3.10 Managing strategic change

Causes of change

Internal causes

External causes

Types of change

Incremental change

Step change

Disruptive change

Incremental change

Occurs over a period of time in incremental, small changes.

Step change

Significant and occurs rapidly.

Disruptive change

A form of step change that arises from changes in the external environment.

Lewin's Force Field Analysis

Provides an overview of the balance between forces driving change in a business and the forces resisting change.

How Lewin's model works

If there is an equilibrium between two sets of forces there will be no change. In addition, for change to happen the driving force must exceed the restraining force.

Examples of forces driving change

Internal forces

Need for higher profits

Poor efficiency

Lack of innovation

Need to change culture

Change of leadership

External forces

Customer demand

Competition

PESTLE

Why change is resisted

Self interest

Misunderstanding

Low tolerance of change

Different assessment of the situation

Organisational structure

Shows how people and management are organised in a business.

Flexible organisation

One that is able to adapt and respond relatively quickly to changes in its external environment in order to gain advantage and sustain its competitive position.

Organic structures

Informal, Flexible and fluid communication which favours verbal communication. Usually associated with decentralised decision making with change being easier to handle.

Mechanistic structures

Formal, Bureaucratic with formal communication associated with centralised decision making and supervision and favours standardised policies and procedures, little perceived need for change.

Characteristics of a flexible organisation

Use flexible working

Flat hierarchies

Culture embraces change

Quick decision making

Hierarchy

The number of layers of management or supervision in the organisation structure.

Delayering

Removing layers of management from the hierarchy of an organisation.

Benefits of Delayering

Lower labour costs

Faster decision making

Shorter communication paths

Stimulating employee innovation

Drawbacks of Delayering

Often significant one-off costs of making managers redundant

Increased workloads for managers who remain

Impact of redundancies on organisational morale

Loss of expertise

Flexible working

Employees have options in terms of working time, working location and pattern of working.

Gig economy

Self employed work such as food delivery, with high labour flexibility for firms and employees.

Kotter and Schlesinger's Reasons for resistance to change

Self interest

Perceived threat employees feels such as job security, status and financial position.

Prefer the status quo

Rather keep things as what they are - bad experience of change

Differing views

Disagreement of what to change and the need of change

Misunderstanding and fear

Misinformed about the position of business

Kotter and Schlesinger's Model of overcoming resistance to change

Education

Participation

Facilitation

Negotiation

Manipulation

Coercion

Handy's four types of culture

Power culture - Centralised culture which focuses on key decision makers, most effective in smaller businesses.

Role culture - Formalised culture with jobs having clear rules and procedures, appropriate for medium to large businesses but may cause a 'silo' mentality where employees do not communicate information.

Task culture - Focus on specific tasks and procedures, usually occur in design and advertising agencies.

Person culture - Individuals have freedom to act independently, may occur in legal or medical practices where individuals have a high level of expertise.

Influences on the organisational culture of a business

Founder

Business size

Rewards

Industry/market

Organisation structure

Work environment

Reasons for changing organisational culture

Business performance

New leadership/strategy

Change in External Environment

To support change management

Critical path analysis (CPA)

A project analysis and planning method that allows a project to be completed in the shortest possible time.

Information needed for CPA

A list of all ACTIVITIES required to complete the project

The time (DURATION) that each activity will take to completion

The DEPENDENCIES between the activities (e.g. activity D cannot be completed until activity B & C done)

CPA Network Diagram Calculates

The longest path of planned activities (Critical path)

Earliest start time (EST) and Latest start time (LFT) that each activity can start and finish without making the project longer.

Four Golden rules of a CPA diagram

1. EST - Calculate first and always work from left to right

2. EST- Where two or more activities meet, EST is always the highest calculated figure.

3. LFT - Calculate after EST and always work from Right to Left

4. LFT - Where two or more activities meet, LFT is always the lowest calculated figure

Float

The duration an activity can be extended or delayed so that the project still finishes within the minimum time.

Calculated as LFT - Duration - EST

Identifying the critical path

Activities with a float of 0 (zero) cannot be delayed without delaying the entire project this is the critical path

On the critical path, activities have an equal EST and LFT

Planned strategy

The intended strategy influenced by specific corporate objectives. Based on formal strategic planning. (e.g. SWOT analysis, PESTLE, Porter's five forces)

Emergent strategy

The strategy that actually happens, strategy that responds to events as they arise often involves strategical and tactical changes.

Strategic drift

When the strategy of a business is no longer relevant to the external environment facing it.

Four phases of strategic drift

Phase 1 - Incremental change, Strategy falls behind from the environment

Phase 2 - Strategic drift, Growing mismatch between strategy and the environment

Phase 3 - Flux, Sudden major strategic change to correct the mismatch

Phase 4 - Transformational change or demise

Corporate Governance

Is the system in which companies are directed and controlled focusing on the needs of their shareholders, managers, employees and other stakeholders.

Contingency planning

The process of preparing alternative courses of action to ensure a business can respond effectively to unexpected events or crises.

Crisis management

The process of dealing with sudden, unexpected events that threaten a business, aiming to reduce harm and restore normal operations quickly.