MGT 300: Chapter 10 & 11

Important supertrends shaping the future of business include…

1) Marketplace is becoming more segmented

2) Competitors offering specialized solutions require us to get our products to market faster

3) Some companies are unable to survive disruptive innovation

4) Offshore suppliers are changing the way we work

5) Knowledge, not information, is becoming the new competitive advantage

6) The employment landscape is shifting

The Marketplace is becoming more segmented and moving towards more niche products

• Demassification → customer groups becoming segmented into smaller and more specialized groups responding to more narrowly targeted commercial messages.

• Marketing messages shaped and personalized by AI allowing bots to engage in conversations with individually targeted consumers

• 66% of today’s consumers expect companies to cater to their individual needs with customized products & services

Companies using customer-centric marketing believes it creates stronger relationships & increases customer loyalty and repeat business.

True

More competitors are offering targeted products, requiring faster speed-to-market

A company’s ability to produce & deliver more goods in less time and at a lower cost is a key competitive advantage.

• Speedsters: Firms with the highest speed to market → outperformed accelerators and starters due to adoption of advanced tech for reducing time and increasing efficiency

• Accelerators: Firms ranked in the middle for speed to market

• Starters: Firms with the slowest speed to market

Some traditional companies may not survive radical change

It’s very difficult for an existing successful company to take full advantage of a technological breakthrough such as digitalization- disruptive innovation.

Offshore suppliers are changing the way we work

US businesses realize substantial savings by sourcing labor from other countries. Further, the offshoring of basic functions allows workers in core jobs to focus on complex tasks.

• US businesses use offshoring to fill core positions → has become increasingly common due to tech advancements making it easier for organizations to access global talent pools & manage dispersed, highly skilled workforces.

Knowledge, not information, is becoming the new competitive advantage

• Definition of knowledge work has changed: Knowledge work is now analytic and consists of problem solving and abstract reasoning- the kind of tasks required of skillful managers, professionals, salespeople, and financial analysts.

• AI has not replaced knowledge workers: Non-routine cognitive occupations-not exceeds 1 billion across the globe. AI can empower knowledge workers to do their jobs better than they ever could without it. → helps workers focus on what matters most.

The employment landscape is shifting, affecting both companies & workers

• Employee implications: Majority of companies are now offering hybrid work in some capacity. Gallup data predicts that 75% of workers who can do their jobs remotely will eventually be working remotely either partially or fully.

• Employer implications: Presents challenges to employers such as retrofitting jobs to align with a remote atmosphere and adopting technology necessary for supporting a remote workforce. Opportunities include access to a global talent pool.

Reactive Change

Making changes in response to problems or opportunities as they arise.

• Often occurs in response to government mandates or incentives that impact the demand for various goods.

Example: Inflation Reduction Act (IRA) incentive caused solar panels to be sold out for more than 2 years due to high demand.

Proactive Change

AKA planned change, involves making carefully thought-out changes in anticipation of possible or expected problems or opportunities.

Example: Microsoft shifts from being seen as an outdated, bureaucratic company to becoming more innovative through proactive change. → after years of criticism, Microsoft invested billions in OpenAI starting in 2019 and later integrated AI tech like ChatGPT into its Bing search engine in 2023. This cultural shift helped the company become more competitive & forward-looking.

Forces Originating Outside the Organization

1) Demographic Characteristics

2) Technological Advancements

3) Shareholder, customer, & broader stakeholder concerns

4) Social & political pressures

Demographic Characteristics

• Age → young Americans living with their parents have increased, younger generations are waiting longer to marry or own homes

• Education

• Skill Level

• Gender

• Immigration

Technological Advancements

• Technology: It is any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product. → Not just computer tech

Ginni Rometty, former CEO of IBM expects tech such as AI to change 100% of jobs by 2030.

Example: Some winemakers now, use drones equipped with infrared cameras to pinpoint irrigation needs, damage, and diseases in their vineyards.

Shareholder, Customer, & Broader Stakeholder Concerns

Shifting perspectives about the purpose of a corporation and whether a firm’s obligations go beyond shareholder wealth creation to include shared value and sustainable development are significant pressures for change.

• Some shareholders may form a B Corporation or benefit corporation where the company is legally required to adhere to socially beneficial practices such as helping consumers, employees, or the environment.

• Customers are becoming more demanding → younger generations are more inclined to buy from a company if it is genuinely connected to a meaningful cause

• Broader stakeholders’ needs are becoming increasingly important for many corporations.→ research suggests consumers form deeper connections with brands they perceive as creating shared value

Social & Political Pressures

Social events can create great pressures on companies to consider change.

