Organizational Change and Leadership

Studies on Interdisciplinary Economics and Business Ozer Ozcelik (Ed.) “Studies on Interdisciplinary Economics and Business – Volume I” Bengü Hırlak1 and Ergün Kara2 Organizational Change and Leadership 1 Introduction In the face of the socio-cultural, economic, political and technological developments that are taking place in today’s business world, the structures of businesses are becoming more and more complicated and management approaches are changing, and the changes in organizations are accelerating. Businesses shall be able to achieve sustainable competitive advantage, shall make their change plans that shall allow them to adapt to these changes and developments, and they shall develop their change strategies, management and leadership approach and style in order to survive. Because, while some changes experienced may solve problems, sometimes they may cause new problems to arise. Effective leaders shall be required in order to be able to initiate change and to resume it in a successful manner, without ignoring the condition when the elements that may affect the change of a business have emerged. Effective leaders are leaders who do not use power to resist the change, but who may accelerate the change with the strong personal qualities, inspire their followers and manifest a vision. In short, the role of the leaders in managing change is too important that it cannot be denied. The aim of this study is to underline the importance of leadership in the process of change by addressing the skills and roles that the leaders shall have in order to manage organizational change by identifying the link between change, organizational change, change management and leadership literature. 2 Conceptual Framework 2.1 Change, Organizational Change and Change Management Change is a concept that affects every aspect of life. Change may happen on everything and everywhere, as the philosopher Herakleitos says, the only thing that does not change is change itself. Economic, socio-cultural, political, technological 1 2 Kilis 7 Aralık University, Faculty of Economics and Administrative Sciences, Department of Business Administration, [email protected] Osmaniye Korkut Ata University, Faculty of Economics and Administrative Sciences, Department of Business Administration, [email protected] 256 Hırlak and Kara and legal structures are constantly changing besides the individuals. In today’s competitive business environment, businesses shall follow and even anticipate these changes occurring around them and determine their plans and strategies accordingly in order to achieve sustainable competitive advantage. While experiencing change in such a rapid pace may sometimes lead to conflicts in organizations, it may cause a great deal of stress for the individuals. Therefore, organizations shall understand what factors affect change, how they shall respond to change, how they shall initiate and manage the change in order to respond to change effectively (Cornell, 1996, p. 23). Change is defined as the process by which individuals, groups and organizations respond to the dynamic internal and external factors that change the current facts, and process of dealing with the process of moving from the current condition to the desired condition (Singh, 2009; cited by: Goswami, 2015, p. 136). Organizational change, on the other hand, is related to optimizing performance standards of an organization, and this may usually arise depending on the proactive capabilities of the managers of the organization or on the peripheral changes or in response to the presence of a crisis. Regardless of the situation, organizations shall always need a very skilful, good management team to be able to trigger a change and to ensure that this change will be successful (Ebongkeng, 2018, p. 3). Organizational change management is expressed as the application of new procedures or technologies aimed at reorganizing a business environment with changing requirements or taking advantage of business opportunities that emerge (Markovic, 2008, p. 7; Cited by: Goswami, 2015, p. 136). Change may be caused by many factors, and these factors may be mainly collected in two groups, namely internal and external. These factors are shown in Fig. 1. Change may be performed proactively and as planned for creating the future, or reactively and adaptively, i.e. in an unplanned manner (Attah, Obera and Isaac, 2017, p. 39). Planned change may take place in two ways: gradual or radical change. In order to adapt to changing conditions, all businesses may make gradual changes from time to time. These changes may cover a wide variety of decisions and actions. For example, roles of organization members may be redefined, new roles may be specified, activities may be re-grouped, organizational structure may be changed, existing systems or procedures may be changed, abandoned, or new ones may be presented (Dawson, 1994, pp. 14–15; Cited by: Bubshait et al. 1998, p. 5). The purpose of radical change is to transform the organization radically into a different style. This type of change involves creating change in values, attitudes and beliefs, which are the elements of organizational 257 Organizational Change and Leadership External Factors -Economical -Market -Technological -Political Internal Factors -Leadership Style -Human Resources Issues -Management Structure -Products/Services -Organizational Culture -Efficiency Planned Change Gradual (Continuous) Change -Redefining the Roles -Regrouping -Restructuring -System Reset Change Requirement Radical Change -Redefining the Culture -Change • Mission • Strategies • Policies • Systems Fig. 1: Change Requirement. Source: Dawson, 1994, pp. 