What Drives Organizational Change? Gregory Fenwick MGT380 July 25, 2011 Garren Hamby What Drives Organizational Change? Organizations change for many different reasons and situations. Some organizations need change to better themselves, others need change organizational change just to survive and stay in business. Some organizations need to change because of growth, and some change because of downsizing. This paper will look at many different reasons for change and how that change is brought about, including if the change is good or bad for an organization.
In business management is faced with competitive environments that sometimes dictate change to keep up with or to surpass competition. The organizations that are able to make effective organizational changes are the ones that survive and prosper while the organizations that do not make the changes necessary to compete often are put out of business by the organizations that can. Even if an organization is able to change their organization, 84% of those organizations will not be successful after the change. This staggering fact raises questions of why management would participate in a major organizational change with such a high failure rate.
One idea based upon the economic perspective of organizational change is based upon the “Management as Control” assumption. This assumption is that “In competitive economies, firm survival depends on satisfying shareholders. Failure to do this will lead them to either move their capital to other companies or to use their influence to replace senior management with those better aligned with their interests. Therefore, managers conduct change in order to produce better organizational performance in the form of better quarterly results with correspondingly better company share prices. (Managing Organizational Change, Palmer, Dunford, Akin; 2009) Another perspective which is aligned with change management images is the “Management as Shaping” assumption, which is part of the organizational learning perspective. This perspective assumes that “Organizations and human systems of all sorts are complex and evolving and therefore cannot be reduced to a single, linear objective of maximizing shareholder value. ” (Managing Organizational Change, Palmer, Dunford, Akin; 2009) This perspective is based upon the theory that the objectives of this type of change are based upon the need to increase an organization’s adaptive capacity.
This includes how an organization might achieve shareholder value. The knowledge needed for achieving these goals is likely to change over time, so it is imperative to build the capacity to both respond to, and shape external changes. This is another reason why management conducts change. One focus for creating change is Environmental Pressure. Environmental Pressure occurs when an organization’s resources decrease because of a reduced demand for products and sales decrease in market share. This includes bad investment decisions.
In extreme cases organizational change because of Environmental Pressure is designed to turn around negative cash flow to avoid bankruptcy or “Organizational Death”. Environmental Pressures include Fashion Pressures or mimetic isomorphism which is when a company imitates another company because of the successful changes that they have made. An example is Boeing Co. imitating General Electric. Mandated Pressure is another environmental pressure that causes organizational change because of a lawsuit or settlement that mandates organizational change.
An example of Mandated Pressure is ChevronTexaco after settling a racial discrimination lawsuit changing its organizational structure to include establishment of an external diversity task force charged with monitoring the company’s practices and ensuring fair treatment for minority staff. Sometimes change is forced upon an organization through formally mandated requirements or coercive isomorphism, where organizations are forced to take on activities similar to those of other organizations because of outside demands placed upon them.
These mandated pressures can be formal (government mandates), or informal (to get the support of other organizations). Geopolitical Pressures are environmental pressures that have impacts on a range of businesses because they are related to global crises. An example of this is the attacks on September 11, 2001. Many businesses were affected by the crises and because of lack of demand or drops in sales many organizations had to make major changes to survive the downturn caused by the global crises. Market Decline Pressures are environmental pressures that are based on declining markets or products and services. With the decline in the market for certain products and services organizational changes would have to be made to combat the decline. This includes layoffs, and downsizing operations. An example of this is AOL Time Warner when broadband was introduced in the U. S. market AOL Time Warner had to make major organizational changes to keep competitive with the broadband carriers, and eventually became an internet web site only, hosting email and other internet services to remain competitive.
Hypercompetition Pressures are environmental pressures that are caused by aggressive companies trying to overtake a market segment, causing organizations to make major changes to stay competitive in the market. An example of this is Dell Computer overtaking Gateway in 1998 for computer sales and causing Gateway to make major organizational changes to keep competitive with Dell. Reputation and Credibility Pressures are another reason for organizational change. When a company’s reputation or credibility come into question, that is usually a time for an organizational change to rebuild the reputation or credibility of the organization.
An example of this is Walt Disney Company had a bad reputation of having one of the worst corporate boards in the United States. The Disney Company had all sorts of problems with credibility because of their lax corporate structure until the corporate crises that confronted Enron, Tyco and Worldcom. Because of the scandals that rocked those companies and their shareholders, the Disney Company made major changes to rectify their corporate structure problems to avoid the perception of being tied to one of those companies. At the Company this writer work for, Ameriforge Group, Inc. they have just undertaken an organizational change because of the overwhelming increase in business. This increase has caused major problems in meeting due dates for product to be delivered to the customer. The organizational change consisted of hiring a production coordinator and an assistant production coordinator to work with each department to help move the production of products faster and more efficiently. The company also restructured some personnel to accommodate the increase in production and hired new personnel with more experience in large production to build a plan to tackle the production problems.
So far these changes have helped to increase production an increase delivery times. Organizational change is an important part of the business world. Organizations that can change and adapt to ever-changing situations and markets are the ones that will survive and flourish. Organizations that cannot change and adapt in a short period of time will fall behind their competition and will have a hard time surviving. Change is not easy. It takes time and dedication from everyone in the organization.
Communicating change is also very important to the success of the change. There are many reasons for organizational change. Some reasons will work and some will fail, but the companies that are willing to adapt and change for the better will be the ones that will be here for a long time. References Akin, G. , Dunford, R. , & Palmer, I. (2006). Managing Organizational Change: A Multiple Perspectives Approach (2nd ed. ). New York, NY: The McGraw-Hill Companies. Kotter, J. P. (1986). Leading Change (). Boston, MA: Harvard Business School Press.