Organizational Change
3e
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This book is dedicated to our partners: Heather, Bertha, and Steve.
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Organizational Change
An Action-Oriented Toolkit
3e
Tupper F. Cawsey
Wilfrid Laurier University
Gene Deszca
Wilfrid Laurier University
Cynthia Ingols
Simmons College
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Library of Congress Cataloging-in-Publication Data
Cawsey, T. F.
Organizational change: an action-oriented toolkit / Tupper F. Cawsey, Gene Deszca, Cynthia Ingols. — Third edition.
pages cm
Includes index.
ISBN 978-1-4833-5930-4 (pbk.: alk. paper)
1. Organizational change. I. Deszca, Gene. II. Ingols, Cynthia. III. Title.
HD58.8.C39 2016
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658.4′06—dc23 2015006458
This book is printed on acid-free paper.
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Brief Contents
Preface
Acknowledgments
Chapter 1. Changing Organizations in Our Complex World
Chapter 2. Frameworks for Leading the Process of Organizational Change: “How” to
Lead Organizational Change
Chapter 3. Frameworks for Diagnosing Organizations: “What” to Change in an
Organization
Chapter 4. Building and Energizing the Need for Change
Chapter 5. Navigating Change Through Formal Structures and Systems
Chapter 6. Navigating Organizational Politics and Culture
Chapter 7. Managing Recipients of Change and Influencing Internal Stakeholders
Chapter 8. Becoming a Master Change Agent
Chapter 9. Action Planning and Implementation
Chapter 10. Measuring Change: Designing Effective Control Systems
Chapter 11. Summary Thoughts on Organizational Change
Appendix: Case Studies
Case Study 1: Building Community at Terra Nova Consulting
Case Study 2: Food Banks Canada: Revisiting Strategy 2012
Case Study 3: “Not an Option to Even Consider:” Contending With the Pressures to
Compromise
Case Study 4: Diego Curtiz at Highland State University
Case Study 5: Ellen Zane—Leading Change at Tufts/NEMC
Case Study 6: Ellen Zane at Tufts Medical Center: Spring 2011
Notes
Index
About the Authors
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Detailed Contents
Preface
Acknowledgments
Chapter 1. Changing Organizations in Our Complex World
Defining Organizational Change
The Orientation of This Book
Environmental Forces Driving Change Today
The Implications of Worldwide Trends for Change Management
Four Types of Organizational Change
Planned Changes Don’t Always Produce the Intended Results
Organizational Change Roles
Change Initiators
Change Implementers
Change Facilitators
Common Challenges for Managerial Roles
Change Recipients
The Requirements for Becoming a Successful Change Leader
Summary
Key Terms
End-of-Chapter Exercises
Chapter 2. Frameworks for Leading the Process of Organizational Change: “How” to
Lead Organizational Change
Differentiating How to Change From What to Change
The Processes of Organizational Change
(1) Stage Theory of Change: Lewin
Unfreeze
Change
Refreeze
(2) Stage Model of Organizational Change: Kotter
Kotter’s Eight-Stage Process
(3) Giving Voice to Values: Gentile
GVV and Organizational Change
(4) Emotional Transitions Through Change: Duck
Duck’s Five-Stage Change Curve
(5) Managing the Change Process: Beckhard and Harris
(6) The Change Path Model: Cawsey–Deszca–Ingols
Application of the Change Path Model
Awakening: Why Change?
Mobilization: Gap Analysis of Hotel Operations
Acceleration: Getting From Here to There
Institutionalization: Measuring Progress Along the Way and Using Measures
to Help Make the Change Stick
Summary
Key Terms
End-of-Chapter Exercises
Chapter 3. Frameworks for Diagnosing Organizations: “What” to Change in an
Organization
Open Systems Approach to Organizational Analysis
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(1) Nadler and Tushman’s Congruence Model
History and Environment
Strategy
The Transformation Process
Work
The Formal Organization
The Informal Organization
People
Outputs
An Example Using Nadler and Tushman’s Congruence Model
Evaluating Nadler and Tushman’s Congruence Model
(2) Sterman’s Systems Dynamics Model
(3) Quinn’s Competing Values Model
(4) Greiner’s Model of Organizational Growth
(5) Stacey’s Complexity Theory
Summary
Key Terms
End-of-Chapter Exercises
Chapter 4. Building and Energizing the Need for Change
Understanding the Need for Change
Seek Out and Make Sense of External Data
Seek Out and Make Sense of the Perspectives of Stakeholders
Seek Out and Make Sense of Internal Data
Seek Out and Assess Your Personal Concerns and Perspectives
Assessing the Readiness for Change
Heightening Awareness of the Need for Change
Factors That Block People From Recognizing the Need for Change
Developing a Powerful Vision for Change
The Difference Between an Organizational Vision and a Change Vision
Examples of Organizational Change Visions
Google’s Implied Vision for Change in Telecommunications
Xerox’s Vision for Creating Agile Business Processes
IBM—Diversity 3.0
Ronald McDonald House Charities (RMHC) Vision
Tata’s Vision for the Nano
World Wildlife Fund: Vision for Its Community Action Initiative—Finding
Sustainable Ways of Living
Vision for the “Survive to 5” Program
Change Vision for “Reading Rainbow”
Summary
Key Terms
A Checklist for Change: Creating the Readiness for Change
End-of-Chapter Exercises
Chapter 5. Navigating Change Through Formal Structures and Systems
Making Sense of Formal Structures and Systems
Impact of Uncertainty and Complexity on Formal Structures and Systems
Formal Structures and Systems From an Information Perspective
Aligning Systems and Structures With the Environment
Structural Changes to Handle Increased Uncertainty
Making Formal Structure and System Choices
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Using Structures and Systems to Influence the Approval and Implementation of
Change
Using Formal Structures and Systems to Advance Change
Using Systems and Structures to Obtain Formal Approval of a Change Project
Using Systems to Enhance the Prospects for Approval
Ways to Approach the Approval Process
Aligning Strategically, Starting Small, and “Morphing” Tactics
The Interaction of Structures and Systems With Change During Implementation
Using Structures and Systems to Facilitate the Acceptance of Change
Developing Adaptive Systems and Structures
Summary
Key Terms
Checklist: Change Initiative Approval
End-of-Chapter Exercises
Chapter 6. Navigating Organizational Politics and Culture
Power Dynamics in Organizations
Departmental Power
Organizational Culture and Change
How to Analyze a Culture
Tips for Change Agents to Assess a Culture
Understanding the Perceptions of Change
Identifying the Organizational Dynamics at Play
Summary
Key Terms
Checklist: Stakeholder Analysis
End-of-Chapter Exercises
Chapter 7. Managing Recipients of Change and Influencing Internal Stakeholders
Stakeholders Respond Variably to Change Initiatives
Not Everyone Sees Change as Negative
Responding to Various Feelings in Stakeholders
Positive Feelings in Stakeholders: Channeling Their Energy
Ambivalent Feelings in Stakeholders: They Can Be Useful
Negative Reactions to Change by Stakeholders: These Too Can Be Useful
Make the Change of the Psychological Contract Explicit and Transparent
Predictable Stages in the Reaction to Change
Stakeholders’ Personalities Influence Their Reactions to Change
Prior Experience Impacts a Person’s and Organization’s Perspective on
Change
Coworkers Influence Stakeholders’ Views
Feelings About Change Leaders Make a Difference
Integrity Is One Antidote to Skepticism and Cynicism
Avoiding Coercion But Pushing Hard: The Sweet Spot?
Creating Consistent Signals From Systems and Processes
Steps to Minimize the Negative Effects of Change
Engagement
Timeliness
Two-Way Communication
Make Continuous Improvement the Norm
Encourage People to Be Change Agents and Avoid the Recipient Trap
Summary
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Key Terms
Checklist: How to Manage and Minimize Cynicism About Change
End-of-Chapter Exercises
Chapter 8. Becoming a Master Change Agent
Factors That Influence Change Agent Success
The Interplay of Personal Attributes, Situation, and Vision
Change Leaders and Their Essential Characteristics
Developing Into a Change Leader
Intention, Education, Self-Discipline, and Experience
What Does Reflection Mean?
