LEADERSHIP AND CHANGE

MANAGEMENT (LCM)
Learning Outcomes
LO5. Critically appraise change theories, tools and
techniques.
Indicative content:
 Describe change theories, tools and techniques

 Analyse these theories, tools and techniques within given

organisations
 Appraise the use of risk management techniques in the
management of change
 Assess the impact of globalisation on change theories,

tools and techniques

Change: Predicting the future
• This „telephone‟ has too many shortcomings to be
seriously considered as a means of communication.
(Western Union internal memo, 1876)
• Airplanes are interesting toys, but of no military
value. (Marshal Foch, 1911)
• Who the hell wants to hear actors talk? (HM Warner
of Warner Brothers, 1927)
• I think there is a world market for maybe five
computers. (Thomas Watson, Chairman IBM, 1943)
Approaches to change management

Two dominant approaches

 The Planned Approach – 1940s

 The Emergent Approach – 1980s.

The Planned Change

 An long established approach

 Many theorists, such as Lewin, Kotter etc
Emergent change

 Open-ended process
 Adjusting to changing external environment
 Bottom-up
 Unpredictable
 Cannot be pre-planned
 Learning process
 No universal rules.
Emergent Change

The recurring story is one of autonomous

initiatives that bubble up internally; continuous
emergent change; steady learning from both
failure and success; strategy implementation
that is replaced by strategy making; the
appearance of innovations that are unplanned,
unforeseen and unexpected; and small actions
that have surprisingly large consequences.
(Weick, 2000)
Selection of an Appropriate Model or Tool

 Before selecting a particular performance management model,

improvement tool or approach, authorities need to be clear
what they are trying to achieve and why. This will involve
asking a series of questions, including:
 What are you aiming to change and improve?
 What outcome are you looking for?
 Does the improvement need to be holistic covering all the
organization‟s activities or designed for a specific task, service or
area of activity?
 What is the key driver for change i.e. inspection or review, change
of staff etc
 What is the timescale for the change?
 What resources are available?
 To what extent do you want to involve staff in the changes?
Kotter's Eight-Stage Process

 Establishing a sense of urgency.

 Creating a guiding coalition.
 Developing a vision and a strategy.
 Communicating the change vision.
 Empowering employees for broad-based action.
 Generating short-term wins.
 Consolidating gains and producing more change.
 Anchoring new approaches in the culture.
 Balanced Scorecard

 A strategic planning and management system to align

business activities to the vision and strategy of the
organization, improve internal and external
communications, and monitor organization
performance against strategic goals.

 Originated by Drs. Robert Kaplan (Harvard Business

School) and David Norton

 To give managers and executives a more 'balanced'

view of organizational performance.
 BALANCED SCORECARD

Adapted from The Balanced Scorecard by Kaplan & Norton

the four perspectives

 Lewin‟s Three Stages of Planned
Change
 Unfreezing
 create a need for change
 minimise resistance (reduce resisting forces)

 Changing
 implementation of new systems of operation
 employees learn new attitudes and behaviours

 Refreezing
 positive reinforcement of desired outcomes to promote
internalisation of new behaviours
 evaluation to ensure new ways habitualised
Lewin‟s 3 Stage Model
 Lewin's 3 Stage Model

3 Stage Model: from one static state via a progression shift,

to another static state

Stage 1: Unfreeze
 Resistance to change

 creating the right conditions for change to occur

 analysis of the current situation

 dialogue and re-educational activities

 team building and personal development.

Lewin's 3 Stage Model

Stage 2: Transition
 The transitional 'journey' is central

 a period of confusion

 old ways are challenged, but there is no clear

understanding of the new ways
 Good leadership is important, and coaching,
counseling or psychological support may be
needed.
 The end goal - 'unfrozen' state and keep them
there.
 new structures and processes are put in place
Lewin's 3 Stage Model

Stage 3: Refreeze
 The changes implemented are then 'frozen'

 supporting mechanisms such as policies, procedures and

reward systems
 The end goal - to achieve a 'refreeze',

 re-establishing a new place of stability

 elevate comfort levels by reconnecting people back into

their safe, familiar environment.
 Refreezing takes people from a period of low productivity
in the transitional state to a stable and productive state.
 Beckhard and Harris's Three States Model
Present, Transition and Future States

