Engineering Management

ChE-410
Lecture-7
Hafiz Mudaser Ahmad
[email protected]
Department of Chemical Engineering
University of Engineering & Technology Lahore
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Outline
• The Nature Of Organization Change

• Managing Change In Organizations

• Areas Of Organization Change

• Organizational Innovation
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 The Nature Of Organization Change

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Organization change
Organizational change is any substantive modification
to some part of the organization.
• Organizational change can affect various aspects, from work
schedules to machinery and even personnel.
• Implementing changes in one area can trigger widespread
effects throughout the organization, often requiring
adjustments in training, compensation, management
structure, and more.
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Forces for Change

• Organizations need to change when external or

internal factors shift, or when future changes are
expected. Failing to adapt to these forces can lead to
problems.

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External Forces
• External forces for change come from the organization’s general and
task environments.
• Organizations must adapt to changes in the general environment,
including international, political, technological, economic, and
sociocultural factors. The task environment, with competitors,
customers, suppliers, regulators, and unions, has a significant impact
on an organization's need for change.
• For example, pricing decisions by competitors, consumer preferences,
supplier actions, regulatory changes, and union negotiations can all
drive organizational change.

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Internal Forces
• Internal forces are factors inside a company, like leadership
or culture, influencing its operations, decisions, and overall
performance.
• For example, A shift in leadership style, from authoritative
to collaborative, impacted employee morale and
communication within the organization, prompting change.
This internal force influenced the company's culture and
team dynamics.

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 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.
• For example, A company decided to switch to a new
computer system to improve efficiency and streamline
operations. Employees were then trained on the new
software to ensure a smooth transition.

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 Planned Versus Reactive Change
• Reactive change in an organization involves responding to external
pressures or unexpected events that require unplanned adjustments
to the existing practices or strategies.
• For example, When a key supplier unexpectedly increased prices, a
company had to quickly adjust its budget and find alternative
suppliers to cope with the cost hike. This reactive change helped the
organization adapt to the unforeseen challenges posed by the
supplier's pricing decision.
• Note: Planned change is almost always preferable to reactive change.

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Managing change in organizations

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•Steps in the Change Process

•Understanding Resistance to Change

•Overcoming Resistance to Change

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 Steps in the Change Process
The Lewin Model
• Kurt Lewin's three-step model for change suggests that change
involves unfreezing, where individuals understand the need for
change, followed by implementing the change, and then refreezing it
to make it a permanent part of the system.
• Caterpillar used this model during the recession, convincing workers
(unfreezing), reducing jobs (implementation), and rebuilding trust
with promises of future pay hikes (refreezing).
• However, the Lewin model is sometimes considered lacking in
operational detail and may require a more comprehensive approach.

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A Comprehensive
Approach to
Change

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 Understanding Resistance to Change
• Understanding and addressing resistance to change is
essential in effective change management. People often
resist change for various reasons.
• For instance, when Schlumberger introduced smartphones
to managers, most accepted it, but one manager resisted the
change, maintaining two phone numbers. This resistance is
common and must be understood and addressed by
managers during the change process.

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• Uncertainty
Employee resistance to change often stems from the
uncertainty and anxiety associated with impending changes.
This uncertainty can lead to job security concerns and
resistance, as seen in situations like Nabisco's takeover battle
and the British Airways strike.
• Threatened Self-Interests
Managers' resistance to change can arise when impending changes
threaten their self-interests, such as power and influence within the
organization. An example is Sears, where a proposed change in store
type faced strong objections from executives responsible for excluded
product lines.

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• Different Perceptions
Differing perceptions among individuals can lead to resistance to
change. For example, 7-Eleven executives faced resistance from
franchisees when they aimed to introduce higher-end products and
shift the company's focus, as franchisees perceived this as moving away
from their core customer base.
• Feelings of Loss
People often resist changes that disrupt their social networks, along
with other intangible factors like power, status, security, familiarity, and
self-confidence.