Developmental Stages of Change Leaders
Four Types of Change Leaders
Internal Consultants: Specialists in Change
External Consultants: Specialized, Paid Change Agents
Provide Subject-Matter Expertise
Bring Fresh Perspectives From Ideas That Have Worked Elsewhere
Provide Independent, Trustworthy Support
Limitations of External Consultants
Change Teams
Change From the Middle: Everyone Needs to Be a Change Agent
Rules of Thumb for Change Agents
Summary
Key Terms
Checklist: Structuring Work in a Change Team
End-of-Chapter Exercises
Chapter 9. Action Planning and Implementation
Without a “Do It” Orientation, Things Won’t Happen
Prelude to Action: Selecting the Correct Path
Plan the Work
Engage Others in Action Planning
Ensure Alignment in Your Action Planning
Action Planning Tools
1. To-Do Lists
2. Responsibility Charting
3. Contingency Planning
4. Surveys and Survey Feedback
5. Project Planning and Critical Path Methods
6. Tools to Assess Forces That Influence Outcomes and Stakeholders
7. Leverage Analysis
8. Operation Management Tools
Working the Plan Ethically and Adaptively
Developing a Communication Plan
Timing and Focus of Communications
Key Principles in Communicating for Change
Influence Strategies
Transition Management
Summary
Key Terms
Checklist: Developing an Action Plan
End-of-Chapter Exercises
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Chapter 10. Measuring Change: Designing Effective Control Systems
Selecting and Deploying Measures
Focus on Key Factors
Use Measures That Lead to Challenging but Achievable Goals
Use Measures and Controls That Are Perceived as Fair and Appropriate
Avoid Sending Mixed Signals
Ensure Accurate Data
Match the Precision of the Measure With the Ability to Measure
Control Systems and Change Management
Controls During Design and Early Stages of the Change Project
Controls in the Middle of the Change Project
Controls Toward the End of the Change Project
Other Measurement Tools
Strategy Maps
The Balanced Scorecard
Risk Exposure Calculator
The DICE Model
Summary
Key Terms
Checklist: Creating a Balanced Scorecard
End-of-Chapter Exercises
Chapter 11. Summary Thoughts on Organizational Change
Putting the Change Path Model Into Practice
Future Organizations and Their Impact
Becoming an Organizational Change Agent: Specialists and Generalists
Paradoxes in Organizational Change
Orienting Yourself to Organizational Change
Summary
End-of-Chapter Exercises
Case Studies
Case Study 1: Building Community at Terra Nova Consulting
Case Study 2: Food Banks Canada: Revisiting Strategy 2012
Case Study 3: “Not an Option to Even Consider:” Contending With the Pressures to
Compromise
Case Study 4: Diego Curtiz at Highland State University
Case Study 5: Ellen Zane—Leading Change at Tufts/NEMC
Case Study 6: Ellen Zane at Tufts Medical Center: Spring 2011
Notes
Index
About the Authors
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Preface
Since the publishing of the second edition of this text, the world has continued to churn in
very challenging ways. Uneven and shifting global patterns of growth, sluggish Western
economies, continuing fallout from the financial crisis, stubbornly high unemployment levels
in much of the world, and heightened global uncertainty in matters related to health, safety,
and security define the terrain. Their consequences continue to unfold. The massive credit
crisis was followed by unprecedented worldwide government stimulus spending, followed by
sovereign debt crises, followed by . . . ??? Wars and insurrections in parts of Africa, the
Ukraine, and much of the Middle East; deteriorating international relationships involving
major powers; fears of global pandemics (Ebola and MERS); and the rise of ISIS and Boko
Haram and their unprecedented inhumanity have shaken all organizations, big or small,
public or private. They have also made us, your authors, much more aware of the extreme
influence of the external environment on the internal workings of an organization. As we
point out in our book, even the smallest of firms have to adapt when banks refuse them
normal credit, and even the largest and most successful of firms have to learn how to adapt
when disruptive technologies or rapid social and political changes alter their realities.
Our models have always included and often started with events external to the organization.
We have always argued that change leaders need to scan their environments and be aware of
trends and crises in those environments. The events of the past two years have reinforced our
sense of this even more. Managers must be sensitive to what happens around them, know
how to make sense of this, and then have the skills and abilities that will allow them to both
react effectively to the internal and external challenges and remain constant in their visions
and dreams of how to make their organizations and the world a better place to live.
A corollary of this is that organizations need a response capability that is unprecedented,
because we’re playing on a global stage of increasing complexity and uncertainty. If you are
a bank, you need a capital ratio that would have been unprecedented a few years ago. If you
are a major organization, you need to build in flexibility into your structures, policies, and
plans. If you are a public sector organization, you need to be sensitive to how capricious
granting agencies or funders will be when revenues dry up. In today’s world, organizational
resilience and adaptability gain new prominence.
Further, we are faced with a continuing reality that change is endemic. All managers are
change managers. All good managers are change leaders. The management job involves
creating, anticipating, encouraging, engaging others, and responding positively to change.
This has been a theme of this book which continues. Change management is for everyone.
Change management emerges from the bottom and middle of the organization as much as
from the top. It will be those key leaders who are embedded in the organization who will
enable the needed adaptation of the organization to its environment. Middle managers need
to be key change leaders.
In addition to the above, we have used feedback on the second edition to strengthen the
pragmatic orientation that we had developed. The major themes of action orientation, analysis
tied with doing, the management of a nonlinear world, and the bridging of the “Knowing–
Doing” gap continue to be central. At the same time, we have tried to shift to a more userfriendly, action perspective. To make the material more accessible to a diversity of readers,
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some theoretical material has been altered, some of our models have been clarified and
simplified, and some of our language and formatting has been modified.
As we stated in the preface to the first edition, our motivation for this book was to fill a gap
we saw in the marketplace. Our challenge was to develop a book that not only gave
prescriptive advice, “how-to-do-it lists,” but one that also provided up-to-date theory without
getting sidetracked by academic theoretical complexities. We hope that we have captured the
management experience with change so that our manuscript assists all those who must deal
with change, not just senior executives or organizational development specialists. Although
there is much in this book for the senior executive and organizational development specialist,
our intent was to create a book that would be valuable to a broad cross section of the
workforce.
Our personal beliefs form the basis for the book. Even as academics, we have a bias for
action. We believe that “doing is healthy.” Taking action creates influence and demands
responses from others. While we believe in the need for excellent analysis, we know that
action itself provides opportunities for feedback and learning that can improve the action.
Finally, we have a strong belief in the worth of people. In particular, we believe that one of
the greatest sources of improvement is the untapped potential to be found in the people of the
organization.
We recognize that this book is not an easy read. It is not meant to be. It is meant as a serious
text for those involved in change—that is, all managers! We hope you find it a book that you
will want to keep and pull from your shelf in the years ahead, when you need to lead change
and you want help thinking it through.
Your authors,
Tupper, Gene, and Cynthia
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Acknowledgments
We would like to acknowledge the many people who have helped to make this book possible.
Our students and their reactions to the ideas and materials continue to be a source of
inspiration. Cynthia’s Leadership and Organizational Change course, spring 2014, included
Mshael Alessa, Daniella Comito, Katrice Krumplys, Jill Peterson, and other students who
applied the concepts in this book and made a difference through their change projects at
Simmons College.
Managers, executives, and frontline employees that we have known have provided insights,
case examples, and applications while keeping us focused on what is useful and relevant.
Ellen Zane, former CEO of Tufts Medical Center, Boston, is an inspiring change leader; her
turnaround story at Tufts Medical Center appeared in the second edition of this book and is
published again in this third edition. Cynthia has also been fortunate to work with and learn
from Gretchen Fox, founder and former CEO, FOX Relocation Management Corporation.
The story of how she changed her small firm appeared in the second edition of the book and
the case continues to be available through Harvard Business Publishing
(http://hbr.org/product/fox-relocation-management-corp/an/NA0096-PDF-ENG). Katharine
Schmidt, a former student of Gene‘s and the CEO of Food Banks Canada, is another of the
inspiring leaders who opened her organization to us and allowed us to learn from their
experience, and share it with you in this edition.
Several colleagues have provided guidance and feedback along the way that have helped us
test our logic and develop our thinking and writing. Cynthia would like to especially thank
Professor Mary Shapiro, a colleague at the School of Management, Simmons College, who
read each chapter thoroughly and gave insightful feedback on the manuscript. Dr. Paul
Myers, consultant, Boulder, CO, read Chapters 2 and 3 with a fine-tooth comb and gave us
astute criticism, allowing us—paradoxically—to both simplify and add complexity to those
chapters.
Our research assistants have provided valuable support. John Schappert and Charles Newell
assisted with the search for relevant research articles, reports of change initiatives, and
websites of interest.
We owe a HUGE THANKS to Paige Tobie. She searched for articles and web-based
materials, participated in our conference calls, made sure ideas and changes didn’t get lost,
and kept us on track, on time, and working with the right versions of the manuscript. She
provided valuable input on drafts of the manuscript from a student/practitioner’s perspective,
and then read the entire manuscript one last time, catching problematic areas. She did all
these tasks while retaining her sense of humor and remaining a pleasure to work with. Thank
you so very much, Paige: You have been a wonderful project manager, researcher, and
colleague!
As with the last edition, our partners Heather Cawsey, Bertha Welzel, and Steve Spitz
tolerated our moods, our myopia to other things that needed doing, and the early mornings
and late nights spent on the manuscript. They helped us work our way through ideas and
sections that were problematic, and they kept us smiling and grounded when frustration
mounted.
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Our editors at Sage have been excellent. They moved the project along and made a difficult
process fun (well, most of the time). Thank you, Maggie Stanley, our acquisitions editor, for
keeping us on task and on time (or trying to keep us on time . . . ). We appreciate your style
of gentle nudges. Nicole Mangona, editorial assistant, was constantly on top of the various
parts of the book and helped us push through to the end.
Finally, we would like to recognize the reviewers who provided us with valuable feedback on
the second edition. Their constructive, positive feedback and their excellent suggestions were
valued. We thought carefully about how to incorporate their suggestions into this third edition
of the book. Thank you, Jeff Zimmerman, Northern Kentucky University; Lorraine M.
Henderson, Nazareth College of Rochester; Ross A. Wirth, Franklin University; Ericka
Kimball, Augsburg College; Whitney McIntyre Miller, Northern Kentucky University;
Sandra R. Bryant, Tiffin University; John Anthony DiCicco, Curry College; and Paul M.
Terry, University of South Florida. In short, our thanks to all who made this book possible.
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Chapter 1 Changing Organizations in Our Complex
World
It is not the strongest of the species that survive, nor the most intelligent, but the most
responsive to change.
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Chapter Overview
The chapter defines organizational change as “planned alteration of organizational components to improve the
effectiveness of organizations.”
