Chapter 14 Managing Strategic Change

Designing a structure and putting in place appropriate resources

does not ensure that strategic change will happen. The major
problems managers report in managing change is the tendency
towards inertia and resistance to change i.e. People will hold onto
the existing ways of doings things
This chapter aims to build on 3 key premises:
1. Strategy matters: (re to previous chapters)
- Why is strategic change needed? (Ch 2,3,4,
and 5)
- The bases of strategy in terms of strategic
purpose, perhaps encapsulated in a
statement of vision or mission (Ch 6)
- The more specific strategy choices intended
in terms of strategic directions and methods
(Ch 7-10)
2. Context matters: the approach to strategic change is context
dependent. Thus no right way to manage change and so must
balance their approaches.
3. Multiple roes in managing strategic change: Much of the
theory on change assumes that strategic change happens in a
top down manner i.e. top managers put the changes into
effect but is unrealistic to suppose they control everything.
Middle managers and others below play a major role in
managing change Ch11 shows how change can emerge from
lower down the organisation
Exhibit 14.1 p 519 Key elements in managing strategic
change (structure of chapter)
1) Diagnose the change situation:
Must identify:
-

The type of change required

The wider context in which it occurs

The specific blockages to change that exist

The forces that exist to facilitate the change

process.

Types of strategic change:

Typically strategic development is incremental. It builds on prior
strategy; it is adaptive in the way it occurs, with only occasional
more transformational changes. Balogun and Hailey identify four

types of strategic change and these have implications or how

change might be managed in Ex 14.2 p 520.
The nature of change:
Beneficial for change to be incremental since it can build on skills,
routines and beliefs and change is more likely to understood and win
over more commitment in the organisation.
However, a big bang approach might be needed in times of crisis or
needs to change direction fast.
The extent of change:
Can change occur within the current culture? If so realignment
strategy is best.
But if the culture requires a change then this is a more
transformational change.
Combining these 4 categories, 4 types of strategic change arise:
Adaptation can be accommodated within current
culture and occurs incrementally. Most common form of
change.
Reconstruction change needed may be rapid but does
not change the culture i.e. as in turnaround situations
where there is need for major cost cutting programs to
deal with changing market conditions or poor financial
performance.
Revolution rapid and major change but also change
within the culture even environmental and competitive
pressure might require fundamental change i.e. when a
takeover threatens the firm
Evolution requires a culture change but over time
(incremental). Managers could anticipate the need for
transformational change and then be in the position of
planned evolutionary change, with time in which to
achieve it. Evolution can also be explained in terms of a
learning organisation where an organisation
continuously changes its strategy as the environment
changes.
Examples A shift from a production focus for a manufacturer to a
customer-led, service ethos may not entail product changes, but
could require significant culture change.
The importance of context:

Managing in a small entrepreneurial business that drives change is

different to managing large corporations with set structures and
routines and perhaps a greater resistance to change.
Approaches therefore need to differ according to context (Balogun
and Hailey).
Contextual features that might require different approaches to
change as illustrated in Ex 14.3 p 523

Time - Available for change could vary dramatically e.g. a

business facing dramatic decline in profits has a different
context for change compared to a management change who
can see the need for a change in the future, perhaps years
away and can plan that as an incremental process.

Scope differs in breadth and depth (culture) of change

required: Re: illustration 14.1 p522 Ministry of Defence
example

Preservation some competences on which changes needs to

be based i.e. a computer organisation needs to become more
formally organised to accommodate its growth but could upset
technical experts who have been used to ready access to
senior management but it could be vital to preserve their
expertise/ motivation and efficiency.

Diversity differing views, opinions and experience may aid

the change process. But if the firm has followed the same
strategy for many years it could have led to a very
homogenous way of viewing the world thus change could be
hampered.

Capability or experience in managing change in the org?

Could be managers who have managed changed effectively in
the past, or a workforce that have been used to change in the
past whilst another org could have relatively no experience.

Capacity available resources to implement change as

change can be costly in both time and financial resources.

Readiness is there a felt need for change or a widespread

resistance or something in between or some aspects of org
feel change while the others are resistant?

Power who has the power to effect change? Not just the
CEO especially in times of resistance. However he/she must
be careful to give responsibility to those who do have power
further down.

