Organizational Change: Perspectives On Theory and Practice: Chapter 2: Causes of Change

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Organizational Change:
Perspectives on Theory and
Practice
Chapter 2: Causes of Change

1
Key topics

• Organizational survival the reason for change


• External environment
– Conceptualizing trends
• Internal factors
– The role of new leaders
– Growth as a driver
– Organizational resources
– Management fashions

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Where we are:

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Organizational survival

• Change happening
– New competitors, new technologies, resources can be
depleted, key people leave
• Fundamental questions for an organization
– How to continue to be viable when changes taking place
around and within the organization?
– How to take advantage of those changes and thrive, not just
survive?

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External Environment

• Task environment – organization’s direct


interactions e.g. with customers, competitors
• Contextual environment – broader, more
general environment (Morgan, 1986)
• Sources of change in the environment
(Dawson, 1992)
– Constituent parts are not static
– Changes in patterns of interactions
– Change because of the organization’s impact on
the environment.

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Scope of External Trends

• Tipping point (Galdwell,2000) – the critical moment in an


evolving situation when after a period of relative stability, a new
pattern is far more apparent and the growth contagious

• Global trends – affect the majority of organizations e.g.


population growth, urbanization, global warming

• Geographic trends – affect one particular region of the world

• Industry trends – affect a particular industry e.g. changes to


legislations concerning food labelling

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The content of external trends

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Management fashions

• A fairly stable body of knowledge about what


leaders should do to improve company
performance (Fincham and Clark, 2002)
• Generally popularized using powerful
marketing techniques e.g. seminars, videos,
books ( Sorge and van Witteloostuijn, 2004)
• 1980s – Total Quality Management
• 1990s- Business Process Re-engineering
• 2000s – Lean, Six sigma

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Internal causes – new leaders
• Hero-leaders who seen as organizational saviours
(Hucyzinski, 1993)

• Very fact of new leaders may signal to rest of the


organization that change is likely, regardless of whether
charismatic

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Internal causes - growth

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Internal causes - growth

• Phase 1: creativity – founders innovative and


entrepreneurial and dismissive of management; long
hours; communication and decision making informal
• Crisis of leadership: need more formal and systematic
ways of communicating and making decisions
• Phase 2: direction – sustained growth with functional
structure and specialized jobs
• Crisis of autonomy – lower levels feel stifled by
bureaucracy but reluctant to take the initiative
• Phase 3: delegation – decentralized structure with
profit centres and use of bonuses for motivation

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Internal causes – growth

• Crisis of control – top executives feel they are losing


control over diversified operations
• Phase 4: co-ordination – formal planning systems
introduced; head office headcount introduced to
introduce company wide review of line managers
• Red tape crisis – head office typecasts rest of
organization as uncooperative; rest of the organization
believe head office does not understand local conditions
• Phase 5: Collaboration – move from roles to
relationships and managing through teams including
team reward

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Commentary on Greiner’s model

• Life cycle models appealing because they reduce


complexity to a uniform, predictable, appealing
pattern (Stubbart and Smalley, 1999)
• Often triggers significant insights for top teams into
where they have got ‘stuck’ as an organization
• Inconclusive empirical support for notion that distinct
stages of development can be identified, that the
order is pre-determined and recognizable and that all
organizations undergo the same sequence of
developmental changes as organisms do (Phelps et
al, 2007)

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Internal resources

• ‘competitive success does not come simply


from making choices in the present ….but
stems from building up distinctive capabilities
over time’ (Boxall and Purcell, 2008)
• Resources
– Assets in formal accounting sense eg factories,
stock, debtors
– Value creating properties which not owned by the
organization e.g. talents and interactions of
employees, deep understanding of customer needs

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Internal resources

• ‘Social complexity’(Barney, 1991) of deep networks of


relationships can be a defence against competition
• Successful organizations become strong clusters of ‘human and
social capital’ (Goshal, 1998), generating valuable new
combinations of human and non-human resources for the
organization which hard for others to imitate
• Organizations may change through building on exiting strengths
rather than first identifying an opportunity in the external market
and then trying to decide how to capitalize on it

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Key points

• Some organizational changes triggered by specific


events or shifting patterns in the external environment.
• External trends may be global, geographic or industry
specific
• Trends can be analysed using PESTLE
• Other changes are caused by changes to the internal
environment e.g. new leaders, new management
ideas, growth or the resources of the organization
• A fundamental question for organizations is how to
change in order to survive and thrive in this dynamic
context

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