Organizational Change

Christian Maravelias Ph. D.

Agenda
     The notion of organizational change The conceptual framework of the course The societal/historical background Functional/normative perspective (module 1) Managing evolutionary and revolutionary change (module 1b)

The notion of organizational Change

 The notion of organizational change implies a conscious decision, undertaken by management, to change the existing order
A formal (official) transformation of the existing order
 That rearranges formal domains of responsibility, goals, and standardized procedures  Using the notion of organizational change is a way of pointing towards what is strategic and valued, and what (who) is not strategic and valued  Hence, it is politically sensitive

 Attempts to change the existing order, which are undertaken by the lower layers of an organizational hierarchy and which lack managements approval: acts of resistance, subversive behavior, etc.

The notion of organizational Change

 Formal order vs. Practiced order
Formal organizational change can be a way of forcing a change of the practiced order Formal organizational change can also be a reflection of how changes of the practiced order forces a change of the formal order

Functional/Normative
How can organizations be improved? What characterizes good as opposed to bad organizations?

Institutional
How do organizations adapt to what is seen as appropriate and good in a given context?

Critical
Whose concealed interests do organizational changes serve?

Managerial perspective
Functional/Normative
How can organizations be improved? What characterizes good as opposed to bad organizations?

Societal perspective

Class/hierarchical perspective

Institutional
How do organizations adapt to what is seen as appropriate and good in a given context?

Critical
Whose concealed interest do organizational change serve?

The historical/societal context

 Capitalism:
Requires stability, yet the accumulation logic of capitalism constantly set in motion destabilizing forces:
 Constant growth/expansion lack of growth leads to crisis  Competition  Subordination of the laboring population to principles of efficient production

 Post World War II

Japanese and European production were threaded and the US could build a huge, stable mass-producing system of gigantic corporations that massliterarily shipped their excess supply over seas

 1968
The crisis of US-Fordism and the threat of Japan US-Fordism The economic crisis was accompanied by radical political movements, which criticized and sought to resist the hierarchical powers of State and Capital

Background
 1970s and onwards: More varieties of products and services Mass customization Shorter product life cycles speeding up the pace of development, making existing products (appear as) obsolete (unfashionable), etc. Development, marketing, and service tend to become more strategic than production Production is increasingly re-located to countries were wages are low re-

 Hence, new forms of organizing large corporations are called for

How to reorganize corporations so that they become able to adapt to contingent demands?
        Organizational Change management PostPost-bureaucracy PostPost-fordism Organizational Learning Corporate culture Total Quality management Business process re-engineering reetc

Classical organization change theory

 Assumes that those organizations which are in fact better, more efficient, etc. will be more successful  Better implies being technically and operative efficient in adapting to the environment of the organization  Market pressures are primarily focused political and cultural pressures are not given much attention  Good and required organizational changes are beneficial to all at least in the long run

Classic Change Management Theory

 Reorganization is usually feared, because it means disturbance of the status quo, a threat to peoples vested interests in their jobs
Hence, the employees constitute the main problem to successful organizational change because:
 They are primarily self-interested and see changes as threats to their selfposition in the organization  They tend to see suggested changes through a political lens  They are emotional, risk aversive, and thus have limited tolerance for change  They do not see the broader picture, misunderstand and mistrust the managers initiating the change

Classic Change Management theory

 Deal with resistance by:
Communication and education compensate for incorrect information Involve key employees (those that have the power to mobilize resistance) to win them over Negotiation Manipulation Coercion

Classic Change Management Theory

 Kotter and Kotter & Schlessingers articles implies a classic hierarchic/centralized organization that goes through episodic changes The ideal employees are obedient servants

 Kanters article implies a decentralized organization that undergoes continuous changes and that requires (idealizes) entrepreneurial, selfselfgoverning employees  Activity, entrepreneurialism, motivation, spirit, ect., is difficult to bring forth through managerial discipline  Continuous, entrepreneurial change requires indirect management :
locating and empowering ideal employees so that they can go beyond the limits of their formal positions

