Understanding Organizational Dynamics of Change in China:

A Multimedia Simulation Approach

Huifang Yang
School of Business, Nanjing University, Nanjing, 210093, China

Philippe Leliaert
Maastricht School of Management, Maastricht, the Netherlands

Shuming Zhao
School of Business, Nanjing University, Nanjing, 210093, P.R. China
and
School of Graduate Studies, Macao University of Science and Technology, Avenida, Wailong,
Taipa, Macao, P.R. China

Albert A. Angehrn
INSEAD, Fontainebleau, France

Leo van Geffen

Maastricht School of Management, Maastricht, the Netherlands

*The authors would like to thank the EuropeAid Co-operation Office of European Commission
for the financial support and National Natural Science Foundation of China (70372036) to this
research. The authors would also like to thank Nanjing University “985 Second Phase
Innovation Base” for its support of this research.

Correspondence concerning this paper should be addressed to Shuming Zhao, School of

Business, Nanjing University, Nanjing 210093, P.R. China. E-mail: zhaosm@nju.edu.cn

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 Abstract

As organizational change, and in particular Information and Communication Technology

(ICT) driven change, has become an important way to improve the efficiency of business
processes, more and more organizations are paying increasing attention to helping their managers
acquire the necessary knowledge and skills for better managing such change. This paper describes
the design of a computer-based interactive multimedia simulation called LingHe Simulation,
which models the dynamics of organizational change in a typical Chinese business environment.
The simulation aims to stimulate and enhance managers’ understanding of organizational
resistance to change and how to more effectively implement changes. Having tested the
simulation among both Western and Chinese managers in a series of workshops, the paper
further examines the effectiveness of the simulation as an innovative learning tool and technique
for improving their understanding of the organizational dynamics and the corresponding
knowledge and skill in managing organizational change in a Chinese environment.

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 Introduction

Information and Communication Technologies (ICT) have over the last 25 or so years
become an important vehicle for organizations to introduce improvements to their business
performance---in the pursuit of either new business opportunities or operating efficiencies---with
often also a profound indirect impact on both organizational structure and business processes.
ICT-driven changes thus often have a similar impact as direct organizational changes initiated by
for instance mergers, acquisitions, and corporate restructuring. Empirical evidence, however,
shows that organizational changes only rarely achieve the desired results, and this is mostly
attributed to a lack of understanding of, and skill in how to deal with organizational resistance to
change. This phenomenon has been observed in organizations in both Western countries and
Eastern countries (Wang, 1994; Boyce, 2002; Geller, 2002; Duck, 1998; Geng, 2003; Goltz,
Hietapelto, 2002; Huse, Cummings, 1985; Koonce, 1991; Kotter, 1996; Kotter, Cohen, 2002; Liu,
2003; Lou, 2001; Lewin, 1947; Levy, 1986; Dai, 1998, Hu, et al., 2003; Jin et al., 2003; Lin, 2001;
Finstad, 1998; Wang, L.G., 2003; Zell, 2003), highlighting, moreover, that IT-driven change in
particular takes people outside their comfort zone, fueling resistance. The reason for this typically
lies in the uncertainty and risk that information technologies bring as they change the way people
work and interact, even affecting life styles and behavioral habits as communication intensifies
and transparency soars, with often significant impact on personal or team status.

The opening of the Chinese market to foreign trade and investments, and the consequent
increased collaboration between Chinese and foreign managers, brings an interesting new
dimension to learning how to effectively introduce innovation in increasingly mixed cultural
environments. This applies to both Western managers who need to adapt their management
styles to better suit the significantly different Chinese context and environment---not blindly rely
on best practices and behaviors from their own past experience---as well as the Chinese managers
who face tremendous change on a scale and at a pace that is previously unseen and for which
therefore there exists little or no relevant past experience to draw on.

Especially in this context of a fast growing Chinese economy and its opening market it is
important not only for Chinese managers but also for their Western business partners to gain
such understanding and build the necessary skills and competences for more effectively
introducing change and innovation in Chinese organizations. By extension, organizations should
also focus on developing the appropriate learning or training tools that may help managers to
more effectively acquire such skills (Zhao, 2001 & 2005; Zhao, Angehrn et al., 2005;Yu, 2000;
Wang, X.B., 2003; Iskat, et al., 2003; Judson, 1991; Fox et al., 2001; Gavin, 2003; Seijts et al.,
2003; Whelan-Berry, Gordon, 2000; Yang, 2001; Yu, 1989).

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 In that respect, computer-based learning tools have already been developed in recent years
as part of a growing family of so-called ‘business games’ for management education (Angehrn,
Doz, Atherton, 1995; Angehrn, Manzoni, 1996; Angehrn, Nabeth, 1997; Manzoni, Angehrn,
1997; Giffin, Angehrn, 1997). The EIS Simulation specifically addresses IT-driven organizational
change where the introduction of an Executive Information System (EIS) among the top
management of a simulated organization leads to different forms and levels of resistance
(Manzoni, Angehrn, 1998). The participants face the challenge of choosing among a range of
initiatives to convince and influence the organization’s managers to start using the EIS in the
shortest possible time. In contrast with traditional learning tools and techniques such as reading
books or listening to a lecture or even attending short role-playing exercises, computer
simulations are capable of capturing a significantly higher level of complexity through the
interaction of many factors, to create a life-like experience yet in a risk-free environment. The
participants are primed to experiment and learn from their mistakes – something that is difficult
to realize in real-life, on-the-job training.