Example: hospitals founds that their governance and

organisational structures prevented any clear authority to
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manage change combined with resources constraints thus more

likely that one off change must occur before strategic change can
happen therefore include new managers that have experience
in managing change or it must be realised that change has to
be managed incrementally etc
Diagnosing the cultural context:
Can inform the decisions of which changes are required Re:
Illustration 14.2 p 525 using the cultural web please read this to
understand culture contexts change.
By understanding the current culture (through use of cultural
web) it can help identify what is problematic about the existing
culture but what might be added or introduced if change is to
occur. It is useful in this respect, not least because it embraces
the softer sides of the org in terms of symbols but also harder
aspects such as political processes and operating routines.
Overall it helps to identify the blockages and facilitators to
change.
Forcefield analysis:
This analysis can also help us identify what are the blockages and
facilitators to change by looking at the existing culture.
Def: it provides a view of change problems that need to be
tackled, by identifying forces for and against change
Re: Ex 14.4 p 527 looking at the pushing and additional factors
for change and the factors of resistance.
It allows key questions to be asked:
What are change blockers and how can they be overcome?
What are change levers and how can they be reinforced?
What needs to be introduced or developed to aid change?
2.) Change management: Styles and roles
Roles in managing change:
There is often too much emphasis on individuals at the top of the
org to manage strat change. It is useful to think of a change
agency more broadly. A change agent is the individual or group
that helps effect strategic change in the org e.g. a middle
manager or perhaps consultants working together with managers
from within the org.
Strategic leadership

The management of strat change is often linked to the role of a

strat leader. However leadership is the process of influencing an
organisation in its efforts towards achieving an aim or a goal
thus a leader does not need to be at the top of the org.

Charismatic leaders build a vision and energising people

to achieve it they have a beneficial impact on
performance when the people who work for them see the
org facing uncertainty

Instrumental or transactional leaders focus more on

designing systems and controlling the organisations
activities rewards for achieving etc.

Contextual leaders are able to tailor their leadership style

to context and they are the most successful strategic
leaders i.e. a leader might need to create a strategy
initially and then control later so charismatic
instrumental

Symbolic leadership of change - highly significant in the

change process e.g. CEOs will be seen by others as
intimately associated with strategic change programmes.

Middle managers
Top down models see middle managers as change implementers
and play multiple roles may play wider mediating roles;
In the context of managing strategic change there are five roles that
they play:

The implementation and control role ensure that resources

are allocated and controlled appropriately, monitoring
performance and behaviour of staff and explaining the
strategy to those reporting to them

Sense making of strategy locally how strategy makes sense

in specific contexts (region of an MNC or a functional
department) vital for middle managers to feel ownership of
the intended strategy

Reinterpretation and adjustment of strategy - in the light of

local intelligence i.e. they have knowledge of the customer
relationships, suppliers, the workforce as they are in daily
contact with such aspects of the org and its environment

Relevance Bridge between top management and members

of the org at lower levels. MM can translate change initiatives
into a message that is locally relevant.

Advisors - to senior management on local blockers and levers

for change

Outsiders
They are the external change agents that have also got important
roles to play:

New CEO - coming in from outside to enhance the capability

for change. Especially common in turnaround situations they
bring a fresh perspective on the organisation and are not
bound by the constraints of the past that prevent strat
change.

New managers from outside - to break up cultural barriers and

increase diversity, experience and capability for change. They
must have visible backing from CEO to show they have
authority.

Consultants (e.g. McKinsey) brought in to help formulate

strategies and plan the process. They are the facilitators of
change process. They are crucial as they do not
o Inherit the cultural baggage of the firm and can have a
dispassionate view
o May analyse taken for granted ways in order to question
their effectiveness
o Signal symbolically the importance of the change
process
o Programmatic or off the shelf change strategies (e.g.
TQM; BPR; Lean Production);

Other stakeholders - e.g. customers; government, investors

and suppliers

Styles of managing change re: Ex 14.5 p 530

Organisational Development approach would be to increase the
amount of communication and number of media. Different styles of
management are determined depending on the context.

Education involves the explanation of the reasons and means

for change is more appropriate when there is misinformation
or a lack of information and can be used to persuade people
for change. Change may be more effective if those affected by
it are more involved in its development and planning.

Participation - in the change process to build ownership. This

can foster a more positive attitude to change and see the

constraints that the org is faced with and will therefore be

more committed/ready/ capable for change. But too much
participation can run the risk of solutions being found from the
bottom therefore there should still be someone to intervene.

