Organisational Change
Chapter 1
Organisations and
Their Changing Environments
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Chapter 1 Objectives
• Describe the general characteristics of
organisations and their essential components;
• Say how different methods of wealth creation,
viewed from a historical perspective, have
influenced present-day organisational strategies
and focus;
• Discuss the concept of organisations as systems
operating in multi-dimensional environments and
its implications for understanding the causes of
organisational change;
• Recognise that change can be triggered from any
number of directions: through historical
influences, from the external environment and
from within the organisation itself - the internal
environment.
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1. Views of Organisations
‘Organizations are social arrangements for the
controlled performance of collective goals.’
(Huczynski & Buchanan, 1991: 7).
‘Organization: a group of people brought together
for the purpose of achieving certain objectives.
As the basic unit of an organization is the role
rather than the person in it the organization is
maintained in existence, sometimes over a long
period of time, despite many changes of
members.’
(Statt, 1991:102).
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The Meaning of Organisation (1)
A typical working definition of an
organization might say it is:
A social entity that.
Has a purpose.
Has a boundary, so that some
participants are considered inside while
others are considered outside, and.
Patterns the activities of participants into
a recognizable structure (Daft, 1989).
Source: Butler, R. (1991) Designing Organizations. A Decision-Making Perspective, London, Routledge, pp. 1-2.
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The Meaning of Organisation (2)
Although organizations are real in their
consequences, both for their
participants and for their environments,
they are essentially abstractions
Source: Butler, R. (1991) Designing Organizations. A Decision-Making Perspective, London, Routledge, pp. 1-2.
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The Meaning of Organisation (3)
... the hospital, the firm, or the school ... have
something real and physical about them but this is
not the organization; People are doing tasks to
which there is a pattern, raw materials are taken in,
converted, and distributed to markets; Capital is
provided by banks and other financial institutions;
Systems provide information for decision making
and co-ordination; People are talking about matters
which do not necessarily appear to have anything to
do with the job, some people remote from the
physical plant, perhaps a continent away, are
making decisions critical to our factory.’
Source: Butler, R. (1991) Designing Organizations. A Decision-Making Perspective, London, Routledge, pp. 1-2.
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The Organisation as an Open System
INPUTS
* materials
* resources
THE ORGANISATION
Formal Sub-System
strategy
goals
structure
operations
technology
management
leadership
culture
politics
conflict
co-operation
Informal Sub-System
* organisational
goal achievement
* employee
satisfaction
OUTPUTS
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Other Views on Organisations (1)
 It is useful to conceive organisations
as OPEN SYSTEMS.
 Nevertheless, the concept of
organisations as systems has been
criticised.
 One contrasting view is that
organisations are composed of
individuals and groups with multiple,
different interests (the social action
view).
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Other Views on Organisations (2)
 Another contrasting view of
organisations relates to theories of
modernism and post-modernism, and
regards organisations as more
unpredictable, fluid and chaotic than is
implied in the systems diagram.
 Yet another view stresses the
complexity of organisations and the
impossibility of establishing a single,
‘correct’ representation and
understanding of an organisation.
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2. The Historical Context for Change
 Organisations operate in multiple environments, of
which the temporal environment is just as important
as the current internal and external environments.
 Goodman (1995) offers a reasoned framework for
considering the influence of the past on the present
and future.
 An interesting question is the extent to which
present-day organisations have moved into what
Goodman calls ‘value-oriented time’.
 Some regions of the world are only just entering the
industrial age, so organisations operating in a global
context will need to be aware of this.
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Three Historical ‘Ages’ (1)
 Agricultural Age – local markets,
subsistence level living, predictable
cycles of activities.
 Industrial Age – inventions lead to mass
production; predictable cycles of supply
and demand; mechanistic and hierarchical
organisation; strong demand means that
organisations operate in a seller’s market.
 Neo-Industrial Age (also called ‘PostIndustrial Age’, ‘Services Age’ or
‘Information Age’) – enormous pace and
scale of change; global competition;
emphasis on the nurturing of human
creativity, energy and foresight.
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Three Historical ‘Ages’ (2)
 Different regions and countries
are at different historical ‘ages’.
China is moving from
Agricultural/Industrial Age to
Industrial/Information Age at
breathtaking speed.