The EIS Simulation has already been used extensively as a learning tool in Master of
Business Administration (MBA) and corporate management training programs in Western
organizations. However, as the EIS Simulation was developed based on Western cultural
contexts and dynamics, its relevance and usefulness to Eastern management training was
potentially limited. Western best practices in managing organizational change were found to be
ineffective and sometimes counter-effective when applied in a Chinese organizational
environment (Zhao, Angehrn et al., 2005; Angehrn, Leliaert, et al., 2005). This explains the often-
heard frustration on the part of experienced Western managers with the perceived slow,
convoluted and in transparent decision processes among Chinese counterparts - mirrored by
frustration on the part of equally experienced Chinese managers with the perceived brash,
impatient and impersonal management styles of their Western counterparts. A new set of best
practices therefore had to be developed to more closely reflect the dynamics of organizational
change in a Chinese business context.

Another factor for consideration was whether the use of computer-based learning tools,
which themselves appear to be an innovation to the Chinese educational system, would be
accepted and effective among Chinese managers to acquire new management competences and
skills.

The present paper first describes the design of the LingHe Simulation, which was based on
the existing EIS Simulation but now rather put in the context of organizational change in a
Chinese business environment. More specifically it describes the selection of a set of change
tactics, and examines their reliability and validity in effectively achieving change. Finally, the

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paper evaluates the effectiveness of the LingHe Simulation in transferring new competences and
skills regarding the management of changes in a Chinese business context, as measured among
participants in a series of workshops carried out during 2004.

Design of the LingHe Simulation Context

The purpose of the LingHe Simulation was to offer an advanced multimedia learning tool
for Chinese and foreign managers wanting to implement organizational change in a context that
is typical of current business issues in China. But other than being recognizable and realistic, the
context moreover had to be challenging so as to “force” managers to make mistakes (on the
premise that one learns as much if not more from one’s mistakes than from one’s successes) and
avoid “quick-fix” solutions including, for instance, replacing the entire top management layer and
subsequently imposing the intended changes: such action, although often practiced especially in
the wake of a takeover or restructuring, does not offer any insights in how to invoke rather than
impose change nor is it anyway always an option especially when the management carries
significant relational capital that needs safeguarding.

Authors selected a fictitious company called LingHe Company, located in Changsha, capital
of the Hunan Province. The name and context of LingHe Company were loosely based on the
existing case of a state-owned textile company facing restructuring (Heling, van Geffen, 2004).
The context was adapted to include the following boundary conditions, which were deemed to be
the most relevant, typical and recognizable challenges in China:

- On-going privatizations and alterations into joint-stock companies of state-owned

companies, and with it the introduction of profitability targets and personal
accountability;

- The introduction of new (and sometimes ill-aligned) management culture and values in
Joint Ventures with Western or Western-style companies;

- The introduction of new information & communication technologies, but also of foreign
management techniques, in hitherto traditionally-managed companies;

- “Job hopping” (i.e. frequently moving from one employer to another) by younger
generations of managers who are lured by better living standards and better career
prospects in cities like Shanghai and Beijing.

Authors wanted to convey a company that was still relatively remote from Western
influences (which one might expect in the immediate hinterland of cities like Shanghai, Beijing,
Guangzhou, etc.), based in a region with a moderate pace of economic change where therefore

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the need to change might not be felt as prominently. In addition the company was defined to be
moderately profitable, further reducing any urgency to change.

The choice of a (former) state-owned enterprise (SOE) is a reflection of business reality in

China, whereby recent and on-going alterations of state-owned enterprises into joint-stock
companies have as goal the reduction of bureaucracy and pursuit of cost efficiencies - targets that
managers may not necessarily be very familiar with. This choice was made in spite of the fact that
especially in SOE’s the organizational structure would likely be very hierarchical in nature with
decisions being imposed from the top down, negating the need to “manage change” as resistance
would not be deemed very credible. However, this was countered by initiating the change outside
the company itself, namely from its new majority shareholder following its alteration into a joint-
stock company. Rather than immediately introducing foreign ownership, authors opted for
LingHe Company’s major Chinese customer to become the new majority shareholder – reflecting
the close relationship that is often found between suppliers and customers in China - avoiding
any “obvious” resistance on the part of LingHe Company management.

The choice of industry sector on the other hand was driven by authors’ concern with
realism, as managers being interviewed during the course of research deemed for instance the
textiles sector less likely to undergo significant structural changes or introduce sophisticated
management information systems.

In conclusion, the context was defined in such a way as to convey a realistic case for change
(following alteration into joint-stock company) yet with local management (the ones undergoing
and having to carry out the change) rather unconvinced of any need to change the way they have
operated to date.

The eventual context of the LingHe Simulation was defined as follows:

a. The Context:

Ling He Company (LHC) is a switching equipment manufacturer founded in 1975 and located near
Changsha in the Hunan Province (southern China). LHC is a state-owned enterprise controlled by the
Ministry of Information Industry, and a major supplier to the local telecoms industry.

As with most state-owned enterprises LHC has no board of directors but operates essentially according to
the decisions of its General Manager, Mr. An Cheng.

