MGTO650N
Managing Organizational Change
Xueguang Zhou
MGTO, HKUST
Topics for today
• House-keeping business
• Question for discussion:
– What are the challenges in organizational change?
• Close-up: Lessons from 3M—a permanently
changing organization
• Analytical tools
– Vocabularies, concepts, and models
• Overview of the course
What this course is about
• Organizations change all the time
– Disruptively, continuously
– Intentionally, unintentionally
• Why a course on organizational change
– Instances of failures to change
– Instances of successful turnarounds
– Frustrations about change: at both ends of the table
• Agents of change
• Recipients of change
Format and Requirements
• Format:
–
–
–
–
Instructor’s presentation
Case study, team presentation
Debate and class discussion
Readings
• Requirements
– Class participation
– Team project
– Final examination
• Formation of teams
• Grading
Q: What are the challenges for
organizational change?
• An observation: Most large companies at the
beginning of the 20th century disappeared by
the end of the century. Why?
• Close-up: The case of Robin Hood
– Populist rebellion against excessive tax collection
– Rob from the rich and give to the poor
– Established the camping basis in Sherwood Forest
To this day, Robin Hood remains famous for
bringing together the heroes inhabiting
Sherwood Forest, but its growth has produced
a new management challenge. Our task is to
diagnose and propose ways to better address
managing in this changing environment.
Robin Hood
•
Is there a problem in Sherwood Forest?
•
What new options should be considered?
•
Which do you recommend?
•
In what ways has Robin Hood’s leadership style
previously been most successful?
•
What are his weaknesses at this point?
•
Have you seen any of the types of management
problems in this case in your own work experience?
The organizational chart
Robin Hood
Will Scarlett
Little John
Scarlock
Much the Miller’s Son
intelligence
discipline
finance
troop
The band of Merrymen
Issues related to “growing pains”
• Increasing organizational size
• Resources become scarce
– Food supplies, finance
• Change of mission, identity?
– From confiscation to fixed transit tax
• Increasing competition
– The sheriff’s increasing threats
• Strategic alliance
– Conspiracy against Prince John?
• Similar patterns in other types of organizations?
The Five Phases of Growth
Larry Greiner
Organization Practices During Evolution in the
Five Phases of Growth
Category
MANAGEMENT
FOCUS
PHASE 1
Make & Sell
ORGANIZATION
Informal
STRUCTURE
TOP
MANAGEMENT
STYLE
CONTROL
SYSTEM
MANAGEMENT
REWARD
EMPHASIS
PHASE 2
PHASE 3
PHASE 4
Efficiency
Expansion of Consolidation
of
market
of organization
operations
Centralized Decentralized
Line-staff &
&
&
product groups
functional geographical
Individualistic
&
Directive
entrepreneurial
Standards
Market results & cost
centers
Salary &
Ownership
merit
increases
Delegative
PHASE 5
Problem
solving
& innovation
Matrix of
teams
Watchdog
Participative
Plan &
Reports &
investment
profit centers
centers
Mutual goal
setting
Individual
bonus
Team bonus
Profit sharing &
stock options
Organizational Change Exercise
1.
The overall phase (of Greiner’s five) in which I see my organization now is:
1
2.
4
5
2
3
4
5
Which of these phases have you seen it move through?
1
4.
3
In 10 months, the phase in which I anticipate my organization will be is:
1
3.
2
2
3
4
Think back on how the transitions were accomplished.
5
Questions for discussion
1. Why is it difficult to change?
2. What is your experience regarding change?
Issues related to organizational change
• Strategic—
– Leadership: visions, anticipatory action
– strategies in timing,, initiation, coalitions & mobilization
• Political
– Vested interests—the politics of change
• Structural
– The power of organizational routines
– Informal networks
• Cultural
– Stability in experience, expectations
– Psychological contracts
STRATEGIES OF ORGANIZATIONAL CHNGE
1. Change or Stability?
2. Change from strength or from weakness?
3. Change from top-down or from bottom-up?
4. Using existing structure or creating new structure?
5. Clear goals or ambiguous goals?
6. Focus on short-run gains or long-term goals?
7. Incremental changes or discontinuous changes?
Case study:
3M: The Permanently Changing Organizations
• One of “the ten most admired corporations” — Fortune
annual poll of American CEOs.
• The 3M model:
– Continuous technological innovation
– Institutionalized “individual entrepreneurship”
– Market responsiveness
•
•
•
•
How is this possible—what are the challenges?
Institutionalized “individual entrepreneurship”?
Growth versus decentralization?
Balance between structure, culture, versus change?
3M: A brief history
• Established in 1902, producing abrasives and adhesives products.