Intervention by a change agent - who delegates elements of

the change process e.g. can be delegated to task forces or
project teams to carry out tasks such as data collection,
identification of CSF, idea generation etc again this gives
rise to commitment as these groups can implement parts of
the change process

Direction from the top - clear vision on how the change will
occur and can be accompanied with CSF and priorities.

Coercion direction in its most extreme form by issuing edicts

that lead to change from the top; e.g. in a crisis;

Observations can be made about the appropriateness of these

styles in different contexts:

Different styles for different stages - Styles of managing

change can differ according to stages in the change process
i.e. direction may be needed to motivate a readiness for
change and participation or intervention can help in gaining
the wider commitment etc.

Time and scope participative styles are most suited for

incremental or radical changes within the organisation. But
where transformational change is required then a directive
approach may be required.

Power distribution hierarchical power structures have more

directive styles and in flatter power structures (adhocracy) it is
likely that a participative style will be more common/desirable.

Personality types Those with the greatest capability to

manage change may have the ability to adopt different styles
in different circumstances i.e. are flexible and varied styles

Styles of managing change are not mutually exclusive e.g. a

clear direction on an overall vision might aid a more
collaborative approach to a more detailed strategy
development. Education and communication may be more
appropriate for some stakeholders such as financial
institutions, participation in areas where it is necessary to
build readiness and capability and so forth.

3.) Levers for managing change

Beer and Nohria (2000) observed that there are two approaches
that act as levers for managing change:
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Theory E change is based on the pursuit of economic

value and is typically associated with top down
programmatic hard levers for change emphasis being on
changes of structures and systems, financial incentives to
do with portfolio changes and downsizing.

Theory O change in pursuit of organisational capability.

Emphasis is more on culture change, learning and
participation in change programmes and experimentation
i.e. soft change

But Beer and Nohria point out that these approaches can be
combined and can be beneficial e.g. sequencing; mix of methods
so moving from E O or combining direction from the top with
participation from below, or using the incentives to reinforce
change rather than just drive it.
Challenging the taken for granted:
It is crucial using careful strategic analysis to unfreeze the
paradigms and disturbing mental models that prevent change.
However where long - standing assumptions have persisted
overcoming resistance to change will be difficult. By making the
assumption visible though, more people will be likely to question
it and challenge each others assumption to encourage wisdom
therefore people can see different possible processes
It is also argued that senior managers are disconnected from the
realities of their organisation and therefore they must interact
more with the operational departments to understand the
processes more e.g. CEO of rail company used to travel in cars or
always first class but they introduced policy to have him travel in
the busy and full railway carriages to understand the changes
required.
Changing operational processes and routines:
Strategies are delivered through day-to-day processes and
routines of the operations - such processes and routines could be
part of the core competences of the org and be a competitive
advantage but they can also be a significant blockage, as Barton
points out they can also become core rigidities. Therefore the
relationship between strat change and daily processes and
routines are important to consider and must be aligned

Planning operational change must identify the key

changes in the routines of the organisation required to
deliver that strategy. Has to be considered in terms of reengineering of organisational processes.

Challenging operational assumptions change as practice

so they can question the taken for granted assumptions to
change behaviour therefore learning by doing - rather than
education and communication it is more effective to
involve people in activities of change i.e. through
participation

Operationally led change - may have strategic

consequences where it is more radical i.e. can stimulate
innovation and new strategic thinking. Opportunities can
be found in the operational department but as Hammer
said, managers tend not to consider changes at this level
sufficiently e.g. Taco Bell improved the quality of its offering
but assessing its operational processes.

Bottom up changes could results in routines incurring

wider strategic change i.e. the persistent bending of the
rules of the game can result in processes being
implemented i.e. from performative routines to ostensive.
This can then gradually build a coalition for change, as
more stakeholders believe that the new routines are
acceptable.

Symbolic processes: Re Ex 14.6 p 537

Symbols of the organisation help preserve the established
paradigm; management of meaning;
Def: Symbols are objects, events, acts or people that convey,
maintain or create meaning over and above their functional
purpose
Their role in strategic change is to contribute to changing meanings
e.g. they may be everyday thing, which are nevertheless meaningful
in the context of a particular situation or organisation.
Symbols can reshape beliefs and expectations because meaning
becomes apparent in the daily experiences people have of
organisations, such as the symbols that surround them like the
office layout and dcor.