Example: (Soda taxes) → Several big US cities have already passed special taxes on soda which resulted in a 34% reduction in sugary drink consumption in San Francisco since a soda tax was implemented there. 13% reduction in the probability that a consumer would ingest more than 6 oz of sugary beverages in a single day.

Forces Originating Inside the Organization

1) Human resource concerns

2) Managers’ behavior

Human Resource Concerns

• Unmet needs

• Job dissatisfaction

• Absenteeism & turnover

• Productivity

• Participation/suggestions

Manager’s Behavior

• Conflict

• Leadership

• Reward Systems

• Structural reorganization

Example: Elon Musk slashed the company’s workforce by about 50% and sent an email out saying anyone who wished to remain would have to be “extremely hardcore” in their work to be considered a valuable performer which resulted in hundreds of X employees to resign.

3 forms of change: From least threatening to most threatening

1) Adaptive

2) Innovative

3) Radically Innovative

Least threatening: Adaptive Change (We’ve seen stuff like this before)

Reintroduction of a familiar practice- the implementation of a form of change that has already been experienced within the same organization.

• Easiest to implement successfully → lowest in complexity, cost, and uncertainty

• Least threatening to employees → because it is familiar, adaptive change is likely to create the least resistance

• Fairly common and often arises due to predictable, seasonal fluctuations in demand

Example: During tax season, a store’s accounting department may require an increase in work hours due to high demand for service.

Somewhat threatening: Innovative Change (This is something new for this company)

The introduction of a practice that is new to the organization

• Moderately difficult to implement → form of change characterized by moderate complexity, cost, and uncertainty

• Somewhat threatening to employees → because it is less familiar than adaptive change, innovative change is apt to trigger some fear and resistance among employees

• May arise when an organization adopts a policy or practice that other organizations have embraced, but new for the firm

Example: If a store decides to adopt a new practice among its competitors by staying open 24 hours a day, requiring employees to work flexible schedules, it may be felt as moderately threatening.

Very threatening: Radically Innovative Change (This is a brand-new thing in our industry)

Introduces a new practice that is new to the industry.

• Very difficult to implement → most complex, costly, and uncertain form of change

• Highly threatening to employees

Example: Following COVID-19, companies felt the strain of radically innovative change when many employees realized that they had negotiating power to insist on maintaining a remote or hybrid schedule. Companies had to learn how to manage, monitor, and motivate employees in a completely new way. → highly complex & challenging

Kurt Lewin 3 Stages of Change

1) Unfreezing

2) Changing

3) Refreezing

Unfreezing

Creating the motivation to change

• Employees need to become dissatisfied with the old way of doing things

• Managers need to reduce barriers to change during this stage

Example: Moxi healthcare robots autonomous devices designed to fetch medications from hospital pharmacies, run various errands, and deliver specimens to laboratories are convincing hospital administrators to adopt the change to help with efficiency and financial savings.

Changing

Learning new ways of doing things

• Employees are given tools for change: new information, new perspectives, new models of behavior

• Managers help by providing benchmarking results, role models, mentors, experts, and training

• Employees who posses competencies of proactive learning orientation & openness to change are more likely to accept change

Example: Diligent Robotics closely works with member hospitals to assist with staff becoming more familiar with working alongside robots. Hospitals begin by using the robots for single tasks, such as delivery and pickup of lab specimens, and sequentially introduce new tasks to new departments over time.

Refreezing

Making the new ways normal

• Employees need to be helped to integrate the changed attitudes and behavior into their normal ways of doing things

• Managers assist by encouraging employees to exhibit the new change & through additional coaching/modeling, reinforcing employees in the desired change

Example: Hospital employees who work with Moxi robots have wholeheartedly embraced the change. Nurses are happy with the robots assisting with workload as nurses are able to spend more time with patients rather than running around doing errands (which is what the robots do).

Systems Approach to Change

System: A set of interrelated parts that operate together to achieve a common purpose. → systems approach can be used to diagnose what to change & determine the success of the change effort.

3 Parts

1) Inputs

2) Target Elements of Change

3) Outputs

Inputs: Why should we change, and How willing and Able are we to change?

1st question: A systems approach begins with the question of why change is needed- assessment of what the problem is that needs to be solved.

• Answer must be aligned with the organization’s mission statement, vision statement, and strategic plan

2nd Question: How willing & able are management and employees to make the necessary change?

• Readiness for Change

Readiness for Change

The beliefs, attitudes, and intentions of the organization’s staff regarding the extent of the changes needed and how willing and able they are to implement them.

