Topic

1
Nature of
Change
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1.
Identify different types of change using a change spectrum;
2.
Give examples of internally and externally generated change;
3.
Describe the areas of organisational change;
4.
Determine the impact of change on businesses; and
5.
Justify the importance of change for organisations.
 INTRODUCTION
This topic provides a basic understanding of organisational change, which refers
to the modification of the existing organisation to enhance its effectiveness and
efficiency. It introduces the basic concepts of organisational change and describes
the various forms of change, the sources of change (internal and external) and the
focus of change (people, structure and technology).
In todayÊs complex business environment, the magnitude, speed and impact of
change on organisations are increasing. Organisations are confronted almost
daily with the need for change. Over the last few decades, many new products
and services have been introduced into the market; local markets have become
global markets; protected industries have been opened up to competition; and
public institutions have either been privatised or found themselves adopting
more market-oriented practices. In other words, change has become both
pervasive and prevalent.
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NATURE OF CHANGE
Hence, change is inevitable in organisations. As the environment changes,
organisations must adapt if they are to survive in the market. An organisationÊs
ability to change will have a significant impact on its performance and success.
Thus, managing change effectively is a major challenge facing organisations.
1.1
MAGNITUDE OF CHANGE
The nature and pace of change can vary substantially from one organisation to
another. Change experienced by organisations can be distinguished by their scale
and importance. Generally, the change continuum ranges from incremental
changes which involve fine-tuning the organisation to quantum changes which
require the transformation of the organisation (Burnes, 2004). The incremental
perspective views change as being a process whereby individual organisational
subunits deal with changes incrementally and separately with one problem and
one goal at a time. On the other hand, the quantum or transformation perspective
sees change as radical and unpredictable due to the complex environment in
which the organisation is operating. Figure 1.1 presents the change spectrum
where change ranges from small-scale and incremental to large-scale and
transformational.
Figure 1.1: The continuum of change
Source: Burnes (2004)
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Table 1.1 presents the differences between incremental change and quantum
change.
Table 1.1: Incremental vs Quantum Change
Incremental Change
Quantum Change
 Small scale.
 Large scale.
 Moderate form of change.
 Radical form of change.
 Involves limited dimensions and levels
of the organisation.
 Involves multiple levels of the
organisation, from top management
through departments and work groups
to individual jobs.
 Involves several organisational
dimensions, including structure,
culture, reward systems, information
processes and work design.
 Operational changes.
 Strategic changes.
 Aims at improving the status quo.
 Aims at altering how the organisation
operates.
 Occurs within the context of the
organisationÊs existing business
strategy, structure and culture.
Examples:
Examples:
 Improving the decision-making of
work groups.
 Downsizing.
 Changing the activities, performance,
behaviour or attitudes of individuals
and groups.
 Business process reengineering.
 Total quality management.
 Change of organisational culture.
 Solving the problem of employee
absenteeism.
ACTIVITY 1.1
Describe the changes made in your work organisation. Then, identify
whether they are incremental changes or quantum/transformational
changes.
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1.2
NATURE OF CHANGE
FORCES OF CHANGE
Changes can be triggered either by internal or external events. Internal forces of
change are those factors originating from the organisation that give rise to
changes (Paton & McCalman, 2008). There are a large number of such factors.
Some examples are:
(a)
Product innovations as a result of research and development;
(b)
New marketing plans;
(c)
Organisational restructuring to fit a new product line;
(d)
Job redesign to fit new organisational structures;
(e)
Improving work processes to increase productivity;
(f)
Computerised human resource systems to better manage human resources;
(g)
Development of databases to facilitate the decision-making process;
(h)
Attitudinal and behavioural changes to improve employee performance;
(i)
Change in composition of workforce;
(j)
Changing employee attitudes, expectations and needs;
(k)
Organisational growth;
(l)
Leadership and management team succession;
(m) Expansion through acquisition or merger; and
(n)
New company policies.
External forces of change are generated from the outside environment. External
changes that organisations are currently facing include (Paton & McCalman,
2008) the following:
(a)
Government Legislation
These are governmental interventions in terms of changes and
implementation of government laws and regulations for example,
strengthening health-related legislation, new systems of handling foreign
workers, emission control legislation, carbon free policy, new tax laws and
tightening international trade.
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(b)
Advances in Information and Communication Technology (ICT)
The rapid advancement of ICT has both revolutionised existing markets
and created new ones. The Internet, for example, has revolutionised how
business transactions are done. In addition, mobile and wireless
technologies not only speed up new product development, but also change
the business portals.
