explain growth patterns in organizations: a. Institutional theory b. Greiners life cycle of model growth Institutional Theory Organizations adopt certain traits, structures and ways of operating in order to gain legitimacy within their environment. The consequence is that organizations with similar environment domains tend to develop standard structures and processes. Not adhering to the institutional standards causes an organization to lose credibility with stakeholders. Greiners Life Cycle Model

 Presents a model of typical pattern of growth of an organization. Life cycle has 5 stages and the stage is related to size, structure, leadership, administrative system and goals that are appropriate. Each life cycle stage is a period of growth followed by a crisis that must be successful managed in order to move on the next growth stage. Greiner hypothesized that an organizational crisis will occur, and that the businesss ability to handle these crises will determine its future: Phase 1 Growth through creativity eventually leads to a crisis of leadership. More sophisticated and more formalized management practices must be adopted. If the founders cant or wont take on this responsibility, they must hire someone who can, and give this person significant authority. Phase 2 Growth through direction eventually leads to a crisis of autonomy. Lower level managers must be given more authority if the organization is to continue to grow. The crisis involves top-level managers reluctance to delegate authority. Phase 3 Growth through delegation eventually leads to a crisis of control. This occurs when autonomous employees who prefer to operate without interference from the rest of the organization clash with business owners and managers who perceive that they are losing control of a diversified company. Phase 4 Growth through coordination eventually leads to a crisis of red tape. Coordination techniques like product groups, formal planning processes, and corporate staff become, over time, a bureaucratic system that causes delays in decision making and a reduction in innovation. Phase 5 Growth through collaboration, is characterized by the use of teams, a reduction in corporate staff, matrix-type structures, the

simplification of format systems, an increase in conferences and educational programs, and more sophisticated information systems. While Greiner did not formally delineate a crisis for this phase, he guessed that it revolve around the psychological saturation of employees who grow emotionally and physically exhausted by the intensity of team work and the heavy pressure for innovative solutions.

Greiners 5 Stages / Crises 1) Growth through creativity entrepreneurial Crisis leadership 2) Growth through direction collectivity Crisis lack of autonomy 3) Growth through delegation differentiation Crisis lack of control 4) Growth through coordination formalization Crisis too much red tape 5) Growth through collaboration Crisis Organizational Maturity Marked by security and by a slight slowdown. Organizational Maturity

By this stage, companies have amassed assets and solid profits, by becoming established a cash cow because it controls a sizable market share and continues to yield profits, but experiences slow or stagnant growth. In order to avoid the decline stage, mature companies often take a variety of actions to renew their growth, such as acquiring other companies and expanding product lines. Some

business theorists consider the foray into new markets a separate stage, namely, the diversification stage. Organizational Decline Struggle to maintain effectiveness and change to survive. Organizational Decline Life-cycle stage that an organization enters when it fails to anticipate, recognize, avoid, neutralized or adapt to external pressures that threaten its long term survival.

Organizational Death Dissolution of the organization.

Weitzel and Jonnsons Model of Decline Decline occurs over time through 5 stages. At each stage, if the organization does not take the proper corrective action, it falls deeper into decline. As decline progresses, it becomes harder and harder to rectify the problems and more radical actions are needed. Eventually if the organization does not pull out decline it fails into a death spiral.

INTERNAL AND EXTERNAL FACTORS AFFECTING ORGANIZATIONAL CHANGE Internal Forces Influencing Change

Changes

in

the

managerial

personnel:

besides

environmental

changes there is a change in managerial personnel. Old managers are replaced by new managers, which necessitated because of retirement, promotion, transfer or dismissal. Each new manager brings his own ideas and way of working in the organization. The relationships, more particularly informal ones, changes because of changes in managerial personnel. Moreover, attitude of the personnel change even though there is no changes in them. The result is that an organization has to change accordingly.

Deficiency

in

Existing

organization:

Sometimes,

changes

are

necessary because of deficiency in the present organizational arrangement and process. These deficiencies may be in the form of unmanageable span of management, large number of managerial levels, lack of coordination between various departments, obstacles in communication, multiplicity of committees, lack of uniformity in policy decisions, lack of cooperation between the line and staff, and so on. Beside these internal factors, there are two more that give rise to organizational changes.

Nature of the work force: the nature of the work force has changed over a passage of time. Different work values have been expressed by different generations. Workers who are in the age group of 50 plus value loyalty to themselves only. The youngest generation of workers is loyal to their career. The profile of the work force is also changing fast. The new generation of workers has better educational; they place greater emphasis on human values and questions authority of managers. Their behavior has also become very complex and leading them towards organizational goals is a challenge for the managers. The employee turnover is also very high which again put strain on the management.

To avoid developing inertia: in many cases, organizational changes take place just to avoid developing inertia or inflexibility. Conscious manager take into account this view of organization that organization should be dynamic because any single method is not the best tool of management every time. Thus, changes are incorporated so that the personnel develop liking for change and there is no unnecessary resistance major change in the organization are brought about.

External Forces Influencing Change

Technology:

When

there

is

change

in

technology

in

the

organizational environment and other organization adopt the new technology, the organizations under focus become less cost effective and its competitive position weakens. Therefore, is has to adopt new technology, its work structure is effects and new equilibrium has to be established.

