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CHAPTER 14: MANAGING STRATEGIC CHANGE

Overview

This chapter consists of the following areas:

• Explore different types of strategic change and their implications.

• Determine and diagnose the organisational context of change using Balogun and Hope Hailey's
contextual features model and the cultural web.

• Establish potential blockages and levers of change.

• Advise on the style of leadership appropriate to manage strategic change.

• Specify organisational roles required to manage strategic change.

• Discuss levers that can be employed to manage strategic change.

• Discuss the pitfalls of change programmes

Sample questions

• June 2008 Question 4 (a) and (b)

• December 2010 Question I (b)

Introduction

This chapter is concerned with the management tasks and processes involved in changing
strategies.

 There is an assumption about strategic change that there will be a tendency towards inertia
and resistance to change.
 People tend to 'cling on' to existing ways of doing things.

 This can lead to 'strategic drift' (refer to chapter 1) and so managing strategic change poses
a major problem to managers.

This chapter will make it clear that strategies often emerge from the lower levels in the
organisation and there are many others, like middle management, who play a major role in
strategic change.

 The assumption that it happens in a top-down manner is only partly true and is unrealistic
because senior management cannot control all aspects of the change.

Section 14.1 in this chapter begins by explaining the important issues that need to be considered
in diagnosing the situation an organisation faces when embarking on strategic change in terms of
the types of change required, the variety of contextual and cultural factors that need to be taken
into account and the forces blocking or backing change.
Section 14.2 discusses the management of strategic change in terns if the style of management
and the played by strategic leaders and the other change agents in managing strategic change.

Section 14.3 considers in more detail the means managers and leaders might employ for
managing change.

 The steps commonly used for rapid turnaround strategies are discussed first.

 Then levers for change are reviewed including changes in structure and control,
organisational routines, symbols, as are the roles of political activity and the different forms
of communication for managing change.

Section 14.4 looks at the common pitfalls found in change programmes.

14.1 Diagnosing the Change Situation

It is important to remember the need to understand:

1 Why strategic change is required.

2 The basis of the strategy with a clear statement of strategic intent.

3 The more specific possible directions and methods.

4 The changes in structures, processes and relationships, resources


and activities required to move from strategic thinking to action.

But there is also a need to understand the magnitude of the challenge faced in trying to effect
strategic change.

 Therefore, we have to consider the type of change required, the wider context in which
change is to occur and the specific blockers to change and what forces might exist to
facilitate (back) the change process.
14.1.1 Types of strategic change (Examined in Jun 08; Q4a)

Quite typically strategy development is incremental in nature, building on prior strategy


(experience lens).

 It is adaptive in the way it occurs with only occasional more transformational changes.

 Balogun and Hope Hailey develop this further to identify four types of strategic change
(see figure 14.1) and these have implications for how change is managed.

There are two key measures of change. Firstly, the nature of the change — how big is the
change?

 Incremental or 'step-by-step' change is arguably better as it will build on the existing


skills, routines and beliefs of the staff in the organisation, and so change is likely to be
efficient and win their commitment.

 It is slow and does not challenge the existing way of doing things and may indeed
reinforce the organisation's processes and culture.

 However, on occasions a 'big bang' might be needed. A 'big bang' or a 'quantum' change
represents significant change. Such a change may be necessary in certain situations.

 For example, if the organisation is facing a crisis, such as a major fall in profitability, then
it needs to respond to the crisis very fast.

 However, this type of change also does not require a change in the business model or
organisational paradigm.
Figure 14.1: Types of strategic change

Secondly, in terms of the scope of the change, the issue is whether change can occur within
the current paradigm or business model (realignment) or whether it requires a change in the
paradigm of the organisation (transformational).

Combining these two axes leads to 4 types of strategic change:

1 Adaptation is the most common type of change which is easy to manage because it
occurs within the current business model and is incremental.

2 Reconstruction is a significant and rapid type of change with lots of upheaval, often
brought on by a crisis, but without needing a change in the organisational paradigm.

 So it does not require a change in the business model.

 For instance, it could be a turnaround situation where there is a need for a major
structural change or cost-cutting programmes to deal with a major fall in
profitability or to ensure survival.

3 Evolution is a strategic change that requires a paradigm change (transformational) but


the change is implemented in stages over time (incremental).

 Managers may anticipate the need for transformational change through the
analytical techniques described in chapters 2, 3 and 4.
 It is therefore a planned evolutionary change, with time to achieve the change.

 Another way to explain change is by thinking of organisations as ‘learning systems’,


continually adjusting their strategies as the environment changes.

4 Revolution is change which requires rapid and major strategic and paradigm change.

 This type of change may be necessary for organisations that have been stuck with
‘core rigidities' for a long time so much so that the organisation has failed to
respond to environmental and competitive pressures.

 This might have occurred over many years and has therefore resulted in situations
where pressures for change are extreme.

 For example, if a takeover threatens the continued existence of the firm, the
organisation may be left with no choice but to change its paradigm or business
model quickly.