The orientation of this book is to assist change managers or potential change leaders to be more effective in
their change activities.
The social, demographic, technological, political, and economic forces pushing the need for change are
outlined.
Four types of organizational change are discussed: tuning, adapting, reorienting, and re-creating.
Four change roles found in organizations are described: change initiators, change implementers, change
facilitators, and change recipients and stakeholders. The terms change leader and change agent are used
interchangeably and could mean any of the four roles.
The difficulties in creating successful change are highlighted, and then some of the characteristics of successful
change leaders are described.
Organizations fill our world. We place our children into day care, seek out support services
for our elderly, and consume information and recreational services supplied by other
organizations. We work at for-profit or not-for-profit organizations. We rely on organizations
to deliver the services we need: food, water, electricity, and sanitation and look to
governmental organizations for a variety of services that we hope will keep us safe, secure,
well governed, and successful. We depend on health organizations when we are sick. We use
religious organizations to help our spiritual lives. We assume that most of our children’s
education will be delivered by formal educational organizations. In other words,
organizations are everywhere. Organizations are how we get things done. This is not just a
human phenomenon—it extends to plants and animals—look at a bee colony, a reef, a lion
pride, or an elephant herd and you’ll see organizations at work.
And these organizations are changing—some of them declining and failing, while others
successfully adapt or evolve, to meet the shifting realities and demands of their environments.
What exactly is organizational change? What do we mean when we talk about it?
Defining Organizational Change
When we think of organizational change, we think of major changes: mergers, acquisitions,
buyouts, downsizing, restructuring, the launch of new products, and the outsourcing of major
organizational activities. We can also think of lesser changes: departmental reorganizations,
installations of new technology and incentive systems, shutting particular manufacturing
lines, or opening new branches in other parts of the country—fine-tuning changes to improve
the efficiency and operations of our organizations.
In this book, when we talk about organizational change, we refer to planned alterations of
organizational components to improve the effectiveness of the organization. Organizational
components are the organizational mission, vision, values, culture, strategy, goals, structure,
processes or systems, technology, and people in an organization. When organizations
enhance their effectiveness, they increase their ability to generate value for those they serve.*
The reasons for change are often ambiguous. Is the change internally or externally driven? In
winter 2014, Tim Hortons (a Canada-based coffee restaurant chain) announced that it was
aiming to open 1,000 new stores globally by 2018, joining their network of 3,468 outlets in
Canada, 807 in the United States, and 29 in the Persian Gulf. It has also been busy revising its
menu to shore up flattening same-store sales, adding Wi-Fi access, undertaking major store
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remodeling, and making changes to its sustainability and corporate social responsibility
initiatives. What is driving these changes? The executives reported that they were
undertaking these actions in response to competitive pressures, customer needs, market
opportunities, and the desire to align their efforts with their values. For Tim Hortons, the
drivers of change are coming from both the internal and external environment. Dunkin’
Donuts, a much larger U.S. chain with similarities to Tim Hortons’ business model and
competitive pressures, seems to be pursuing similar adaptive responses.1 It is essential for
managers to be sensitive to what is happening inside and outside the organization, and adapt
to those changes in the environment.†
Note that, by our definition and focus, organizational change is intentional and planned.
Someone in the organization has taken an initiative to alter a significant organizational
component. This means a shift in something relatively permanent. Usually, something formal
or systemic has to be altered. For example, a new customer relations system may be
introduced that captures customer satisfaction and reports it to managers; or a new division is
created and people are allocated to that division in response to a new organizational vision.
Simply doing more of the same is not an organizational change. For example, increasing
existing sales efforts in response to a competitor’s activities would not be classified as an
organizational change. However, the restructuring of a sales force into two groups (key
account managers and general account managers) or the modification of service offerings
would be, even though these changes could well be in response to a competitor’s activities
rather than a more proactive initiative.
Some organizational components, such as structures and systems, are concrete and thus easier
to understand when contemplating change. For example, assembly lines can be reordered or
have new technologies applied. The change is definable and the end point clear when it is
done. Similarly, the alteration of a reward system or job design is concrete and can be
documented. The creation of new positions, subunits, or departments is equally obvious. Such
organizational changes are tangible and thus may be easier to make happen, because they are
easier to understand.
When the change target is more deeply imbedded in the organization and is intangible, the
change challenge is magnified. For example, a shift in organizational culture is difficult to
engineer. A change leader can plan a change from an authoritarian to a more participative
culture, but the initiatives required to bring about the change and the sequencing of those
initiatives are trickier to get a hold of than more concrete change initiatives. Simply
announcing a new strategy or vision does not mean that anything significant will change
since: “You need to get the vision off the walls and into the halls.”2 A more manageable way
to think of such a culture change is to identify concrete changes that reinforce the desired
culture. If management alters reward systems, shifts decision making downward, and creates
participative management committees, then management increases the likelihood that it will
create cultural change over time. Sustained behavioral change occurs when people in the
organization understand, accept, and act. Through their actions, the new vision or strategy
becomes real.3
The target of change needs to be considered carefully. Often, managers choose concrete
tangible changes because they are easiest to plan for and can be seen. For example, it is
relatively easy to focus on pay and give monetary incentives in an attempt to address
employee morale. But the root cause of these issues might be managerial styles or processes
—much more difficult to recognize and address. In addition, intervening through
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compensation may have unanticipated consequences and actually worsen the problem. An
example of this can be found in the story below.
In this example, if the original analysis had been accepted, turnover rates might have declined
since staff may have been persuaded to stay for higher wages. But the agency would be
facing monetary issues and would have had a festering morale problem.
Change at a Social Service Agency
In a mid-sized social service agency’s family services division, turnover rates climbed to more than 20%, causing
serious issues with service delivery and quality of service. The manager of the division argued that staff were
leaving because of wages. According to him, children’s aid societies’ wages were higher and staff left to join
those organizations. Upon investigation, senior management learned of morale problems arising from the
directive, noninclusive management style of the manager. Instead of altering pay rates, which would have caused
significant budgetary and equity problems throughout the organization, senior management replaced the manager
and moved him to a project role. Within months, turnover rates dropped to less than 10% and the manager
decided to leave the agency.4
The Orientation of This Book
The focus, then, of this book is on organizational change as a planned activity designed to
improve the organization’s effectiveness. Changes that are random (occur simply due to
chance) or unplanned are not the types of organizational change that this book will explore,
except, insofar, as they serve as the stimulus for planned change initiatives. Similarly,
changes that may be planned but do not have a clear link to attempts to improve
organizational effectiveness are not considered. That is, changes made solely for personal
reasons—for personal gain, for example—fall outside the intended focus of this book.
There is a story of two stonecutters. The first, when asked what he was doing,
responded, “I am shaping this stone to fit in that wall.” The second, however, said, “I am
helping to build a cathedral.”
The jobs of the two stonecutters might be the same, but their perspectives are dramatically
different. The personal outcomes of satisfaction and organizational commitment will likely be
much higher for the visionary stonecutter than for the “just doing my job” stonecutter.
Finally, the differences in satisfaction and commitment may well lead to different
organizational results. After all, if you are building a cathedral, you might be more motivated
to stay late, to take extra care, to find ways to improve things, and to help others when help is
needed.
In other words, the organizational member who has a broader perspective on the value of his
or her contributions and on the task at hand is likely to be a more committed and capable
contributor. As a result, we take a perspective that encourages change leaders to take a
holistic perspective on the change and to be widely inclusive in letting employees know what
changes are needed and are happening.
If employees have no sense of the intended vision and see themselves as “just doing a job,” it
is likely that any organizational change will be difficult to understand, be resisted, and cause
personal trauma. On the other hand, if employees “get” the vision of the organization and
understand the direction and perspective of where the organization is going and why, they are
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more likely to embrace their future role—even if that future means they leave the
organization.5
This book is aimed at those who want to be involved in change and wish to take positive
action. We encourage readers to escape from passive, negative change recipient positions and
to move to more active and healthy roles—those of change initiators, facilitators, and
implementers. Readers may be in middle-manager roles or may be students hoping to enter
managerial roles. Or they may be leaders of change within an organization or a subunit. The
book is also intended for the informal leaders in organizations who are driving change,
sometimes in spite of their bosses. They might believe that their bosses “should” be driving
the change but don’t see it happening, and so they see it as up to them to make change happen
regardless of the action or inaction of their managers.
This book has an action, “how to do it” emphasis. Nothing happens unless we, the people,
make it happen. As one wag put it, “The truth is—the cavalry aren’t coming!” There will be
no cavalry charging over the hill to save us. It is up to us to make the changes needed. At the
same time, this “how-to” orientation is paired with a focus on developing a deep
understanding of organizations. Without such an understanding, what needs to be changed,
and what the critical success factors are, change efforts will be much more difficult. This twin
theme, of knowing both how to do it and what to do, underpins the structure of this book and
our approach to change. To paraphrase Zig Ziglar: “It’s not what happens to you that matters.
It’s how you respond that makes a difference.”6
Change capability is a core managerial competence. Without skills in change management,
individuals cannot operate effectively in today’s fluctuating, shifting organizations.7 Senior
management may set the organizational direction, but, in this decentralized organizational
world, it is up to managers and employees to shift the organization to accomplish the new
goals and objectives. To do this, change-management skills are paramount. In many
organizations, those managers are looked to for insights, innovative ideas, and initiatives that
will make a positive difference in their firms. Investigate firms such as Google, the Mayo
Clinic, Cisco, and others listed among the 100 best to work for here and offshore, and you
will find many examples of firms embracing these practices.8 They do so with a realistic
appreciation for the fact that change management is often more difficult than we anticipate.