(c)
Globalisation
The integrated internationalisation of markets has changed the way modern
corporations do business nowadays. Jobs, knowledge and capital can now
be channeled across borders with far greater speed. The worldwide
availability of the Internet and supply-chain logistics enable companies to
locate and work with multiple partners to serve any market anywhere, thus
venturing into a global market instead of national markets. Business
organisations must change to keep up with global developments to position
themselves for sustainable competitive advantage.
(d)
Changing Consumer Needs, Requirements and Expectations
ConsumersÊ attitudes and demands for products and services are forever
changing. The attitude towards green environment in the 1990s led to
consumer demands for environmentally friendly products and packaging.
In the 2000s, health-consciousness among consumers gave rise to the
popularity of organic foods. More sophisticated and educated consumers
are now demanding for more integrated financial services and packages.
Developing innovative products to suit the changing preference of
consumers has become a fact of life for business organisations.
(e)
Competitor and Supply Chain Activities
The competition landscape has changed how firms do business nowadays.
The methods of competition change in response to the strategic moves of
competitors. Organisations are increasingly forming strategic alliances with
providers of related services and products. This is done in an effort to gain
competitive advantage and cost efficiency. Competition is essentially
challenging the past and creating new and exciting ways of doing business.
(f)
General Economic or Social Pressure
In the global economy and market place, societies are becoming less
isolated and more independent. Economic downturns in the United States,
for instance, will not only affect their immediate locality, but also create a
ripple effect throughout the global society. Organisations worldwide have
to learn to survive in bad times. Similarly, the contamination of foods in
China has also created pressure for multinational companies to produce
food and beverages of higher quality.
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(g)
Unpredictable Environmental Catastrophes
Unpredictable catastrophes have been and will always be, a source of
disruption and despair. Examples are the tsunami disaster in Indonesia, the
fallout of Hurricane Katrina in the United States, and the meltdown of
nuclear power in Japan in recent years. Since these catastrophes are
unavoidable, they must be effectively managed when they occur. In short,
organisations must change and adjust to regain their footing when these
disastrous events take place.
NATURE OF CHANGE
The manner in which a trigger or driver of change impacts upon a situation, to a
certain extent, depends on its source, nature and magnitude. Internally generated
change is likely to be managed far more proactively and effectively due to prior
knowledge and understanding. Table 1.2 highlights the differences between
internally and externally generated changes.
Table 1.2: Differences between Internal and External Sources of Change
Internally Generated Change
Externally Generated Change
 Proactive stance;
 Reactive response;
 Positive feelings;
 Negative feelings;
 Greater driving force;
 Greater restraining force;
 Viewed from an opportunistic position;
 Viewed from a problem-solving
position;
 Greater certainty;
 Greater uncertainty;
 Greater control;
 Reduced control;
 Less disruption; and
 Closed boundaries and fixed time
scales.
 Greater disruption; and
 Vague boundaries and variable time
scales.
Source: Paton & McCalman (2008)
SELF-CHECK 1.1
Give and explain two examples of internal sources of change and two
examples of external sources of change in your work organisation.
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NATURE OF CHANGE 
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ACTIVITY 1.2
We experience change throughout our lives. List three significant
triggers of change, identify their sources and rank your feelings of
„control‰ in coping with each change.
Trigger
Source
(Internal/External)
Ranking
(5 – High Level of Control;
1 – Low Level of Control)
1.
2.
3.
1.3
FOCUS OF CHANGE – DETERMINING
WHAT SHOULD BE CHANGED
Changing an organisation is the process of modifying an existing organisation in
order to increase organisational effectiveness. Most managers, at one point or
another, will have to make some changes in their workplace. These changes are
termed organisational change. The focus of organisational change can be people,
structure and technology (Certo & Certo, 2009; Robbins & Coulter, 2009). In other
words, managers may make three types of organisational change – changes in
people, structure and technology.
(a)
People Change
Emphasises the improvement of job performance by changing certain
aspects of organisation members, such as their work attitudes and work
behaviour. Managers may attempt to make this kind of change when
human resources are shown to be the major cause of organisational
ineffectiveness.
(b)
Structural Change
Helps increase organisational effectiveness by changing organisational
controls which influence organisation members in performing their jobs.
Managers may choose to make structural changes within an organisation if
they believe that the present structure impedes organisational effectiveness
and efficiency.
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(c)
Technological Change
Focuses on modifying the level of technology in both the management and
production systems. Managers can change the technology used to convert
input into output to increase production efficiency. Today, technological
changes usually involve the introduction of new machinery, equipment,
tools or methods. For instance, the evolution in ICT has given birth to
online businesses.