It is important to consider whether or not the required change can be accommodated within
the bounds of the culture as it is.

 Any of the above changes may require significant culture change.

 For example, a retailer could launch new products within the bounds of the existing
culture but a manufacturer (without making any changes to existing products) shifting
from a product-orientation to a marketing-orientation strategy will require significant
cultural change.

14.1.2 The context of change

There is no universal formula to manage change.

 Different approaches are required depending on the context of change.


 For example, managing change in a small business, where a motivated team themselves
are driving change would be different from managing change in a large bureaucratic
organisation where there are long- established routines and structures.

 The contexts are completely different and therefore the approach to managing change
needs to be different.

Balogun and Hope Hailey highlight a number of important internal contextual factors that
must be considered when designing change programmes:

1 Time

How quickly is change needed?

 For example, the time available for a turnaround type of change would be a lot
lesser compared to a business where the management may see the need for
change coming in the long-term future and may therefore have the time to plan it
carefully as an incremental change.

2 Scope

This was already discussed in section 14.1.1.

3 Preservation

Whatever the type of change, there will be a need to preserve certain aspects of the
organisation.

 What organisational resources and characteristics need to be maintained?

 For example, let us assume that a fast- growing computer business needs to be
more formally organised.

 This could upset the technical specialists who are used to rapid access to senior
management: but it could be critical to preserve their expertise and motivational
levels.

4 Diversity

Change may be helped with a more diverse workforce.

 If the staff groups and divisions within the organisation have been homogeneous
for many years, change could be hampered.

 So it is important to assess the diversity of the workforce before implementing


change.

5 Capability

What is the managerial and personal capability to implement change?

 It could be that an organisation has managers experienced in managing change, or


a workforce that is used to and open to change, whilst another has little experience
of change.

6 Capacity

What is the degree of change resource available?

 Does the organisation have the capacity to change in terms of available resources?

 Change can be expensive in terms of financial and management resources.

7 Readiness

How ready for change is the workforce?


 In some organisations, the entire workforce may be always prepared for change.

 Whilst in others there could be widespread resistance or pockets of resistance.

8 Power

What is the power possessed by the change leader?

 Too often it is assumed that the chief executive has such power, but in the face of
resistance from low level staff or external stakeholders, this may not be the case.

 It could also be that the chief executive assumes that someone in the organisation
has the power to effect change when they do not.

14.1.3 Organisational culture and forcefield analysis

The cultural web model (studied in chapter 4) showed us how it could be used as a diagnostic
tool to understand the culture of an organisation.

 It can also be applied to consider the problems and requirements of strategic change.

 It is useful to analyse the current culture and consider the differences that would be
needed to implement the strategic change successfully.

 Managers can use their analysis of the current and required future cultural web to
inform their discussions about what changes are required.

 Here Kurt Lewin's forcefield analysis can help.

A forcefield analysis provides a view of change problems that need to be tackled, by


identifying forces for and against change. It asks 3 key questions:

1 What aspects of the current situation might aid change and how to reinforce these? In
other words, these are the pushing factors.

2 What aspects of the current situation block change and how to overcome these?
Otherwise known as the resisting factors.

3 What needs to be newly introduced or added to aid change?

Figure 14.2 is a representation of blockages (resisting factors) to change as these constitute a


significant problem in implementing strategic change.

 The figure also identifies aspects of the organisation and its culture that might aid
(pushing factors) change.

 Conceiving of what the organisation would need to look like if a different strategy were
being followed is also useful and the cultural web can be used for this too.

 This helps identify what needs to added or introduced (additions) if change is to occur
and a number of examples are shown in figure 14.2.

 Managers, on undertaking a forcefield analysis, will realise that the routines, control
systems, structures, symbols and power can be important blockages and facilitators to
change.

 Changes in the structure, design and control systems were discussed in chapter 8 and in
the next two sections different styles and roles (section 14.3) in the change process and
other levers for managing change (section 14.4) are discussed.
Figure 14.2: Forcefield analysis
14.2 The Business Change Lifecycle

Business change is an important issue for most organisation.

 To reflect this fact, the business change lifecycle model has been included in the P3 syllabus.

 The lifecycle provides a broad umbrella framework from which different business change
methodologies can operate.

 The business change lifecycle model (see figure 14.3) has been included to complement
existing areas in the syllabus such as business process redesign, project management and
organisational change.

 The model provides a strategic step-by-step framework for considering a proposed business
process change project.

As with any project methodology, the business change lifecycle framework has a beginning,
middle and end.

Each aspect of the framework is considered in turn throughout the next section.

Figure 14.3: The business change lifecycle model


Stage 1: Alignment

The external environment

A common theme in modern business concerns the need to constantly assess the external
environment.

 As the environment changes, management need to consider the potential impact


external developments may have on the ability of the organisation to achieve its
objectives.

From time to time businesses may be required to align (or realign) their goals with the
environment.

 External regulation, or developments by competitors, will often require organisations to


undertake some form of business change in order to respond effectively.

