Module: Managing Change in Organisations Unit: Change Management; The Business Context Lesson: Drivers for Change

Drivers for Change

Introduction and Background

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The business drivers for change in the next decades will be more numerous than in the past. There will be challenges from global expansion, new technologies and new business models. What is clear is that the successful organisation of the 21st century will have to be an agile workforce with ability to embrace and thrive on change. Change management is therefore a critical focus area for Leaders and Managers of visionary organisations. In this lesson we look at the drivers for change. We also examine how organisations have evolved to be more responsive to change.

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Drivers for Change

Drivers for Change

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The drivers for change are numerous in a highly competitive and global business context. The expansion of the global economy is assured. With it comes the challenge of conducting business efficiently across different geographical and cultural boundaries, and adopting new business models. Mergers and acquisitions will increase as corporations seek to fast track global expansion. Furthermore the pace of technological development is expected to continue unabated. All of these factors provide the background to change within an organisation.

Alvin Toffler, a former editor of Fortune Magazine and influential voice in business, made the famous comment: 'There is only one constant today and that is change' Tofler made that comment some decades ago, and today the rate of change is phenomenal. No longer can organisations, even in the public sector, sit back and be content with steady state. Every organisation is challenged by change, and competitiveness is determined by the organisation's ability to cope with change. How is your organisation challenged by change? Identify three areas of major change your business is faced with.

So what are the drivers for change? We have mentioned some of the factors that call for change. Here are others - weak business performance, poor customer satisfaction, high rate of project failure, lack of innovation, rapid technology advances, new business models, outsourcing, mergers and acquisitions, collaborative partnership models, greater agility in customer responsiveness and so on.

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Drivers for Change

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Here are some different views on the drivers for change and the need for formal management of change:

A Customer's View 'The new implementation is probably a great system, but my staff are not using it' A Project Manager's View 'We delivered the project on time and to budget, but the customer is not using the system' A CEO's view 'An unacceptable number of our projects fail to deliver to customer expectations'

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Drivers for Change

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Historical Context; How organisations have evolved to manage change

Change is not new. Businesses have always faced change, but the rate of change is increasing at a phenomenal pace. Historically, those organisations that have been well placed to embrace change have thrived and have stood the test of time on competitiveness. The structure of organisations and the mode of working can have a considerable effect on the ability of an organisation to embrace change and exploit change. Today, leaner, flatter organisations, and projectbased working models, are sought for agility and faster responsiveness to changing business conditions. Let us trace a few of the significant milestones in the development of organisations.

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Drivers for Change

Bureaucratic Organisations

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During the late 1800s, many European organisations were managed on a personal, family-like basis. Employees were loyal to a single individual rather to the organisation or its objectives. The dysfunctional consequence of this management practice was that resources were used to realise individual desires rather than organisational goals. Employees in effect owned the organisation and used resources for their own gain rather than to serve customers. Change was initiated from the top - usually by the owner of the business and not in response to environmental triggers or organisational goals. Recognising the dysfunctionality of the above, Max Weber Weber, M (1947) suggested that organisations could be managed on an impersonal, rational basis. It was felt that organisations, based on rational authority, would be more effective and adaptable to change because continuity is related to formal structure and positions rather than to a particular person, who may at some point leave. This form of organisation was called a bureaucracy. Rules, regulations, hierarchy, authority and impersonality were the hallmarks of bureaucratic organisations. Again, change was prescribed from the top (top-down) but much more structured and rational.

Identify why Weber's structure was superior to the personal, family-like management previously deployed - particularly in the context of managing change?

Here are Weber's reasons for introducing bureaucratic management:

Rules and regulations The formal guidelines that define and control the behaviour of all the employees while they are working. This formal system helps to provide the discipline that an organisation needs to exercise control and reach its goals. Adherence to rules and regulations ensures uniformity of procedures and operations regardless of an individual manager's or employees personal desires. Rules and regulations also enable top management to direct and co-ordinate the efforts of the middle managers and, through them, the efforts of line managers and employees. Managers may come and go, but rules and regulations help to maintain organisational stability. Impersonality Reliance on rules and regulations leads to impersonality, which protects employees from the personal whims of managers. Although the term often has negative connotations, Weber believed that impersonality ensured fairness for employees. An impersonal superior evaluates subordinates objectively on performance and expertise rather than subjectively on personal and emotional considerations. In other words, impersonality heightens a manager's objectivity and minimises discretion or favouritism. Such an environment is more conducive to change Division of labour Managers and employees perform officially prescribed and assigned duties based on specialisation and expertise. This enables management to set people to work on jobs that are relatively easy to learn and control. Hierarchical structure Weber advocated the use of a clear hierarchical structure in which jobs were ranked vertically by the amount of authority the holder had to make decisions. Typically, power and authority increase through each level up to the top of the hierarchy. Each lower position is under the control and direction of a higher position. Authority structure A system based on rules, regulations, impressionability, division of labour and hierarchical structure is tied together by an authority structure - the right to make decisions of varying importance at different levels within the organisation. Rationality Refers to using the most efficient means to achieve the organisation's objectives - an important factor in achieving change. Hence, managers should run their organisations locally and 'scientifically'. All decisions should lead directly to achieving the organisation's objectives.