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 Threatened
Uncertainty Self-
Interests

Different Feelings of
Perceptions Loss

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 Overcoming Resistance to Change
• Participation
Engaging employees in change planning reduces resistance,
fostering understanding and lowering uncertainty. This
involvement also enhances productivity and satisfaction, as
supported by studies.
• Education and Communication
Educating employees about the reasons for a change and its
expected outcomes can reduce resistance. Open communication
throughout the change process minimizes uncertainty. Caterpillar
successfully employed these strategies during its cutbacks by
informing employees and maintaining transparency.
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• Facilitation
• To ease change resistance, introduce necessary changes with
advance notice, allowing people time to adjust, avoiding
rushed implementations. Rushed changes, like in Prudential,
can lead to hostility and resentment.
• Force-Field Analysis
• Force-field analysis identifies and balances factors for and
against change, as seen in General Motors addressing
resistance and reinforcing factors for change.

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Areas of Organization Change

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•Changing Technology and Operations
•Changing People, Attitudes, and Behaviors
•Changing Business Processes
•Organization Development

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Changing Technology and Operations
In today’s fast-paced world, technological change is crucial for
organizations to stay competitive, especially in information technology and
machinery upgrades.
• Broad Impact Beyond Manufacturing: Technology advancements impact
not only manufacturing but also service organizations as they adapt to
evolving customer demands.
• Real-World Example – Flashlight Manufacturing: Changes in work
processes, like shifting from metal to plastic in flashlight production,
require adjustments in quality control and impact operational efficiency.
• Enterprise Resource Planning (ERP) Systems: ERP systems integrate
various business activities, allowing real-time data monitoring and
coordination across different locations. This integration improves
responsiveness and streamlines operations.

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 Changing People, Attitudes, and Behaviors

• Enhancing Workforce Skills: Improving employee competencies to meet

evolving organizational needs.
• Boosting Performance through Incentives: Encouraging higher
performance with reward systems and incentives.
• Shifting Employee Attitudes: Adjusting attitudes to align with
organizational goals. Example: Microsoft adopted a “growth mindset”
culture, encouraging employees to embrace learning and innovation.
• Aligning Pay and Benefits Perceptions: Organizations work to ensure
employees understand and feel positive about their compensation
packages by providing detailed statements that compare local standards.
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 Changing Business Processes
• Modern companies often make big changes to how they do
things, using new technology or reorganizing processes to
improve costs, service, or time.
• Netflix Initially a DVD rental service, Netflix transitioned to an
online streaming platform, revolutionizing the entertainment
industry. Later, it transformed again by producing original
content, disrupting traditional media production

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 Approaches to Business
Process Change
Setting Clear
Goals and
Strategy

Top
Balanced
Management
Involvement
Involvement

Starting Sense of
Fresh Urgency

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 Organization Development

• Organization development (OD) is a way to make a company

better by planning and using behavioral science.

• It believes employees want to grow, and how a company is set up

affects how people behave.

• Managers and employees work together, sometimes with

outside experts, to make these planned changes.

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 OD Techniques
Life and
Diagnostic
Career
Activities
Planning

Process Team
Consultation Building

Third-Party Survey
Peacemaking Feedback
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OD Techniques
Diagnostic Activities: OD involves diagnosing an organization's current state using
tools like surveys, interviews, and meetings to identify problem areas.
Team Building: Enhancing group effectiveness and satisfaction through activities,
discussions, and exercises. Team-building is essential, particularly in a team-
oriented workplace.
Survey Feedback: Employees complete surveys to assess perceptions and attitudes.
Results are shared with everyone, often to change supervisors' behavior based on
subordinates' feedback.
Third-Party Peacemaking: Used to address substantial conflicts within the
organization, employing mediation or negotiation techniques to resolve disputes.
Process Consultation: OD consultants observe and provide feedback on an
organization's communication, decision-making, leadership, and cooperation
processes, aiming to improve them.
Life and Career Planning: Assisting employees in setting personal goals, aligning
them with organizational objectives, and planning their career paths, often
including training needs.
Coaching and Counseling: Providing non-evaluative feedback to help individuals
understand how others perceive them and develop behaviors to achieve work-
related goals.
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The Effectiveness of OD
• Some companies, like American Airlines and Procter &
Gamble, use Organizational Development (OD) successfully.
• However, it doesn't work for everyone, and its effectiveness
is hard to measure because organizations are complex and
influenced by many factors.