 In recent years there have been a number of high profile cases involving companies
which have failed to react to external pressures and, as a result, have gone out of
business.

When business change is required, organisations need to determine the most appropriate
approach to achieve it.

 Proposed action is often implemented through a business change project.

Bottom-up change

It should, however, be noted that not all proposals for business change comes directly from
the environment.

 Operational staff in an organisation may also push for changes to exrsting business
processes in order to deliver short-term improvements.
 However, short-term changes initiatives implemented in a haphazard fashion can prove
detrimental to Ihe organisation's overall performance. proposed business changes should
be considered in to the organisation's overall performance, long-term strategy and
objectives.

Stage 2: Definition

Forming the business case

Once the need for change has been established, the practicalities of defining the
improvement begin.

 This will lead to the establishment of a formal project team designated to explore and
evaluate the available options to achieve the desired change.

 This evaluation will often involve a 'gap analysis' where the project team assesses the
organisation's current position and processes.

 'Gaps' between the current position and targeted end state are then revealed.

 The gap analysis should help to provide the project team with an idea of the work
required to implement a successful change.

Gap analysis

The 'gaps' identified will help to determine the type of business change required.

 For example, a process change upgrading a company's existing website is likely to result
in a relatively basic change, whereas changes of a more complex nature will require a
fundamental rethinking of existing processes.

 This is known as business process re-engineering (BPR), and we will look at BPR in more
detail later in this chapter.

Gap analysis gives particular consideration to the organisation's core resources including its
people and IT infrastructure.

 The project team may conduct face-to-face interviews with users of existing processes,
and may even observe staff while they work to better understand the improvements
needed.

Need for holistic view

Taking a holistic view of any proposed business change is particularly important in helping the
project team gain an understanding of how different activities and resources interact; most
business change programmes will affect more than one area of the business.

Traditionally, most companies focused on dividing processes into specific activities that were
assigned to specific departments.

 As time went by the departments focused on doing their own activities without much
thought to the overall process.

 This is often referred to as the reductionist approach.

 It suggests that each department is its own isolated entity.

On the contrary, the systems perspective emphasises that everything is connected to


everything else.

 Systems thinking stress linkages and relationships and information flows.

 It emphasises that any given employee or unit or activity is part of a larger entity and that
ultimately those entities, working together, are justified by the results they produce.

 This approach is called the holistic approach.

There appears to be universal agreement that business analysis requires the application of a
holistic approach.
 Although the business analyst performs a key role in supporting management's
exploitation of IT to obtain business benefit, this has to be within the context of the
entire business system.

 Hence, all aspects of the operational business system need to be analysed if all of the
opportunities for business improvement are to be uncovered.

 The POPITTM model (Figure 14.4) highlights the different views that must be considered
when identifying areas for improving the business.

POPIT model
Figure 14.4: The POPIT model

This model shows us the different aspects, and the correspondences between them, that
business analysts need to consider when analysing a business system.

For each area, we might consider the following:

1 The people

 do they have the required skills for the job?

 How motivated are they?

 Do they understand the business objectives that they need to support?

2 The organisation
 is there a supportive management style?

 Are jobs and responsibilities well defined?

 Is there collaborative cross-functional working?

 The project team needs to consider how departments interact with one another.

3 The process

 are they well defined and communicated?

 Is there good IT support or are there several 'work-arounds' in existence?

 Does the process require documents to be passed around the organisation


unnecessarily?

 Is there the potential for delays or the introduction of errors?

4 The information

 do the staff have the information to conduct their work effectively?

 Are managers able to make decisions based on accurate and timely information?

5 The technology

 do the systems support the business as required?


 Do they provide the information needed to run the organisation?

We need to examine and understand all of these areas to uncover where problems lie and
what improvements might be possible, if the business system is to become more effective.

Taking a holistic view is vital as this ensures not only that all of the aspects are considered but
also the linkages between them.

 It is often the case that the focus of a business analysis or business change study is
primarily on the processes and the IT support.

 However, even if we have the most efficient processes with high standards of IT support,
problems will persist if issues with staffing, such as skills shortages, or the organisation,
such as management style, have not also been addressed.

 It is vital that the business analyst is aware of the broader aspects relating to business
situations such as the culture of the organisation and its impact on the people and the
working practices.

The adoption of a holistic approach will help ensure that these aspects are included in the
analysis of the situation.

 Business analysis places an emphasis on improving the operation of the entire business
system.

 This means that, while technology is viewed as a factor that could enable improvements
to the business operations, other possibilities are also considered.

To make all this more concrete, consider how it is applied to Porter's value chain.
 What's important to Porter's concept is that every function involved in the production of
the product, and all the support services, from IT to accounting, should be included in a
single value chain.

 It's only by including all of the activities involved in producing the product that a
company is in a position to determine what the product is costing and what margin the
firm achieves when it sells the product.

For instance, a business process, such as production, should cut across traditional
departments to combine activities into a single seamless process flow from start to finish.