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The Move to ‘Value-oriented Time’
 Entering the information age requires organisations
to embrace value oriented time
 This involves a constant emphasis on:
 Relationship marketing
 New product development
 Achieving differentiation through innovations of products,
of supply methods, and of marketing methods
 ‘Lean’ production
 Responsiveness to customer demand
 Product variety
 High quality
 Networking
 Ideas, intelligence, brainpower, ingenuity, creativity’
 Complex problem solving
 Autonomous units
 Project focused teams; Cross-functional teams
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3. An Uncertain Future
 The WINDS OF CHANGE are blowing at typhoon
strength. (…All that is solid melts into air).
 The idea that the future is extremely uncertain has
become accepted wisdom for most organisations
today.
 ‘The future is full of surprises, uncertainty, trends
and trend breaks, irrationality and rationality, …the
results of innumerable… forces’.
 Issues of creativity and innovation are uppermost in
many managers’ minds as they strive to keep their
organisation at the forefront of their industry and the
market.
 Consequently, it is important that managers and
others remain constantly alert to the changes in their
current environments and to anticipating changes in
the future.
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Organisations As Symphony Orchestras
 Peter Drucker had the idea that organisations of the
future are modelled on as symphony orchestras.
 In a symphony orchestra, over 100 individuals may
perform together on stage, but there is only one
manager – the conductor.
 There are no vice-conductors or assistant
conductors.
 Each player is a highly-trained specialist.
 They play directly to the conductor, with no
intermediaries.
 The idea is contentious but serves as a debating
point.
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4. Environmental Triggers of Change
The environment is:
‘All factors, including institutions, groups,
individuals, events, etc., That are outside the
organisation…but that have a potential impact.’
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Some Elements in an Organisation’s Environment
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
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Markets, clients, customers
Suppliers
Government, regulatory bodies
Trade unions
Competitors
Financial institutions
Labour supply
Levels of unemployment
Economic climate
Technological, computing, info systems, e-commerce, internet
advances
Globalisation of trade
Political ideology
Family structure
Distribution of wealth
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External Environments (a)
 The use of the mnemonics PETS, or PEST, or STEP
draws attention to the multiple facets of the external
environment.
 The speed at which the internet has come to be used
in almost every type of organisation (as well as the
ones which are built entirely upon its capacities) is a
clear example of the influence of the
TECHNOLOGICAL ENVIRONMENT.
 Another example of the impact of this sector on
organisational life is the threat to employee rights of
using surveillance monitoring of emails and internet
use, and the advent of sexual harassment via the
sending of unsolicited pornographic emails.
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External Environments (b)
 The POLITICAL ENVIRONMENT is constantly
changing.
 Governments change and new alliances are formed
with old ones broken.
 With the advent of the European Union and the
Common European Currency, no longer do
individual countries have sole power over what laws
apply and even what economic policies they might
pursue.
 Groups such as the ASEAN-4 Group form significant
trading blocs which must catch the attention of
organisations trading worldwide.
 The attack upon the World Trade Center Building
and the Pentagon, is an example of an event, whose
influence will continue to be felt in a multitude of
ways for many years hence.
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External Environments (c)
 The ECONOMIC ENVIRONMENT has always
been of the utmost importance in forcing
organisations to second guess what
competitors might do and the changing
needs and desires of actual and potential
customers.
 Intertwined with all these aspects of the
external environment, as they are with each
other, is the SOCIO-CULTURAL
ENVIRONMENT.
 Demographic changes, changes in living,
working and leisure pursuits impact upon
people’s needs and wants and the capacity
of organisations to change to meet them.
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Some Elements in an Organisation’s Environment
Overall points:
 The various aspects of the PETS environment are
interrelated (e.g. socio-cultural factors will influence
economic factors and vice-versa).
 Some factors can be categorised in more than one
sector.
 Few ‘triggers’ for change emerging from the external
environments can be responded to without taking
other factors into account.
 Any force for change has multiple and complex
causes.
 Organisations which ignore this deep complexity are
unlikely to prosper.