14–15; Cited by: Bubshait, Burney and Nadeem, 1998, p. 5 culture. All attempts to realize a radical change may fail unless a cultural change takes place (Roberts and Hunt, 1991, p. 321; Cited by: Bubshait et al. 1998, p. 5). Furthermore, Kerber and Buono (2005, pp. 29–30) state that each of these change approaches are guided by two main factors: complexity of the task and the socio-technical uncertainty. The complexity of the task indicates the complexity of the system, the number of essentially different components and the degree of differentiation in the organizational system where the change shall be applied. As you may see in Fig. 2, the optimal situation for the managed change approach is that both levels of the complexity of the task and the socio-technical uncertainty are less. If it is possible to implement change in a relatively simple, routine environment, and if the change involves well-known and accepted actions, managed change may ensure optimal use of limited organizational resources. In this context, ethical and persuasive communication by the change expert/strategist is essential for achieving integrity and credibility. Because the members of the organization shall be less likely to accept the change if they do not trust the person implementing the change and his/her messages. In planned change, the bottom line is complexity of the task. When the complexity of a task is increased, it shall be better to adopt a planned change approach. And for the guided change, 258 Hırlak and Kara High Planned Complexity of the Task Managed Guided Low Low Socio-Technical Uncertainty High Fig. 2: Complexity, Uncertainty and Approaches of Change. Source: Kerber and Buono, 2005, p. 30 what matters is the socio-technical uncertainty. If the future condition or the solution for the change is not known, managers may not be able to plan the change process carefully and may be able to guide change in a meaningful way even in simple conditions faced. It would be more appropriate to adopt a guided change approach rather than a managed change in such a case. The process of change in organizations consists of three stages. The first stage is being ready for change and indicates that the members of the organization are ready for change and that they support change. The second stage is adoption. At this stage, change has occurred and the employees have adopted the new methods. However, this adoption process is a trial process and employees deny the change at the end of this stage. The third stage is institutionalization, and change is reinforced until employees internalize the change and consider it as a norm, and required efforts are made to ensure that the adoption stage is resumed (Armenakis and Harris, 2002, p. 169). Organizations may receive four different types of responses to change, change messages, or just to possibilities of change. These are as follows (Cornell, 1996, p. 25): • Withdrawal: This behaviour is related with the thought that the change has not occurred and that the things shall always continue as usual. • Resistance: This behaviour covers sabotaging of the change by opposing to change directly, delaying the implementation of the change, and refusing to cooperate, etc. Organizational Change and Leadership 259 • Acceptance: This means submitting to the change reluctantly considering that change is inevitable. • Embracing/adoption: This means truly volunteering for change in order to implement the new order of things by looking at new opportunities positively. Organizations shall always respond to change in the face of change being experienced and adapt themselves to their environment. Businesses, which cannot adapt to this change, shall have their existence under threat after a while (Waddell and Sohal 1998, p. 543). The management of the organization shall not focus on the requirements of the organization only, and shall not neglect the requirements of its employees in order to reduce the resistance to change and to ensure adoption of the change by the members of the organization. Because, change programs are crucial for the survival and success of the organizations. Neglecting the requirements of the employees may be a serious mistake at this point. If employees are neglected in the planning and implementation of organizational change, this process shall probably very stressful for all employees and the negative impacts of this condition shall be reflected on the organizations as some kind of a cost (McHugh, 1997, pp. 345–359). As a result of many researches conducted, it has been shown that an important variable for the success of the change is the human factor, and it has been found that the change programs are not successfully implemented without the support of the persons, no matter how well the change program was developed. In this context, it is not required that persons are ready for organizational change only, but they shall also participate in the change (Herscovitch and Meyer, 2002; Cited by: Mangundjaya, Utoya, and Wulandari, 2015, p. 472). In other words, the success of the organizational change is related with the participation of the employees in the change. What is essential is to determine the variables that may increase the participation rate of employees to the change (Mangundjaya et al. 2015, pp. 472–477). However, although we know that there are many studies related to organizational change in the literature, the studies investigating the effects of change on the individual level and its effects on the behaviour of employees are less in number unfortunately (Rafferty and Griffin, 2006, p. 1154). Yet, perceptions and attitudes of employees against change have a great effect in the implementation of change successfully (Eby, Adams, Russel and Gaby, 2000, p. 420). These perceptions may facilitate or weaken the effectiveness of an intervention aimed for change (Armenakis, Harris and Mossholder, 1993, Lewin, 1951, Cited by: Susanto, 2008, p. 51). 