 Porter's value chain and value network concepts were a revolt against excessive
departmentalism and a call for a more holistic view of how activities needed to work
together as one process to achieve organisational goals.

Contents of the business case

Proposals for change are drawn together to produce a business case.

 This sets out supporting recommendations to help management decide the most
appropriate change project to undertake.

 The business case will include the associated costs of the change options identified. (See
Benefits Management in chapter 11 for more detailed information on the business case)

Benefits of change

The project team will set out the improvement objectives that the desired change will
achieve.

 For example, a new call management system at a call centre should lead to improved call
response times, which will lower the number of customer complaints and boost sales.
(See Benefits Management in chapter 1 1 for more detailed information)

Most organisations will appoint a benefit owner to assess whether the project delivers the
anticipated benefits.
 The benefit owner may be an individual or group of people closely connected to the
change process to help the project team ensure that the business plan is delivered.

 The role of the benefit owner was explored in Chapter 11.

Stage 3: Design

Once a project has been started, the work of detailing how the new process will actually work
begins.

 The POP IT model is, again, a useful framework that will ensure a holistic approach.

The table below (figure 14.5) sets out the four views of the POPIT model and the
consideration each is likely to require during the design stage as well.
POPIT heading Areas for consideration

Organisational Management support


context

The project team should assess the level of management support required for
business change.

Cross-functional working

In order for processes to work effectively it is critical that departments


co-operate beyond functional boundaries.

 Departments should be configured to 'add value' during process change.


Functional departments such as the accounts and human resources teams
need to be closely integrated.

Jobs and responsibilities

Consideration will need to be given to the job roles and responsibilities of


existing employees.

 Business change projects should ensure that all staff affected has clear,
well-defined job roles and associated responsibilities for the new process.

 If people know what is expected of them and they are provided with the
resources to carry out their responsibilities, it should lead to optimal
performance once change is implemented.

Processes IT support

The level of IT support required within an organisation should be assessed.

 Organisations with poor IT support in place are likely to need to address


such weaknesses as part of process improvement.
Manual processes and system workarounds

Existing processes which require physical documents and paperwork to be


passed around the organisation should be redesigned perhaps by using a
workflow system.

People Skills

Determining the new skills required to carry out the activities in the new
process is critical.

 A significant proportion of the process design stage may be designated to


enhancing staff skill levels through the use of training.

Involving staff at the process design stage may help to ensure a smoother
implementation phase, as any problems with the proposed changes can be
identified and corrected prior to any further development.

Staff motivation

Most business change will only be successful if consideration is given to staff


morale.

 Reward systems which influence staff motivation must be designed in


alignment with the organisation's goals.

Information Information systems


Technology

Business processes need to be configured so that they help facilitate the flow
and delivery of critical information.

The board of directors will want internal and external information which they
can use to make decisions about the strategic direction of the business.
 Middle management will require information about key aspects of
performance which affects the ability of their department to achieve the
overarching strategy.

 For example, a breakdown of production down time.

Operational level staff will need information about operational performance


which affects the organisation on a day to day basis.

 For example, daily sales data.

What ICT systems are required to provide such high quality information?

 However, the focus should be on the information needs rather than the
technology itself.

Figure 14.5: Elements of the POPIT model for the DESIGN stage

Stage 4: Implementation

Forcefield analysis

The implementation stage of business change is likely to be the most challenging. This is due to
the influence of certain stakeholder groups.

 Failure to gain the support and acceptance of staff may undermine any changes.

The use of a forcefield analysis (seen earlier) can prove particularly useful in identifying those
forces driving and restraining change. By understanding the motives of those resisting change, an
should be better placed to weaken such opposition.
Communication

The use of a communication plan which highlights the benefits of the change is likely to prove
central to overcoming resistance.

 Communication needs to be of a professional nature to help build confidence and create


staff 'buy-in' to the new processes.

Rewards

Management may attempt to incentivise staff to embrace new processes by offering one-off
payments for flexible working conditions during the implementation stage.

 Longer term incentives such as the re-designing of existing performance appraisal schemes
and introducing performance-related pay may also help embed a new process.

Training

This may take the form of group or one to one sessions where training on how to use a new
process is provided.

 In cases of IT enabled change, it is common for staff to be provided with technical support
from the IT help desk.

Systems

As a significant number of modern business change projects involve the use of IT, the project
team will ensure that the technology undergoes sufficient system testing.

 Lacks of testing and insufficient attention to the need for data migration are common
problems with IT related process change.

 Data migration is concerned with transferring existing data from one system to another.

 It is a common feature of most IT system upgrade projects.

Stage 5: Realisation

See 'benefits realisation review' in Chapter 11.

In conclusion, the focus should be on business improvement, rather than on the use of
automation per se, resulting in recommendations that improve the whole business.

 Typically, these include the use of IT but this is not necessarily the case.

 There may be situations where a short-term non-lT solution is both helpful and
cost-effective.

 For example, a problem may be overcome by developing internal standards or training


members of staff.

