Chapter 6

Managing Change and

Innovation

Change is a constant for organizations and thus for managers. Because change can’t
be eliminated, managers must learn how to manage it successfully. Because innovation
is often closely tied to an organization’s change efforts, managers must know how to
manage it as well. Focus on the following learning outcomes as you read and study this
chapter.

LEARNING OUTCOMES

6.1 Compare and contrast views on the change process.

6.2 Classify types of organizational change.
6.3 Explain how to manage resistance to change.
6.4 Discuss contemporary issues in managing change.
6.5 Describe techniques for stimulating innovation.

A MANAGER’S DILEMMA

In today’s dynamic workplace, managers can be sure that one thing will remain
constant—change. In order to compete successfully, managers must encourage
creativity and innovation among all of the employees in their organization. In “A
Manager’s Dilemma”, one of the most innovative organizations in the United States,
and quite possibly the world, is undergoing a dramatic change. From its high of putting
a man on the moon and the development of the space shuttle program, NASA has
made a reputation of doing what seemed impossible. Today, NASA will have to
reinvent itself as it is called upon by Congress and the President to cut costs and
undergo organizational reformation. How will employees respond?

Change will not be easy for NASA. Over the years it has grown like most government
agencies into a bureaucracy that resist change. As your students study this chapter,
they will discover ways to stimulate creativity and innovation and to manage change
successfully. As Chapter 6 opens, students are asked what NASA should do to revitalize
the US space program to promote scientific development and space exploration for the
future. If your students were in a leadership position at NASA, what would they do?
CHAPTER OUTLINE

INTRODUCTION
Change and change management are important aspects of the manager’s job.
Chapter 6 focuses on ways to manage change effectively and to promote
innovation in an organization.

6.1 THE CHANGE PROCESS

Exhibit 6-1 shows that both external and internal forces create the need for
change. External forces creating the need for change come from various
sources:
1. The marketplace
2. Government laws and regulations
3. Technology
4. Labor markets
5. The economy

Internal forces creating change usually originate from the internal operations of
the organization or from the impact of external changes. These internal
forces include:
1. Changes in strategy
2. Changes in the workforce
3. New equipment
4. Changes in employee attitudes
A. Two Views of the Change Process. Two very different metaphors can be
used to describe the change process.
1. The calm waters metaphor characterizes the process of change
as being like a ship crossing a calm sea. The calm waters
metaphor can be illustrated by Lewin’s 3-step process for change.
(See Exhibit 6-2)
a. Unfreezing the equilibrium is the first step. Unfreezing the
equilibrium can be accomplished in one of three ways.
1. Increasing driving forces, which are forces that direct
behavior away from the status quo.
2. Decreasing restraining forces, which are forces that hinder
movement from the existing equilibrium.
3. Combining the two approaches.

b. The next step is to implement the change itself.

c. The final step is to refreeze the situation.
B. The white-water rapids metaphor describes change that takes place in
uncertain and dynamic environments. To put the two views into
perspective, it is helpful to note that not every manager constantly faces a
world of chaotic change. However, the number of managers who do not
face this type of environment is rapidly dwindling!

6.2 TYPES OF ORGANIZATIONAL CHANGE

 A. What is organizational change? Organizational change is defined as
any alteration of people, structure, or technology in an organization.
Instead of trying to eliminate change, managers must realize that change
is always present and that they should seek ways to manage change
successfully.
B. Types of Change
What can a manager change? A manager may make changes in three
categories: structure, technology, and people. (See Exhibit 6-3)
1. Changing Structure
a. Managers can alter one or more structural components of
the organization, such as work specialization,
departmentalization, chain of command, span of control,
centralization and decentralization, and formalization.
b. Frequently, the design of the organization’s structure is
changed in order to meet new demands.
2. Changing Technology
a. Competitive factors or new innovations often require
introduction of new equipment, tools, or operating
methods.
b. Automation is a technological change that replaces certain
tasks done by people with machines.
c. Computerization has probably been the most visible
technological change in recent years.
3. Changing People
a. Organizational development (OD) is techniques or
programs to change people and the nature and quality of
interpersonal work relationships.
b. Exhibit 6-4 provides descriptions of the most popular OD
approaches.
B. The Manager as Change Agent
Change requires a catalyst. The manager may act as a change agent—
someone who acts as a catalyst and assumes the responsibility for
managing the change process.