Classic Change Management Theory things to note

 Employees resistance is the main obstacle to pursued organizational changes  Resistance and critique are of no or little value  Whereas employees emerge as emotional, uninformed, and irrational, leaders emerge as cool, rational, and knowledgeable  Organizational change is a matter of exercising sovereign power in such a way that it does not seem as power, but as an enlightened care for the common good  Whereas managers emerge as the fathers of their organizations, employees emerge as the children of the organization understand them and make them feel safe, and they will eventually go your way

Organizational change through cultural change

 Whereas the previous articles assume individuals that act on the basis of their self-interest, the articles which concern selfcultural change assume that individuals act on the basis of the norms and values that define the social situation  An organizational culture is the system of taken for granted beliefs, values, and norms that, over time, have come to define what is appropriate and inappropriate behavior for a member of the organization  Organizational change is not only a matter of changing individuals, it is a matter of changing that which express and symbolize the established culture which in turn sets the limits to what is accepted

Organizational change through cultural change

In Becks article the culture is traced back to the achievements and personality of founding father of the Bank
    Giannini was unusual in that he lived is values He was a risk taker He wanted to improve the quality of life (he was a good man) He was a visionary

When the founder died some of his legacy was lost, now, in times of change, it needs to be found again

 Those that have the right to define an organizations history, do they have the power to define an organizations culture? Is organizational change a matter of rewriting the history of the organization?

Organizational change through cultural change

 In Scheins article the culture is traced back to three in part separate professional communities:
Executive communities Engineering communities Operative communities

 Each tend to establish a corporate culture of its own values, norms and beliefs which are unique and often in conflict with the two other professional communities
The operative culture assumes that technical solutions are found locally The engineering culture assumes that principle and abstract solutions can be developed and implemented locally The executive culture focus on financial issues and disregard technicalities

Concluding comments
 These articles should be read not merely as theories but as ideology, i.e. as ways of infusing corporate life with particular values  This is why we must read them with a critical distance studying them at once as theories about organizational change and as parts of the managerial practice of organizational change

Part II Balancing evolutionary and revolutionary change

Balancing organizational change

 Traditional ways of thinking about change treats it as:
an event to be managed during a limited period of time (Freeze Unfreeze Refreeze) a planned, hierarchically instigated process that aims to achieve precisely defined goals

 More turbulence and uncertainty makes:

precisely planned and hierarchically instigated change problematic
 Improvised change (Orlikowski) (Orlikowski)

abilities to balance evolutionary and revolutionary change crucial

 Ambidextrous organizations (Tushman & OReilly) OReilly)

organizational learning a strategic issue

 Myopia of learning (March & Levinthal)

Organizational change tends to be based on what our experience has taught us

 Yet, sometimes experience is a poor teacher

Learning from experience

 Simplification:
In order to render experience understandable and communicable

 Specialization:
In order to render experience manageable and possible to act on in a coordinated fashion In order to reduce the focus of the learner

The myopia of learning

 Simplification and specialization lead to increases in performance  but also set limits to those improvements:
Ignoring the long run Ignoring the larger picture

The trade-off between tradeexploration and exploitation

Exploitation organizational change based on experience

Exploration organizational change based on experimentation, theory, play, leaps of faith, etc.

The vulnerability of exploration

 Compared to returns from exploitation, returns from exploration are less certain, more remote in time and distant from the locus of action  The certainty, speed, proximity, and clarity of feedback ties exploitation to its consequences more quickly and precisely than is the case for exploration  Learning from experience, imitation, and reason inhibits play and experimentation

Traps related to exploitative and explorative organizational change

 The failure trap: failure lead us to search for new ideas trap: instead of sticking to existing ones; initially most new ideas do not work well; hence we tend to abandon new explorative pursuits, long before we have given them a proper chance to work  The success trap: past exploitation in a given domain trap: makes future exploitation in the same domain more effective - learning increase performance and reliability and thus decrease the likelihood of explorative pursuits

Questions issues
 What type of leadership does a balance between exploitation and exploration (evolutionary and revolutionary change) imply?
For example, Frontstage vs. Backstage leadership

 How should organizations be structured to handle the exploitationexploitation-exploration balance?

Are there any good examples of organizations, companies, industries?

 In management literature it is often said that a strong culture is important for the performance of an organization. Yet, how does a strong culture affect the exploration exploitation balance?