4 Components:

1) How strongly the company needs the proposed change.

2) How much the top managers support the change.

3) How capable employees are of handling the change.

4) How pessimistic or optimistic employees are about the consequences of the result.

Target Elements of Change: Which levers can we pull that will produce the change we want?

4 Levers managers may use to diagnose problems:

1) People: their knowledge, ability, attitudes, motivation, and behavior

2) Organizational arrangements: such as policies & procedures, roles, structure, rewards, and physical setting

3) Methods: processes, workflow, job design, and technology

4) Social factors: culture, group processes, interpersonal interactions, communication, and leadership

2 Important things to realize:

• Any change made in each & every target elements will ripple across the entire organization → if a manager changes a system of rewards to reinforce team rather than individual performance, that change is apt to affect organizational culture (social factor)

• All organizational change ultimately affects the people in it & vice versa → more likely to succeed when managers carefully consider the prospective impact of a proposed change on the employees

Output: What results do we want from change?

Represent the desired goals of a change

• Feedback: How is the change working & what alterations need to be made? → compare status of an output such as employee or customer satisfaction before the change to the same measurable output sometime after change has been implemented.

• Force-Field Analysis: Which forces facilitate change & which resist it? → A technique to determine which forces could facilitate a proposed change & which forces could act against it.

2 Steps to Force-Field Analysis:

1) Identify thrusters & counterthrusters: Identify positive forces (thrusters) and negative forces (counterthrusters). Brainstorm and select 3-5 in each category.

2) Remove the most important negative forces & increase positive forces

Applying the Systems Model of Change

1) As an aid during the strategic planning process → once a group of managers identifies the organization’s vision & strategic goals, group members can consider the target elements of change when developing action plans to support the accomplishment of goals.

Example: Lego → from brink of death to most valuable toy brand

• Organizational arrangements: Focused on building new digital content such as movies & TV shows

• Methods: Switched to an outsourcing model for areas with high potential value → partnering with brilliant people, better products

• People: Leveraged people inside & outside the organization to assist in company’s transformation

2) As a diagnostic framework to identify the causes of an organizational problem & propose solutions

Example: Dr Kinicki was contacted by the CEO of a software company & asked to figure out why the presidents of 3 divisions were not collaborating with each other- the problem. After interviewing employees, it revealed that there was a lack of collaboration among division presidents due to reward system, competitive culture & poor communications, & poor workflow. Knicki’s recommendation was to change the reward system, restructure the organization, & redesign the workflow.

Organizational Development (OD)

A set of techniques for implementing planned change to make people & organizations more effective.

• Focuses specifically on people in the change process

Change Agent

A consultant with a behavioral sciences background who can visualize new solutions to old problems. → Authors serve as change agents

• Some organizations put OD into practice by enlisting an outside change agent, while others may employ organizational development specialists to help the company lead & manage change.

What can OD be used for?

1) Improving Individual, Team, & Organizational Performance → offering coaching programs for new leaders

2) Transforming Organizations → OD can help open communication, foster innovation, and deal with stress → rapid change of technology and organizations having to adopt new ways of doing things to keep up with the change.

3) Adapting to Mergers → associated with increased anxiety, stress, absenteeism, turnover, and decreased productivity. OD experts are called upon in situations to help ease the tensions involved in integrating 2 firms with varying cultures, products, & procedures.

How OD works

Managers & consultants follow a medical-like model → follow rules of evidence-based management

Approach:

1) Diagnosing the organization’s ills (What is the problem?)

2) Prescribing treatment or intervention

3) Monitoring or evaluating progress

• If evaluation shows that procedure is not working effectively, the conclusions drawn are then applied (via feedback loop) to refine the diagnosis, and the process starts again.

Intervention

The attempt to correct the diagnosed problems.

Organizational Development (OD) activities for implementing planned change include:

• Communicating survey results to employees to engage them in constructive problem solving.

• Helping group members learn to function as a team.

• Improving work technology or organizational design.

Recommendations for increasing the likelihood that OD will be successful

1) Multiple interventions → goal setting, feedback, recognition/rewards, training

2) Ensure management support

3) Use goals wisely → strive for a program that achieves both short-term goals and long-term goals

4) Understand the impacts of culture

Innovation

Occurs when a new solution to an existing problem is valuable enough that consumers are willing to pay for it.

• More likely to occur when organizations create & support a system of innovation, which includes tailoring the characteristics of the physical environment to support innovation.

Product Innovation

A change in the appearance or functionality/performance of a product or a service or the creation of a new one.