 These solutions may be superseded by longer term, possibly costlier, solutions, but the
focus on the business has ensured that the immediate needs have been met.

 Once urgent issues have been addressed, the longer term solutions can be considered more
thoroughly.

14.3 Change Management Styles and Roles

This section looks at the different styles of managing change.

 It then goes on to examine the role of strategic leaders, middle managers and the influence
of outsiders such as consultants and external stakeholders.
14.3.1 Styles of managing change

This framework was developed by Kotter.

1 Education and communication involves explaining the reasons for and the means of
strategic change.

 This method might be appropriate if the problem to managing change is based on


misinformation or lack of information and if there is adequate time to invest in
persuading people.

 However, it is not effective to change 'core rigidities' or long-embedded


assumptions especially if there is a lack of mutual trust and respect between
managers and employees.

 It primarily involves top-down communication and it does not encourage low level
involvement.

2 Collaboration or participation in the change process is about involving likely affected


parties in the strategic issues of the change agenda or the implementation of change
strategy into routine aspects of organisational life.

 This method fosters a more positive attitude as people feel increased ownership to
the change process.

 It also builds readiness and capability.

 But the problem is that solutions may be found from within the existing culture
and therefore anyone who sets such a process must have the ability to intervene in
the process.

3 Intervention is the coordination of and authority over processes of change by a change


agent who delegates elements of the change process.

 For example, certain stages of change, such as ideas generation, data collection
etc., are delegated to project teams.

 The advantage is that it involves members not only in generating ideas but also to
partially implement them.

 This method fosters greater commitment but the risk is that of perceived
manipulation.

 In other words, employees might see the change agent to be manipulative.

4 Direction involves using personal managerial authority to establish a clear future


strategy and how change will occur.

 It is essentially top-down management of change and may be associated with a


clear vision or strategic intent developed by someone seen as a leader in the
organisation.

 This method is suitable for turnaround type of change.

 The is the style usually adopted by transformational leaders.

5 Coercion or edict involves imposing change.

 It is the most extreme form of change and may be successful if the organisation is
facing a crisis or state of confusion otherwise it will be least successful.

See figure 14.6 for a summary of the different change management styles.
Style Means/ context Benefits Problems Circumstances of

effectiveness

Education and Group briefings Overcoming Time Incremental


communication change
assume lack of (or mis) consuming.
or long-time
internalization of information Direction or
horizontal
strategic logic progress may be
and transformational
unclear
trust of top change

management

Collaboration/ Involvement in Increasing Time


participation
setting the ownership of a consuming,
strategy agenda
decision or Solution/
and/or resolving
strategic issues process. May outcome within
by taskforces or
groups improve quality existing

of decisions paradigm

Intervention Change agent Process is Risk of

retains co- guided/ perceived

ordination/ controlled but manipulation

control; involvement
delegates
takes place
elements of
change

Direction Use of authority Clarity and Risk of lack of Transformational


to set direction
speed acceptance and change
and means of
change ill-conceived

strategy

Coercion/ edict Explicit use of May be Least successful Crisis, rapid


power through successful in unless crisis transformational
edict
crises or state of change or
change
confusion
in established

autocratic
cultures

Figure 14.6: Summary of change management styles


Observations

1 Different styles may be required in different stages of the change process.

2 In terms of time, participative styles are more appropriate for incremental change but
where a big bang change is needed, direct approaches may be more suitable.

3 In organisations with hierarchical power structures a direct style will be typical and it
may be difficult to break away from it.

 On the other hand, in 'flatter' power structures, collaboration or participation will


be both desirable and inevitable.

4 Different styles suit different managers' personalities.

 Normally, those with the greatest capability to manage change are those who have
the ability to adopt different styles in different contexts.

5 Styles of managing change are not mutually exclusive.

 There will be a diversity of views about change within the organisation and
amongst its different stakeholders.

 Some stakeholders may prefer a participative style whilst some others may prefer
a more direct approach.

14.3.2 Roles in change management

A change agent is the individual or group that helps effect strategic change in an
organisation.

 It could be a strategic level manager or a middle manager or a group of change agents


from within the organisation or from outside (consultant) with a large team working on
implementing the change.

1. Strategic leaders

The management of change is, more often than not, linked to the role of a strategic leader.

 Leadership is the process of influencing an organisation in its efforts towards achieving


an aim.

 So it may not necessarily be someone from the top but rather someone who is in a
position to have influence.

There are normally 2 categories of leaders (as seen in chapter 12):

1 Charismatic leaders are mainly concerned with building a vision and energising people
to achieve it, and are therefore associated with managing change.

 These leaders have beneficial impact on performance when the people who work
for them see the organisation facing uncertainty.

2 Instrumental or transactional leaders focus more on designing systems and controlling


organisation's activities and are more likely to be associated with improving the current
situation.

See figure 14.7 for the five different approaches to strategic leadership.
 Some charismatic leaders take a personal responsibility in the search for future
opportunities and the development of overall strategy (the strategy approach) or on
strategic change and the continual reinvention of the organisation.