The formal organization of LHC includes departments for Finance, Human Resources &
Administration, Research & Development, and Sales, and three Production units. All have direct

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 reporting lines to the General Manager. The five Deputy General Managers share a delegated
responsibility over one or more of the departments.

In spite of quite respectable financial performance the Ministry of Information Industry recently decided to
sell a 60% stake in LHC to SinoCom, China’s largest national telecoms operator and internationally
considered as one of the country’s best-managed enterprises. This move was to help introduce best
management practices at LHC and to consolidate the national telecoms industry to better compete against
foreign entrants.

b. The Change Plan:

SinoCom’s success was attributed to a combination of solid but lean management, and tight financial &
operational performance measurement and reporting using an enterprise-wide, computer-based
Performance Management System (PMS).

The management team at LHC was left intact following the change in ownership, in no small measure
due to Mr. An Cheng’s negotiating skills. However SinoCom insisted that the management structure
should be simplified and LHC should start introducing best practices from its other operating units.

As a result the Deputy General Managers have become Heads of Department with full and sole
responsibility for the performance of their assigned departments, reporting directly to the General
Manager. Initial actions included a significant reduction in the workforce.

It was also seen as essential that each of the senior managers sets and adopts both personal and
departmental goals, and should start using the corporate PMS to monitor and report on progress towards
the achievement of those goals. Thus far no such performance management appears to have been
introduced, much to the dismay of SinoCom.

c. The Challenge:

SinoCom has temporarily reassigned you from its Jiangsu division to help the LHC management
introduce the PMS. Specifically, all senior managers at LHC are to comment on their department’s
performance through the PMS.

But for a company like LHC, adopting principles of profitability and personal objectives, as well as
starting to use electronic tools for information gathering and communication, involves a major cultural
change in how people think, behave and work. As you will experience, this is often a slow and difficult
process.

Your assignment has been limited to 6 months (120 days). During this time you will be able to:

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 ! Gather information about the management team of the company

! Implement different change management initiatives

! Continuously monitor your progress in helping the 24 members of the management team to move
through the phases of awareness, interest, and trial and finally adoption of your Performance
Management System.

In short your challenge is to get as many adopters as possible! This is how SinoCom will evaluate your
performance at the end of the 6 months.

d. How to go about it:

Changing the way people think and behave in organizations is not a simple task and often requires a
combination of different tactics to be used at the right time with the right people. This simulation will
make it possible for you to experiment with the implementation of different change management tactics
(or initiatives), but it will be your task to decide when and with whom to implement a given tactic.

First of all - before plunging into your first decision - we advise you to:

(1) Try to understand the context in which you are going to work. Remember that Head Office has
sent you. Initially you don’t know the people at LHC and they don't know you!

(2) Review the different initiatives/tactics you may use to change people’s attitudes!

(3) Develop a change strategy, which will guide you through the project
(“top-down"; "bottom-up”; “impose it”; “selling”; etc.) and write it down!

If necessary you may at any point during the simulation review and adapt your strategy.

Dynamics of Change in the LingHe Simulation

Authors designed the underlying dynamics in the LingHe Simulation according to existing
theories of organizational change. Goodman and Dean (1982) pointed out that individuals accept
organizational change through four sequential phases: first the phase of awareness, whereby
individuals have become aware of the need to change; second is the phase of interest, whereby
individuals show a willingness to further investigate and gain more relevant or appropriate knowledge
regarding the impact of change; third is the phase of trial, where individuals want to test and
compare possible alternatives, and get first-hand experience of the proposed change and its impact;
finally the phase of adoption, where individuals have been convinced and actively engage in the
new way of operating. These four phases of change are used to track progress in the LingHe
Simulation.

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 Rogers and Shoemaker (1971) on the other hand classified how individuals may behave
differently when faced with the organizational change process, affecting the time taken in
accepting and adopting change. They argued that, relatively speaking, there are five distinct types
each with different attitudes and behaviors relative to change: pioneers, early adopters, early majority,
late majority and resisters. They also pointed out that most people are either early or late majority
(together typically 80% of a population), fewer are early adopters and resisters (around 5-10%
each), or the fewest are pioneers (around 2%). This typically normal distribution of profiles is
maintained in the LingHe Simulation (see Figure 1).

Percentage of
population

Attitude to
5-10% 40% 40% 5-8% 2% Change
Resisters Late Early Early Pioneers
Majority Majority Adopters

Figure 1: Normal Distribution of Attitude to Change

Underlying this distribution are three levels (kinds) of resistance to change according to
various sources in literature: individual resistance (such as the need of seeking job safety and
stabilization); group resistance (such as the need of maintaining existing relationships, power and
interest, etc.); and organizational resistance (such as the culture factor).

The combination of these phases of change, attitude profiles, and kinds of resistance reflect
the complexity of any organizational change. It means that in the face of change each individual
will expect and require a different approach in order to become convinced, depending on the
individual’s attitude profile, the applicable kind(s) of resistance, and the phase of change the
individual find him/herself in. A critical component in the design of the simulation therefore
concerns the choice of influence tactics or initiatives that managers may take to convince people
in an organization during the process of adopting proposed changes. The learning objective then
becomes building awareness, understanding and proficiency about which tactic is likely to be
most effective when applied to which individual at which stage of change.