We believe, as do Pfeffer and Sutton, that there is a Knowing–Doing gap.9 Knowing the
concepts and understanding the theory behind organizational change are not enough. This
book is designed to provide practicing and prospective managers with the tools they will need
to be effective change agents.
Environmental Forces Driving Change Today
Much change starts with shifts in an organization’s environment. For example, government
legislation dealing with employment law pushes new equity concerns through hiring
practices. Globalization means that marketing, research and development, production, and
other parts of an organization (e.g., customer service’s call centers) can be moved around the
world and/or outsourced. International alliances form and reform. These and related factors
mean an organization’s competition is often global in nature, rather than local. New
technologies allow purchasing to link to production within an integrated supply chain,
changing forever supplier–customer relationships. Concerns over global warming,
sustainability, and environmental practices give rise to new laws, standards, and shifts in
consumer preferences for products and firms that exhibit superior environmental
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performance. A competitor succeeds in attracting an organization’s largest customer and
upsets management’s assumptions about the marketplace. Each of these external happenings
will drive and push the need for change. These factors are summed up in the acronym
PESTE. PESTE factors include political, economic, social, technological, and
ecological/environmental factors that describe the environment or context of an organization.
These are not simply private sector realities. Not-for-profits, hospitals, schools, and
governments all experience these environmental challenges as the world shrinks and the
seeming pace of change accelerates and increases in complexity. Not-for-profits or NGOs
(nongovernmental organizations) and various governmental bodies respond to hunger in wartorn Somalia and Syria, public universities and hospitals respond to for-profit competitors.
Governments around the world deal with issues related to enhancing their economic
competitiveness and attract employment, hopefully in sustainable and socially responsible
ways. No one is immune.
Sometimes organizations are caught by surprise by environmental shifts, while other
organizations have anticipated and planned for new situations. For example, management
may have systems to track the perceived quality and value of its products versus its
competition’s. Benchmarking data might show that its quality is beginning to lag behind that
of a key competitor or it might be instrumental in identifying product changes that can lead to
market advantages. These environmental scanning and early warning systems allow for
action before customers are lost or provide paths to new customers and/or new services.
Toyota had such systems in place, but management appears to have responded inadequately.
It’s beyond the scope of this book to provide an in-depth treatment of all of the various trends
and alterations in the environment. However, we will highlight below some of the important
trends to sensitize readers to their environments. As is always the case, organizations find
themselves influenced by fundamental forces: changing social, cultural, and demographic
patterns; spectacular technological achievements that transform how we do business;
concerns about the physical environment and social responsibility that are producing
demands for changes in our products and business practices; a global marketplace that sends
us competing worldwide and brings competition to our doorsteps; political and legal forces
that have the potential to transform the competitive landscape; continued political uncertainty
in many countries that has the potential to introduce chaos into world markets; and the
aftermath of the economic turmoil that rocked the world economy in 2008, 2009, and 2010.
The Changing Demographic, Social, and Cultural
Environment
Age Matters.
The social, cultural, and economic environment will be dramatically altered by demography.
Demographic changes in the Western world and parts of Asia mean that aging populations
will gray the face of Europe, Canada, China, and Japan.14 The financial warning bells are
already being sounded. Even before the huge government deficits of 2009 and beyond that
Western nations have been digging themselves out from under, Standard & Poor’s predicted
that the average net government debt-to-GDP ratio for industrialized nations will increase
from 33% in 2005 to 180% by 2050, due to rising pension and health care costs,15 if changes
are not undertaken.
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Although the United States will age less quickly, Europe and Japan will face a dependency
crisis of senior citizens requiring medical care and pension support. By 2050, the median age
in the United States is projected to be 36.2 versus 52.7 in Europe. The United States will keep
itself younger through immigration and a birth rate that is close to replacement level,16
though even here growth assumptions have come under question as the rate of immigration
has declined in the aftermath of the economic slowdown and questions around emigration
policies remain highly politicized. Even with this influx, if nothing changes, Standard &
Poor’s estimates the U.S. governmental debt-to-GDP ratio will grow to 472% of GDP by
2050, due mainly to pension and health care costs.17 Aging European countries will be
around 300–400% of GDP, despite older populations, due to more cost-efficient approaches
to these areas. On the high side, Japan is predicted to reach 729%. Europe’s population is
projected to peak in 2015 at around 400 million, while the United States passes that number
in 2020 and continues to grow thereafter.
Throughout the world, fertility rates are falling and falling fast.18 In 1974, only 24 countries
had fertility rates below replacement levels. By 2009, more than 70 countries had rates below
2.1. In some countries, the swings are dramatic. The fertility rate in Iran dropped from 7 in
1984 to 1.9 in 2009, a huge shift.
Source: U.N. Population Division.
Approximate data from the bar graph are summarized in the following table:
Some see a close tie between female education, fertility rates, and economic growth. When
economies are poor, the fertility rate is high and there are many young dependents relying on
working adults and older siblings for sustenance. When fertility rates drop, there is a bulge of
people, meaning the ratio of working adults to dependents increases, leading to an increase in
per capita wealth. Mexico and China are examples of this currently. When this bulge ages,
dependent, nonworking seniors become a larger percentage of the population, so these
advantages tend to disappear over time, as incomes rise and fertility rates fall.19 As discussed
above, this has happened and is happening in Europe and Japan. India, Africa, and Mexico
are examples of areas with a smaller proportion of dependents (the young and the old)
relative to their working populations, and this is something referred to as an economic
dividend. However, it is only a dividend if the population has the skills and abilities needed,
and there is infrastructure and policies in place to support such employment—something
many developing nations are finding very challenging.20
These demographic shifts can take decades to work their way through, and the economic
implications for organizations are significant. Imagine 400 to 500 million relatively wealthy
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Americans and the impact that will have on global economic power, assuming that pension
and health care challenges are effectively managed. Consumer spending in emerging
economies is expected to more than double from $4 trillion to more than $9 trillion in the
next 10 years.21 Also imagine the impact of a graying Europe and Japan’s declining
workforce. Some estimates put the fiscal problems in providing pensions and health care for
senior citizens at 250% of national income in Germany and France.22
Pension costs can become a huge competitive disadvantage at the company level as well. At
General Motors, there were 2.5 retirees for every active worker in 2002. These so-called
“legacy” costs were $900 per vehicle at that time due to pension and health care obligations.
These costs rose to $1,800 by 200623 and retired employee–related costs were one of the key
reasons that GM sought bankruptcy relief in 2009.
Companies appear to be ill prepared to deal with this aging population.24 Both private and
public sector employers are waking up to these pressures and attempting to bring about
changes to their pension programs that will be more sustainable, but the journey will not be
easy. Public pushback to reductions in pension income and other entitlement programs has
been strong, and even relatively modest proposals for shifts to policies such as increasing the
age of retirement by a year or two have faced widespread resistance. This is resistance that
scares politicians because these are also people who are most likely to vote and who are also
feeling vulnerable as they find their savings are insufficient to sustain their lifestyle.25
An aging population also provides new market opportunities—would you have predicted that
the average age of a motorcycle purchaser would be over 49? That’s Harley-Davidson’s
experience.26
With aging populations, organizations can expect pressures to manage age prejudice more
effectively. Subtle discrimination based on age will not be accepted. Innovative solutions will
be welcomed by aging members of the workforce and an increasing necessity for employers.
See the story below.
Did Toyota or GM Know About the Safety Defects?
Misreading the Environment and Associated Risks
On April 5, 2010, the U.S. government’s transportation department stated it would seek $16.4 million from
Toyota for not notifying the government about potential accelerator pedal problems. “In taking the step, federal
authorities are sending the strongest signal yet that they believe the carmaker deliberately concealed safety
information from them.”10
Did Toyota know about these deficiencies and respond by denying they existed and covering up? If so, this is an
example of an inappropriate organizational response to environmental stimuli.
The same question could be asked of General Motors concerning ignition switch problems in the Cobalt and
other brands. By GM’s admission, they first became aware of this problem in 2001. It was the subject of a
technical service bulletin in 2005, but there was no recall until 2014, in the aftermath of multiple deaths and
injuries, mounting public scrutiny, and lawsuits. The global recall totaled 2.6 million vehicles by May 2014, there
have been humiliating U.S. congressional hearings, Mary Barra (GM’s new CEO) has publically apologized, and
GM is seeking immunity from the courts for lawsuits related to periods before its 2009 bankruptcy. To say this
has the potential to undermine confidence in GM and its brand would be a gross understatement and points to the
danger of failing to act and implement needed changes in a timely manner.11
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The Risks of Excessive Push From the External Environment
The financial crisis of 2008 occurred because banks failed to comprehend the risks they took with asset-backed
securities and other derivatives. Incentive systems drove bankers to take on excessive risks for excessive profits.
They denied the evidence presented to them, and when the bubble burst, the results were catastrophic. For
example, when warned by his chief risk officer, who proposed shutting down the mortgage business in 2004, the
head of Lehman Brothers threatened to fire him! This rush for profits drove many banks. Chuck Prince, the head
of Citigroup at the time, just before the credit markets seized up in August 2007, said: “As long as the music is
playing, you’ve got to get up and dance. We’re still dancing.”12
Clearly both bankers misread the ethical and business implications of what was going on inside their firms.