Think about organisations of which you may have experience. Do any of them show characteristics of bureaucratic management? What leads you to this conclusion?

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Drivers for Change

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There is a move away from highly bureaucratic organisations today, even in the public sector. The onus of responsibility and accountability is increasingly passed down to the individual or to small project teams. However, even in the modern day organisation, there is clearly a need for some form of hierarchy; a pyramid of positions as described next.

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Drivers for Change

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Managing the business The work of a relatively small group of people carrying the responsibility for the overall direction and performance of the organisation. They will develop strategy, policies and have particular responsibility for managing relations with people and strategic partners, including all stakeholders, media and elected representatives. Their knowledge of internal detail will be good but they are likely to spend only little time dealing with direct operations as the organisation grows bigger. Managing managers Usually referred to as 'middle management. Managers are expected to ensure that First-line Managers/supervisors comply with the broader policies of the organisation. They ensure that performance targets are being met, maintain contact with what is happening and provide support or pressure as and when required. The performance of middle managers is assessed to a large extent on their ability to manage other managers. Managing staff on direct operations First-line managers who ensure that staff perform the daily operations of the organisation. They also deal with any unforeseen circumstances that might arise. Examples might include manager of a bank branch, senior nurse on a hospital ward, or head chef in a hotel. Performing direct operations Employees performing direct operations, and who carry out the work to produce and deliver products and services.

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Drivers for Change

Scientific Management

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Frederick W Taylor originated a theory based on the relationships between the worker and the machinebased production systems that at the time were in widespread use. He stated that 'the principle object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity for each employee. The words maximum prosperity are used to mean the development of every branch of the business to its highest state of excellence, so that the prosperity may be permanent.' Taylor felt that the best method of achieving this was to ensure that every worker was functioning at his/her maximum efficiency, thus attaining the highest grade of work possible as a result of natural ability. This could be secured by detailed of control of the process, which would be the primary responsibility of management, not the worker. During the 1920s and 1930s these ideas were followed by many industrial economies, allowing productivity to increase. However, some commentators have devalued Taylor's approaches to work measurement, particular in western economies.

The main disadvantage of scientific management was the concentration on finely subdivided tasks that a worker would repeat thousands of times in a working life. This process can be viewed as de-skilling and dehumanising - it permitted no variation or individuality. Scientific management is inconsistent with achieving an agile and motivated workforce for implementation of change in organisations today.

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Drivers for Change

Human Relations School

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The Human Relations school of thought considers that truly effective control comes from within the individual worker rather than from strict, authoritarian control. This philosophy recognised and responded to social pressures for improved treatment of workers. The focus on this school of thought increased following a series of studies, known as the Hawthorne studies, carried out at a Chicago electric company.

The main findings of the Hawthorne studies attributed employees' increased output to managers' better treatment of them. Human relations were found to be an important part of the overall output of the plant. Employees performed better when managers treated them in a positive manner.

Gain a better understanding of the human relations school, by carrying out some research of your own on the Hawthorne studies. You may wish to start by reading the article 'The Human Relations Approach' at: http://www.accel-team.com/human_relations/index.html Summarise the human relations school and comment on the findings of the Hawthorne studies.

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Drivers for Change

Fordism

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Fordism is associated with industrial, mass production, mass consumption economies. It was originated by Henry Ford, the founder of the Ford Motor Corporation, and made a major contribution in the area of process engineering, by emphasising standardisation and quality. However, the term Fordism was actually coined by Frederick Taylor who was critical of Ford's work. Ford controlled all the stages of production from raw materials to final distribution to customers by a process of standardisation. Ford was one of the first to recognise the need to embrace quality at all levels of the organisation - from management right down to the operational workers. Many of Ford's ideas were later embraced by Japanese car manufacturers with great success.

Henry Ford's approach to quality and, in particular, to mass production and assembly lines, is termed 'Fordism'. An improvement in quality is one aspect of change management. The adoption of Taylorism and Fordism by organisations in the early 1900s led to significant improvements in quality. Increased efficiency was achieved in the production process by having the workers focus merely on production to specification. Quality products were achieved, but often at great cost - because defects were being encountered at the end of the production process. Today there is a higher emphasis on 'building in' quality rather than just inspecting it.