– Benefited from product innovation in the early days
– The culture of “individual entrepreneurship”
• The McKnight era, 1929-1966
– Organizational design for continuous changes
• The Lou Lehr era, 1980-1985
– Reorganization and reorientation
• The “Jake” Jacobson era: 1986-1991
– The orientation to competition in existing markets
• Main characteristics:
– Changes and evolution in adaptation to environments
– Changes in organizational attributes for innovation
Challenge 1:
Entrepreneurship versus structure
• Innovation – the spirit of entrepreneurship
– Competition through new products
– Competition through new niches
• The dilemma between entrepreneurship and structural
differentiation
• The 3M way:
–
–
–
–
External demands and internal capabilities
Decentralization: locus of decision at lower lab units;
Organizational design to facilitate lateral communication
The strategy of growth through new niches, rather than
competition in existing markets.
Challenge 2
The role of organizational culture
• Organizational culture: norms, expectations, and tacit
knowledge
• The 3M way:
– Innovation is the center of organizational culture
– Resistance to bureaucratic intervention is encouraged;
– Contribution to innovation is greatly respected—legends,
institutional memories, ceremonies.
• Structure versus culture
– Cultural: The value of knowledge sharing
– Structural: Technical Council, Technical Forum, lateral
interaction
Challenge 3
Human resource practice
• The roles of rewards and incentives
• The role of loyalty for 3M
• The 3M way:
– Rewards for innovation
– Dual track of promotion and recognition
– Tolerance of “well-intentioned failures”
Mistakes will be made, but if a person is essentially
right, the mistakes he or she makes are not as serious
in the long run as the mistakes management will make
if it is dictatorial and undertakes to tell those under its
authority exactly how they must do their job.
Management that is destructively critical when
mistakes are made kills initiative, and it is essential
that we have many people with initiative if we are to
continue to grow.
William L. McKnight
Challenge 4
Leadership and Strategic Vision
• The role of leadership
– Allowing failures
– Patient with experimentation
• Strategic visions
– The link between structure, culture, and growth
strategies
– The evolution of strategies
• The 25% rule
• From single market to multiple markets
• From new market niche to competition in existing markets
Unanswered Questions
• Politics in organizations
– Vested interests in existing technologies, products
– Competition, turf wars among labs, divisions
• Culture:
– How is it sustained with the flow of people in organizational
growth?
• The costs of innovation
– Failures, start-up costs, learning curves
– Demands for new structures, resources
• Organizational Life Cycle
– Entrepreneurship, expansion, structural differentiation, and
associated challenges
• Changes in environments
– Imitation-competition from other companies
Three Lenses to “see” Organizational Change
Political:
interests
coalitions
resources/power
Cultural:
artifacts
values
assumptions
Strategic:
leadership
timing
process
alignment
The strategic lens
• Organization as a system designed to achieve
certain goals;
• Focus on principles for organizational design
–
–
–
–
–
–
Strategic intent
Linking strategy and organization
Strategic grouping
Strategic linking of jobs, departments, and functions
Alignments of rewards & incentives with grouping
Fit between organization and environments
Processes in strategic design
Assess environment
(Threats and opportunities
Industry analysis, etc.)
Strategic
Intent
Assess organization
(Core competences,
Organizational capacities)
Strategic
Organizational
Design
(grouping,
Linking,
Alignments)
The political lens
• Organization as a political coalition
• Identify and map relationships among
stakeholders, and their different interests and
goals
• Focus on –
–
–
–
–
sources and strength of power
distribution of resources
coalition building
bargaining processes
The Stakeholder Model
Professional
Community
Shareholders
Top Managers
Researchers
Customers
FIRM
Local
Community
Workers
Middle
Managers
Suppliers
Unions
Public interest
groups (e.g.,
environmental
groups)
Banks/Creditors
The cultural lens
• Organization as a system of symbols and
meanings
• The importance of history and interpretations
• Official culture versus subculture
• Formal authority versus informal social control
• Cultural context and strategic design
Three Lenses to “see” Organizational Change
Political:
interests
coalitions
resources/power
Cultural:
artifacts
values
assumptions
Strategic:
leadership
timing
linking
process
Goal of the course:
A repertoire of managerial skills
• Vocabularies – how do we talk about changes?
– Issues: leadership, coalition building, culture, etc.
• Analytical models – how do we analyze changes?
– Political
– Cultural
– Strategic
• Hand-on practice—how do we manage changes?
– Case studies
– Simulation
– Debates, brainstorm, collective diagnosis
Outline of the Course
1. Why Change?
Session 1. Issues related to organizational change
Session 2. Leadership in organizational change
2. Processes of Organizational Change
Session 3. Individual level: agents and incentives
Session 4. Interpersonal: Social relations and culture
Session 5. Putting things together: the EIS simulation
Session 6. Organizational: Strategic dimensions
3. Summary and Reflections
Session 7. Strategies of organizational change
Session 8. Final examination
Key Takeaways – Managing Growth
• Know where you are in the development cycle.
• Be prepared to dismantle current structures before a
crisis hits.
• Realize new solutions breed new problems.
• Continually strive to become a learning organization.
Different images of organizations
• Organization as a system for rational design
• Organization as a political coalition
• Organization as a system of symbols and
meanings
• What are the implications for understanding
organizational changes?
• What are the implications for managing changes
in organizations?
Overview of the course
Strategic
Culture
design Leadership
Agents
Recipients
Politics