Either there was collective myopia at work with respect to mounting evidence of excessive risk from very
credible sources13 or the rewards and short-term performance pressures were such that they chose not to attend to
the warning clouds.
Older Workers Can’t Be Ignored
“The day is coming when employers are going to embrace the value of older workers. They don’t have a choice,”
writes Kerry Hannon. Demographic and fiscal realities are making the retention of older members of the
workforce escalate in importance and give rise to the innovations in working relationships, from full time to
flexible work relationships and contract positions. Some employers are realizing the benefits that these
employees can bring with them and are recognizing the importance of investing in them before their knowledge
walks out the door. Employers that fail to adjust their approach to older employees could find themselves
seriously at risk as U.S. labor markets reflect the demographic realities.27
KPMG has publically recognized the benefits, noting that “older workers tend to be more dedicated to staying
with the company, a plus for clients who like to build a relationship with a consultant they can count on to be
around for years.”28
Diversity Matters
Other demographic issues will provide opportunities and challenges. In the United States,
Latinos will play a role in transforming organizations. The numbers of Latinos jumped from
35.3 million during the 1990s, to 50.5 million or 16% of the population in 2010 (up from
13% in 2000), making them the largest ethnic/racial group in the United States. They are also
much younger (27 versus the national average age of 37.2), and 63% of its members have
been born in the United States. Significantly, the largest growth often is in “hyper-growth”
Latino destinations such as Nevada and Georgia,29 some of which have seen an increase of
more than 300% in Latino populations since 1980. The immigration component of this
growth rate was adversely affected by the U.S. economic downturn and improvements in the
Mexican economy, but it is predicted to continue upward due to domestic population growth,
plus the impact that a return to economic health will have on immigration. One of the
outcomes of hyper-growth in certain urban areas has been an imbalance of Latino males and
females. In the non-Latino population, the ratio of males to females is 96:100. In the Latino
population, ratios as high as 118:100 are seen in the hyper-growth destinations.30 While the
specific implications for businesses are unclear, the general need for response and change is
not. Notions of cultural norms (including those around English literacy and dominant
language used) and markets could be shattered by such demographic shifts.
There have also been significant demographic shifts in Europe and parts of Asia, as people
move from disadvantaged areas (economic, social, and political) in search of greater
opportunities, security, and social justice. These trends are likely to continue, and as in the
United States, they provide both challenges and opportunities. For countries like France and
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Austria, they help to moderate the effects of an aging population by providing new entrants to
the workforce and new customers for products and services. However, they also represent
integration challenges in terms of needed services and there has been a backlash from some
groups, who see them as both an economic and social threat. Resistance to immigration
reform in the United States, the tightening of emigration rules in Canada, and the rise of antiimmigration political parties in Western Europe are evidence of this.
Our assumptions about families and gender will continue to be challenged in the workplace
and marketplace of the future. Diversity, inclusiveness, and equity issues will challenge
organizations with unpredictable results. The heated debates that occurred in the United
States in 2006 concerning legislation related to illegal or undocumented immigrants,
temporary workers, and family unification continue to provoke passionate positions and no
resolution as of 2014. In Europe, debate around these topics has given rise to some electoral
success by what used to be fringe parties, and isolated examples of violence. Some nations
have implemented laws around certain religious practices (typically associated with dress and
visible symbols in schools and workplaces) that are viewed by many as discriminatory.31
Matters related to same-sex marriage, gender identity, and gender equity continue to be
challenging for many organizations, as laws and behavioral norms related to what is
acceptable slowly evolve. The front-page coverage devoted to the drafting by the St. Louis
Rams of Michael Sam, the first openly gay professional football player, testifies to the
attention and emotions these matters can generate.32 In too many parts of the world they
represent life and death issues.
In some nations, employment- and human rights–related legislation have gone a long way
toward advancing the interests and acceptance of diversity, by providing guidance, rules of
conduct, and sanctions for those who fail to comply. However, issues related to race and
diversity still need to be attended to by organizations. Participation and career advancement
rates and salary level differences continue to attract the attention of politicians, the public,
and the courts. Further, they constrain the development of talent in organizations and have
adverse consequences on multiple levels—from the ability to attract and retain to
performance and attitudinal outcomes that can, in turn, influence the culture and work climate
of the firm.33
What happens when this boils over? In 2014 the intense news coverage and disciplining of
Donald Sterling, the owner of the Los Angeles Clippers NBA franchise, for racist comments
made during a private conversation, point to the extreme distress it caused members of the
team and the reputational and brand consequences his behavior had on the franchise and the
league itself. Only the swift actions of NBA Commissioner Adam Silver contained the
damage, facilitated the sale of the franchise, and clearly signaled what was expected of
owners.34
Risks in this area are not just related to the actions of senior management. Social media
exposure extends the risks to all levels of the firm, where postings from organizational
members can and do go viral with adverse consequences (more will be said about this later).
Employees in the United States have certain protections when it comes to discussing working
conditions with others online. In the case of fast-food restaurants, this has manifested itself
into a very public national campaign to increase the minimum wage from $7.50 to $15.00 per
hour. This campaign began on social media and firms are finding they must respond very
carefully, in part because of the public’s connection to a workforce where matters of age,
gender, race, ethnicity, and economic fairness are very visible.35
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When employee postings go over the line on matters of race, gender, diversity, and equity,
firms need to act and be seen to be acting quickly and appropriately in order to control
damage.36 Being viewed as proactive and progressive in these areas can create advantages for
firms in terms of attraction, retention, and the commitment levels of employees and
customers. Firms such as TD Bank communicate this commitment very publically and have
been recognized as one of the best employers by Diversity Inc., Corporate Knights, and the
Human Rights Campaign.37 Multinational corporations, such as IBM, view workforce
diversity management as a strategic tool for sustaining and growing the enterprise.38 That
doesn’t mean it is easy. Google has sought to increase the diversity of its workforce for
several years. In May 2014 it publically recognized its current lack of diversity (30% women,
2% black, and 3% Hispanic), and committed itself to aggressively address this through
significant external and internal initiatives geared to attracting more individuals from these
groups to technical careers and Google.39 Smaller and medium-size firms (particularly tech
start-ups) are increasingly recognizing the importance of this, as they attempt to scale their
operations.
Race, gender, age, and diversity-related challenges multiply once organizations extend their
footprints internationally. Differing rules, regulations, cultural norms, and values add to the
change leadership challenges that need to be managed, as people learn to work with one
another in efficient, effective, and socially appropriate ways. Think of the workforce
challenges that a North American, Brazilian, or Indian firm needs to address when
establishing their presence in a different part of the world. How will they deal with norms and
values in these areas that run contrary to their core values? This is not just an issue for larger
organizations. Increasingly, smaller firms find themselves facing international challenges as
they seek to grow. These come in many forms—from managing virtual, globally dispersed
teams and supply chains, to dealing with the complexities of joint ventures. While the
challenges can seem daunting, an increasing number of small and midsize companies are
succeeding on the global stage. A study of 75 such firms highlights the strategies and tactics
that have produced positive results. Change leadership skills in these firms play a critical role
in their survival and success.40
The Physical Environment and Social Responsibility Matters
Concerns over global warming, the degradation of the environment, sustainability, and social
responsibility have escalated societal pressure for change at the intergovernmental,
governmental, multinational and national corporate, and community levels. Accountability
for what is referred to as the “triple bottom line” is leading firms to issue audited statements
that report on economic, social, and ecological performance with the goal of sustainability in
mind.41 The 2013 fire and building collapse involving garment suppliers in Bangladesh
(1,100 workers killed) and the 2014 spread of the Ebola virus in West Africa intersect with
questions about the role of multinational corporations in the health and safety of people in
developing countries. The 2010 pictures of BP’s oil well gushing millions of gallons into the
Gulf of Mexico combined with pictures of oil-coated pelicans, drought, extreme heat, stormrelated flooding, and disappearing ice masses reinforce the message that action is urgently
needed. These pressures will intensify in the years ahead. There is also mounting evidence of
the advantages that can accrue to organizations that think about these issues proactively and
align their strategies and actions with their commitment to sustainability and corporate social
responsibility.42
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New Technologies
In addition to responding to environmental and demographic changes in the workplace and
marketplace, organizations and their leaders must embrace the trite but true statements about
the impact of technological change. Underpinning technological change is the sweeping
impact that the digitization of information is having. The quantity of data available to
managers is mind-boggling. It is estimated that digital data will grow from 400 billion
gigabytes of Web-enabled data in 2013 to 40 trillion gigabytes by 2020.43 The explosion in
the amount of data available will be aided by the impact of inexpensive nano-scale
microelectronics that will allow us to add sensors and collection capacity to just about
anything. Data mining is becoming an increasingly common function in organizations that
seek to transform data into information.44
The following list of technological innovations points to the breadth of changes we can
anticipate. This is not the stuff of science fiction. In most of these areas applications are
already present and costs are declining rapidly:
Software that writes its own code, reducing human error
Health care by cell phone and laptop
Vertical farming to save space and increase yield45
Mobile Internet, the Internet of Things, cloud technology, and crowd sourcing
The automation of knowledge work
Advanced robotics, from industrial applications to surgery
Wearable computing, from basic data gathering to human augmentation and computer–
brain interfaces
Autonomous and near autonomous vehicles
Next-generation genomics, from agricultural applications to substance production (e.g.,
fuel) and disease treatment applications
Renewable energy and energy storage breakthroughs that will change energy access and
cost equations
3-D printing for applications as varied as the production of auto parts and human body
parts
Advanced materials (e.g., nano technology) for a host of applications that will result in
dramatic reductions in weight and improvements in strength, flexibility, and
connectivity
Advanced oil and gas exploration and recovery technologies46
Technology has woven our world together. The number of international air passengers rose
from 75 million in 1970 to an estimated 2.9 billion in 2012.47 The cost of a 3-minute phone
call from the United States to England dropped from more than $8 in 1976 to less than $0.06
in 2014 when VoIP (voice over Internet protocol) is used for a call to a landline or cell phone.