260 Hırlak and Kara There are many studies that address the importance of the leader in initiating of the change in the literature. Transformational leadership style, which is closely bound up with change, draws more attention in the execution of the change in these studies. This style of leadership is discussed under the next heading, “leadership”, in this study. 2.2 Leadership Leadership term is of English origin, and “Lead” as a verb is described to guide, to direct; and “Leader” is described as chief, guide, head, commander, captain, pioneer (Redhouse, 2005). Leadership has been the subject of many studies in popular and academic literature as a concept and a whole body of applications. It is stated that leadership may be defined infinitely under eleven main categories, namely “focal point of the group process, art of assuring obedience, influencing, behaviour, form of persuasion, relation of power, means of achieving goals, result of interaction, differentiation of roles, activator of a structure and combination of different elements” (Bass, 1990a, pp. 19–20). Leadership is the ability to instil support and confidence in people who need to achieve organizational goals (Dubrin, 2012, p. 346). Leadership is guiding the persons in the organization in a proactive work for ensuring motivational process, inspiration, and following up of organizational goals (Hill and McShane, 2008, p. 404). The main task of the leaders consists of the realization of the organizational goals. Thus, leadership means directing a group of people toward the accomplishment of a task or the reaching of an endpoint through various ethically based means (Rowe and Guerrero, 2011, p. 2). Leadership is being capable of influencing others in order to achieve the specified goals, leading the organization to become more consistent and harmonious (Sharma and Jain, 2013, p. 310), Management is also a process used to reach organizational goals successfully just as leadership (Bohoris and Vorria, http:// www.ep.liu.se/ecp/026/076/ecp0726076.pdf, p. 2). However, while there are similarities between the leaders and the managers in terms of the goals to be achieved, it may be said that there are differences in terms of the means they use. Some of these differences are provided in Tab. 1. Developments and changes experienced have revealed new leadership approaches such as transformational, charismatic and interactional leadership, etc. One of the most comprehensive leadership theories for organizational transformation is transformational and transactional leadership theories. While Burns (1978) has brought forth initial ideas about transformative and transactional leadership in political terms, Bass (1985) has improved these leadership Organizational Change and Leadership 261 Tab. 1: Comparison of a Leader and a Manager. Source: Bennis, 1989, p. 7; Lunenburg, 2011, p. 2 Leader Is innovative Is genuine Improves, provide strength, creates the future Has a long-term perspective Asks what and why Challenges status quo Focuses on persons Looks at external environment Creates a vision Sees the whole forest Considers employees as colleagues Trusts and improves employees Does the right things Creates change Serves his/her subordinates Manager Manages Is a copy Protects, supervises, develop the current condition Has a short-term perspective Asks how and when Accepts status quo Focus on the job, system and structure Looks at internal environment Applies plans Sees trees Considers employees as subordinates Directs and controls employees Does things in the right way Manages change Serves his/her superiors approaches and defined them in organizational terms (Eisenbach, Watson and Pillai, 1999, pp. 83–85). These approaches may be described as follows: – Transformational Leadership: Transformational leadership is a style of leadership that emerges as a result of the transformation process between the leaders and their followers. Leaders offer awards for their followers’ performances. Transformational leaders shall apply the change after developing a vision first. This may only be achieved with intellectual stimulation, i.e. leaders set challenging targets for their employees and encourage them to rethink about their old ways of doing business. Leader may render the change attractive and achieve the change successfully by ensuring that it addresses the achievement and improvement requirements of the employees only. If the leader may provide support, coaching and guidance for his/her employees with an individualized approach in this process, this may facilitate the change. These coaching and guidance actions are particularly important for achieving large-scale transformations and ensuring the creation of self-managing teams. And many of the modern businesses are adopting teamwork for the construction of an organization, which is an important cultural transformation in itself. (Eisenbach et al. 1999, pp. 83–85). Transformational leadership 262 Hırlak and Kara has some key qualities that allow it to be distinguished from other types of leadership. These features are listed as follows (Bass, 1990b, p. 22): • Charisma: Determination of mission, vision and culture, taking pride, gaining respect and confidence. • Inspiration: Using symbols that direct efforts, expressing important goals with simple methods. • Intellectual stimulation: Providing support for resolution of problems in intelligent, rational, and careful manner. • Individualised consideration: Offering personal