Change Management
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Organizational Change:
Background
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Organizational change is intended alterations in
organizational design elements such as structures,
technology, culture.
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Change is increasingly integral to management
External forces for change: The “usual suspects”:
regulatory change; globalization; technological change,
etc.
Internal forces for change: Poor performance, change in
strategy, management, processes, and workforce.
“Change agents” – people (often managers) who
catalyze change and take responsibility for making
change happen. (I prefer to the term change leaders).
Change environments:
Calm vs. White-Water Rapids
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Calm Water: Relatively long periods of stability
interrupted by short periods of significant change
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White Water: Change never really stops
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Traditionally, the professions were examples
Competitive markets today: complex and dynamic.
Firms’ ability to change rapidly becomes strategic
Senior managers seek change leaders “down the line”
Understanding Change:
Lewin’s Three-step model
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An early and enduring model of change
Says organizations are in inertial equilibrium
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“Inertial” equilibrium: organizations must be pushed
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out of equilibrium (status quo), and moved into
another equilibrium.
Otherwise they just “roll back” to where they were
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E.g, employees return to comfortable habits & ways.
Lewin’s Three-Step Change Model
(A different take than the textbook)
Unfreezing
Changing
Refreezing
Unfreezing - increasing forces for change, decreasing forces against
change, relative to the status quo (equilibrium).
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Changing - move to another equilibrium level
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Refreezing - stabilizing new equilibrium to make change permanent
Where is Lewin’s model useful
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This is a very general model, as applicable for
changing a single policy in a department as for
transforming an entire organization:
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Applies to both Calm Waters and White Waters.
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Textbook says its only applicable to Calm Waters, that’s
wrong.
Organizational inertia is universal (for example, culture).
Better way to think about it: There is more change in
white-water situations, so rather than one big unfreezechange-refreeze, there are multiple unfreeze-changerefreeze efforts going on all the time.
Comparison of Kotter’s (1995) 8 Step Model and Lewin’s Model
Establishing a Sense of Urgency
Unfreeze
Forming a Powerful Guiding Coalition
Creating a Vision
Communicating the vision
Empowering Others to Act on the Vision
Change
Planning for and Creating Short-Term Wins
Consolidating Improvements, Produce More Change
Institutionalizing New Approaches
Refreeze
Types of Change:
Decision vs. Behaviorally-driven
Decision-driven change:
change initiators can
decide to change these
Structure
Technology
(processes)
People
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Behaviorally-driven change:
change initiators must influence
others who decide to change:
Change in Behavior (or
attitudes, expectations,
perceptions) across the
organization
Resistance to Change:
Another reason behavioral change is tough
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Rather than simply complying with or committing to changes, people
often resist them. There are several reasons:
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Uncertainty: Change replaces the known with ambiguity and uncertainty, and
potentially thus with fear and anxiety.
Self–Interest: Change threatens personal investments in and rewards from
the status quo. Can lead to dysfunctional, “hidden agenda” politics.
Differing Assessments: People affected by the change view the situation –
problem, solution, etc. – differently from change initiators.
Misunderstanding: Especially when trust is lacking, people may not
understand the implications of change, and they may fear the worst.
Reasons experienced, smart managers
have trouble driving change
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Change takes longer, is more complex, is more problematic,
and is more difficult to sustain than managers expect (Jick):
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Managers underestimate the difficulty of change efforts
(Kotter):
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Implementation took more time than originally allocated (76%)
Unexpected major problems surfaced during implementation (74%)
Coordination of implementation activities was not effective enough
Competing activities and crises distracted attention (64%)
Difficulty of driving people out of comfort zones
Degree of resistance that is likely to arise
How much communication it takes to get the vision across
How important it is to remove obstacles (people and policies) to change
Don’t assume people will agree with changes
Unexpected resistance to change examples
As president, you initiate these changes:
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1. You create a new position, VP of new product planning &
development, to rationalize new product development
efforts. Responsibility for new product development is
spread across different functions and is too important to not
have someone explicitly responsible for it. How do the
existing VPs react?
The change substantially reduces existing VPs decisionmaking power in this new area, and threatens their status
because new product development is so powerful. Over
the next two months each of the several VPs so threatened
come up with six or seven reasons why the arrangement
won’t work, and their objections get so loud that you decide
to shelve the idea.
Don’t assume people will understand changes
Unexpected resistance to change examples
As president, you initiate these changes:
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2. You’ve been to a management seminar that introduces you to a
new concept, flexible working schedules. You believe this will
improve working conditions, particularly for clerical and plant
personnel. In the next company newsletter you include a brief
announcement that the company will be implementing a flexible
working schedule for those employees. How do employees react?
After the announcement, rumors circulate among employees who
don’t know what this means. One rumor suggested it meant most
people would have to work whenever supervisors asked, including
evenings and weekends. The employee association, a local union,
held a quick meeting and then presented management with a nonnegotiable demand that the concept be dropped. Caught completely
by surprise, you comply.
Don’t assume people will understand OR agree with changes
Unexpected resistance to change examples
As president, you initiate these changes:
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3. You are shocked by your executive staff’s analysis of
potential losses from REIT (real estate investment trust)
loans. Loss exposure is large already and increasing
monthly. You take quick action. You decide not to release
the report to anyone but the REIT section manager
because it is too sensitive, but within a week, you have
drawn up a plan to reorganize that part of the bank. How
do people within the REIT group react?
People wonder whether you have gone mad and why you
are tearing up this section of the bank. 3 talented people
leave and cripple an existing program, that you were
unaware of, that aimed to reduce loan losses.
Methods for reducing or
overcoming resistance to change
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See exhibit 13.4 p. 347.
Education & communication: To help people see the logic.
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Participation: in decisions about changes & implementation.
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Almost always key in general
Crucial to help avoid resistance from misunderstandings.
Helps avoid resistance from differing assessments
To gain commitment rather than compliance
Facilitation & Support: counseling, training, etc.
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Helps address resistance from low tolerance for change
These
are best, if they are at all possible
 However, can be expensive, time consuming, and still fail.
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Methods for reducing or
overcoming resistance to change
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Negotiation: Exchange value to reduce resistance
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Manipulation: Hide/distort information.
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Tempting and sometimes a seductive way out of a tough
situation. But, its playing with fire.
Coercion: Direct or implied threats.
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Can address self-interest, but can be a “slippery slope”
Useful when your position is strong, fast action is
needed (e.g., crisis), you know what needs to be done,
and just need compliance
Obviously likely to lead to resentment or revolt.
Don’t be a one-trick pony. Use multiple methods, strategically
Some examples of dealing with
resistance to change
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Participation -> Head of small financial services company forms a
task force of 8 second/third level managers to help design and
implement changes in the companies reward system.
Facilitation & Support -> Rapidly growing electronics firm staffs
human resources with four counselors who spend most of their
time talking with people who are feeling “burnt out” or having
difficulty adjusting to their new jobs.
Coercion: Frank Borman (at Eastern Airlines) urges workers to
vote for a new union contract to cut costs at the failing airline, “or
else.”
Change and you “in the trenches”
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Senior managers are desperate to find change
leaders “down the line.”
Leaders who can provide:
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Linchpin linkages: marketplace realities, top
leadership aspirations, workforce capabilities
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360 degree impact (most notably impact up)
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Expandable toolkit (are opportunistic and experimental
to meet the situation at hand)
Adopted from “Real Change Leaders.” Katzenbach, McKinsey Quarterly, 1997