 Very similar to Lewin's model – with a further clarification that

mangers should expect low productivity in the transition period
and must plan accordingly

CURRENT STATE
 Clear roles

 Known skills

 Known styles

 Clear relationships

 Expected performance
Beckhard and Harris's Three States Model

TRANSITION STATE
 Flux

 Experimentation

 Uncertainty

 Learning

 lower performance

FUTURE STATE
 Uncertain roles

 New skills

 New-styles

 Different relationships

 Improved performance
McKinsey 7S Model

 Strategy: the direction and scope of the company over the

long-term.
 Structure: the basic organisation of the company, its
departments, reporting lines, areas of expertise and
responsibility (and how they inter-relate).
 Systems: Formal and informal procedures that govern
everyday activity, covering everything from management
information systems, through to the systems at the point of
contact with the customer (retail systems, call centre systems,
online systems, etc).
McKinsey 7S Model

The 4Ss across the bottom of the model are less tangible, more
cultural in nature, and were termed “Soft Ss” by McKinsey.
 Skills: The capabilities and competencies that exist within

the company. What it does best.

 Shared values: The values and beliefs of the company.

Ultimately they guide employees towards „valued‟

behaviour.
 Staff: The company‟s people resources and how they are
developed, trained and motivated.
 Style: The leadership approach of top management and the

company‟s overall operating approach.

McKinsey 7S Model
McKinsey 7S Model

 In combination, the 7Ss provide another effective

framework for analysing the organisation and its
activities.
 In a marketing-led company they can be used to
explore the extent to which the company is working
coherently towards a distinctive and motivating
place in the mind of the consumer.
Managing Risk in the Context of Change

 Planning change requires the organisation to

identify potential risks associated with the
intended change and its processes. These risks may
relate to both the internal and external
environment.
 Identifying and factoring in risk when implementing
change can reduce the likely problems that might
arise as a result of the changes planned.
Risks that may arise in implementing change
include

 Financial risks
 Market-related risks
 Production and delivery risks
 Supplier risks
 Other external stakeholder risks – the local
community, the natural environment
 Organisational and management risks
 Staffing risks – capability and capacity
 Staffing risks – commitment, morale, retention
Managing Risk
 Having identified possible risks associated with change
that you plan, options include:
 a) Know what your risk exposures are and how they
can affect you
 b) Transfer the risk. Insurance is the most common
technique used to protect against risk c) Seek to avoid
the risk
 d) Control the risk
 e) Retain the risk
 f) Indemnity agreements
Change and the impact of globalisation

 Recognise how globalisation imposes change on

different types of organisations and the types of
change that are likely to occur. Useful reading on
this topic is Atul Vashistha‟s (2007) paper on
“Change Amidst Globalization
 This identifies the key principles to adopt when
facing the external pressures for change which
globalisation of the world economy may impose.
Globalisation

 Sustainability?

 Workforce diversity?

 Business ethics?
Globalisation (Continued)

Sustainability
 The regenerative and assimilative capacities of

the biosphere cannot support even the current

levels of consumption, much less the manifold
increase required to generalize to higher
standards of living worldwide. Still less can the
planet afford an ever-growing human population
striving to consume more per-capita.
(Lines, 2002: 126–127)
 Globalisation (Continued)

Sustainability
… encompasses three levels: the individual, the
organizational and the societal. Sustainability at one level
cannot be built on the exploitation of the others. These
levels are intimately related to the organization’s key
stakeholders: personnel, customers, owners and society.
An organization cannot be sustainable by prioritizing the
goals and needs of some stakeholders at the expense of
others … Thus sustainability has a value basis in the due
considerations and balancing of different stakeholders’
legitimate needs and goals.
(Docherty et al, 2002: 12)
 Globalisation (Continued)

Sustainability
… encompasses three levels: the individual, the
organizational and the societal. Sustainability at one level
cannot be built on the exploitation of the others. These
levels are intimately related to the organization’s key
stakeholders: personnel, customers, owners and society.
An organization cannot be sustainable by prioritizing the
goals and needs of some stakeholders at the expense of
others … Thus sustainability has a value basis in the due
considerations and balancing of different stakeholders’
legitimate needs and goals.
(Docherty et al, 2002: 12)
 Globalisation (Continued)

Sustainability

 There is a widespread view that governments must

solve environmental problems. However, the major
multinationals outstrip many of the world’s national
economies in terms of wealth and power, and their
global coverage allows them to escape the
requirements of particular governments seeking to
place severe environmental restrictions on them.
They can simply move their operations across
national borders. The world’s multinationals are in
fact more powerful than most national governments.