interest, coaching and counselling for each individual. – Transactional Leadership: Transactional leadership is a model based on mutual exchange. In this type of exchange, the followers are awarded with a prize when they fulfil their duties and face a punishment when they do not. The leader uses organizational resources to ensure his/her followers are obedient and willing to work (Grundstein, 1999, p. 150). Transactional leaders have certain features. These are listed as follows (Bass, 1990b, p. 22): • Contingent reward: Promising prizes for good performances and recognition of the successes. • Management by exception (active): Investigation of deviations from rules and standards, taking corrective measures. • Management by exception (passive): Intervening when standards are not met only. • Laissez-faire: Not taking responsibility, avoiding making decisions. According to Burns (1978), transactional leadership occurs when a person or a leader makes an attempt to make changes and communicate by going making a deal on some issues and taking decisions together (Kuhnert and Lewis, 1987, p. 648). According to Bass (1990b, pp. 19–21), transformational leaders inspire and provide energy to their employees, are charismatic, cause intellectual stimulation, and may meet the emotional requirements of their employees. Bass also suggests that leaders may learn the skills they need to become a transformational leader trough training and that they may learn the techniques required. A transformational leader is defined as a source of vision, creativity and inspiration that drives the change (Al-Qura’an, 2015, p. 1). – Charismatic Leadership: Max Weber described charisma as an effect that is not based on authority of an office, or the condition of followers ascribing extraordinary qualities to their leaders. Charismatic leaders usually emerge during transition periods of organizations and under stressful conditions (Edwards 2012, p. 14). Charismatic leadership is related to values that the Organizational Change and Leadership 263 followers attribute to their leaders and the personal characteristics of leaders (Pawar and Eastman, 1997, p. 84). 2.3 The Role of Leadership in Organizational Change Organizational change is defined as a deliberate effort by the leader or manager of the organization aimed at improving the organization. While it is possible that internal and external factors such as technological, social or economic or motivational factors may lie behind the change process, it is also possible that visions and innovative ideas of organization leaders may lie behind it, too (Abbas and Asghar, 2010, p. 18). Curry (1992, pp. 23–25) has cited many different authors to identify various roles that the leaders may play to facilitate the change. These are (Cited by: Gray, 1997, pp. 8–9): Leaders play an important role in the institutionalization of organizations, creating an environment where change can take place or affecting the perceptions and attitudes of members of the organization. • Leaders help to identify and to shape the issues that lead to innovation, to define the organization as an environment, to facilitate discussions, and to encourage more participation in innovative activities. They ensure participation of other members of the organization to the decision making process. • Leaders create coalitions to support change, and they follow the important processes. • Leaders may provide finance and other incentives for participation in the change process. • Leaders are the sponsors of change sponsors, and they attempt to create a synergy. • Leaders perform tasks that may facilitate change such as collecting information, communicating with other members of the organization, developing new coalitions, and identifying existing coalitions that perceive their members as stakeholders within this process. • Leaders shall have a vision so that they may initiate the change. Moreover, decision-making and communication processes shall be mutual. Otherwise, the culture that was created as a result of the change shall not be shared. According to Pagon et al. (2008, p. 4), competencies that shall be found in the leaders for a successful and effective change management are given in Fig. 3. According to Gill (2002, pp. 307–309), if we consider change as taking an organization to a journey from its current condition to the future, dealing with 264 Hırlak and Kara Cognitive Competence -Creativity -Problem solving skills -Analytical skills -Alternative and strategic thinking -Focusing on the future -A good guide -Critical approach and thinking Functional Competence -Communication skills -Technical skills -Personal development -Carrier planning skills -Managerial and decision-making skills -Learning skill Personal/Social Competence -Team work skills -Self-management -Inter-cultural skills -Stress management skills -Honesty, acting ethically, compassion -Integration skills -Motivation skills -Skills for making people move Successful Change and Change Management -Increase in efficiency -Increase in the quality of relationships -Lesser conflicts -Increased cooperation -Strong organizational culture and climate etc. Leadership Competencies Required for Successful and Effective Change Management Fig. 3: Competencies Required in Leaders for Successful and Effective Change Management. Source: Pagon et al. 2008, p. 4 problems that occur in course of the journey shall be related with leadership besides being related with management. Change shall be well managed, planned, organized and inspected. Effective leadership is required to be able to accomplish the change successfully, i.e. it is the leader that makes the difference. In order to manage change successfully, an