Example (Dizolve Group Corporation): Instead of bulky containers of liquid or plastic-laden pods, detergent can now be delivered in thin, lightweight sheets or strips that dissolve in the wash, leaving nothing behind but clean and fresh-smelling garments.

Process Innovation

A change in the way a product or a service is conceived, manufactured, or distributed.

Example: Flytrex is a drone delivery company focusing exclusively on suburban areas in the US, delivering anything from Chinese takeout to morning coffee.

Focus Continuum

Measures the scope of the innovation.

Improvement Innovations

Enhance or upgrade an existing product, service, or process.

• Often incremental and are less likely to generate significant amounts of new revenue at one point in time.

Example: J-Tip was invented to take the anxiety & pain out of receiving an IV, a procedure that can be especially upsetting to children receiving medical care.

New-direction Innovations

A totally new or different approach to a product, service, process, or industry.

• Focuses on creating new markets & customers & rely on developing breakthroughs and inventing things that didn’t already exist.

Example: The adoption of virtual healthcare → ability to hold healthcare appointments virtually making it easier for individuals in rural areas or those with mobility issues to receive access to health care.

Innovation System

A set of mutually reinforcing structures, processes, and practices that drive an organization’s choices around innovation and its ability to innovate successfully.

7 Components:

1) Innovation Strategy

2) Committed Leadership

3) Innovative Culture & Climate

4) Required Structure & Processes

5) Necessary Human Capital

6) Human Resource Policies, Practices, & Procedures

7) Appropriate Resources

Innovation Strategy

Amounts to a plan for being more innovative, requires a company to integrate its innovation activities into its business strategies.

• This integration encourages management to invest resources in innovation & generates employee commitment to innovation across the organization.

Example: RB who owns brands such as Lysol focuses on taking its most successful products and tweaking them in modest ways that better solve consumers’ problems. Innovation strategy is characterized by small, incremental improvements rather than massive innovations.

Commitment from Senior Leaders

The achievement of strategic goals is unlikely without real commitment from senior leaders.

Foster an Innovative Culture & Climate

Organizations that wish to create new products & ideas need an innovative culture & climate. Innovation requires experimentation, failure, and risk taking, these are all aspects of an organization’s culture.

Required Structure & Processes

Organizational structure & internal processes can promote innovation if they foster collaboration, cross-functional communication, and agility. → plan

• Turns inputs into outcomes

• Plays a critical role in innovation

IDEO’s approach to innovation

1) Inspiration: The problem or opportunity that motivates the search for solutions

2) Ideation: The process of gathering, developing, and testing ideas.

3) Implementation: The final step, implementation, links the problem’s solution to people’s lives.

Crowdsourcing

The practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people typically via the Internet.

Example: Student innovation competitions

Develop the Necessary Human Capital

One of the most valuable assets of any economy or company is its human capital- the skills, capabilities and innovations of its citizens.

• The productive potential of an individual’s knowledge & actions → Human Capital

Top 5 Most Important Skills for Innovation

1) Analytical thinking & innovation

2) Active learning & learning strategies

3) Complex problem-solving

4) Critical thinking & analysis

5) Creativity, originality, and initiative

Human Resource Policies, Practices, and Procedures

Need to be consistent with & reinforce the other 6 components of an innovation system.

• Alignment is related to valued outcomes

• Performance management & incentives are often not designed to foster innovation → companies need to align their reward & recognition systems with innovation-related goals

Appropriate Resources

Organizations need to put their money where their mouths are. If managers want innovation, they must dedicate resources to its development.

Resources can include:

• People

• Dollars

• Time

• Energy

• Knowledge

• Focus

Resistance to Change

An emotional/behavioral response to real or imagined threats to an established work routine.

Resistance can be considered to be the interaction of 3 causes:

1) Employee characteristics

2) Change agent characteristics

3) The change agent-employee relationship

Employee Characteristics

The characteristics of a given employee consist of their individual differences, actions and inactions, and perceptions of change.

Change Agent Characteristics

The characteristics of the change agent- the individual who is a catalyst in helping organizations change- consist of the agent’s individual differences, experiences, actions and inactions, and perceptions of change.

• These may contribute to employees’ resistance to change

Example: An employee may react to the change agent’s leadership style, personality, tactfulness, sense of timing, awareness of cultural traditions or group relationships, and/or ability to empathize with the employee’s perspective.

Change-Agent Employee Relationship

Resistance to change is reduced when change agents and employees have a trusting relationship- faith in each other’s intentions. Mistrust encourages secrecy, which begets deeper mistrust, and can doom a well-conceived change.