(Dunphy and Griffiths, 1998: 183)

Globalisation (Continued)

Workforce diversity
 Diversity is dissimilarities – differences – among
people due to age, gender, race, ethnicity,
religion, sexual orientation, socioeconomic
background, and capabilities/disabilities …
Diversity raises important ethical issues and social
responsibility issues as well. It is also a critical
issue for organizations, one that if not handled
well can surely bring an organization to its knees,
especially in our increasing global environment.
(Jones et al, 2000)
Globalisation (Continued)

Workforce diversity
 … contemporary workforce characteristics are
radically different from what they were just twenty
years ago. Employees represent every ethnic
background and color; range from highly educated
to illiterate; vary in age from eighteen to eighty;
may appear perfectly healthy or may have
terminal illness; may be single parents or part of
dual-income, divorced, same-sex or traditional
families; and may be physically or mentally
challenged.
(Cummings and Worley, 2001: 429–430)
Globalisation (Continued)

Workforce diversity
Over the past decade, more than one-third of
people entering the US workforce have been
members of racial or ethnic minority groups.
Moreover, the proportion of racial and ethnic
minorities in the workforce is expected to increase
indefinitely. The situation is similar in some
European countries.
(Hitt et al, 2009)
 Globalisation (Continued)

Business ethics
 Ethics are moral principles or beliefs about what is right or
wrong. These beliefs guide people in their dealings with other
individuals and groups (stakeholders) and provide a basis for
deciding whether behavior is right and proper.

(Jones et al, 2000: 183)

 Managers today are usually quite sensitive to issues of social

responsibility and ethical behavior because of pressure from
the public, from interest groups, from legal and government
concerns, and from media coverage. It is less clear where to
draw the line between socially responsible behaviour and the
corporation’s other concerns, or between the conflicting
expectations of ethical behaviour among different countries.
(Deresky, 2000: 56)
 Globalisation (Continued)

Business ethics
 The 1990s were a decade of persistently rising markets – 10 years
of economic expansion, with investors pouring record amounts into
stocks and pocketing double-digit returns year after year. … The
decade was peppered with financial debacles, but these faded
quickly from memory even as they increased in size and complexity.
The billion dollar-plus scandals included Robert Citron of Orange
County, Nick Leeson of Barings and John Meriwether of Long-Term
Capital Management, but the markets merely hiccoughed and then
started going up again. When Enron collapsed in late 2001, it
shattered some investors' beliefs and took a few other stocks down
with it. Then Global Crossing and WorldCom declared bankruptcy,
and dozens of corporate scandals materialised as the leading stock
indices lost a quarter of their value. … Companies' reported earnings
were a fiction and financial reports chock-full of disclosures that
would shock the average investor if they ever even glanced at them
– not that anybody ever did.
(Partnoy, 2003: 1)
Globalisation (Continued)

Business ethics
 A pair of Bear Stearns executives were arrested and charged
with fraud yesterday over the collapse of two hedge funds. In
early-morning raids, the FBI arrested Ralph Cioffi and
Matthew Tannin at their homes in New Jersey and New York.
The pair were handcuffed and escorted, grim faced, into court
in front of a battery of television cameras. According to the US
government, the duo concocted a web of lies to persuade
investors to keep funds in two mortgage-heavy funds that
evaporated in value in June last year, losing more than $1.4bn
(£710m) of clients' money. Among the biggest victims was
Barclays Bank, which had pumped in $400m. Benton
Campbell, a federal prosecutor, said: ‘They lied in the futile
hope that the funds would turn around and that their income
and reputations would remain intact.’
(Clark, 2008)
Change Amidst Globalization
 Jointly Identify Business Problems & Solutions
 Develop a Shared Vision & Communications
 Identify Change Leaders
 Focus on results
 Govern & Monitor Change
(By Atul Vashishtha)
Additional Reading

Please Read articles in folder „Lesson 5‟