Rituals can be introduced to effect or consolidate

change

Changes in physical aspects e.g. change in location or in

dress codes

Behaviour of change agents especially strategic

leaders are powerful symbols to influence change

The language used by change agents is important they

must galvanise change YES WE CAN and not seem
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reluctant or because it is status quo to implement

change.
From Ex 14.6:
Rites of passage: socialisation into role induction programmes;
speeches at leaving events;
Rites of enhancement recognition and promotion processes;
honorary awards;
Rites of integration Xmas parties;
Rites of sense making rumours and office gossip;
Rites of counter challenge grumbling; working to rule; cynical
jokes;
PLUS MORE on Ex.
But these symbolic levers are difficult to predict as they can be
interpreted differently.
Power and political processes:
Must consider managing change in a political context as powerful
support might be needed from various groups e.g. CEO or member
of the board. Reconfiguration of power structures may be necessary
especially if transformational change is required. Thus a formal
(stakeholder analysis) or informal diagnoses of power relations
should be conducted.
Mechanisms associated with managing change from a political
perspective:

Acquiring resources - securing power over key resources (e.g.

investment decisions) the effective allocation or withdrawal
of resources to build readiness for change and overcome
resistance.

Association with powerful actors (e.g. Board) - removal of

change resistors e.g. people in senior positions or senior
executives in a threatened function. Change agents who are
respected and visibly successful can capture the middle
ground and overcome resistance to change.

May need to build a coalition or network to sustain change

from powerful groups, building alliances can help influence
parts of the organisation individually as it is difficult to convert
a whole org at once to the prospect of change.

Power to intervene in the symbolic sphere identify with

symbols to work within committee structures that are

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identified with org. rituals or stories. Also challenges taken-for

granted assumptions.
However in Ex. 14.7 p 539 the problems of political aspects of
change are summarised. There could be a lack of power to
overcome resistance trying to break down the status quo may take
too long and the org may not recover from it.
Change tactics:
Timing

Never waste a good crisis even if its actual or perceived it

can be very useful depending on the degree of change
required. So if there is a higher perceived risk of maintaining
the status quo than changing it people will change it it is
used by execs to galvanise change e.g. a threat of takeover
may be used as a catalyst for strat change.

Windows of opportunity the arrival of a new CEO, and

introduction of a successful product or the arrival of a new
competitor may present opportunities to make changes. It is
important to view change as positive so any person that is
removed should be removed before change takes place.

Signal symbolic reframing of time frames - (e.g. shorten

decision-making time frames opposed to maintaining
processes that suggest long time horizons.

Visible Short Term Wins

It is important to display success of the change strategy fairly
quickly so must use visible indicators to galvanise change further.
Thus:

Pick the low hanging fruit break down old ways and
demonstrate better working ways

Speeding up decision making by removing committees

Define job responsibilities

Establish role model sites when there is a lack of resources

so that what resources there are can be focused on these sites

Rapid roll out will then follow to the other areas of the
organisation and change will be implement more successfully.

4.) Managing Strategic Change Programmes

There are distinct change types plus associated tactics
Strategy reconstruction and turnaround strategy:
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In a turnaround strategy there is emphasis on speed of change and

rapid cost reduction/income generation and managers must
prioritise these things to produce a quick significant change.
Typically a directive style is required.
Main elements of turnaround strategy are:

Crisis stabilisation requires short-term focus on cost

reductions and revenue increase. The most successful
turnaround strategies involve focus on directing operational
costs and on productivity gains. But it should be more than
cost cutting exercise as cost cutting alone cannot restore
growth. Other factors like environmental changes could play a
role.

Management changes in the top by introducing new

chairman as well in the departments or the boards as seen in
M&S. Old management could have caused old problems and
so new managers with experience required to turn situation
around.

Gain stakeholder support poor quality information could

have been provided to stakeholders so they need to be clearly
informed of the situation and the improvements.

Clarifying the target markets to generate cash and profit

growth by getting closer to customers and improving the flow
of information especially to senior levels of management.

Refocusing by clarifying target market also provide

opportunities to discontinue or outsource products and
services that are not targeted on those markets.

Financial restructuring including changing the capital

structure by raising additional finance or renegotiating
agreements with creditors especially banks.

Prioritisation of critical improvement areas prioritise tasks

that give quick and significant change.

Managing revolutionary strategic change:

Revolutionary change differs from reconstruction (turnaround)
change in 2 ways:
1) Fast plus cultural change not just fast.
2) Change resistance and denial causing strategic drift (as a
result of many years on decline in the markets and wedded
into processes that are no longer valued by customers) or
people cannot see a way forward from the problems.

