THE NATURE OF ORGANIZATION CHANGE

Organization change is any substantive modification to some part of the organization.2

Thus, change can involve virtually any aspect of an organization: work schedules, bases
for departmentalization, span of management, machinery, organization design, people
themselves, and so on. It is important to keep in mind that any change in an organization
may have effects extending beyond the actual area where the change is implemented.
For example, when General Motors recently installed a new automated production
system at one of its plants, employees were trained to operate new equipment, the
compensation system was adjusted to reflect new skill levels, the span of management
for supervisors was altered, and several related jobs were redesigned. Selection criteria
for new employees were also changed, and a new quality control system was installed.
In addition, it is quite common for multiple organization change activities to be going on
simultaneously.
Forces for Change
Why do organizations find change necessary? The basic reason is that something relevant
to the organization either has changed or is likely to change in the foreseeable
future. The organization therefore may have little choice but to change as well. Indeed,
a primary reason for the problems that organizations often face is failure to anticipate or
respond properly to changing circumstances. The forces that compel change may be
external or internal to the organization.3
External Forces External forces for change come from the organization’s general and
task environments. For example, two energy crises, an aggressive Japanese automobile industry,
floating currency exchange rates, and floating international interest rates—all manifestations
of the international dimension of the general environment—profoundly influenced U.S.
automobile companies. New rules of production and competition forced them to dramatically
alter the way they do business. In the political area, new laws, court decisions, and regulations
affect organizations. The technological dimension may yield new production
techniques that the organization needs to explore. The economic dimension is affected by
inflation, the cost of living, and money supplies. The sociocultural dimension, reflecting societal
values, determines what kinds of products or services will be accepted in the market.
Because of its proximity to the organization, the task environment is an even more
powerful force for change. Competitors influence an organization through their price
structures and product lines. When Dell lowers the prices it charges for computers,
Hewlett-Packard may have little choice but to follow suit. Because customers determine
what products can be sold at what prices, organizations must be concerned with consumer
tastes and preferences. Suppliers affect organizations by raising or lowering prices
organization
change
Any substantive
modification to some
part of the
organization
194 Part 3: Organizing
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or changing product lines. Regulators can have dramatic effects on an organization. For
example, if OSHA rules that a particular production process is dangerous to workers, it
can force a firm to close a plant until it meets higher safety standards. Unions can force
change when they have the clout to negotiate for higher wages or if they go on strike.
Internal Forces A variety of forces inside the organization may cause change. If top
management revises the organization’s strategy, organization change is likely to result.
A decision by an electronics company to enter the home computer market or a decision
to increase a ten-year product sales goal by 3 percent would occasion many organization
changes. Other internal forces for change may be reflections of external forces. As sociocultural
values shift, for example, workers’ attitudes toward their job may also shift—and
workers may demand a change in working hours or working conditions. In such a case,
even though the force is rooted in the external environment, the organization must
respond directly to the internal pressure it generates.4
Planned Versus Reactive Change
Some change is planned well in advance; other change comes about as a reaction to
unexpected events. Planned change is designed and implemented in an orderly and
timely fashion in anticipation of future events. Reactive change is a piecemeal response to
circumstances as they develop. Because reactive change may be hurried, the potential for
poorly conceived and executed change is increased. Planned change is almost always preferable
to reactive change.5
Georgia-Pacific, a large forest products business, is an excellent example of a firm that
went through a planned and well-managed change process. When A. D. Correll became
CEO, he quickly became alarmed at the firm’s high accident rate—9 serious injuries per
100 employees each year, and 26 deaths during the most recent 5-year period. Although
the forest products business is inherently dangerous, Correll believed that the accident rate
was far too high and set out on a major change effort to improve things. He and other top
managers developed a multistage change program intended to educate workers about safety,
improve safety equipment in the plant, and eliminate a long-standing part of the firm’s
culture that made injuries almost a badge of courage. As a result, Georgia-Pacific achieved
the best safety record in the industry, with relatively few injuries.
On the other hand, Caterpillar was caught flat-footed by a worldwide recession in the
construction industry, suffered enormous losses, and took several years to recover. Had
managers at Caterpillar anticipated the need for change earlier, they might have been
able to respond more quickly. The importance of approaching change from a planned
perspective is reinforced by the frequency of organization change. Most companies or
divisions of large companies implement some form of moderate change at least every
year and one or more major changes every four to five years. Managers who sit
back and respond only when they have to are likely to spend a lot of time hastily changing
and rechanging things. A more effective approach is to anticipate forces urging
change and plan ahead to deal with them.6
MANAGING CHANGE IN ORGANIZATIONS
Organization change is a complex phenomenon. A manager cannot simply wave a wand
and implement a planned change like magic. Instead, any change must be systematic and
logical to have a realistic opportunity to succeed. 7 To carry this off, the manager needs to
understand the steps of effective change and how to counter employee resistance to
change.8
planned change
Change that is
designed and
implemented in an
orderly and timely
fashion in anticipation
of future
events
reactive change
A piecemeal
response to
circumstances as
they develop
Chapter 7: Organization Change and Innovation 195
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Steps in the Change Process
Researchers have over the years developed a number of models or frameworks outlining
steps for change. The Lewin model was one of the first, although a more comprehensive
approach is usually more useful in today’s complex business environment.
The Lewin Model Kurt Lewin, a noted organizational theorist, suggested that every
change requires three steps.9 The first step is unfreezing—individuals who will be
affected by the impending change must be led to recognize why the change is necessary.
The second step is the implementation of the change itself. The third step is
refreezing, which involves reinforcing and supporting the change so that it becomes a
part of the system.10 For example, one of the changes that Caterpillar faced in response
to the recession noted earlier involved a massive workforce reduction. The first step
(unfreezing) was convincing the United Auto Workers (UAW) to support the reduction
because of its importance to long-term effectiveness. After this unfreezing was
accomplished, 30,000 jobs were eliminated (implementation). Then it worked to
improve its damaged relationship with its workers (refreezing) by guaranteeing future
pay hikes and promising no more cutbacks. As interesting as the Lewin model is, it
unfortunately lacks operational specificity. Thus, a more comprehensive perspective is
often needed.
A Comprehensive Approach to Change The comprehensive approach to change
takes a systems view and delineates a series of specific steps that often leads to successful
change. This expanded model is illustrated in Figure 7.1. The first step is recognizing the
need for change. Reactive change might be triggered by employee complaints, declines in
productivity or turnover, court injunctions, sales slumps, or labor strikes. Recognition