The complexity of change in an organization counting many individuals by definition means

that the decision to use any tactic at any one time may be effective for some but will be
ineffective but potentially also counter-effective for others. Organizational change management
thus involves continuously running on a tightrope between doing the right thing for some while

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minimizing the negative effect on others. The LingHe Simulation provides immediate (positive,
neutral or negative) feedback following each decision taken, visually keeping track of how each
individual in the simulated environment moves forward or backward in the process towards
adoption.

The objective of the simulation is to support learning about organizational change. The
“game” dimension actually helps in providing participants an environment where making
mistakes is permissible and even intended. Evidence from running the simulation among groups
of managers and management students invariably demonstrates the highest levels of participation
and enjoyment. But learning also comes from confronting the participants with their own
unconscious behaviors and team dynamics during decision making about which tactic to use next,
which brings home perhaps even more the limitations of coercive, top-down management styles
in gaining broad support for one’s decisions.

Developing a representative Scale of Change Tactics

In order to collect change tactics, 59 top and middle level managers were randomly selected
from companies in Shanghai and Nanjing and interviewed. Based on open-ended interviews with
25 managers and completing an open questionnaire with 34 managers, authors drafted a shortlist
of 30 influence tactics that Chinese business managers may typically use in organizational change
projects, as well as their likely effect on others. By further comparative assessment, authors
eliminated the 11 least popular tactics and remained 19 tactics as follows (for their full
description, see Appendix A)1:

a) Tactics that “Gather Information regarding individual or organizational dynamics” include Short
Breaks (T2), Social Network (T17), Gather Information (T18), and Process Mapping (T20);
they are essentially diagnostic in nature and do not impact people’s attitudes per se; they
are aimed at understanding how the organization works and identifying benefits or fears
that people may potentially have in respect of the proposed changes.

b) Tactics that “Provide Information” include Email (T4), Bulletin Board (T12), Internal
Magazine (T13), and Memorandum (T26); they aim to inform groups of people, without
however allowing for feedback, discussion, explanation or negotiation.

c) In contrast, “Communication tactics” do invite two-way discussion between either individuals

(Face to Face Meeting – T11) or groups of people (External Speaker – T9; Top
Management Meeting – T23, Staff Meeting Discussion – T25).

1
A 20th tactic “Invitation to Dinner” (or “Dinner Event”) was subsequently added to the list of tactics available in
the LingHe Simulation, but not included in the above factor analysis.

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 d) “Compulsion/Enforcement tactics” in one way or another impose the changes upon groups or
individuals through the use of one’s (formal) authority; they include Directive (T3), The
“Sandwich” (T27), and Neutralize Resisters (T6).

e) Finally, tactics that are about “Implementing Changes” include Task Force (T7), Workshop
(T14), Management Training (T15) and Pilot Test (T19), where especially the latter three
specifically focus on demonstrating the changes and getting people to implement these.

In summary, some tactics are aimed at gaining information about individuals and the
organization; some aim to influence one individual, others aim to influence groups of individuals;
some apply emotional intelligence to influence, while others are more direct or even coercive in
nature. Participants in the simulation are given a choice of tactics (or decisions) to select in order
to influence one or more individuals. Although clearly managers may want to use other influence
tactics in the course of real life projects, those eventually available in the simulation were to
provide a sufficient range to influence any type of individual in any phase of change.

To further assess the effectiveness of change tactics that were collected, 400 managers at
different management levels in companies in Shanghai, Nanjing and Beijing were randomly
selected as subjects, who were active in field’s management including human resources,
marketing, production, finance, research and technology, and strategic management. The subjects
were asked to rank the proposed influence tactics according to likelihood of usage by
questionnaire. Out of the 400 subjects, 253 valid questionnaires were returned.

Authors adopted factor analysis to examine the validity of the change tactic scale by using
methods of Principal Component Analysis, and Varimax with Kaiser Normalization Rotation. It
showed that the data were suitable for factor analysis (KMO=0.873; Bartlett’s test of sphericity:
χ2 =1264.711, p<0.001). Factor analysis showed that rotation converged in 15 iterations and
extracted 5 factors (selected factors whose eigenvalues exceed 1). These 5 factors together
explained 55.860% of the variance, while each factor explained the variance by respectively
16.552%, 14.624%, 9.630%, 8.010%, and 7.044% (see Table 1). That was to say, the change
tactic scale had good construct validity. It was sufficiently representative of the tactics that
managers use in organizational change in China. Factor loading of each individual component
(change tactic) is shown in Table 2.

In addition to examining the structural validity of the change tactic scale, authors also
checked the reliability of the scale. The sub-scales composed by the first four factors were highly
correlated with the whole scale, with correlation coefficients between 0.645 and 0.845. Only the
sub-scale composed by factor 5 showed relatively weak correlation with the whole scale (r=0.486,
p<0.01). The correlation coefficients between sub-scales ranged from 0.321 to 0.567. The internal

11
consistence coefficient (α) was 0.8541. So besides having good structure validity, the change tactic
scale also had good reliability, namely the change tactics selected for the LingHe Simulation are
valid and reliable, and may be considered representative of tactics Chinese managers use in
organizational change. This guarantees a high level of consistency in change tactics between the
simulated and actual organizational change situation in China.