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 Organizational Innovation

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•The Innovation Process
•Forms of Innovation
•The Failure to Innovate

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 Organizational Innovation
• A final element of organizational change that we
address is innovation, which is the managed effort of
an organization to develop new products or services
or new uses for existing products or services.
• Innovation is clearly important because, without new
products or services, any organization will fall behind
its competition.

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The Innovation Process

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Innovation Development
Innovation development involves enhancing creative ideas to increase their
potential. For instance, Parker Brothers transformed a modest indoor
volleyball game concept into a more successful product by marketing the
foam ball designed for the game separately, resulting in substantial revenue
from Nerf Ball and related products.
Innovation Application
Innovation application is when an organization applies a developed idea to
create new products, services, or processes. This stage turns the idea into
tangible goods or services, and business incubators are sometimes used to
support this process.
Application Launch
Application launch is when an organization introduces new products or
services to the marketplace. Success at this stage depends on whether
customers will want to purchase the innovative product, as some creative
ideas have failed in the past despite development and application.

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Application Growth
The application growth stage follows a successful innovation launch, marked by
high demand for the product or service. Failure to anticipate this stage can limit an
organization's growth while overestimating demand can lead to unsold products
sitting in warehouses.
Innovation Maturity
Innovation maturity is the stage when most organizations in an industry have
access to and apply innovation in a similar manner. The technological sophistication
of innovation during this stage is high, but it doesn't offer a competitive advantage
since many firms have adopted it. The time it takes to reach innovation maturity
varies based on the complexity of skills and ease of imitation, potentially leading to
sustained competitive advantage if skills are rare and hard to replicate.
Innovation Decline
Innovation decline is the stage when demand for innovation decreases, and
substitute innovations emerge as organizations seek new competitive advantages.
To maintain their edge, organizations must continue the search for new innovations
as mature innovations no longer provide a competitive advantage.

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Forms of Innovation

Radical innovations are entirely new things that replace

what's already there, like CDs replacing vinyl records.
Incremental innovations are smaller changes, like new iPhone
versions, that modify existing things. Both types impact
competition and how businesses interact in their industries.

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Technical innovations change how a product looks or works, An example
of technical innovation is the transition from traditional incandescent light
bulbs to LED bulbs, which has improved energy efficiency, longevity, and
brightness in lighting products.
Managerial innovations are changes or improvements in the way an
organization manages its operations, processes, or people to enhance
efficiency, productivity, or overall effectiveness. Example, Lean
management practices involves optimizing processes by eliminating
waste, improving workflow, and ensuring that resources are used as
efficiently as possible.

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Product innovations change how products look or perform,
while process innovations change how products are made or
delivered.
In the beginning, when a new thing is created, the product's
features are crucial, but as it grows, improving how it's made
becomes essential for success. Japanese companies excelled
by continuously improving how they made cameras,
eventually dominating the market.
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The Failure to Innovate
Challenges to Innovation
• Innovation requires resources: money, time, and skilled people.
• Limited resources force companies to carefully choose which ideas to
pursue.
• Being overly cautious can lead to missed opportunities.
• Resistance to change within organizations can hinder new initiatives.
Approaches to Foster Innovation
Rewards: Recognize and celebrate good ideas to motivate employees.
Culture: Build a work environment that values creativity and risk-taking.
Example: Companies like Apple and Google encourage experimentation.
Intrapreneurship: Allow employees to act like entrepreneurs within the
organization, fostering new ideas and projects.
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 Thanks

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