Summary of the first two chapters of Organizational Change by Senior and Swailes

Chapter 1: Organizations and Environments

An organization is a ‘system that consists of formal aspects of operations and management which are massively covered by informal aspects in the organization that is derived from the relation between people. An organization operates and interacts with three sorts of environment, namely: temporal, external and internal.

1.1 What are common factors of an organization?

According to Tony Watson (2006) a common factor of organizations is the idea that organizations have goals which act as an adhesive holding together the various systems used to produce things. In this sense, organizations can be seen as people interacting to achieve some defined purpose. Watson (2006) talks about organizational goals, but these goals are often defined by top management. A typical working definition of an organization might say that an organization is a social entity that has a purpose, has a boundary and patterns the activities of participants into a recognizable structure (Daft, 1989). The organization as a system consists of input, subsystems and output. Inputs in the organization are materials and resources. Output consists of achievement of organizational goals and employee satisfaction.
Input à the organization (formal and informal subsystems) à output.
So, an organization can be seen as a system of interacting subsystems and components set within wider systems and environment that provide inputs to the systems and receive its outputs. This can be divided into two subsystems: an informal and a forma subsystem. These subsystems identify the main elements of an organization.

• Informal: culture, politics and leadership.
• Formal: management, strategy, goals, structure, operations, technology.

Nadler and Tushman (1988) included the informal organization in their system of organizational behaviour. This informal organization exists of patterns of communications, power and influence, values and norms. Next to that, ‘legitimate themes’ are used to explain conversations that people are comfortable having in an open discussion and ‘shadow themes’ to explain that people are not able to have these conversations openly (Stacey, 2007). The informal subsystem is called a shadow system in which the informal subsystems encapsulated the more hidden elements.

According to Silverman (1970) the ‘social action approach’ is known as a contrasting view of organizations being composed of individuals and groups with multiple different interests.

An organization is a complex system incorporates the aspect of unpredictability by highlighting the interactions in and between individuals in different domains. It is important to recognize an organizational system as an open system.

1.2 What is the historical context for change in an organization?

The Industrial Revolution and the industrial age was characterized by a series of inventions and innovations that reduced the number of people needed to work and provided the means of mass productions. Since demand and supply of products and services were predictable, companies were able to structure their organizations. Burns and Stalker (1966) described this as the mechanistic lines. These mechanistic lines are a systems of structure hierarchical structures and lines of control.

Organizations focused on efficiency and effectiveness during the Industrial age and produced as many products (task-oriented/fordism). At the same time, organizations faced increasing international competition and there was a shift from manufacturing to services. In the neo-industrial age, the emphasis has moved towards adding value to goods and services. Goodman (1995) called this the value-oriented time. Adding value means identifying potential customer expectations and them exceeding them. Since economies of the West could no longer rely on mass productions, the knowledge has become increasingly important and through intelligence and creative thinking organizations will improve competitiveness.

In short, the market factors that impacts the operations of Western organizations. It shows the differences between the Industrial age and the Neo-industrial age in the table below.
 

1.3 Is the future becoming more uncertain?

Most commentators on organizations argue that business is becoming ever more uncertain as the pace of change quickens and the future become more unpredictable (Furnham, 2000). Next to that, business conditions are extremely complex. Drucker (1988) claimed that future organizations would be almost completely information-based and that they would resemble more a symphony orchestra than the command and control, managed structures prevalent in the past. Dawson (2003) states that managers should be leaders of change. If they are not, the organization will cease to exist is an increasingly competitive environment.

1.4 What are the environmental triggers of change?

There were several financial scandals such as the Leman Brothers, the bankruptcy of The Times and other financial communities fell out or were baled-out. In the business community, the confidence decreased, and fear increased. Next to the macro-economic events, change is triggered by events that have an impact on the lines of an individual such as education or healthcare. It seems that a change in organizations is triggered by large and momentous events and by events. Organizational change is influenced by the external environment besides the internal systems (input, conversion, output) and history. An organization consists of several elements which are interrelated and operate in a multi-dimensional environment. Brooks (2011) explains the environments as a general concept which take into account the totality of external environmental forces which may influence any aspect of organizational activity. A common way of grouping different environmental factors uses the PEST mnemonic. PEST stands for:

• Political
• Economic
• Socio-cultural
• Technological

Political trigger
A political trigger may influence economic environment like government legislation, international law, wars, local regulations, universal rights, trade union activities and taxation. The most important goal for governments is to enhance economic prosperity.