The number of transborder calls in the United States was 200 million in 1980.48 Estimates of
the numbers today are in the tens of billions. VoIP has disrupted traditional long-distance
telephone markets dramatically, and the proliferation of alternative communication channels,
including SMS texting, BBM (Blackberry Messenger), Facebook, and their equivalents on
other platforms have transformed the communication landscape. There were a total of 6.8
billion cell phones in use in 2013, meaning one for almost every person alive.49 In 2013, an
estimated 968 million smartphones were shipped, meaning access to digital information and
apps for everything from weather forecasts to online purchasing and the transfer of funds.
Even those without access to a bank or smartphone can transfer cash safely and securely on a
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regular cell phone in some developing parts of the world—google “M-Pesa” for an example
of this.50
Our embrace of digital technology and connectedness has opened the world to us and made it
incredibly accessible, but it has come with costs. Security concerns related to viruses and
hacking have also escalated, and serious breaches are a common occurrence. The Ponemon
Institute estimates that in the United States alone, 110 million adults had their personal
information exposed by hackers during a 12-month period in 2013. The cost to firms
responding to these threats and breaches are in the billions, and that doesn’t include the
damage done to customer trust/loyalty. Costs related to online fraud and identity theft are in
the billions and growing rapidly. These issues will not go away any time soon.51 Issues
related to the loss of privacy, industrial espionage, and sabotage involving both firms and
government agencies have also become common.52 On a business-to-business level, supply
chains woven together through software allows them to operate effectively and efficiently,
while at the same time opening them to risks.53
With the Internet, students around the globe can access the same quality of information that
the best researchers have, if it is in the public domain (which is increasingly the case) and if
their government hasn’t censored access to it. At the same time, the technology that has made
the world smaller has also produced a technological divide between haves and have-nots that
has the potential to produce social and political instability. Aspects of the gap are closing, as
is seen in the growth of cell phones, smartphones, and Internet access in the developing
world. Laptops and tablets are now available at well under $100, and the cost in India has
dropped to below $50.54 Lack of access to clean water, sufficient food, and needed
medication is less likely to be tolerated in silence when media images tell people that others
have an abundance of such resources and lack the will to share. Events such as the Arab
Spring, Occupy Wall Street, and the 2014 election of Narendra Modi as India’s prime
minister point to the power this technology has in mobilizing public interest and action.
Technology transforms relationships. Facebook, LinkedIn, Twitter, and their equivalents
keep us connected, a third of U.S. newlyweds in 2012 were reported to have met online, and
people have even been found attempting to text in their sleep.55
The New Change Tool on the Block
Social media has fundamentally altered thinking about change management. It has changed how information is
framed, who frames it, and how quickly it migrates from the few to the many. It can stimulate interest,
understanding, involvement, and commitment to your initiative. Or it can create anxiety and confusion and be
used to mobilize opposition and resistance by those opposed. The one thing it can’t be is be ignored!
Our purpose is not to catalogue all new and emerging technologies. Rather, our intent is to signal to change
leaders the importance of paying attention to technological trends and the impact they may have on
organizations, now and in the future. As a result of these forces, product development and life cycles are
shortened, marketing channels are changing, and managers must respond in a time-paced fashion. Competitors
can leapfrog organizations and drop once-market-leaders into obsolescence through a technological
breakthrough. The advantages of vertical integration can vanish as technical insights in one segment of the
business drive down the costs, migrate the technology through outsourcing to other segments, or otherwise alter
the value chain in other ways that had not been anticipated.
Is this overstating the importance of paying attention to how rapidly technological and social change can alter the
competitive landscape? BlackBerry went from creating and dominating the smartphone business to less than 3%
market share in five years. Dramatic downsizing and reinvention are now the order of the day, as the BlackBerry
executives search for new paths forward and renewed market relevance.56 Now shift your thoughts to the
automotive sector. What will the emergence of self-driving electric vehicles mean for manufacturers and their
suppliers and distributors? What will they mean for city planners, urban transit, and the taxi driver? Prototypes
are currently driving on the streets of Mountain View, California, and expectations are that these sorts of vehicles
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will be for sale in a few years.57
The watchwords for change leaders are to be aware of technological trends and to be proactive in their
consideration of how to respond to organizationally relevant ones.
Political Changes
The external political landscape of an organization is a reality that change leaders need pay
attention to and figure out how to engage. Even the largest of multinationals has minimal
impact on shaping the worldwide geo-political landscape and the focus of governing
bodies.58 However, if they are attentive and nimble, their interests will be better served.
The collapse of the Soviet Empire gave rise to optimism in the West that democracy and the
market economy were the natural order of things, the only viable option for modern society.59
With the end of communism in Russia, there was the sense that there was no serious
competitor to free-market democracy and the belief existed that the world would gradually
move to competitive capitalism with market discipline.
Of course, this optimism was not realized. Nationalistic border quarrels (India–Pakistan, for
example) continue. Some African countries have become less committed to democracy
(Zimbabwe and Ethiopia). Nation-states have dissolved into microstates (Yugoslavia and
Sudan) or had portions annexed as in the case of Crimea. While American power may be
dominant worldwide, September 11, 2001 (9/11), demonstrated that even the dominant power
cannot guarantee safety. Non–nation–states and religious groups have become actors on the
global stage. The Middle East, North Africa, and Central Asia continue to be in turmoil,
creating political and economic uncertainty.
Changes in the economic performance of nations have also altered the geo-political
landscape. Growth in China and India, though it has slowed, continues to advance much more
than twice the rate of the developed world.60 They led the world out of the 2007–2008 crash,
and have now been joined by other African and Asian nations that are experiencing more
rapid economic growth than the developed world. However, grinding poverty rates, though
improving, are still the reality for hundreds of millions of people who live in these areas.61
As organizations become global, they need to clarify their own ethical standards. Not only
will they need to understand the rules and regulations, they will also have to determine what
norms of conduct they will work to establish for their organizational members, and what
constitutes acceptable and unacceptable behavior. Peter Eigen, chairman of Transparency
International, states: “Political elites and their cronies continue to take kickbacks at every
opportunity. Hand-in-glove with corrupt business people, they are trapping whole nations in
poverty and hampering sustainable development. Corruption is perceived to be dangerously
high in poor parts of the world, but also in many countries whose firms invest in developing
nations.”62 Left unaddressed, this political corruption becomes imbedded in organizations.
Transparency International finds bribery most common in public works/construction and
arms and defense as compared with agriculture.63 The accounting and governance scandals of
2001 to 2002 (Enron and WorldCom), followed by an almost uninterrupted series of major
ethical lapses in global financial services/banking, pharmaceutical, and government sectors
(to name just three), have created public demands for more transparency, accountability,
regulations with teeth, and heightened expectations that firms should be expected to behave
in socially responsible manners. Some companies, Hewlett-Packard, H&M, Tesco, Loblaw,
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and Apple, for example, have responded by requiring that they and the participants in their
supply chain adhere to a set of specified ethical standards. Further, they are committed to
working with their suppliers to ensure they reach these standards.64
The politics of globalization and the environment have created opportunities and issues for
organizations. The United States’ Obama administration appears committed to the
introduction of new green energy initiatives. The desire to reduce the environmental impact
and the United States’ dependence on foreign oil and coal has meant subsidy programs for
new technologies and opportunities for businesses in those fields. It has also led to an
explosion of energy recovery methods such as fracking, which bring with them their own
ethical issues. Some organizations are restructuring themselves to seize such opportunities.
For example, Siemens has reorganized itself into three sectors—industry, energy, and health
care—to focus on megatrends.65 Senge and his colleagues argued that the new
environmentalism would be driven by innovation and would result in radical new
technologies, products, processes, and business models.66 The rapid rates of market
penetration for such technologies and the decline in their costs are evidence that Senge was
right.
The politics of the world are not the everyday focus of all managers, but change leaders need
to understand their influence on market development and attractiveness, competitiveness, and
the resulting pressures on boards and executives. Firms doing business in jurisdictions such
as Russia, China, and Argentina know this all too well. Issues related to climate change,
water and food security, power, urbanization/smart cities, public transport, immigration,
health care, education, trade, employment, and our overall health and safety will continue to
influence political discussion and decision making at all levels—from the local to the
international context. A sudden transformation of the political landscape can trash the bestlaid strategic plan.
Successful change leaders will have a keen sense of the opportunities and dangers involved in
global, national, and local political shifts. If they are behaving in a manner consistent with
corporate social responsibility, they will also have a keen sense of the opportunities and
dangers related to the issues themselves.
The Economy
In 2007, the world economy crashed into financial crisis and appeared headed for a 1930s
depression. Trillions of dollars of asset-backed paper became valueless, seemingly overnight.