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Internal Triggers for Change
Internal triggers can often be seen as changes in
response to influences in the organization’s
environment. Examples include:
 Formation or disbandment of a labour union inside the
company
 Appointment of a new CEO or other top executive
 Changing the administrative structures
 Job redesign affecting many employees
 Factory redesign or office layout
 New IT equipment
 New marketing strategy
 Outsourcing
 Layoffs
 More resources to research and development
department
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5. Organisational Responses to Change
Summary So Far
The multiple environments of organisations
– The temporal environment
Historical developments bringing change over
time to an industry and pointing to the need for
brainpower and knowledge
– The external environment
PETS, or PEST, or STEP
– The internal environment
Organisational changes that are often first-line
responses to changes in the temporal and
external environments
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Reminder
The temporal environment
– Agricultural Age
(tradition, rhythms of nature)
– Industrial Age
(bureaucracy, mechanisation, ‘Fordism’,
assembly-line)
– Neo-Industrial Age or Post-Industrial Age
(services, information, knowledge-based
products, etc)
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Winds of Change Blow Through the Organisation
 Organisations can be seen as systems operating in
multidimensional environments.
 For some organisations, the winds of change are
strong, gusty, variable, swirling.
 The next slide may not fully represent the possible
turbulence in the external, temporal and internal
environments.
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The organisational system operating in multidimensional environments
EXTERNAL ENVIRONMENT
THE ORGANISATION
sociocultural
influences
Formal Sub-System
management
goals
political-legal
influences
strategy
structure
operations
technology
leadership
culture
politics
economic
influences
Informal Sub-System
technological
influences
INTERNAL ENVIRONMENT
ecological
influences
TEMPORAL ENVIRONMENT
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Responding to Levels of Environmental Turbulence
 It has been claimed (Ansoff & McDonnell) that the
degree of aggressiveness and responsiveness of an
organisation should match the level of turbulence of
the organisation’s environment
 The greater the level of turbulence, the stronger the
forces are for change
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Levels of Environmental Turbulence
 Level 1. Predictable. Stable markets. Pace
of change is slow. Future will be like the
past.
 Level 2. Some complexity, but the
environment is Forecastable by
extrapolation.
 Level 3. More complexity, but at least there
are predictable threats and opportunities.
 Level 4. Complexity is further increased by
the winds of global and social-political
changes, but nonetheless there are
partially predictable opportunities.
 Level 5. Unpredictable surprises.
STRONG FORCES
Unexpected events and situations occur
FOR CHANGE
more frequently that the organisation can
Amount of
Aggressiveness & respond to them.
WEAK FORCES
FOR CHANGE
responsiveness
required
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Types of Change Situation
 Closed change. When explaining this type
of change, people involved in it would
readily be able to agree on, and describe,
what happened, why it happened, what the
consequences were, and how the business
has been affected.
 Contained change. When explaining this
type of change, people involved in it would
only be able to say what probably
happened, what the probable causes,
consequences and business implications
may be.
 Open-ended change. When explaining this
type of change, people involved in it would
have different and possibly conflicting
accounts and explanations of what
happened, why it happened, and what its
consequences and implications are.
CLOSE TO CERTAINTY
FAR FROM
CERTAINTY
Degree of
Certainty
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The multiple causes of the situation faced by Shell
Renewed criticism
of Shell’s role in
Nigeria
Successful
experience in
discovering oil in
similar geological
conditions in the
USA
Demands for Shell to
withdraw from Nigeria
Shell’s new
discovery
Shell looks for
alternative
offshore
possibilities in
Nigeria
Shell’s
failure to
keep up new
discoveries
Boycott of
Shell petrol
Execution of
Ogoni leader
Clashes between
the government
and the Ogoni
people
Resentment and
direct confrontation
with Shell
Importance of
oil industry to
Nigeria
Nigerian
government’s wish
to exploit its natural
resources
International
criticism of Shell’s
role in Nigeria
Shell as largest foreign
oil producer in Nigeria
(mostly onshore
production)
Little benefit from oil
money in nearby
communities
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Conclusions
Organisations operate in multiple
environments
The key tasks for organisations is to achieve
external adaptation and internal integration
Organisations need to be ‘quick on their feet’
to anticipate opportunities ands threats and
respond wisely to unpredictable surprises
This requires understanding how the formal
organisational subsystem responds to the
external, internal and temporal environments
It also requires understanding the informal
subsystem
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