Table 1 Total variance explained in change tactic set

Component Rotation sums of squared loadings
Total Variance % Cumulative %
Factor 1 3.145 16.552 16.552
Factor 2 2.779 14.624 31.176
Factor 3 1.830 9.630 40.806
Factor 4 1.522 8.010 48.816
Factor 5 1.338 7.044 55.860

Table 2 Rotated component matrix in change tactic scale

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5
T19 0.749
T18 0.727
T17 0.637
T20 0.613
T25 0.604
T27 0.498
T14 0.731
T9 0.690
T11 0.644
T23 0.559
T2 0.427
T3 0.785
T4 0.559
T6 0.533
T13 0.775
T7 0.497

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T12 0.427
T16 -0.723
T15 0.629

Note: T2: short breaks; T3: directive; T4: electronic mail; T6: neutralize resisters; T7: task force; T9:
external consultant; T11: face to face meeting; T12: bulletin board; T13: internal magazine;
T14: workshop; T15: management training; T16: memorandum; T17: social network; T18:
gather information; T19: pilot test; T20: process mapping; T23: top management meeting; T25:
staff meeting discussion; T27: “sandwich”

Although factor analysis did not result in the five groupings with the same tactics as initially
formulated (see higher), the first two factors, together explaining 31.176 % of the variance,
include all Diagnostic/Gather Information and Communication tactics, as well as two of the
Implementation tactics (Workshop and Pilot Test) that are moreover ranked the highest in the
factor groups. The remaining three factors, together explaining 24.684% of the variance, include
all Provide Information tactics and two out of three Compulsion tactics (Directive, Neutralize
Resisters).

By and large, the first factor group may be called “collecting information regarding change attitudes”
and includes Pilot Test, Gather Information, Social Networks, Process Mapping, Staff Meeting
Discussion and The “Sandwich”. Authors conclude that managers tended to recognize the need
to prepare and inform themselves about the organization, with attention given mainly to its
formal structures.

The second factor group includes most communication tactics plus the Workshop and
Short Breaks tactics, and might therefore be called “Intensive Communication” tactics as they imply
individual and top management communication, understanding informal influence channels,
providing external expert opinion and interactive demonstration.

The third factor group combined Directive and Neutralize Resisters, a clear use of compulsion
(or formal authority), as well as Electronic Mail. It is interesting to note that the latter finds itself
together with all other information-providing tactics in the bottom three factor groups with least
explanatory power, an indication that one-way (mass) communication was not well regarded
among participating managers as a way to influence people’s opinions, attitudes or behaviors.
Management Training could possibly be regarded in a similar vein, as this tactic implies that the
subjects are supposed to comply with what the trainer requires them to do. Overall, tactics that
were impersonal if not authoritative appeared to score relatively poorly among participating
managers.

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 The fact that the Task Force tactic – often used in Western companies to engage selected
individuals from the organization as champions for change – did not receive strong backing from
participating managers could indicate their reluctance to nominate (or be nominated as)
champions for change, as this could potentially lead to loss of “face”.

Evaluation of Realism and Effectiveness as a Learning Tool

The LingHe Simulation incorporates both a context that is intended to be typical of current
business challenges in China, and a set of influence tactics that was validated by managers as
being representative, including the likely response of individuals to such tactics depending on
their attitude to change and the stage of adoption they are in. Rather than validating the
individual responses to individual influence tactics, authors decided to immediately test the
realism of the simulation as a whole among groups of managers “playing” the business game. To
that end a questionnaire was developed (see Appendix B) and put to participating managers at
the end of a change management workshop based around the simulation. The questionnaire was
designed to measure specifically

(i) The effectiveness of the simulation in improving practical knowledge regarding change
management (questions 1-4);

(ii) The realism of the simulation (questions 5-9); and

(iii) The effectiveness of the simulation as a learning tool compared to other ways of
teaching (question 10). Participants were asked to rate questions on a 7-point Likert scale.

Factor analysis (Principal Component Analysis, and Varimax with Kaiser Normalization
Rotation) was again used to assess the structural validity of the evaluation scale (see table 3 and
table 4). Three factors were extracted, together these three factors explained 57.101% of the
variance, and it indicated a good structural validity of the evaluation scale. Factor 1 included
questions Q5.1, Q5.2, Q6, Q7, Q8, Q9, all of which were relating to the realism of the simulation.
Factor 2 contained questions Q1.1, Q2, Q3, Q10, by and large related to the effectiveness of the
simulation in building awareness and understanding of change dynamics in China. Factor 3
included questions Q1.2, Q1.3, Q4, Q5.3, the second and last of which specifically address the
issue of “culture” in the success or failure of organizational change.

Authors found that the three factor groups were high correlated with the overall evaluation
scale, with correlation coefficients ranging from 0.752 to 0.893. The correlation between factor
groups ranged from 0.499 to 0.593. The internal consistence coefficient (α) was 0.8784. Therefore
besides having good structural validity, the evaluation scale also had good reliability.