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Drivers for Change

Knowledge Age

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Today we operate in what is termed the knowledge age. An age where continuous learning in the pursuit of intellectual assets is at the heart of competitiveness. The advent of the personal computer, the Internet and the electronic delivery of information has transformed the world from a manufacturing, physically-based economy to an electronic, knowledgebased economy. The key resources of the new, knowledge-based economy are intellectual assets; brainpower and the ability to acquire, deliver, and process information effectively.

'Education will become the centre of the knowledge society, and the school is the key institution' Peter F Drucker Drucker, P (1999)

The growth industries of the future will be propelled by intellectual capital; software, biotechnology, nanotechnology, new mediaall examples of knowledge industries. Technology is a driver of growth industries of the future, but human capital is its fuel. One of the reasons India is a rising economic power is because of the huge increase in knowledge workers it is creating. With the acceleration of Internet learning, the democratisation of education will dramatically increase the advantages countries such as India have, by lowering the cost, increasing access and ultimately improving the quality. Education has become critical for both individuals and employers. In today's economy, a degree is just a prerequisite to participating in the industries of the future. As the result of technology innovations such as the Internet, video-conferencing, and satellite systems, a New Economy has emerged driven by knowledge and information. The prominence of the knowledge economy has led to accelerated change.

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Drivers for Change

Environmental Turbulence

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Environmental turbulence refers to the amount of change and complexity in the environment of a company. The greater the amount of change in environmental factors, such as technology and governmental regulations, and/or the greater the number of environmental factors that must be considered, the higher the level of environmental turbulence. Today we operate in an environment of very high volatility. When external factors change rapidly, the organisation experiences very high uncertainty; examples include telecommunications and aerospace firms, computer and electronics companies, and ecommerce organisations that sell products and services over the Internet. Organisations have to adapt to the rapid changes in the environment to stay competitive.

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Drivers for Change

Planned and Emergent Change

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Understanding the nature of the change you wish to effect and the context in which you are working are important in determining an appropriate strategy. Entering uncharted change territory without some sort of route map puts you at an immediate disadvantage from the start. One of the first stages in charting the territory is to understand a little more about the type of change you wish to make (broadly where you want to get to and how you plan to travel).

Planned change is deliberate and a product of conscious reasoning and actions. Emergent Change is change that unfolds in an apparently spontaneous and unplanned way.

In the business context, in what ways can change be emergent rather than planned?

Change can be emergent rather than planned in two ways: Managers make a number of decisions apparently unrelated to the change that emerges. The change is therefore not planned. However, these decisions may be based on unspoken, and sometimes unconscious, assumptions about the organisation, its environment and the future (Mintzberg, H (1989)) and are, therefore, not as unrelated as they first seem. Such implicit assumptions dictate the direction of the seemingly disparate and unrelated decisions, thereby shaping the change process by 'drift' rather than by design. External factors (such as the economy, competitors' behaviour, and political climate) or internal features (such as the relative power of different interest groups, distribution of knowledge, and uncertainty) influence the change in directions outside the control of managers. Even the most carefully planned and executed change programme will have some emergent impacts. This highlights two important aspects of managing change. The need to identify, explore and if necessary challenge the assumptions that underlie managerial decisions. Understanding that organisational change is a process that can be facilitated by perceptive and insightful planning and analysis and well crafted, sensitive implementation phases, while acknowledging that it can never be fully isolated from the effects of uncertainty and chance.

Recent management experience and research concludes that organisation-level change is not fixed or linear in nature but contains an important emergent element. Hence the emphasis on learning organisations. As the organisations collectively 'learn' the nature of changes becomes clearer and change is emergent.

Executives are increasingly aware that organisational culture has a profound effect on overall performance. But how do you change something as pervasive as culture? Research has shown that the enterprise learning function touches and connects all employees. It has a unique ability to create cultural traits important to high performance, or to change traits that are impeding success. Read the following article: http://www.accenture.com/ Now turn your attention to your own organisation. Discuss the role of enterprise learning in the context of organisational culture and change.

There are a number of ways in which change can be categorised, most are related to the extent of the change and whether it is seen as organic (often characterised as bottom-up) or driven (top-down). Ackerman (1997) has distinguished between three types of change: Developmental Transitional Transformational

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Drivers for Change

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Developmental Change Developmental change can be planned or emergent; it is first order, or incremental. It is change that enhances or corrects existing aspects of an organisation, often focusing on the improvement of a skill or process. Transitional Change Seeks to achieve a known desired state that is different from the existing one. It is episodic, planned and second order, or radical. Much of the organisational change literature is based on transitional change. Transformational Change Transformational change is radical or second order in nature. It requires a shift in assumptions made by the organisation and its members.Transformation can result in an organisation that differs significantly in terms of structure, processes, culture and strategy. It may, therefore, result in the creation of an organisation that operates in developmental mode - one that continuously learns, adapts and improves.

