Organizational Change Notes

Forces of Change

Change is all around us, affecting both personal and professional lives.

• Demographic and Social Forces: Increasing cultural diversity and an aging population choosing to stay in the workforce longer, leading to age diversity in organizations.

• Technology: Faster and cheaper technology allows for quicker work turnaround.

• Economic Forces: Various economic shocks such as stock market collapses, changes in interest rates, and trade wars can affect organizations.

• Competition: Global competition requires organizations to identify their competitive advantages to stand out.

• Ethical Forces: Many organizations have ethics officers to address ethical issues.

Types of Change

Magnitude of Change

• Evolutionary Change (First-Order Change): Incremental, small changes. For example, operating system updates done weekly.

• Revolutionary Change (Second-Order Change): Very large changes. Examples include:

  • Restructuring: Changing the business model to transform the organization.

  • Innovation: Using skills and resources to create new technologies or services. For example, Elon Musk's Hyperloop, which aims to transport people and objects at airline or hypersonic speeds while being energy efficient, potentially reducing travel time.

Proactive vs. Reactive Change

• Reactive Change: Unplanned change brought about by external forces. For example, the COVID-19 pandemic affected many industries, leading restaurants to implement measures like plastic bubbles to ensure social distancing.

• Proactive Change: Planned change where the organization anticipates trends and adapts to better achieve its objectives.

Strategic Change

Strategic change is defined as a process of formulating, implementing, and evaluating decisions that enable an organization to achieve its objectives.

Underlying Assumptions:

1. Strategic planning is deliberate.

2. Changes are radical and in response to new competitors and technologies.

3. Strategic planning occurs when current objectives are no longer being met.

4. New organizational objectives require new organizational strategies.

Examples of Strategic Change:

• New products and services.

• Changes to the organizational structure, such as downsizing or outsourcing.

Goals of Strategic Change:

• Increase market share: Developing a wider range of products. For example, the market responding to reduced alcohol consumption by offering beverages with little to no alcohol (e.g., Budweiser 0).

• Increase profits: Training employees to be more efficient.

• Turnarounds: Brick and mortar stores innovating to combat the rise of e-commerce. For example, Kohl's partnered with Amazon to accept Amazon returns, hoping to bring people into the store and attract a younger clientele.

Organizational Change Models

Lewin's Force Field Theory

Lewin's force field theory is the foundation for organizational change theories. Organizational change proceeds in three stages:

1. Unfreezing: Initiating change by:

   • Increasing driving forces that direct behavior away from the status quo.

   • Lowering restraining forces that hinder movement.
     At this stage, driving and restraining forces are at equilibrium with one another.

2. Movement: Establishing change by transforming the organization from the status quo to a desired end state.

3. Refreezing: Institutionalizing the change by stabilizing it through balancing the driving and restraining forces again.

Video Case: Billy Beane and the Oakland Athletics (Moneyball)

• Context: In 2000, the Oakland Athletics had a 44 million budget compared to the New York Yankees' 125 million budget.

• Problem: Baseball was heavily based on scouting, but the A's couldn't afford top players identified by scouts.

• Solution: Billy Beane introduced sabermetrics, using specific statistics and data to select players.

Unfreezing Stage

Creating a sense of urgency by illustrating the problem and the need for change to be competitive with other teams.

Movement Stage

Introducing the vision of sabermetrics and selecting undervalued players based on statistics rather than traditional scouting.

Refreezing Stage

Institutionalizing the change by seeing other teams adopt sabermetrics. The Boston Red Sox hired Bill James, the originator of sabermetrics.

Kotter's Eight-Step Model

A contemporary version of organizational change that builds upon Lewin's theory:

• Steps 1-4: Unfreezing:

  1. Establishing a sense of urgency: Convincing at least 75 percent of managers that the status quo is more dangerous than the unknown. (This is the step at which most organizations fail). It can take 5-9 months in order to acheive this stage.

  2. Creating a powerful guiding coalition: Having a group with shared commitment and enough power to lead the change effort.

  3. Developing a vision: Identifying the longer-term vision.

  4. Communicating the vision.

• Steps 5-7: Movement:

  5. Empowering others

  6. Planning for and creating short-term wins: (approx. one year)

  7. Consolidating improvements, producing still more change.

• Step 8: Refreezing:

  8. Institutionalizing new approaches.

Conclusion

Change is constant and affects us both personally and professionally. Organizational change involves different forces and types of change. Lewin's force field theory and Kotter's eight-step model are two different models of organizational change.