Investors and pension funds lost 20% of their value. Global stock markets shrank by $30
trillion, or half their value.67 The American housing market, which provided an illusory asset
base, collapsed and led to the credit crisis. Firms that were chastised for having too much
cash on hand and were seen as missing opportunities suddenly became the survivors when
credit vanished. At the individual firm level, the economic crisis led to layoffs and
bankruptcies. Firms saw their order books shrink and business disappear. Entire industries,
such as the automotive industry, were overwhelmed and certain large automotive
manufacturers perhaps would have vanished if not for government bailouts. An example of
the impact on one small firm is shown in the story below.
Governments responded to the economic crisis with Keynesian abandon. G20 countries ran
huge deficits as governments tried to stimulate their economies out of recession. America’s
federal deficit hit 10% of GDP in 2009, and the overall debt to GDP went from 65% in 2007
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to over 100% in 2012.69 In December 2010, economists were talking about a slow recovery
in America and an almost nonexistent one in Europe, and they were right.70 Economists also
predicted that China would have an 8.6% GDP growth and 11.1% investment growth, with
significant growth also predicted for India and the other BRIC nations. While growth in these
economies has not been as robust as expected, most have performed relatively well. Clearly,
there has been a shift in the economic order of the world.71
The lessons from the economic crisis are centered on risk management and capacity building.
In a world where everything is interconnected, organizations need to be able to respond
quickly. In order to do so, organizations need the capacity to weather such challenges.
Ideally, organizations will incorporate the mechanisms to anticipate these challenges and
adapt into management, leadership, and the underlying social fabric of the firm. In many
situations, these anticipatory mechanisms will not be available and organizations will need to
rely on their ability to adapt and change as the environment shifts.
See Toolkit Exercise 1.2 to practice thinking about environmental forces facing your
organization and their implications.
The Impact of the 2007–2009 Recession on a Small Business
Serge Gaudet operates a wholesale/retail drapery and window blind business in the small Canadian town of
Sturgeon Falls, Ontario. The world economic crisis suddenly became real when banks would no longer extend
him credit. In his words, “I had signed orders, contracts in hand, and my bank refused my line of credit so that I
could buy the inventory. How was I to finance this deal? I had the contract and it was with a government
hospital. Surely, this was credit worthy? What else could I do?”
Mr. Gaudet managed through the crisis by negotiating newer, tougher terms with his bank. But the lack of credit
was not his only problem. “Normally, I bid on requests for proposals and win a reasonable percentage of them,”
he reported. “Suddenly, there was nothing to bid on. Nothing. Every institution that was going to buy blinds was
waiting—waiting for government aid that was very slow in coming. It was touch and go whether I could last until
new contracts came in.”
Mr. Gaudet’s story is typical of the situation faced by many small businesses as they struggled through the
economic crisis of 2007–2009. Many did not survive. Those that did were able to do so because they had low
overhead and debt.68
The Implications of Worldwide Trends for Change
Management
The economic globalization of the world, the demographic and social shifts in the Western
and developing world, technological changes, environmental and ecological pressures, and
the upheaval and political and economic uncertainties that flair up around the globe form the
reality of organizational environments. Predicting specific short-run changes is a fool’s
errand. Nevertheless, change leaders need to have a keen sense of just how these seemingly
external events impact internal organizational dynamics. “How will external changes drive
strategy and internal adjustments and investments?” has become a critical question that
change leaders need to address. For example, the rise of the sharing economy has disrupted
traditional business structures of the hotel and taxi business. Airbnb and Uber have both
capitalized on globalization trends and technological innovations to improve access to
information relevant to travelers, increase social trust, and through these mechanisms change
the way that people travel.72
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Barkema, Baum, and Mannix suggest that macro environmental changes will change
organizational forms and competitive dynamics and, in turn, lead to new management
challenges.73 (Table 1.1 summarizes Barkema and colleagues’ article.) They describe three
macro changes facing us today: digitization of information, integration of nation states and
the opening of international markets, and the geographic dispersion of the value chain. These
are leading to the globalization of markets. This globalization, in turn, will drive significant
shifts in organizational forms and worldwide competitive dynamics.
Table 1.1
Source: Adapted from Barkema, H. G., Baum, J. A. C., & Mannix, E. A. (2002). Management challenges in a new
time. Academy of Management Journal, 45(5), 916–930.
The early decades of the 21st century suggest accelerated change in comparison to the latter
part of the 20th century. Diversity, synchronization and time-pacing requirements, decision
making, the frequency of environmental discontinuities, quick industry life cycles and in
consequence product and service obsolescence, and competency traps all suggest greater
complexity and a more rapid organizational pace for today and tomorrow. Barkema et al.
argue that much change today deals with mid-level change—change that is more than
incremental but not truly revolutionary. As such, middle managers will play increasingly
significant roles in making change effective in their organizations in both evolutionary and
revolutionary scenarios.
Four Types of Organizational Change
Organizational changes come in many shapes and sizes: mergers, acquisitions, buyouts,
downsizing, restructuring, outsourcing the human resource function or computer services,
departmental reorganizations, installations of new incentive systems, shutting particular
manufacturing lines or opening new branches in other parts of the country, and the list goes
on. All of these describe specific organizational changes. The literature on organizational
change classifies such changes into two types, episodic or discontinuous change and
continuous change. That is, change can be dramatic and sudden—the introduction of a new
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technology that makes a business obsolete or new government regulations that immediately
shift the competitive landscape. Or change can be much more gradual, such as the alteration
of core competencies of an organization through training and adding key individuals.
Under dramatic or episodic change, organizations are seen as having significant inertia.
Change is infrequent and discontinuous. Re-engineering programs are examples of this type
of change and can be viewed as planned examples of injecting significant change into an
organization. On the other hand, under continuous change, organizations are seen as more
emergent and self-organizing, where change is constant, evolving, and cumulative.74
Japanese automobile manufacturers have led the way in this area with kaizen programs
focused on encouraging continuous change. In the technology sectors, collaborative
approaches, facilitated by social networks that extend beyond corporate boundaries and even
crowd sourcing, are giving rise to continuous change models for organizational adaptation,
growth, and renewal.75
A second dimension of change is whether it occurs in a proactive, planned, and programmatic
fashion or reactively in response to external events. Programmatic or planned change occurs
when managers anticipate events and shift their organizations as a result. For example, Intel,
a multinational semiconductor chip maker headquartered in California, anticipates and
appears to encourage a cycle of computer chip obsolescence.76 As a result, the organization
has been designed to handle this obsolescence. Alternately, shifts in an organization’s
external world lead to a reaction on the part of the organization. For example, the emergence
of low-cost airlines has led to traditional carriers employing reactive strategies, such as
cutting routes, costs, and service levels in an attempt to adapt.77
Nadler and Tushman combine these two dimensions in a useful model illustrating different
types of change (see Table 1.2). They define four categories of change: tuning, adapting,
redirecting or reorienting, and overhauling or re-creating.
Table 1.2
Source: Adapted from Nadler, D. A., & Tushman, M. (1989, August). Organizational frame bending: Principles for
managing reorientation. Academy of Management Executive, 3(3), 196.
Tuning is defined as small, relatively minor changes made on an ongoing basis in a
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deliberate attempt to improve the efficiency or effectiveness of the organization.
Responsibility for acting on these sorts of changes typically rests with middle management.
Most improvement change initiatives that grow out of existing quality-improvement
programs would fall into this category. Adapting is viewed as relatively minor changes made
in response to external stimuli—a reaction to things observed in the environment such as
competitors’ moves or customer shifts. Relatively minor changes to customer servicing
caused by reports of customer dissatisfaction or defection to a competitor provide an example
of this sort of change, and once again, responsibility for such changes tends to reside within
the role of middle managers.
Redirecting or reorienting involves major, strategic change resulting from planned
programs. These frame-bending shifts are designed to provide new perspectives and
directions in a significant way. For example, a shift in a firm to truly develop a customer
service organization and culture would fall in this category. Finally, overhauling or recreation is the dramatic shift that occurs in reaction to major external events. Often there is a
crisis situation that forces the change—thus, the emergence of low-cost carriers forced
traditional airlines to re-create what they do. Likewise, the credit crisis bankrupted General
Motors and forced a complete overhaul and downsizing of the company.
The impact of the change increases as we move from minor alterations and fine-tuning to
changes that require us to reorient and re-create the organization. Not surprisingly,
reorienting and re-creating an organization is much more time-consuming and challenging to
lead effectively. They also have a greater impact on individuals who must reorient
themselves. Regardless of difficulty, the financial crisis and recession of 2008–2009 forced
companies to react. While there are no data that we know of to confirm this, anticipatory
organizational change does not seem to be sufficient to prepare organizations for the dramatic
shift in the global business environment presented by 2008–2009. While planning can help
organizations think about risk and opportunities, it was their sense of awareness and adaptive
capacity that allowed firms to respond and survive the crisis.
An examination of the history of British Airways provides a classic example of a single
organization facing both incremental and discontinuous change while both anticipating issues
and being forced to react.78
Nadler and Tushman raise the question: “Will incremental change be sufficient or will radical
change be necessary in the long run?” Suffice it to say that this question has not been
answered. However, the Japanese provided a profound lesson in the value of incremental,
daily changes. Interestingly enough, it was a lesson the Japanese industrialists learned from
North American management scholars such as Duran and Deming. If one observes employee
involvement and continuous improvement processes effectively employed,81 one also sees
organizational team members that are energized, goal directed, cohesive, and increasingly
competent because of the new things they are learning. Such teams expect that tomorrow will
be a little different from today. Further, when more significant changes have to be embraced,
these teams are likely to be far less resistant and fearful of them because of their earlier
experiences with facilitating change within group structures. Organizational change is part of
daily life for them.
