Chapter 15

Organization Transformation and Strategic Change

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 1

Learning Objectives (part 1 of 2)

Identify and define organization transformation. Understand basic strategy-culture matrix and other approaches to changing culture.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 2

Learning Objectives (part 2 of 2)

Recognize importance of corporate culture and its relation to strategy. Experience these concepts in management simulation.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 3

Strategy and Transformation

Success can work against a company when it looses touch with customers. Radical changes may be only choice for organization in desperate need of change.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 4

Organizational Transformation
(part 1 of 3)

OT refers to drastic changes in:

How organization functions. How it relates to environment.

OD strategies represent more gradual approaches to strategic change. OT approaches are drastic and abrupt change.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 5

Organizational Transformation
(part 2 of 3)

OT may or may not be developmental. OT tends to use directive, not participative, approaches to change. Usually top-down, top-management driven. OT shaped by use of power rather than collaboration.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 6

Organizational Transformation
(part 3 of 3)

Requires:
Shared vision. Willingness to clean house. Restructure. Tackle many problems.

Due to immediate threat, this may be only way for organization to survive.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 7

Large-Scale Change Strategies

Incremental.
Long-term planned change. Relies upon collaboration.

Transformative.
Immediate, drastic change. Uses directive methods.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 8

Large-Scale Change Model

Model based on 3 key dimensions.
1. Time frame of changeshort or long. 2. Level of support of organizational culture. 3. Degree of discontinuity with environment.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 9

Figure 15.2 Strategies for Planned Change

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 10

Four Change Strategies (part 1 of 2)

1. Participative evolution.
Incremental and anticipates change. Support of culture through collaborative means.

2. Charismatic transformation.
Radical change in short time with support of culture.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 11

Four Change Strategies (part 2 of 2)

3. Forced evolution.
Incremental adjustments over longer period without support of culture.

4. Dictatorial transformation.
Used in times of crisis. Major restructuring running counter to internal culture.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 12

Results of OT
OT may be best or only way to bring back an organization under immediate threat. OT more likely to be used by externally recruited managers. OT is risky and outcome is uncertain.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 13

The Corporate Culture

System of shared values held by members that distinguishes one organization from another. CEO and managers actions, not words, produce culture. A culture is organizations major strength when consistent with strategies.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 14

Strategy-Culture Fit
Strategy:
Course of action used to achieve objectives. Relates resources of organization to opportunities in environment.

Culture:
Set of values for setting priorities. Critical factor in implementation of strategy.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 15

Core Characteristics of Culture

Individual autonomy. Sensitivity to customers and employees. Managers provide support and assistance. Employees initiate new ideas. Openness of communication channels. Risk-seeking encouraged.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 16

Sharing the Vision

Management theorists feel vision is essence of leadership. Vision involves several stages.
Share the vision. Empower the individual. Develop trust. Reward performance.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 17

Figure 15.3 Sharing the Vision

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 18

Strong Versus Weak Cultures

Strong culture.
Basic values intensely held and widely shared.

Weak culture.
May be seen in young company or one with high turnover.

Culture is product of key components.

Structure, systems, people, and style.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 19

Figure 15.4 Relative Strength of Cultures

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 20

Strategy-Culture Matrix (part 1 of 4)

Four basic alternatives in determining strategy changes: 1. Manage change (manageable risk).
Change important and compatible with culture. Use cultural reinforcement as strategies.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 21

Strategy-Culture Matrix (part 2 of 4)

2. Reinforce culture (negligible risk).
Forge vision that emphasizes shared values. Reinforce existing culture.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 22

Strategy-Culture Matrix (part 3 of 4)

3. Manage around culture (manageable risk).
Change important and incompatible with present culture. Reinforce value system, reshuffle power, use leverage in the organization.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 23

Strategy-Culture Matrix (part 4 of 4)

4. Change strategy to fit culture (unacceptable risk).
Change important but incompatible with culture. Changing culture is explosive, long-term process that may be impossible.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 24

Figure 15.5 Strategy-Culture Matrix

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 25

Strategic Change Management

Seeks to align organizations strategy, structure, and human resources to fit environment. Parts of system in perpetual interaction with environment.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 26

Organizations Composed of 3 Systems

Technical - solve production problems. Political - solve allocation problems of resources and power. Cultural - solve value/belief problems.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 27

Figure 15.6 Environmental Forces and Organizational Systems

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 28

Three Steps to Strategic Change

Step 1: Develop image of desired organization. Step 2: Separate systems and intervene separately in each one. Step 3: Plan for reconnecting three systems.
Chapter 15 Slide 29

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Reasons for Large-Scale Cultural Changes

Company has strong values that do not fit changing environment. Industry competitive and changes quickly. Company mediocre or worse. Firm about to join ranks of very largest. Firm small but growing rapidly.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 30

Cautions in Cultural Change

Cultural change can be difficult and time consuming. Should be attempted only after lessdifficult solutions have been ruled out.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 31

OD Application Transformation at Home Depot

Home Depot is number-one homeimprovement retail chain in U.S. It had unstructured and entrepreneurial culture. Competitor Lowes began taking market share.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 32

 Nardelli was brought in as CEO to turn around dysfunctional culture. Nardelli brought in new top management team. Lacked support from lower levels. Changes resulted in unintended consequences.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 33

 Culture became one of revolt. Innovation and sense of ownership declined. When market share declined more, board replaced Nardelli with Ellison. Ellison has made methodical and longrange changes.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 34

Key Words And Concepts

Culture.
Reflects organizations past and is rooted in firms history.

Incremental approach.
Long-term planned change that relies on collaboration.

Organization transformation (OT).

Drastic, abrupt change to structure, management, and culture.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 35

 Strategic change management.

Focus on alignment with strategy, structure, and human resources systems.

Strategy.
Course of action used to achieve major objectives.

Strategy-culture matrix.
Assess readiness of culture for strategic changes.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 36

 Technical, political, and cultural systems.

Organizational systems of strategic change management model.

Transformational change.
Immediate drastic change accomplished by directive methods.

Vision.
Mental image of a possible and desirable future state of organization.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 37

OD Skills Simulation 15.1 The GenTech Company

Purpose.
To experience and observe how information affects strategic decision making. To develop strategy and culture in an organization. To receive feedback on your risk-taking level.
An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 15 Slide 38

Preparations for Next Chapter

Read Chapter 16. Complete the Profile Survey and Profile Form in Simulation 16.1, Part A, Step 1. Complete Step 1 of OD Skills Simulation 16.2.

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 39

An Experiential Approach to Organization Development 8 th edition Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 15 Slide 40