 Others focus on developing people who can take responsibility for strategy at the
market interface (the human assets approach) or on a particular area of expertise that
will be a source of competitive advantage.

 The transactional leader's focus is on the development, communication and monitoring


of a set of controls to ensure uniform organisational behaviour and standards (a box
approach).

Figure 14.7 strategic leadership approaches

2. Middle managers
A top-down approach to managing change sees middle managers as implementers of change.

 Their role is to put into effect the directions established by top management by making
sure that resources are allocated and controlled appropriately, monitor performance
and behaviour of staff and where required, explaining the strategy to those reporting to
them.

 As such middle managers may be seen, not as facilitators but as blockers to the strategic
change process.

 As a result, top management may prefer to reduce the numbers and layers of
management so as to speed up communications between top management and
organisational members, and to reduce potential blockages and filters.

However, Steve Floyd and Bill Wooldridge argue that middle managers can play 5 important
and beneficial roles especially in large and complex organisations and yet reduce hierarchical
structures:

1 The systemic role of implementers and controllers where they are monitors of change
handed down from top managers.

2 Translators of change where change is established by senior management. Their role is


to interpret the strategic direction of change to lower level staff.

3 Likewise, middle managers are likely to be involved in the reinterpretation and


adjustment of strategic responses as events unfold (for e.g. in terms of relationships
with customers, suppliers, the workforce and so on) — a vital role they are uniquely
qualified for because they are in day-to-day contact with such aspects of the
organisation.

4 They are therefore a crucial relevance bridge between top management and lower level
staff.
 They are in a position to translate change initiatives into a locally relevant form or
message.

5 They can also be advisors to senior management on the likely blockages to change and
the requirements for change.

Therefore, they may contribute substantially to strategic change, but if they are not
supported, they may become blockers of change.

 Their lack of commitment can lead to serious blockages and resistance and hence their
involvement is very important to the change process.

3. Outsiders

Outsiders are important to the change process and may take different forms:

1 A new chief executive officer could be effective for turnaround type of change.

 He or she brings a fresh perspective to the context of change, not bound by the
past or existing cultural and structural constraints.

 New hybrid chief executives seem particularly successful.

 These executives are from the same industry or from some other part of the
conglomerate who have experience and visible success in change management.

2 New management from outside can increase the diversity of ideas and break down
cultural barriers to change.

 However, their success in managing change will depend on how much explicit
visible backing they receive from the chief executive otherwise they will be seen to
lack authority and influence.
3 Consultants are increasingly used to facilitate change processes.

 For example, they might be used as project planners or facilitators of project teams
or to conduct strategy workshops.

Their value is twofold:

a They do not inherit the 'cultural baggage' of the organisation and can therefore
bring a dispassionate view to the process.

 As a result, they may ask questions and undertake analyses that are likely to
challenge the taken-for-granted ways of seeing or doing things.

b They symbolically signal the significance of the change process, not least because
their fees may be of a very high order.

4 It must also be remembered that external stakeholders like the government, investors,
customers, suppliers and business analysts all have potential to act as change agents.

14.4 Levers for Managing Strategic Change

This section examines the different 'levers' that can be employed to manage strategic change. It
must be noted that many of these take us back to the elements of the cultural web.

14.4.1 Turnaround

In a turnaround strategy the emphasis is on speed of change (big bang) and rapid cost
reduction and or revenue generation.

 However, there is no need to change the business or organisational paradigm.

 Balogun and Hailey cite turnaround as an example of a reconstruction type of change.

 In its absence a business could face closure, enter terminal decline or be taken over.

Some of the main elements of a turnaround strategy are:

1 Crisis stabilisation

The aim is to regain control over the fast declining position.

 There must be a short term focus on cost reduction and/or revenue increase (see
figure 14.8). However, these measures must be taken quickly.

 Research has shown that the most successful turnaround efforts focus on reducing
direct operational costs and on productivity gains.

2 Management changes, especially at the top

It usually includes the introduction of a new chairman or CEO as well as changing the
marketing, sales and finance directors. There are 3 reasons for this:

 Old management will be seen as the reason for the existing problems and key
stakeholders may therefore want them to be replaced.

 The need to bring in management in turnaround experience.

 New management are likely to bring different approaches to the management


process including directive approaches to change.
3 Gaining stakeholder support

A clear assessment of the different stakeholder groups will become crucially important
in managing turnaround.

 Keep 'key player' stakeholders, like banks and shareholders, informed of the
situation as it is and improvements as they are being made.

4 Clarify target market(s)

Focus revenue generating activities on key market segments.

 This may even require withdrawing immediately from non-profitable markets.

 Get 'closer' to the customers and improve the flow of marketing information,
especially to senior levels of management.

5 Re-focus

The above action will provide opportunities to reduce the scope of the organisation's
product range.

 The firm could also consider outsourcing non-core activities.