Many think of incremental/continuous change and discontinuous/radical change as states
rather than a perspective or a spectrum of change size. From the organizational a point of
view, a departmental reorganization might seem incremental. However, from the
department’s perspective, it may seem discontinuous and radical. As Morgan puts it:
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A mythology is developing in which incremental and quantum change are presented as
opposites. Nothing could be further from the truth... True, there is a big difference
between incremental and quantum change when we talk of results (but) incremental and
quantum change are intertwined. As we set our sights on those 500% improvements,
remember they’re usually delivered through 5, 10, and 15% initiatives.82
The perception of the magnitude of the change lies in the eye of the beholder. Incremental
changes at the organizational level may appear disruptive and revolutionary at a department
level. However, as noted earlier, those who are accustomed to facing and managing
incremental change on a regular basis will likely view more revolutionary changes in less
threatening terms. Those who have not faced and managed change will be more likely to
view even incremental changes as threatening in nature.
Organizational members need to learn to accept and value the perspectives of both the
adaptor (those skilled in incremental change) and the innovator (those skilled in more radical
change).83 As a change agent, personal insight regarding your abilities and preferences for
more modest or more radical change is critical. The secret to successful organizational
growth and development over time lies in the capacity of organizational members to embrace
both approaches to change at the appropriate times and to understand that they are, in fact,
intertwined.
British Airways: Strategic and Incremental Change
Todd Jick’s case study describes the crisis of 1981. British Airways’ (BA’s) successful response in the 1980s was
revolutionary in nature. During that period, BA revolutionized its culture and its view of the customer with
outstanding results. In the 1990s, BA entered a period of slow decline as the systems and structures at BA
became increasingly incongruent with the new deregulated environment and the successful competitors that were
spawned by that environment. Major upheavals in international travel pushed BA into a reactive mode following
9/11, and the results of management’s attempts to develop new strategies were unclear for a considerable period.
A strike in the summer of 2003 created more uncertainty for the firm.79 The dramatic rise in oil costs during
2007 and 2008 forced BA to cut costs and implement a merger with Iberia. These strategic moves to cut costs
were matched by more incremental internal actions to limit the wages of cabin staff, to match those of its
competitors. These changes led to limited strike action in 2010 and a negotiated resolution in 2011, which was
facilitated by the arrival of new chief negotiators on both sides—Keith Williams, BA’s new president, and Len
McCluskey, the union’s new general secretary. Fleet renewal (their first Airbus A380 was put into service in
2013), along with ongoing changes to systems, processes, and procedures, mark the continuance of their change
journey, marked by both strategic and incremental change initiatives.80
Planned Changes Don’t Always Produce the Intended Results
To this point, it is clear that change—from simple fine-tuning to radical reconstruction—is a
necessary prerequisite to organizational survival. However, successful change is extremely
difficult to execute as the scope and complexity increases. Many types of change initiatives
have failed: reengineering, total quality management, activity-based costing, joint
optimization, strategic planning, and network structures.84 If change leaders were to fully
consider the failure rates when designing interventions or acquisitions, fear would trump
action. As one manager put it, “The opportunity has turned out to be 10 times what I thought
it would be. The challenges have turned out to be 20 times what I thought they were”!85
Fortunately or unfortunately, inaction and avoidance are no solution. Maintaining the status
quo typically does not sustain or enhance competitive advantage, particularly in troubled
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organizations. Delays and half-hearted efforts that begin only after the problems have become
critical increase costs and decrease the likelihood of a successful transformation. As Hamel
and Prahalad put it: “No company can escape the need to re-skill its people, reshape its
product portfolio, redesign its process, and redirect resources.”86 Organizations that
consistently demonstrate their capacity to innovate, manage change, and adapt over the years
are the ones with staying power.87
Hamel and Prahalad believe that restructuring and re-engineering, on their own, do little to
increase the capabilities of the firm. These two Rs increase profitability and can enhance
competitiveness but “in many companies... re-engineering (and restructuring)... are more
about catching up than getting out in front.”88 Hamel and Prahalad argue that companies need
to regenerate their strategy and reinvent their industry by building their capacity to compete.
These transformations and realignments that result are sustained marathons, not quick fixes.
Skilled change leaders provide a coherent vision of the change and do all that they can to help
people adapt and embrace the changes with realistic expectations. When change recipients
understand that things will often get worse before they get better, but also believe that the
benefits are well worth the effort, change initiatives are more likely to be sustained.89 For
example, as costs rise in China, the environment is shifting manufacturing elsewhere,
including a rebirth of manufacturing in the United States. This trend demands a continuing
evolution of strategy as well as reshaping of supply chains to alter ingrained overseas
production practices that have evolved over the past 15 years—changes that manufacturing
and supply chain managers may have difficulty adjusting to.90
Radical solutions both terrify and fascinate managers. Often managers are comfortable with
relatively small technological fixes as the source of products, services, efficiency, and
effectiveness. However, they tend to fear interventions that seem to reduce their control over
situations, people, and outcomes. When organizations embrace technology but not people,
they pay a steep price. They reduce the likelihood that the change will produce the desired
results and they fail to take advantage of the collective capacity of organizational members to
improve operations, products, and services. To say the least, this practice is extremely
wasteful of human capacity and energy, causing them to atrophy over time. And recent
evidence suggests that true productivity increases come only when the forms are reorganized,
business practices reformulated, and employees retrained. Investment in infrastructure alone
is insufficient.91
Organizational Change Roles
Without a sense of vision, purpose, and engagement, it is easy to become the passive
recipient of change. As a passive recipient, you see yourself as subject to the whims of
others, as relatively helpless, perhaps even as a victim. As a passive recipient, your selfesteem and self-efficacy may feel as if they are under attack.92 Your perception of power
and influence will diminish and you will feel acted on. Years ago, Jack Gordon talked
about aligning employees. That is, once top management has decided on the strategic
direction, employees need to be aligned with that direction. We cannot help but think
that if you are the recipient of change, “being aligned” just won’t feel very good.93
Who are the participants in organizational change? Many employees will step up and make
the change work. They will be the change implementers, the ones making happen what
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others, the change initiators, have pushed or encouraged. Change initiators, or champions,
also frame the vision for the change and/or provide resources and support for the initiative.
Or they could be on the receiving end of change, change recipients. Some will play a role in
facilitating change—change facilitators won’t be the ones responsible for implementing the
change, but they will assist initiators and implementers in the change through their contacts
and consultative assistance.
Of course, one person might play multiple roles. That is, a person might have a good idea and
talk it up in the organization (change initiator); take action to make the change occur (change
implementer); talk to others to help them manage the change (change facilitator); and,
ultimately, be affected by the change too (change recipient). In this book, we use the terms
change leader and change agent interchangeably. Change initiators, change implementers,
and change facilitators represent different roles played by the change leader or change agent.
At any given moment, the person leading the change may be initiating, implementing, or
facilitating. Table 1.3 outlines the roles that people need to play in organizational change.
Change Initiators
Change initiators get things moving, take action, and stimulate the system. They are the ones
seeking to initiate change to make things better. They identify the need for change, develop
the vision of a better future, take on the change task, and champion the initiative. Change
initiators may face considerable risk in the organization. To use a physical metaphor, action
creates movement, movement creates friction, and friction creates heat! And creating heat
may help or hurt one’s career. Change agents need to take calculated actions and be prepared
to undertake the work needed to create and support the powerful arguments and coalitions to
effect change in organizations from the top or the middle of the organization.
Change initiators will find useful aids for change in this book. We, as authors, cannot supply
the passion and powerful vision needed by initiators, but we can point out the requirements of
successful change: planning, persuasion, passion, and perseverance. And we can provide
frameworks for analysis that will enhance the likelihood of successful change.
Table 1.3
Change initiators need to be dogged in their desire and determination. Those who succeed
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will earn reputations for realistic, grounded optimism, for a good sense of timing, and for not
giving up. If nothing else, the opposition may tire in the face of their persistence. Better yet
are those who have the uncanny ability to creatively combine with others into a coalition that
turns resisters into allies and foot draggers into foot soldiers and advocates for change.
Change Implementers
Many would-be and existing managers find themselves as change implementers. Others,
including their bosses, may initiate the change, but it is left to the implementers to make it
work. This role is critical. Pfeffer argues that effectiveness doesn’t come from making the
critical decision but rather from managing the consequences of decisions and creating the
desired results.94 As he says, “If change were going to be easy, it would already have
happened.” The change implementer’s role is important and needed in organizations. Without
it, there is no bridge to the desired end state—no sustained integrated approach.95
Change implementers will find much in this book to assist them. They will find guidance in
creating and increasing the need for the changes that change initiators are demanding. They
will find tools for organizational diagnosis and for identifying and working with key
stakeholders. And they will find concepts and techniques to facilitate the internal alignment
of systems, processes, and people; improve their action plans and implementation skills; and
help them sustain themselves during the transition.
At the same time, we encourage and challenge change implementers to stay engaged, to stay
active, and to initiate change themselves. Oshry identifies the dilemma of “middle
powerlessness,” where the middle manager feels trapped between tops and bottoms and
becomes ineffective as a result.96 Many middle managers transform their organizations by
recognizing strategic initiatives and mobilizing the power of the “middles” to move the
organization in the direction needed.
Change Facilitators
Today’s complex organizational changes can fail because parties lock into positions or
because perspectives get lost in personalities and egos. In such cases, an outside view can
facilitate change. Change facilitators understand change processes and assist ...
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