effective leader shall meet some different aspects and requirements. These are as follows (Gill, 2002, p. 311): • The intellectual/cognitive aspects and requirements of leadership (thinking): Effective leaders shall understand the information using their intellectual and cognitive skills, and they shall reason with knowledge, imagine the possibilities, make judgements, solve problems and make decisions. • The spiritual/moral aspects and requirements of leadership (meaning): The spiritual aspect of leadership is about the desire to have a meaning and to feeling of being esteemed that motivate people on what they are doing and searching for. This feeling of having a meaning and being esteemed depends on the vision and values shared. For example; Xerox PARC’s guru John Seely Brown described the purpose of leader today as creating meaning and winning people’s souls, not just to make money (Dess and Picken, 2000). • The emotional aspects and requirements of leadership (emotions): Effective leadership also requires a well-developed emotional intelligence. Emotional Organizational Change and Leadership 265 intelligence is expressed as the ability to understand oneself and other people, to ensure self-control and self-confidence, and to respond to others in appropriate forms. Leaders with high emotional intelligence use their personal power instead of their official power or authority. • The behavioural aspects and requirements of leadership (actions): Behavioural skills required for leadership covers, for example, both using emotions and responding to emotions using body language, as well as communicating by writing, speaking, listening and physical behaviour using personal power. 3 Conclusion and Discussion Change is an essential concept, which never goes out of date and always continues to be discussed, in the field of management. Today, we experience continuous change in all kinds of structures as an inevitable condition due to vital reasons. The developments in the field of science and technology, which have an important role in satisfaction of human requirements in particular, force organizations to undergo a serious structural change. Therefore, it is only possible for organizations to sustain their existence in line with their missions, only by keeping up with current developments and changes. Organizations are trying to meet the demands that arise as a result of all developments that are experienced, and to adapt to change. Leaders shall have a significant effect on achieving this adaptation. However, it is almost impossible that these continuous organizational changes may be succeeded by managers with lesser visions. Thus, managers with leadership qualities are required in order to ensure a successful transformation in the organizations. Managers with different leadership qualities are employed in today’s organizations. It is not enough for a leader just to motivate his or her employees on work, to take steps to improve their performance or to motivate them. The leader shall also have the knowledge and technique to ensure that the organizational change is carried out successfully. Many researches on the role of leaders in organizational change show that leaders who attach importance to participation in organizational decisions, who are agreeable with a democratic approach, and who keep their communication channels always open are more successful in the works for achieving change. This leadership style, which may keep up with the changes that may occur around the business while keeping its organizations at the top level in terms of efficiency, is named as the “Transformational Leadership Model” within the literature. Thus, transformational leadership has become the most preferred and accepted leadership model for organizational change. Transformational leaders work to 266 Hırlak and Kara determine the most appropriate vision for the organization and to realize radical changes that shall be performed in economic, social and technological terms to reach their goals in line with this vision. A transformational leader shall create a detailed plan of change and manage the process in the best way to bring the organization to the future in the most appropriate way for its current condition. Failure shall be inevitable if the organizational change process can not be planned and managed properly. When the need for change arises, it shall be ensured that the necessary infrastructure conditions are met and that the change is perceived positively in both personal and organizational contexts in order to realize the change. In such a condition, it would also be possible to remove any resistance that may cause the change to fail. At this point, leaders shall ensure the harmony and consistency of the change process with the strategies, policies, visions, goals, objectives, values, and beliefs of the business in order to manage the change well. They shall take necessary precautions to prevent resistance against change, to keep communication channels open, and to support the development of the skills and knowledge required for change. Differences in organizational structure shall also be considered in the change. Because the structure of each organization is different and the change made in one organization may not be suitable for another organization. All differences shall be considered when you are managing a change. Changes applied regularly and properly by considering organizational culture and structure will be successful. References Abbas, W. and Asghar, I. (2010). The Role of Leadership in Organisational Change: Relating the Successful Organisational Change to Visionary and Innovative Leadership. 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