GSBS6008

1. GSBS6008 Global Business Management Lecture 3 Managing change in international organisations Sources: Kelly (2009) International Business and Management and McShane & Travagliano (2011) Organisational Behaviour on the Pacific Rim

2. Learning objectives After today’s lecture, you should be able to: Describe the main theoretical foundations of change management Critically evaluate the planned and emergent approach to change Identify and describe a selection of integrated change management models Appreciate the situations in which the various approaches to change are most appropriately used Explain the role of leaders, managers and change agents in the change process Understand resistance to change

3. Overview Organisational change concerns the alteration of organisational components (such as the mission, strategy, goals, structure, processes, systems, technology and people) to improve the firm’s effectiveness or efficiency. Change may take place in any part and at any level of the organisation. When we think of organisational change, we may think of significant changes aimed at making the organisation more effective or smaller (efficiency based), such as departmental reorganisation, the implementation of new technologies and systems. The primary needs for change derive from the need for alignment between the organizations’ internal and external environments.

4. Theoretical foundations of change management There are many types of change distinguished according to a variety of variables: discontinuous versus continuous planned versus unplanned organisational level: individual, group or total system. Nadler and Tushman argue change can be considered in two dimensions. The first is the scope of the change and the second concerns the positioning of the change in relation to key external events.

5. Theoretical foundations of change management Some changes are clearly in response to an event or series of events. These are called relative (reactive) changes. Other changes are initiated, not in response to events but in anticipation of external events that may occur. These are called anticipatory (proactive) changes. The intensity relates to the severity of the change and, in particular, the degree of shock, upset, or discontinuity created throughout the organization. Strategic changes are obviously more intense than incremental changes. Much change starts with shifts in an organization’s environment.

6. Generic change model There may be changes in the social, cultural and demographic environment, new technologies may become available, and the external political landscape may change as might economic or environmental forces. The generic change model on the next slide illustrates the 5 – whys of change management Why What Who When Where in relation to the external environment

7. Generic change model

8. Organisational system model • The organizational system model proposed by Leavitt (1965) is made of four major components: • task (the organisation’s purpose) • people (those who carry out the task) • technology (tools and computers, etc.) • structure

9. Organisational model Recognizing the firm is influenced by its environment, Nadler & Tushman (1989) took account of both systems and open system theory. They divided their model into inputs, process and outputs.

10. A model of organisation performance and change Burke & Litwin (1992) provide a causal framework that encompasses both the what and the how – what organisational dimensions are key to successful change and how these dimensions should be linked causally to achieve the change goals.

11. Gap analysis and visioning • Gap analysis and visioning are amongst the tools that can provide answers to the question, why change. • Gap analysis is used by change leaders to frame the vision for the change. • Visioning is a mental process in which images of the desired future (goals, objectives, outcomes) are made explicit motivators for action. • In many cases, the need for change will derive from an evaluation of organisational outputs (products and services), where it operates, what it does (primary activities) and how it performs such activities (work).

12. Gap analysis and visioning • Individuals and groups will need to gather and make sense of internal and external data and the perspectives of stakeholders and must take account of their own concerns and preferences. • Having established the need for change, change initiators should then consider whether the organisation is in fact ready for change.

13. Types of change Change has been characterised in various ways: • Converging or frame breaking • Fine-tuning, incremental adjustment, modular transformation, corporate transformation • Adaptation, evolution, reconstruction, revolution • Smooth incremental, bumpy incremental, discontinuous • Closed, contained, open-ended

14. Punctuated equilibrium • Theories of change in very diverse disciplines demonstrate the same characteristics: • There exists a deep structure which patterns the phenomenon e.g. time of life, organisation’s culture and structure, science’s paradigm. Change will not occur as a result of life as usual. • The phenomenon goes through periods of equilibrium where the system is maintaining itself through an overall pattern of rules which resist change. • Revolutionary change occurs when internal disruptions or environmental changes create the need for change.

15. Fine Tuning Ongoing process of refinement Quality, costs, personnel, fostering commitment, clarifying roles etc. E.g. Within divisions Incremental Adjustment Distinct modifications Corporate strategy, structures, management processes E.g. Across divisions Modular Transformation Major realignment, radical change Sub-parts of the organisation Corporate Transformation Organisation-wide change Radical shifts in strategy Revolutionary changes through whole organisation Model: four types of change

16. Planned and emergent change Intendedchange Ø Deliberate change plan Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø Realised change Ø Ø Unrealised Change (change you don’t do) Emergent forces (forces you don’t expect)

17. Managing organisational change • Lewin’s force field analysis model (on the next slide) states that all systems have driving and restraining forces. • Change occurs through the process of unfreezing, changing, and refreezing. • Unfreezing produces disequilibrium between the driving and restraining forces. • Refreezing realigns the organization’s systems and structures with the desired behaviors. • Force-field analysis is a process of identifying and analysing the driving and restraining forces associated with a change.