6 Financial restructuring

Change the existing capital structure, raising additional finance or renegotiating with
creditors, especially banks.

7 Prioritise critical areas

Identify those areas that promise quick and significant improvements.


 The focus of action should be on the existing business and problems rather than
seeking new opportunities in different markets or businesses that managers do not
understand.

Increasing revenue Reducing costs

-Ensuring marketing mix tailored to key -Reduce labour costs and reduce costs of
market segments senior management

-Review pricing strategy to maximize -Focus on productivity improvement


revenues

-Reduce marketing costs not focused on


-Focus organizational activities on needs of target market
target market sector customers

-Tighten financial controls


-Exploit additional opportunities for
revenue creation related to target market
-Tighten control on cash expenses

-Invest funds from reduction of costs in new


growth areas -Establish competitive bidding for suppliers;
defer creditor payments, speed up debtor
payments

-Reduce inventory

-Eliminate non-profitable products/service

Figure 14.8: Turnaround - revenue generation and cost reduction strategies


14.4.2 Challenging the taken-for-granted

One of the major challenges of strategic change is the need to change the paradigm.

 Where there are long standing assumptions there will be higher resistance to change.

 People will always find ways to 'cling on' to the existing paradigm.

Therefore, senior managers need to:

1 Unpack in an analytical fashion the elements people take for granted bringing this into
the open and debating it through workshops.

 Such strategy workshops are becoming increasingly popular as it makes these


assumptions visible and therefore they are more likely to be questioned.

2 Use scenario planning to get people to see different possible futures and their
implications for the organisation.

 This will permit managers to see the realities of changing circumstances.

3 Bring senior managers face-to-face with realities by making them 'taste' their own
products or services.

 For example, a senior executive of a rail company introduced a policy that all senior
managers should travel economy class wherever possible as this will bring them
closer to their markets or customers.

14.4.3 Changing routines

Routines are the organisational specific 'ways we do things around here' which tend to
persists over time and guide people's behaviour and can at times be a source of competitive
advantage (core competences).
 However long-established routines can seriously block change and can become core
rigidities.

 Managers should not assume that the required changes will happen automatically just
because they have explained what changes are needed and why and how these changes
will take place.

 They may find that the influence of long-standing routines can delay or block changes.

If a planned, top-down approach to change is adopted it is important to identify the critical


success factors and competences underpinning these routines.

 In so doing the planning of the implementation of strategy can be driven down to lower
levels and it is likely this will require changes in the routines of the organisation.

 It is probably easier to change behaviour and thus change taken-for-granted


assumptions than to try to change taken-for-granted assumptions as a way of changing
behaviour.

 Changing routines to change behaviour may itself help change people's beliefs and
assumptions.

Experiment with changing routines as a way of changing strategy.

 Begin by extending (slight changes) existing ways of doing things such that there is
hardly any discernible difference.

 If this is accepted, go further and 'bend the rules of the game'.

 Initially staff may resist but with persistent extending and bending, new routines will
soon become acceptable.

14.4.4 Symbolic processes


Symbols are objects, events, acts or people which express more than their intrinsic content.

 Examples include status symbols such as cars and office sizes, the type of language and
technology used, and organisational rituals.

Consider the following examples of how to change symbols and bring about strategic change:

1 Organisational rituals are meant to effect or consolidate change.

 Introduce new rituals and/or do away with old ones to signal or reinforce change.

2 Change existing systems and processes. Reward systems, information and control
systems and organisational structures that represent reporting structures and status are
all symbolic in nature.

 For example, banks, by shifting from manual to computer-based processing, have


not only signalled an era of technological change, but also highlighted to staff that
their prime responsibility is dealing with customers, rather than dealing with forms.

3 Change the physical aspects of the work environment.

 For example, change of location for the head office, relocating personnel, changing
uniforms, altering office space, etc are all powerful symbols of change.

4 Perhaps the most powerful symbol of all in relation to change is the behaviour of
change agents themselves, especially strategic leaders.

 Their behaviour, language and the stories associated with them can signal
powerfully the need for change.

 It is vital that the visible behaviour of the change agent is in line with the change.
 Their behaviour must be positive and show commitment to the change.

5 Change the language used by the change agents.

 Change agents need to think carefully about the language they use.

 They should aim to galvanise change with their language and should not use
language that signals adherence to status quo, or a personal reluctance to change.

6 Stories may also be used to some extent.

 Use the corporate newsletter, the Intranet or even informal subtle tactics to
spread stories that would galvanise change.

14.4.5 Power and political processes

To effect change, powerful support is needed from an individual or group combining both
power and interest ('key player' stakeholder).

 This may be the CEO or a powerful member of the board or an influential outsider.

 There may be a need to reconfigure the power structures if transformational change is


required.

The following are some of the mechanisms associated with power which can be used for
change:

1 Having the power or ability to acquire, withdraw or allocate important resources can be
a valuable tool in overcoming resistance to change and therefore building readiness.