Economic triggers
Economic triggers are factors as competitors, suppliers, employment rates, wage rates, government economic policies, currency exchange rates, other countries’ economic policies, leading policies of financial institutions and changes from public to private ownership. Economic and political environments are closely related since political decisions shape economic fortunes and economic changes influence political decisions. Governments in developed countries work to keep four key economic indicators in balance (Cook, 2011):

• Economic growth
• A healty balance of payments
• Low inflation
• Low unemployment

Social-cultural triggers
Social-cultural triggers influence the way in which an organisation is set up, run and managed. It is also about their capacity to attract people within their company. Examples of the socio-cultural triggers are:

• Changes within existing norms, values and culture.
• Factors include demographic changes such as the age of people, mobility of labor.
• Changes in family structure and the roles of man and women can influence the preferences for working hours and the provisions of child care.

Other influences are: trends, lifestyle changes, skills availability, gender issues, concern for the environment, willingness and ability to move, attitude to work, employment and minority groups and business ethics.

Technological triggers
Examples of technological triggers include information technology, internet, new production processes, new ways to generate energy, waste management and recycling, computerization of processes and changes in transport technology.
An organization can 1) adopt and use technology to assist in production and delivery of goods and services and 2) exist through the creation of technology itself such as Microsoft or a telecom company.

1.5 What are the organizational responses to change?

The authors suggest that organizations operate in three types of environments:

1. Historical developments. These developments bring changes over time. An important category is the temporal environment. This category can influence an organization through 1) cycles of industry-based innovations and 2) life cycle of the organization itself.
2. PEST framework
3. Internal environment of the organization. This includes changes in the organizations that are responses to changes in the external and the temporal environment.

In short, the organizational system operates in a multi-dimensional environment. The external environment is influenced by four factors (economic, technological, socio-cultural and political-legal). The internal environment is the organization with its formal and informal subsystem.

Environmental turbulence

The dynamics of an organization’s environment have also been described in terms of the degree of environmental turbulence. Ansoff and McDonnel (1990) explain that the performance of a company is optimized when its aggressiveness and responsiveness match its environment. They propose five levels of environmental turbulence:

1. Predictable.
2. Forecast able by extrapolation.
3. Predictable threats and opportunities.
4. Partially predictable opportunities.
5. Unpredictable surprises.

These five levels can be compared to three different kinds of change situation proposed by Stacey (1996) namely closed change, contained change and open-ended change. Stacey’s named two related concepts ‘close to certainty’ and ‘far from certainty.
It is important to notice that from level three the time to responds get less. Next to that, the strength of the forces for change can be related to the degree of turbulence. The stronger the force, the more likely that the environment is moving to level 5. If this level increases, managing change becomes more difficult.

1.6 Conclusions

Since organization operate in multiple environments, the key task is to work and try to manage the external adaptations and internal integration. They need to be quick on their feet to anticipate to opportunities and threats and the unpredictable surprises.

Chapter 2: What is the nature of organizational change?

Within this chapter, different models of organizational change will be discussed. The explanation of some terms within this chapters are summarized below:

1. Convergent: fine-tuning of an existing configuration. The organizational configuration or template is not itself changed.
2. Radical: also known as frame-bending breaking away from a position such that a very different position is reached.
3. Planned: discrete beginning and end points. Change is seen as something that managers can control.
4. Evolutionary: also known as continuous change, slow adaptation of existing systems or structures.
5. Revolutionary: Fast paced, which affect all or most of an organization at the same time.
6. Emergent: change is seen as something that managers create the right climate for. Organization is seen as an evolving system then change arises out of experimentation and adaptation.