6.3 MANAGING RESISTANCE TO CHANGE

Managers are motivated to initiate change when they are committed to improving
organizational performance.
A. Why do People Resist Change
Resistance to change is a natural event in organizations and occurs for
three main reasons including: uncertainty, habit, concern about personal
loss, and the belief that the change is not in the organization’s best
interest.
B. Techniques for Reducing Resistance to Change
Organizations can build up inertia that actually motivates employees to
resist change. The techniques for Reducing Resistance are listed in
Exhibit 6-5. They are:
1. Education and communication
2. Participation
3. Facilitation and support
4. Negotiation
 5. Manipulation and co-optation
6. Coercion
6.4 CONTEMPORARY ISSUES IN MANAGING CHANGE
Contemporary issues related to managing change include organizational culture,
employee stress, and successful change action.
A. Changing Organizational Culture
1. Culture is resistant to change because:
a. Culture consists of relatively stable and permanent
characteristics.
b. Culture is formed over a long period of time.
c. Strong cultures have highly committed people.
2. Understanding the Situational Factors
Some situations can facilitate culture change, including:
a. A dramatic crisis
b. A change in leadership
c. A young organization that is small in size
d. A culture that is weak
3. How Can Cultural Change Be Accomplished?
Exhibit 13-5 demonstrates the need for a comprehensive,
coordinated strategy for managing cultural change.
B. Employee Stress
1. What is Stress? Stress is the adverse reaction people have to
excessive pressure placed on them from extraordinary demands,
constraints, or opportunities.
2. Causes of Stress. Research shows that stress may be related to
the organization or to personal factors.
3. Symptoms of Stress. Stress may be exhibited in a number of
ways. For example, an employee who is experiencing a high
degree of stress may become depressed, accident prone, or
argumentative and may be easily distracted. Exhibit 6-7 groups
stress symptoms into three categories: physical, psychological,
and behavioral.
4. Reducing Stress
Employee selection, RJP, MBO, and job redesign are methods of
reducing stress in an organization.
C. Making Change Happen Successfully
Managers can increase the likelihood that change will be successful in
their organization by:
1. Focusing on preparing the organization for change
(See Exhibit 6-8 for characteristics of a change-capable
organization.)
2. Recognizing the important role they themselves play in the
change process
3. Involving every organizational member in the change

6.5 STIMULATING INNOVATION

Innovation is essential to organizational success in a dynamic marketplace.
Whether it’s Google, Facebook, or Apple, all companies rely on innovation to
deliver the products and services necessary for the marketplace. Exhibit 6-9 is a
list of companies named as most innovative in the world.
 A. Creativity versus Innovation.
1. Creativity is the ability to combine ideas in a unique way or to
make unusual associations between ideas.
2. Innovation is taking creative ideas and turning them into useful
products or work methods.
B. Stimulating and Nurturing Innovation
How can managers foster innovation? The systems model shows how to
foster innovation. (See Exhibit 6-10) Three sets of variables have been
found to stimulate innovation.
1. Structural variables can be summarized as follows:
a. Organic structures positively influence innovation.
b. The easy availability of organizational resources provides
a critical building block for innovation.
c. Frequent communication among work units helps to break
down barriers to innovation.
d. Minimize time pressures on creative activities.
e. Provide explicit support for creating work and non work
sources.
2. Cultural variables show that an innovative culture is likely to have
the following characteristics:
a. Acceptance of ambiguity
b. Tolerance of the impractical
c. Low external controls
d. Tolerance of risk
e. Tolerance of conflict
f. Focus on ends rather than means
g. An open systems focus
h. Positive feedback
3. Human resource variables indicate the important role that people
play in innovative organizations.
a. Innovative organizations actively promote the training and
development of their employees so that their knowledge
will be current.
b. Innovative organizations offer employees high job security.
c. Innovative organizations encourage individuals to become
idea champions—that is, individuals who actively and
enthusiastically support new ideas, build support,
overcome resistance, and ensure that the innovations are
implemented.

LEADERS WHO MAKE A DIFFERENCE

Ratan Tata, chairman of both Tata Group and Tata Motors in India, has an interesting
way to promote innovation in his company. Each year, Tata host a competition
designed to promote internal innovation. Last year 1,700 employee teams participated.
The prize for the winners? Tata doesn’t give cash, but instead gives awards that
promote team respect and recognition.