2 Association with powerful stakeholder groups can help build a power base or
management should seek to associate with a respected or visibly successfully change
agent.

 This can help to overcome resistance to change.

 Some change agents may deliberately seek out and win over someone who is
highly respected from within the very group resistant to change.

3 Remove individuals or groups resistant to change.

 These individuals or groups could be powerful or powerless and may be either


internal or external stakeholders.

4 Build up alliances and networks of contacts and sympathisers even if they are not
powerful.

 The change agent should focus on individuals or departments more sympathetic to


change to build momentum.

 He may even marginalise those who are resistant to change.

 But the drawback is that powerful groups in the organisation may regard these
actions as a threat to their own power, and this is likely to result in further
resistance.

5 Remove or challenge or change the rituals and symbols as this may be a very powerful
way of achieving the questioning of what is taken for granted.

14.4.6 Communicating and monitoring change

Management and change agents must not underestimate the extent to which staff
understand the need for change, what change is intended to achieve, or what is involved in
the changes.
Some important points to emphasise are:

1 Effective and open communication may be the single most important factor to build
trust and overcome resistance to change.

2 Clarify the vision and strategic intent of the change.

 This may not be easy but to be effective it is important that the strategic purpose
of change is made clear.

3 Choose the right media to communicate.

 Figure 14.9 summarises some of the choices and the likely effectiveness of these in
different circumstances.

 To communicate about routine changes, general bulletins like e-mail circulars will
be sufficient.

 However, for complex and important changes, face-to-face communication will be


necessary.

4 Involve affected members in the strategy development process or the planning of


strategic change.

 This is a form of communication and is very effective.

 Those who are involved in effect become part of the change agency process
themselves.
 This is an important element of the intervention process discussed earlier.

5 Communication must be seen as a two-way process.

 Feedback on communication is crucial especially for critical, complex and/or


threatening changes.

 It is rare that changes have been thought through in ways that have meaning or
can be put into effect at lower levels in the organisation.

 It is also possible that the purpose of change be misunderstood at such levels.

6 Using the right emotional aspects of communication are important for the change
process.

 Change agents need to use appropriate messages or language (words such as


'danger' and 'risky') to describe negative situations and positive language
associated with 'pleasure' and 'progress' to describe the desired future.

7 Monitor and control the change programme as this is of key importance.

 But sadly, too often, change programmes are not closely monitored.
Figure 14.9: Effective and ineffective communication of change

14.5 Potential Pitfalls of Change Programmes

There are lessons to be learnt from failed change programmes. Lloyd Harris and Emmanuel
Ogbonna identified a number of unintended outcomes of change programmes:

1 The ritualisation of change and 'initiative overload':

change agents may see the change programme as a series of ongoing activities (instead of a
one-off programme).

 However the risk is that change programmes may be seen by people as a ritual signifying
very little.

2 Hijacked processes of change:

well-meant change efforts generate the opportunity for others to hijack them for different
purposes.

 For example, in an insurance firm, the introduction of a computerised telephone system


originally meant to improve customer service became a vehicle for reducing the
workforce dealing with customers.

 The result was no improvement in service and a highly suspicious workforce.

3 Erosion:

the original intention of the change programme becomes gradually eroded by other events in
the organisation.

 For example, it is difficult to maintain the impetus of a change programme in a situation


where there is a high turnover of staff.

4 Reinvention:

the attempted change gets reinterpreted according to the old culture.

 As a result, no change occurs. For example, when a clothing company tried to shift from a
product-orientation to a customer-orientation, it was reinvented such that 'customer
service' became translated as 'service quality' — equally acceptable to those who
remained loyal to the old product-orientation.

5 Ivory tower change

here the proponents of change, perhaps top level managers, do not understand the realities
of change at the ground level, in terms of either the needs of the marketplace or the views of
the people in the organisation.

 They are removed from reality and are therefore not credible.

6 Inattention to symbols of change


change agents fail to link the big messages about change to the day-to-day and symbolic
aspects of the organisation and hence may inadvertently signal the wrong messages.

 For example, a family firm, keen to bring in professional management which, by doing so
at CEO level, inadvertently signalled that the previous family-dominated management
was unprofessional.

7 Uncontrolled and uncoordinated efforts

here there are inconsistencies between the intentions of change and the practices introduced
in terms of change systems and Initiatives.

8 Behavioural compliance

this means that staff are not really 'buying into' change.

 Instead they just appear to comply with the changes.

 There is likely to be superficial compliance especially when the change agent is around.

So the important managerial implications are:

1 Management and change agents must pay special attention to the monitoring of change as it
takes place.

 They also need to be flexible enough to change the emphases and tactics within the
change programme.

2 Change programmes are most likely to run foul of the power of existing culture.

 Therefore change agents need to understand the existing culture and its likely effects.
3 Involving people will bring more benefits.

 Change agents must not regard them as just recipients of change.

4 A major challenge: change agents must be careful not to underestimate the complexity of
change as any form of change is difficult.

 It is likely to be more difficult than the optimistic change agent may think.