Marketing conditions: Since every organization exports its outputs to the environment, an organization has to face competitive in the market. There may be two types of forces which may affect the competitive position of an organization other organizations supplying the same products and, buyers who are not buying products. Any changes in these forces may require suitable changes in the organization. The result in that there have been may cases of divesting the business, and developing competitive competence to face competitive threats. Similarly, there may be changes in buyers in terms in their needs, liking disliking and income disposal for a product. These changes from the organizations to bring those products which meet buyers requirement. Social change: Social reflects in terms of peoples aspirations, the needs, and their ways of working. Social changes have taken place because of several forces like level of education, urbanization, feeling

of autonomy, and international impact due to new information sources. These social changes affect the behavior of people in the organization. There, it is required to make adjustment in its working so that it matches with people.

Political and legal changes: political and legal factors broadly define the activities which an organization can undertake and the methods which will follow by it in accomplishing those activities. Any changes in these political and legal factors may affect the organization operation.

PLANNED CHANGE AND UNPLANNED CHANGE Planned Change It normally stars from a decision by the system itself to deal with new demand from the market or other factors in the environment. External resources might be engage and the change can include most of the organization, aiming at an improvement of its functioning in general. In order to entire employees to accept change, an organization must have a clear, defined version. The vision must be one that is a slogan or a bumper sticker campaign of clichs such as customer oriented or new and improved. The leaders of the organization must show the employees how the change will benefit them and the business. It is also important to remember that any desired outcome must be congruent with core values. Decisions that encompass the values, ideas, and suggestions of the group, or employees, are stronger and more powerful than decisions based on the viewpoint of a single person. Involving employees to help create the vision will help to motivate them to achieve the vision. Unplanned Change

It starts the system, in event out of control from the system. The forces the system to adopt in an unplanned manner which leads to the fact that an unplanned change normally is restricted to a limited segment of the organization.

COMMUNICATING CHANGE TO EMPLOYEES Communicating organizational change Communication is the foundation to successful management of organizational change. The goal of communication during organization change is to deliver information that changes behavior in front-line employees. During organizational change employees are often in turmoil, fearing loss of employment security and loss of loyalty to seemingly uncaring employers. For all its capacity, information technology provides only limited relief for the anxieties and frustrations of human resources burdened by change. Factors in communicating organizational change

During organization change perception equals reality: The level of stress an employee feels during organizational change is proportional to the level of perceived threat. Managers need to anticipate and adjust their communication to minimize the perception of threat during change.

Organizational change trust and credibility: A message is as credible as the highest credible source that will state it. Trust is the single most important factor in the perception of a threat.

To gain the advantages of trust, managers must understand the basis of trust. Honesty and openness Competence and expertise

 Dedication and commitment Caring and empathy

Organization change Perceived control: Research shows that when we feel we have some control over an event it is less threatening. Making sure employees have a voice in decisions, in an

appropriate manner is critical to their sense of control and therefore acceptance of organization change. It does not constitute a vote or a veto. What employees need is assurance that their point of view has been heard, reasonably considered and responded to before the decision is made.

Personal benefit: A change that has a definable level of benefit is not seen as threatening as one that does not.

BARRIERS TO CHANGE Individual and Organizational Barriers to Change Despite the potential positive outcomes, change is often resisted at both the individual and the organizational level (Mullins, 99) It is in human nature to resist change. We resist change. We choose to keep our habits, rather the comfort of our habits. Resistance to change can take various forms and the task of filtering out the cause of resistance can often be difficult. Examples include change in work processes where the needs, expectations, and concerns of individuals are ignored. Change and resistance to it forms a knock-on-effect to both the construction and destruction of any organization. Fear is one of the major forms of resistance to change and I shall discuss this in depth at a later stage.

Alas resistance to change can be categorized to the organizational level and the individual level. It is these two separate levels which I shall discuss further exploring what steps may be taken to overcome resistance at both the organizational and individual level. The Organizational Barriers to Change There are a number of barriers to change at the organizational level that, need to be addresses to allow change to be implemented with the least amount of resistance. These include: Undefined Goals and Objectives Financial and Environmental Lack of Resources and Bad Resources Allocation Structural Insufficient Communication Lack of or Bad Leadership Lack of Preparation for New Roles Cultural Issues Fear Lack of Input into the change OVERCOMING RESISTANCE TO CHANGE Resistance to change is the action taken by individuals and groups when they perceive that a change that is occurring as a threat to them. Resistance may take many forms, including active or passive, overt, covert individual or organized aggressive or timid. Way for Overcoming Resistance to Change

Style

Situation

Strengths

Weaknesses

1.

Education & There is a lack of Once Communication information inaccurate information analysis. help

persuaded, Cab be very time if implement many people are involved.

or people will often consuming and the change.

2.Participation & Involvement

The initiators do People information need others considerable power to resist. to they committed

who Can also be very if an to participators

not have all the participate will be consuming design implementing the design have relevant information have will integrated they be into change.

the change, and change, and any inappropriate

3.Facilitation & Support People of are

the change plan. Can be very time other consuming, works expensive, with still fail. and well

resisting because No adjustment approach as adjustment problems. 4.Negotiation & Agreement problems.

Some person or Sometimes it is a Can group considerable power will to clearly lose with relatively way to avoid alerts

be if others

too it to for

easy expensive negotiable compliance.

resist major resistance.

out in a change.

5.Manipulation & Cooptation

Other tactics will It too expensive. and

can

be

a Can lead to future if feel

not work, or are relatively solution resistance problems.

quick problems to manipulated.

inexpensive people

6.Explicit & Implicit Coercion

Speed change possess considerable power.

is It is speedy and Can be risky if it people with the initiators kind of resistance. angry

essential, and the can overcome any leaves initiators.