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To manage such a change there must be

Articulation of clear strategic direction and decisive action

CEOs credited for making huge difference and become
symbols of change.

Combining economic and symbolic levers the hard

decisions from a reconstructed strategy will be taken such
as cost cutting and downsizing, greater market focus etc
but will be used to send symbolic messages of change e.g.
Murdoch taking his newspaper from fleet street to Wapping
was seen as modernization

Introducing an outside perspective new managers at

senior level can have different perspective and consultants
used to have a dispassionate analysis.

Multiple changes of change management getting beyond

simple direction styles of management are not mutually
exclusive so directive in one area can be combined with
intervention style in another area of the org.

Working with elements of the existing culture, using a

Forcefield approach instead of changing the whole culture
aspects of culture to be built upon e.g. Zander new CEO
of Motorola in 2004 added to long term vision of quality
and reliability by emphasising on innovation and market
refocus.

Monitoring change in relation to clear (financial) targets

linked to improved returns to shareholders.

Managing evolutionary strategic change:

More gradual approach to significant change it involves
transformational change but incrementally. It can be thought of in 2
ways:
1) To create a learning organisation capable of self generated
continual change and requires a challenging set of
organisational shifts

Empowering the organisation participation and responsibility

of people lower down (participation and intervention style)

A clear and broad strategic vision - to frame local changes by

setting the vision so people can see how they can contribute
to the future strategy but also the org must retain some local
discretion so that people do not become constrained in their
enthusiasm to contribute and innovate

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Continual change and experimentation in regards to org

processes throughout the org.
2) To conceive strategy as a long-term transition to a changed
strategy i.e. movement from one strategy to another over
time.

Identify transitional stages where change process is

important as sometimes implementing change when there is
lack of resources and readiness could be detrimental.

Establish some irreversible changes path dependency e.g.

changes in recruitment policies with KPMG to appoint uni
graduates to partnership within 10 years however once made
could not be reversed.

Sustained top management commitment/stability in core

team (yet rapid turnover in practice) danger is people find it
difficult to sustain consistent commitment.

Winning ownership may be complex as people might not feel

there are problems with the status quo so there is a need for
multiple levers of change to be used consistently including
education and participation allowing people to see the need
for change and they can understand them both emotionally
and rationally. They should send key signals of improved
economic performance.

Some overall lessons:

Change programme overload: too many superficial and shortterm initiatives and could signify very little and less people will
be committed.
Hijacked processes and mixed messages e.g. an insurance firm
introduced computerised telephone systems to improve
customer service but others viewed this as a way to reduce the
number of people dealing with customer enquiries.
Reinvention: change programme captured by the old culture e.g.
an engineering company intended strategy of adding value in
customer terms was interpreted as high levels of technical
specification by the engineers.
Disconnectedness: gap between strategy and operations i.e.
people not affected by the change in their reality as some CEOs
as mentioned before do not understand the realities of the lower
levels of the org.
Behavioural compliance; tactical compliance rather than cultural
shifts i.e. people just follow change because they are used to it

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not because they buy into them so it becomes superficial

compliance.
Since 1994 Boston Consulting Group has used 4 KSFs (Sirkin et
al, 2005) in change programmes;
1) Milestones for reviewing progress: explicit and regular
review against key tasks bi-monthly.
2) A high integrity change team: the team is checked
through regular reviews if they have the right skills and
personal qualities to execute the change programme.
3) Visible commitment to change over time from senior
management and consistency in how the change is
explained accompanied with straight talking.
4) Time and effort for managing change: change team
needs protected time and resource to carry out their
tasks.
Summary:

There are different types of strategic change, which can be

thought of in extent and nature and is achieved through
incremental change, or big bang approach. Different
approaches and means of managing change are likely to be
required for different types of change.

It is also important to diagnose wider aspects of organisational

context such as resources and skills that need to be
preserved, the degree of homogeneity or diversity in the
organisation, the capability, capacity and readiness got
change and the power to make change happen.

The cultural web and force-field analysis are useful as mean of

identifying blockages and facilitators to change.

Change agents may need to adopt different styles of

managing strategic change according to different contexts
and in relation to the involvement and interest of different
groups.

Levers for managing strategic change need to be considered

in terms of the type of change and context of change. Such
levers include surfacing and challenging the taken for granted,
the need to change operational processes, routines and
symbols and the importance of political processes and other
change tactics.

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