2.1 What are the different types of change?

Change is not homogeneous but exists and comes in many different forms. A starting point for considering the nature of organizational change is Grundy’s (1993) three varieties of change:

1. Smooth incremental change. This type of change emerges slowly in a systematic and predictable way. It is constant.
2. Bumby incremental change. This type of change is characterized by periods of relative tranquillity punctuated by acceleration in the pace of change.
3. Discontinuous change. This type of change shows rapid shifts in strategy, structure or culture, or in all three of them. An example is the privatication of earlier publicly owned services.

Grundy’s major types of change can be visualized in a graph. The horizontal axis represents the time and the vertical axis represents the rate of change. Smooth incremental change happens at a constant level, so it shows a horizontal straight line. Bumpy incremental change goes up and down in the graph. Discontinuous change is first constant and after a certain period it increases. 

Pace and scope of change

The types of change from Grundy (1993) are simplistic. Therefore, Balogun and Hope (2008) go a step further by suggesting four types of change.

• Evolution
• Adaptation
• Revolution
• Reconstruction

These four types of change are categorized in two dimensions: 1) scope (incremental or big-bang) and 2) the scale (realignments or transformation). The scale is the end result and the scope can be seen as the nature of change.

Transformation                        Realignment

Incremental

Big Bang

Tushman, Newman and Romanelli (1988) proposed a model of organizational life that consists of ‘periods of incremental change, or convergence, punctuated by discontinuous changes’. They mention two types of change: fine-tuning and incremental adaptations. Fine-tuning is about doing better what is already done good. Incremental adaption is about little changes as a reaction to small shifts in the environment. Both types of changes focus on performing better and optimize the fit between structure, strategy, people and processes.
A major change in the organization is a frame breaking change (revolutionary, reorganization, new executives, altered power and status, reformed mission and core values).

Organizational change can be mapped in terms of its pace (continuous or episodic) and its scope (convergent or radical) according to Plowman et al. (2007). Each type of change differs on the following dimensions:

• The driver (namely instability or inertia)
• The form (namely adaptations or replacement)
• The nature of change (namely emergent or intended)
• The types of feedback (negative feedback discourages)
• The connections in the system (loose or tight)

The four quadrants portray four types of change:

1. Continuous and convergent change.
   Change is slow and channelled into improving systems and practices. Change happens within organizational template. The template itself is not changed.
   1. Driver: minor instability
   2. Form: adaptations
   3. Nature: emergent
   4. Feedback: positive, encouraging deviations and adaptations.
   5. Connections: loose coupling
2. Episodic and convergent change.
   Change occurs more quickly and perhaps as a result of a specific shock or crisis. Negative feedback pushes minor changes and keeps the template in shape.
   
   1. Driver: minor inertia
   2. Form: replacement within an existing frame
   3. Nature: intended and local
   4. Feedback: negative – highlight the need for replacement
   5. Connections: loose coupling
3. Episodic and radical change.
   Change happens quickly in response to a major shock or crisis. The template is changed through, for example, a new top management team or new strategy.
   
   1. Driver: major inertia
   2. Form: replacement
   3. Nature: intended and system-wide
   4. Feedback: negative – highlight the need for replacement
   5. Connections: tight coupling
4. Continuous and radical change.
   Change arises out of an accumulation of small changes that gather momentum and lead to a new template being formed. If successful the new template becomes established and is reinforced by new rules, values and norms.
   