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 Table3 Total variance explained in evaluation scale
Component Rotation sums of squared loadings
Total Variance % Cumulative %
Factor 1 3.186 22.757 22.757
Factor 2 2.419 17.279 40.036
Factor 3 2.389 17.065 57.101

Table 4 Rotated component matrix of evaluation scale

Factor 1 Factor2 Factor3
Q9 0.733
Q7 0.728
Q6 0.681
Q8 0.649
Q5.1 0.629
Q5.2 0.619
Q3 0.843
Q2 0.714
Q1.1 0.648
Q10 0.583
Q1.3 0.710
Q5.3 0.692
Q1.2 0.634
Q4 0.630

During the process of testing the realism and effectiveness of the simulation, authors
released three version upgrades of the simulation aimed at putting right any major discrepancies
that were consistently mentioned in participants’ feedback. The simulation was initially developed
and tested three times in an English language version among participants both in China and in
Europe. The Chinese language version was subsequently developed and tested among a group of
Chinese managers. Samples were complete randomalized in statistics. Because the sample of
European subjects was very small (11 managers), no further statistical analysis was made on their
feedback, nor comparisons made with their Chinese counterparts.

Through variance analysis authors found significant differences among the means of the
remaining three tests on Item Q1.1 (F (3,120)=4.435, p<0.01), Q1.2 (F (3,120)=4.317, p<0.01), Q1.3
(F (3,120)=12.509, p<0.001), Q3 (F (3,120)=3.233, p<0.05), Q4 (F (3,120)=14.353, p<0.001), Q5.1 (F
(3,120)=5.481, p<0.001), Q5.3 (F (3,120)=5.309, p<0.01) and Q8 (F (3,120)=3.111, p<0.05); in contrast
authors did not find significant differences among the means of Items Q6, Q7, Q9 and Q10.

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 Table 5 Mean (M) and standard deviation (SD) of four tests among Chinese managers
First time Second time Third time Fourth time
( n=39 ) ( n=32 ) ( n=11 ) ( n=42 )
M SD M SD M SD M SD
Q1.1 5.46 0.79 4.88 0.94 5.64 0.67 5.57 0.99
Q1.2 4.77 1.06 4.94 0.91 5.27 0.90 5.48 0.83
Q1.3 4.13 1.20 4.88 1.36 5.45 1.04 5.64 0.93
Q2 5.08 0.98 5.31 0.90 5.73 0.90 5.40 0.91
Q3 5.28 0.94 5.50 0.76 5.55 0.93 5.90 0.98
Q4 4.44 1.10 5.25 0.95 5.55 0.82 5.81 0.86
Q5.1 4.23 1.22 4.53 1.02 5.27 1.10 5.12 1.09
Q5.2 4.64 1.25 4.59 0.91 5.27 1.27 5.31 1.07
Q5.3 4.26 1.25 4.63 1.16 5.27 0.90 5.17 1.03
Q6 4.46 1.17 4.66 1.00 4.82 0.87 5.05 1.01
Q7 4.74 1.21 5.00 0.80 4.82 1.25 5.21 0.92
Q8 4.28 1.21 4.94 1.13 5.00 0.89 4.98 1.18
Q9 4.26 1.19 4.84 0.81 4.45 1.13 4.38 1.01
Q10 5.23 1.01 5.75 0.76 5.64 0.67 5.43 1.04

Authors used a multiple comparison method to further analyze the items where significant
differences existed among the means between the subsequent tests.

On item Q1.1 (understanding of the role and impact of individuals on the success or failure
of a change process), the mean of the second test was significantly lower than that of the first and
the fourth test (p<0.01), indicating that modifications in the second version of the simulation
were deemed counter-effective but subsequently corrected in the final version.

On items Q1.2, Q1.3, Q3 and Q4 statistically significant improvements were observed in

the mean results between the first, second and final tests (p<0.01) indicating that the subsequent
modifications were deemed effective, and that running the LingHe Simulation significantly
improved participating managers’ understanding of the different forms of resistance to change
during a change project, and of the role and impact of formal and informal networks, of cultural
factors, and of different change tactics on the success or failure of a change process.

On item Q5.1 (the extent the simulation reflects the profiles and behavior of individuals in
Chinese companies), the mean of the first and the second tests were significantly lower than that
of the fourth test (respectively p<0.001, p<0.01). However, the mean difference between the first
test and the second test was not statistically significant. Therefore the modifications between the
first and second version were not deemed to be significant whereas the latest version did provide
a significant improvement in realistically reflecting the profiles and behaviors of individuals in
Chinese companies.

Similar conclusions may be drawn regarding item Q5.2 (the extent the simulation reflects
the relationship of formal and informal networks in Chinese companies) and Q5.3 (the extent the

16
simulation reflects the role and impact of cultural factors on the success or failure of a change
process in Chinese companies).

On item Q8 (the extent the simulation reflects the different forms of resistance appearing in
change processes in Chinese companies), the mean of the first test was significantly lower than
those of the second and the fourth tests (respectively p<0.05, p<0.01), but with no significant
difference between the second and last test. It indicated that on this question the first set of
modifications were significantly effective.

The overall evaluation of the LingHe Simulation among groups of Chinese managers
consistently showed positive feedback regarding its realism and especially its effectiveness in
building a better understanding of the dynamics of change in a Chinese business environment,
and of those factors that may impact the success or failure of change projects. The LingHe
Simulation was rated significantly more effective as a learning tool relative to traditional lecturing
methods in respect of building awareness and understanding of change management (Q10).
Nevertheless further improvements like those observed between different versions of the LingHe
Simulation in the course of testing may still be achieved in future releases.