10 Reasons Employees Resist Change

1) Individuals’ predisposition toward change

2) Surprise & fear of the unknown

3) Climate of mistrust

4) Fear of failure

5) Loss of status or job security

6) Peer pressure

7) Disruption of cultural traditions or group relationships

8) Personality conflicts

9) Lack of tact or poor timing

10) Nonreinforcing reward systems

Self-affirmations

Positive statements that impact your subconscious mind by drawing attention to your values & positive attributes and away from negative self-perceptions.

Examples:

• My work does not define me; I’m a good person.

• I learn from my mistakes.

• I can accomplish whatever I put my mind to.

Increases your openness to either personal or work-related change.

Self-Compassion

The tendency to be understanding, warm, and kind to yourself when you experience pain or failure, rather than being self-critical or over-identifying with negative emotions. → “gentleness with yourself”

• Increases openness to self-development

Two key methods for improving your openness to change are…

Self-affirmation theory & Self-Compassion

Leading

Motivating, directing, and otherwise influencing people to work hard to achieve the organization’s goals.

Personality

Consists of the stable psychological traits and behavioral attributes that give a person their identity.

The Big Five Personality Dimensions

1) Extroversion

2) Agreeableness

3) Conscientiousness

4) Emotional stability

5) Openness to experience

Extroversion

How outgoing, talkative, sociable, and assertive a person is.

• Closely related to leadership as well as higher levels of motivation, positivity, well-being, and interpersonal savviness, which lead to higher job performance.

Agreeableness

How trusting, good-natured, cooperative, and soft-hearted someone is.

Conscientiousness

How dependable, responsible, achievement-oriented, and persistent someone is.

• Most consistent relationships with important outcomes such as task performance, leadership behavior, supervisor-rated liking, resilience, and lower unemployment.

• Disadvantage: More likely to be perfectionists, tending to have negative impact on job performance.

Emotional Stability

How relaxed, secure, and unworried a person is.

Openness to Experience

How intellectual, imaginative, curious, and broad-minded someone is.

Individuals high on conscientiousness, agreeableness, and emotional stability are less likely to engage in workplace deviance (violation of rules).

TRUE

Core Self-Evaluation (CSE)

Represents a broad personality trait comprising four positive individual traits: (1) self-efficacy, (2) self-esteem, (3) locus of control, and (4) emotional stability.

Self-efficacy

The belief in one’s personal ability to do a task.

• “I Can/Can’t do this task”

Generalized self-efficacy: the belief in one’s general ability to perform across different situations.

High levels of self-efficacy are linked to all kinds of positives, including academic performance, work performance, lower burnout, job satisfaction, and motivation.

In order to help with self-efficacy, managers should…

Assign jobs accordingly → complex, challenging, and autonomous jobs tend to enhance people’s perceptions of their self-efficacy. Boring, tedious jobs generally do the opposite.

Develop employees’ self-efficacy & generalized self-efficacy → self-efficacy is a quality that can be nurtured

• Low generalized self-efficacy can foster learned helplessness (the debilitating lack of faith in your ability to control your environment).

• High generalized self-efficacy is positively linked to job performance & satisfaction.

Self Esteem

The extent to which people like or dislike themselves, their overall self-evaluation.

• “I Like/Dislike myself

People with high self-esteem → More apt to handle failure better and to become leaders. However, may become egotistical & boastful when faced with high pressure situations.

People with low self-esteem → Focus on their weaknesses and disengage from tasks when confronted with failure. Dependent on others and are more apt to be influenced by them & to be less likely to take independent positions.

Managers can boost employee self-esteem by…

• Reinforce employees’ positive attributes & skills

• Provide positive feedback whenever possible

• Break larger projects into smaller tasks & projects

• Express confidence in employees’ abilities to complete their tasks

• Provide coaching whenever employees are seen to be struggling to complete tasks

Locus of Control

Indicates how much people believe they control their fate through their own efforts.

• “I Am/Am Not the captain of my fate”

• Internal locus of control: you believe you control your own destiny

• External locus of control: you believe external forces control you

Internals exhibit less anxiety, greater work motivation, and stronger expectations that effort leads to performance. → better leaders & obtain higher salaries

Locus of control: Manager implications (suggestion)

Expect different degrees of structure & compliance for each type → employees with internal locus of control resist close managerial supervision, while employees with external locus of control may perform better in highly structured jobs requiring greater compliance.

Employ different reward systems for each type → internals prefer & respond better to incentives such as merit pay or sales commissions (believes their actions have a direct impact on their outcomes).