   1. Driver: major system instability
   2. Form: adaptations
   3. Nature: emergent and system-wide
   4. Feedback: positive and negative
   5. Connections: tight coupling

Dunphy and Stacey’s (1993) scale is similar to Grundy’s concepts of change. The benefit of this model is the detailed description of each scale. The four scales are:

1. Fine tuning. Change is an ongoing process and fine tunes the match between the strategy, structure, people and processes in an organization. Examples are: refining policies, creating specialist units, developing personnel better suited to the present strategy and clarify established roles.
2. Incremental adjustment. Change involves distinct modifications but not radical change to business, strategies, structures and processes. Examples are: expanding sales territory, improves production process technology, adjustment to organizational structures.
3. Modular transformation. Change is characterized by a major realignment of one or more departments and divisions. Examples are: major restructuring of particular departments, changes in key executives and managerial appointments, reformed divisional goals.
4. Corporate transformation. Change is characterized by radical shifts in business strategy and revolutionary changes throughout the whole organization. Examples are: reformed mission and core values, reorganization and executives in important managerial positions appointed from outside the firm.

Tushman et al. (1998) split the frame-breaking change into two types namely, modular transformation and corporate transformation. Tushman et al. (1998) observe that if organizations are successful and the environment is stable, frame-breaking change is quite dysfunctional.

Different discussions include the idea of organizations striving to maintain a state of equilibrium where the forces for change are balanced by the forces for stability. The organizational system is therefore always changing and making adjustments to maintain its optimum state.

Beck and colleagues (2008) conceptualize change as ‘discrete modification of structural organizational elements’, change today leads to change tomorrow. Experience of change leads to more chances of further change. They identify three commonly analysed change events:

1. Change of markets.
2. Change of organizational leadership.
3. Changes to rules and routines that comprise the basic structure of organization.

They argue more simply that change lead to more change: the more the organization changes different aspects, the more it learns about how to do it right.

The distinction between emergent and planned change is not clear cut. Wilson (1992) criticizes the idea that change can be planned logically and systematically. According to Jian (2007) unintended consequences are those things that would not have happened if an actor had acted differently and are not what the actor had intended. Quinn (1980) has also criticized the idea of planned change. Stacey (2011) summarizes the key points made by Quinn as follows:

1. Effective managers do not manage strategically in a piecemeal manner. The destination is thus intended.
2. The route to that destination (strategy itself) is not intended from the start in any comprehensive way.
3. Strategy emerges from interaction between different groups within the organization and are orchestrated by senior managers
4. Strategy emerges or evolves in small incremental opportunistic steps.
5. The result is an organization that is feeling its way towards a known goal, opportunistically learning as it goes. Quinn terms this process ‘logical incrementalism’

2.2 What is meant by predictable change?

Sometimes, change is not fully emergent or planned. The organizational life cycle is used to describe the stages an organization go through a they grow and develop. The table below summarizes these five phases and the different aspects of structure, systems, styles, strengths, crisis points and weaknesses per phase.

These five phases can be placed in a graph. The horizontal axis represents the age of the organization and ranges from young to mature. The vertical axis represents the size of the organization ranging from small to large. The phases are visualized in an increasing straight line.

A brief description of a typical life cycle pattern is a useful categorization of the characteristics and crisis point with each phase of growth (Greiner, 1972):

1. The entrepreneurial stage (survival is key strategy).
2. The collective stage (organization begins to take ‘shape’).
3. The formalization stage (systems of communication and control become more formal).
4. The elaboration stage (strategic change).

2.3 What is meant by the complexity theory?

Complexity theory is a set of ideas stemming from the study of natural systems such as weather patterns and animal behaviour and which draws on mathematical principles to help explain how organizations behave (Burnes 2005). Some studies argue that the concepts complexity and complicated are the same. This is actually not completely true. For example: a computer is a complicated system but is does not have to be a complex one. A complicated system is an ordered system while a complex system is disordered (unpredictable).

Stacey et al. (2002) identified three cornerstones of complexity theory:

1. Chaos theory. Chaotic systems are characterized by constant transformation analogous to the ways that species evolve.
2. Dissipative structures. These need energy and impetus from outside otherwise they reduce to next to nothing.
3. Complex adaptive systems. These systems are made up of agents each of which conforms to its own principles that shape its behaviour in relation to other agents.