It is understood that managers may use more and other influence tactics in the course of
actual change projects than those made available in the LingHe Simulation. However, factor and
correlation analysis on the set of influence tactics in the LingHe Simulation showed good validity
and reliability, proving its representativeness of those used in actual situations. Authors will take
under consideration the potential for further increasing the realism by expanding the list of
influence tactics as long as this leads to a similar increase in the effectiveness the simulation as a
learning tool, which was the prime objective.

Specifically the questions regarding forms of resistance experienced in Chinese

organizations (Q8), and the correspondence of the simulated context and dynamics versus reality
(Q9) received significantly lower scores than the other questions, with a mean score that is still
positive but also a relatively high standard deviation.

Feedback questionnaires also included open-ended questions so as to elicit further relevant

remarks from participants regarding the simulation and related workshop. On the part of Chinese
participants this feedback mostly focused on the realism of the LingHe Simulation and the
relative simplicity of the context and dynamics compared to real-life situations. Experience with
simulations among Western managers learns that it is not uncommon for first-time users of
business games to expect such higher degree of realism and to struggle with the limited decision
capabilities at their disposal – part of which may be explained as a defense mechanism (denial)

17
after having performed poorly in the simulation. Nevertheless, it remains a point that deserves
on-going monitoring in future workshops.

The feedback received from the limited test among European subjects (who mostly had
significant experience in living and working in China) showed relatively higher scores on almost
all questions, suggesting that the simulation was deemed very effective and realistic at capturing
change dynamics in a Chinese environment. However, more substantive testing is required in
order to further validate the use of the LingHe Simulation as a learning tool for Western
managers wanting to introduce change in a Chinese environment.

Conclusions
The business environment in China is undergoing fast and significant changes, part of
which are also driven by the introduction of information & communication technologies into
business relationships. These changes to the business environment also force managers to more
effectively implement change within their organizations. The LingHe Simulation provides a new
approach for managers to experience the complex dynamics of organizational change in a
multimedia computer-simulated environment.

The LingHe Simulation is very different from traditional learning tools and methods,
making use of advanced technology to offer an interactive learning environment. Authors’
research has so far demonstrated that participants consistently rate the LingHe Simulation as
highly effective at building awareness and understanding of the major factors (including people
profiles, influence tactics, and the different phases of change) that impact the success and failure
of organizational change projects. The use of computer simulation specifically lets participants
experience the challenges and frustrations of having to deal with the complexity of these various
factors interacting with each other in sometimes unpredictable ways – a reflection of the complex
and seemingly unpredictable nature of how individuals and groups of people react to changes –
which traditional teaching methods cannot achieve as effectively.

Further substantive testing of the effectiveness of the LingHe Simulation is required among
in particular Western managers to also validate its use to better prepare these for introducing
change in Chinese business environments. Also, attention must be given to the fact that Chinese
participants have sometimes pointed to an opportunity to further improve the correspondence
between the simulated context and dynamics and those encountered in real life situations, a
reflection of the fact that the LingHe Simulation is necessarily a simplified model of a very
specific business situation. Authors may continue releasing new versions over time to further
increase also the perceived realism of the simulation relative to the real-life situation.

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 Appendix A
Description of Tactics in the LingHe Simulation
T2 - SHORT BREAKS: Spend some time in and about the company in order to see which
groups of managers meet regularly over short breaks such as lunch, in the smoking area, at
the coffee machine. (3 days) NOTE These groups will not change, and the list will remain
available throughout the simulation. This information is accessible by clicking on the button
'Org. Networks'.
T3 - DIRECTIVE: Try to convince the General Manager to send out a directive to all managers
insisting that they start using the PMS in two weeks’ time. (5 days) NOTE - You spend
several days writing a draft of this directive to give to the GM.
T4 - ELECTRONIC MAIL: Send a brief electronic mail to everyone on the management team
explaining your ideas on why the PMS makes sense for them. (1 day) NOTE - Each manager
has an individual e-mail account.
T6 - NEUTRALIZE RESISTERS: Suggest to the relevant Heads of Department and/or
General Manager that some outspoken manager resisting and potentially slowing down the
PMS project should be promoted to a sideways position away from the project. (3 days)
NOTE - You only need to identify the appropriate manager to be promoted away. It is
assumed you will be talking to the appropriate authority for such decision. You'll be able to
use this tactic only once!
T7 - TASK FORCE: Select up to five managers to join you in a Task Force of change
facilitators or ‘champions’, who are to help develop and implement the proposed changes and
eventually influence and train all staff. (5 days) NOTE - If successful (in case all the selected
managers will join your Task Force) the team will be active until the end of the simulation.
T9 - EXTERNAL CONSULTANT: Invite Professor Fan Qun, a partner in a well-known
Shanghaiese management consulting firm, to come and talk about his nation-wide
benchmarking study of "Performance Improvements through Performance Management",
during which he will go into the experiences of other companies with similar Performance
Management Systems. (5 days) NOTE - Every manager is invited by memo to this event, but
attendance is optional.
T11 - FACE-TO-FACE MEETING: Fix a meeting with one of the managers in order to
persuade him/her that the PMS project would make sense to implement. (1 day) NOTE -
The meeting will take place in the manager's office.
T12 - BULLETIN BOARD: Ask Liu Bing, the GM's Assistant, to post a project progress
report on the company Bulletin Board, which hangs on the wall opposite the main stairwell.
You will prepare the project progress report. (2 days) NOTE - Only Liu Bing has the
authority to post messages on the Bulletin Board on behalf of the GM. Messages like your
project report will remain posted until superseded by a more recent report.