18. Force field analysis model

19. Resistance to change • Direct Costs • Saving Face • Fear of the Unknown • Breaking Routines • Incongruent Systems • Incongruent Team Dynamics Forces for Change

20. Creating an urgency for change Inform employees about driving forces • Most difficult when organization is doing well • Must be real, not contrived Customer-driven change • Dissatisfied customers are powerful force for change: • have adverse consequences for organization’s survival • human element further energizes employees • Involves listening directly to customers, monitoring their satisfaction and behavior, engaging them in company practices

21. Communication Minimizing resistance to change • Highest priority and first strategy for change • Improves urgency to change • Reduces uncertainty (fear of unknown) • Problems -- time consuming and costly

22. Training Minimizing resistance to change Communication • Provides new knowledge and skills • Includes coaching and action learning • Helps break old routines and adopt new roles • Problems -- potentially time consuming and costly

23. Employee Involvement Minimizing resistance to change Communication • Increases ownership of change • Helps saving face and reducing fear of unknown • Includes task forces, search conferences • Problems -- time-consuming, potential conflict Training

24. Stress Management Minimizing resistance to change Communication • When communication, training, and involvement do not resolve stress • Potential benefits • More motivation to change • Less fear of unknown • Fewer direct costs • Problems -- time-consuming, expensive, doesn’t help everyone Training Employee Involvement

25. Negotiation Minimizing resistance to change Communication • When people clearly lose something and won’t otherwise support change • Influence by exchange-- reduces direct costs • Problems • Expensive • Increases compliance, not commitment Training Employee Involvement Stress Management

26. Coercion Minimizing resistance to change Communication • When all else fails • Assertive influence • Firing people -- radical form of “unlearning” • Problems • Reduces trust • May create more subtle resistance Training Employee Involvement Stress Management Negotiation

27. Refreezing the desired conditions • Realigning organizational systems and team dynamics with the desired changes • Alter rewards to reinforce new behaviors • Feedback systems • help employees learn how well they are moving toward desired objectives • provide permanent architecture to support the new behavior patterns for long-term

28. Change agents • A change agent is anyone who possesses enough knowledge and power to guide and facilitate the change effort • May be external consultant, but typically people within organization with leadership competencies • Change agents apply transformational leadership • Help develop a vision • Communicate the vision • Act consistently with the vision • Build commitment to the vision • Also requires transactional leadership • Aligning employee behavior through rewards, resources, feedback, etc.

29. Planned approach to change Models of planned Organisation change depict the process in a linear, step-by-step fashion. However, what actually occurs in reality is anything but linear.

30. Factors affecting change difficulty • Change presents itself in a wide variety of shapes and sizes. • Consequently, there are many approaches to managing change. • Some forms of change are more difficult to manage than other forms as the following diagram illustrates.

31. Factors affecting change difficulty

32. Conclusion The diagnosis of organisations draws on open systems theory, the study of the behaviour and interactions within and between systems. The models discussed in this lecture and the McKinsey 7‐ S model, described in the text, help us to structure our thinking about organisations and organisational change. Leavitt’s (1965) model is made of four major components: task (the organisation's purpose), people (those who carry out the task), technology (tools and computers etc.) and structure. He argues that the components are inter-dependent and a change in any one will result in change amongst the other three.

33. Conclusion Planned approaches to organisational change are more likely to make use of the change models, tools and techniques discussed. Emergent change is more likely in an organisational culture that perceives organisational change as a continuous process of experimentation and adaptation, achieved through many small to medium sized incremental changes. Ultimately, Change leaders need to understand why people react to change as they do ‐ they must consider those on the receiving end.

34. Organisations are about people • “Take away my people, but leave my factories, and soon grass will grow on the factory floors. Take away my factories, but leave my people, and soon we will have a new and better factory.” • Andrew Carnegie (1835-1919)

35. Learning Activity – BP case study • Time now to form the groups you will be working in for the rest of the trimester. • Once you have formed your group and handed me your list of group names and student numbers, take 30 minutes to read the Philippine Long Distance Telephone Company case study on pages 136 - 138 of the text and discuss your thoughts on the following: • How sustainable do you believe the changes made were? How long might it take PLDT to refreeze? What are the chances of the organisation reverting to old ways once the consultants completed their assignment? • The be prepared to share your group’s thoughts with the rest of the class