Burnes (2005) proposes three implications of applying complexity theory to organizations:

1. To give employees the scope to act, there must be more democracy and equalization off power.
2. Between the two extremes (incremental change and large-scale transformation) lies a continuous approach.
3. Self-organizational needs the presence of order-generating rules to fuel the continuous change ideal

The complexity theory can be used as a metaphor to understand how change can occur and how it is sustained. This provides new insights to managers about how an organization works and how they can understand change. Stacey (1995) argues that the only way to know every detail of a development is to let the development occur. If complexity theory is an accurate portrayal of organizational life and behaviour, then it is not possible to use theory testing, hypotheses- testing and to research thing that lead to success.
Houchin and Maclean (2005) suggest that complexity theory can be used to understand organizational change because it provides insights into how patterns of order develop and how organizations learn and adapt. The shadow system is consisting of the old network that employees had before the new organization was formed still existed and meant that employees could, to a point, continue with their established working ways.

The tipping point of change
A tipping point is another concept of the complexity theory. Here, events occur and are contained within a system which lead up to and which culminate in a tipping point (Boyatzis, 2006). The butterfly metaphor captures the idea that tiny variations in air pressure caused by the beat of a butterfly’s wings in one place can set in motion a chain of weather events that lead to a hurricane on the other side of the world.

2.4 How can change be diagnosed?

“Those who pretend that the same kind of change medicine can be applied no matter what the context are either naïve or charlatans.” (Strebel, 1996)

Diagnosing a change situation is important if companies want to respond or manage this change. The organizational cycle of Greiner or techniques such as SWOT or PEST are useful to diagnose change. In contrast to Greiner who focuses on the structure and management of an organization, Strebel (1996) links his model to an organization’s competitive environment including breakpoints. These breakpoints are those times when organizations must change in response to changes in competitor behaviour. This model is called the evolutionary cycle of competitive behaviour and involves two main phases:

1. Innovation (a new business opportunity is discovered). This triggers a breakpoint that causes divergence of offerings: variety creation/new business.
2. Efficiency. This triggers convergence: survive of fittest and the least efficient one leaves.

To conclude: the competitive cycle argues that there are two basic types of breakpoints.

• Divergent breakpoint associated with sharply increasing variety in the competitive offering, resulting in more value for the customer.
• Convergent breakpoints associated with sharp improvements in the systems and processes used to deliver the offerings, resulting in lower delivered costs.

Breakpoints are difficult to predict, but triggers can be recognized. Triggers originate from competitions, clients, suppliers, distributors etc.

Hard and soft problems
Changes or events in the internal environment of an organization results mostly in small-scale changes. Changes or events in the external environment of an organization will have more impact on the strategy, processes and structure of an organization. Paton and McCalman (2000) use the terms hard and soft to describe two types of complexity problems. The Open University uses difficulties and messes. The authors interpret hard as difficult and soft as messy. The difference between these two types are as follows:

• Difficulties: smaller scale, clear priorities and to what might need to be done, quantifiable objectives, known timescales.
• Messes: larger scale, interrelated complex of problems that cannot be separated from their context, subjective and semi-quantifiable objectives, fuzzy timescales.

The change spectrum
To identify whether it is likely to involve hard or soft complexity and therefore, whether it can be seen as more of a difficulty or more of a mess. The following distinguish can be made by using TROPICS.

• Hard: timescale clearly, resources needed identified, objective clear (smart goals), perception and possible solution shared by all, interest in problem limited, control by managing group and source originated within the organization.
• Soft: timescale ill-defined, resources needed uncertain, change objective subjective, no consensus on what constitutes the problem, interest in the problem is ill-defines, control is shared with people outside managing group, source of problem originated outside organization.

2.5 In what way has change changed?

The differences in the table reflects changes in the way change is discussed in the management research literature (Oswik et al., 2005)

2.6 Conclusion

Organizational change can be categorized in three dimensions: pace, scope and planned-emergent. Different models and approached can be used. The models discussed in this chapter are compared in table above. Cautionary note: Models are often showed two dimensional, assume orthogonality, have discontinuous scale and incidence of types. However, the reality is the opposite: multi- dimensional, interwoven, not so black-white with every quadrant filled.