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T13 - INTERNAL MAGAZINE: Ask the editor of the company’s internal magazine to
include a short article you write on the advantages that Performance Management Systems
can bring to managers, to be published in the upcoming edition. (3 days) NOTE - Ths
magazne is dstributed to all of the company staff including management. The article is about
the generic advantages of PMS, and does not include any company specific information.
T14 - WORKSHOP: Help one of the managers to organise and lead a demonstration &
discussion session on PMS for all the managers interested in the topic. (5 days) NOTE - This
will provide the opportunity for the workshop leader to share and gather views and
experiences on PMS.
T15 - MANAGEMENT TRAINING: Organise for up to five managers a three-day residential
training programme at a nearby 4-star hotel on the potential benefits of an PMS and how to
actually use such a system. (5 days) NOTE - You do not attend the programme, but it takes a
considerable amount of your time to plan it. In addition, managers can only attend such
programmes once a year.
T17 - SOCIAL NETWORKS: Spend some time observing or finding out which managers
regularly play MahJong, go together to the company Health Club, or are members of the
Communist Party. (3 days) NOTE - These groups will not change, and the lists will remain
available throughout the simulation. This information is accessible by clicking on the button
'Org. Networks'.
T18 - GATHER INFORMATION: Obtain more information about up to five members of
the top management team based on their personnel records kept in the HR department at
Ling He. (2 days) NOTE - Each person’s profile includes a qualitative description of the
individual and will help you understanding how difficult it will be to help that individual move
through the different change phases. The profiles, once gathered, will be available to you
during the whole session.
T19 - PILOT TEST: Try to get commitment from one of the top managers by asking him/her
to organise a two-week-long pilot test of the PMS in his/her department using current
company data. (4 days) NOTE - This will involve setting up the PMS on all the departments'
computers and providing users with the appropriate training.
T20 - PROCESS MAPPING: Interview and observe a large cross-section of staff to determine
the way they interact with each other in the course of their day to day work. This results in a
Process Map, a schematic that defines the main processes and who is active in these processes.
(5 days) NOTE - Process membership will not change, and will remain available throughout
the simulation. This information is accessible by clicking on the button 'Org. Networks'.
T23 - TOP MGMT MEETING: Organise a special meeting with all Heads of Department and
the GM to share and discuss thoughts, results and action plans for the PMS project. (3 days)
NOTE - Heads of Department are informed that they can also bring along managers from

23
 their department.
T25 - STAFF MEETING DISCUSSION: Develop a slide show on the PMS and the progress
of the project, and present it during the regular weekly management staff meeting. (5 days)
NOTE - The presentation includes potential applications of the PMS within the different
processes. All members of the management team are in principle expected to attend these
meetings.
T26 - MEMORANDUM: Write a send to any five of the top managers a brief memo on how
some of the specific features of the PMS will improve the transparency of information flows
in the company. (1 day) NOTE - This is distributed in the company internal mail system.
T27 - THE ‘SANDWICH’: Suggest to a group of selected managers who already show strong
interest in the PMS but whose Heads of Department are still unconvinced, that they should
lobby the General Manager to talk to the Heads. (4 days) NOTE - This initiative assumes
that you have identified the appropriate managers to approach, and does not require you to
specify them.

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 Appendix B
Evaluation Questions for LingHe Simulation
Questions relating to the effectiveness of the simulation to improve practical knowledge.
1. To which extent does the LingHe Simulation improve your understanding of:
1.1 The role and impact of individuals on the success or failure of a change process?
1.2 The role and impact of relationship networks (formal and informal) on the success or
failure of a change process?
1.3 The role and impact of cultural factors on the success or failure of a change process?
2. To which extent does the LingHe Simulation improve your understanding of the different
phases of a change process?
3. To which extent does the LingHe Simulation improve your understanding of the impact of
different change tactics/initiatives that can be used in a change process?
4. To which extent does the LingHe Simulation improve your understanding of the different
forms of resistance appearing in change processes?
Questions relating to the validity and realism of the simulation.
5. To which extent does the LingHe Simulation reflect
5.1 The profiles and behaviour of individuals in Chinese companies?
5.2 the relationship of networks (formal and informal) in Chinese companies?
5.3 The role and impact of cultural factors on the success or failure of a change process
in Chinese companies?
6. To which extent does the LingHe Simulation reflect the different phases of a change process
in Chinese companies?
7. To which extent does the LingHe Simulation reflect the different change tactics/initiatives, which
can be used in a change process in Chinese companies?
8. To which extent does the LingHe Simulation reflect the different forms of resistance
appearing in change processes in Chinese companies?
9. How would you assess in general the correspondence between the situation and dynamics
presented in the simulation and the real situations and dynamics in Chinese companies?
Question relating to the relative effectiveness of the simulation as a learning tool.
10. How would you assess the simulation as a learning/training tool for managers to better
understand change management, in terms of effectiveness as compared to a lecture?

25