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Drivers for Change

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Review Activity
Read the article See Planned, Emergent and Opportunistic Change at the back of this lesson booklet..

1. Contrast planned, emergent and opportunistic change, and discuss the effects of these types of change. 2. Identify examples of planned, emergent and opportunistic change in your own area of business. 3. Given the dynamic business environment we operate in, it is impossible to anticipate all possible technological and social developments that would impact your business. How can your organisation position itself to be better oriented towards emergent and opportunistic change?

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Module: Managing Change in Organisations Unit: Change Management; The Business Context Lesson: Drivers for Change

Planned, Emergent, and Opportunistic Change

JoAnne Yates MIT Sloan School of Management In thinking about the many organisational changes that have to occur in the development of something as extensive and deeply embedded as a cyber infrastructure, it is important to keep in mind some of the general patterns of organizational change that will shape these changes. In particular, I want to argue have that it is important to understand the nature and potential interactions between three key types of change: planned, emergent, and opportunistic (Yates, Orlikowski, and Fonstad, 2001). Traditionally, management, engineering, and public administration literatures have emphasized rational decision making and planned change, but if those deciding on and trying to institute change dont also understand emergent and opportunistic change, they will constantly be surprised and frustrated. The introduction of new information technology has traditionally been conceptualized as planned in advance and implemented in a discrete, discontinuous episode. Nevertheless, many researchers and practitioners have also recognized that change rarely proceeds exactly as plannedan outcome generally seen as negative. Increasingly, however, some social scientists have turned their attention to understanding organizational change around technology that emerges more spontaneously from situated actions that may be deliberate, knowledgeable improvisations responding to situated circumstances or inadvertent slippage (Orlikowski, 1996). Such change is seen as ongoingnot something that ends after a discrete time period designated as implementation, but something that emerges from the interactions of people as they use the technology in a particular setting. Such change is typically unexpected by those who planned the change and often even by those involved in it. A third kind of change that has received even less attention can be called opportunitybased or opportunistic change (Orlikowski and Hofman, 1997; Yates, Orlikowski, and Fonstad, 2001). Such change occurs when actors observe an emergent change and deliberately decide to reinforce (or undercut) that change. Although a particular emergent change is unexpected, it may be seen as an opportunity to be reinforced and built on (or discouraged), rather than simply a threat to the plan. With access to resources, the actors can reinforce and/or channel the emergent change, in a particular direction. The value of this approach is that it both acknowledges the inevitability of unanticipated emergent and improvisational developments and sees them as potentially positive rather than always negative. While those in authority in a particular setting cannot necessarily control change around technology so it occurs as planned, they may be able to provide resources to capitalize on potentially useful emergent developments. In thinking about creating a cyber infrastructure, NSF program managers and those in authority positions within particular scientific communities will face the challenge of accepting that, however well they plan, over time neither the development of the new scientific computing infrastructure nor its extension to various communities with their own, pre-existing platforms will proceed as planned. Local improvisations that are not

exactly to plan should not automatically be viewed as problematic. Such emergent change may be what is needed to allow a particular community or subset of a community to use the infrastructure effectively. Moreover, such emergent change can generate innovation and learning that allows the infrastructure to advance in unexpected and generative ways, as well. Thus, these actors should observe and monitor implementation and use of the infrastructure across communities of practice over time, alert for opportunities to provide resources that may reinforce positive emergent changes. This framework helps us better understand the story of the Internet standards wars of the 1980s and early 1990s over OSI (Open Systems Interconnection) and TCP/IP, an earlier infrastructure issue (Russell, 2006). Although the OSI standard was under development through the official ISO (International Organization for Standardization) standards-setting process and was endorsed by its member national associations as well as the DOD and the National Bureau of Standards in the U.S., it ultimately lost out to the TCP/IP internetworking standards being developed from the bottom up within the Internet Engineering Task Forces (which had no membership and in which participation was open). Russell traces this outcome to network operators endorsement of standards-setting by rough consensus and running code over OSIs formal processes and top-down implementation. We can interpret the TCP/IP standard-setting process as based on opportunistic change leveraging emergent running code, while the OSI process was built on a notion of extensive planning before implementation. The advocates of TCP/IP benefited from their respect for and reinforcement of local and emergent change, while the advocates of the OSI process were ultimately frustrated in their attempts to achieve unanimity around a planned change. Similarly, by recognizing that planned change is always intertwined over time with emergent and improvisational changes, NSF and other leaders of the cyber infrastructure effort can position themselves to take advantage of unanticipated opportunities as the process unfolds. Moreover, in an uncharted territory such as cyber infrastructure represents, any changes planned in advance cant possibly reflect the reality as it will unfold. No one can anticipate all the possible technological and social developments. An orientation towards emergent and opportunistic change will help establish a more robust process that builds in the possibility for learning and development over time.