NATURE OF CHANGE
Table 1.3 depicts the features of these three areas of change.
Table 1.3: Categories of Organisational Change
Focus of Change
People
What It Involves
 People factors are the competencies and all other characteristics
of human resources within the organisation.
 Changes in employee attitudes, expectations, perceptions, skills
or behaviour.
 Examples:
 Training given to employees to learn new computer skills.
 Stress management programmes to enhance employeesÊ
welfare.
Structure
 Structural factors are organisational controls, such as policies and
procedures.
 Any modification in authority relationships, chain of command,
coordination mechanisms, degree of centralisation or
decentralisation, job design, span of control, work specialisation,
departmentalisation, formalisation, standardisation, or team
building.
 It may involve major changes in the actual structural design.
 Changing conditions or changing organisational strategies often
lead to changes in the organisational structure.
 Examples:
 Revision of job specification and job description.
 Modifying organisational structure to fit the communication
needs of the organisation.
 Decentralising the organisation to reduce the cost of
coordination, increase the controllability of work units,
increase employee motivation and gain greater flexibility.
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Technology
NATURE OF CHANGE 
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 Technological factors are any types of equipment or task
processes which assist organisation members in performing their
jobs.
 Changes in work processes, work methods, or tools and
equipment used.
 Examples:
 Automation of production facilities.
 Computerisation of human resource systems.
It has been generally accepted that organisational effectiveness depends
primarily on activities centered around these three classes of factors. Figure 1.2
shows the interrelationship among these areas of changes in relation to achieving
organisational effectiveness.
Figure 1.2: Determining organisational effectiveness based on the
interrelationships among people, structural and technological changes
Source: Certo & Certo (2009)
Note that these three types of organisational changes are interrelated in
improving organisational effectiveness. For example, structural changes must
take people and technological factors into account. Similarly, changing people
necessarily involves some consideration in terms of structure and technology.
Hence, a change that affects any one factor will, to a greater or lesser extent,
interact with the other factors and create a chain effect.
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ACTIVITY 1.3
Identify what areas need to be changed at your workplace. Then,
classify whether the change is people, structural or technological
change. Explain your answer.
1.4
IMPACT OF CHANGE
As mentioned in the beginning of this topic, change is inevitable in organisations.
There are various factors which contribute to the need for an organisation to
move from its status quo. The most obvious are those significant factors in the
external environment. To understand the impact of change, just think about how
the organisation will be affected by the following changes in the external
environment:
(a)
Changes in communication technologies;
(b)
Changes in consumer attitudes;
(c)
Changes in societal values;
(d)
Changes in population demographics;
(e)
Changes in government laws;
(f)
Changes in the competition landscape; and
(g)
Changes in the supply chain.
For example, changes in consumer value towards green environment and
environmental protection laws are some of the forces driving manufacturers to
use green technology in the production process so as to produce goods without
causing further damage to the environment. The depletion of natural resources
also prompts manufacturers to look for more efficient energy sources or stop
harvesting animals and sea lives which are in danger of extinction.
In short, changes in consumer attitudes and values, business conditions,
economic events, technology, society, and the political and legal environment
will have an impact on the production methods, work processes, and products
and services provided by the organisation.
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SELF-CHECK 1.2
Describe how each of the following factors has an impact on your
organisation:
(a)
The Internet;
(b)
Consumers becoming more health conscious; and
(c)
Changes in customer needs.
1.5
IMPORTANCE OF CHANGE
Managers of organisations, be they in the public or private sector, or
manufacturing or service line, will continue to be judged by their ability to
effectively manage change. If an organisation is to thrive, it must change
continually in response to the changing world. Change is crucial to the success of
the organisation and so employees should be encouraged to generate ideas to
achieve beneficial changes. Certo and Certo (2009) cited General Motors (GM) as
a classic example. GM provides its employees with a „think list‰ to encourage
them to develop ideas for organisational change. The employees of GM are
reminded that change is vital to the continued success of GM. The think list
includes questions such as:
(a)
Can a machine be used to do a better and faster job?
(b)
Can the handling of materials for the machine be improved?
(c)
Can the quality of a part be improved by changing the sequence of the
operations?
(d)
Can the materials be cut or trimmed differently for cost efficiency?
(e)
Can the operation be made safer?
(f)
Can paperwork be reduced or eliminated?
(g)
Can the established procedures be simplified?
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12  TOPIC 1 NATURE OF CHANGE
In conclusion, change is important to organisations because it is a contributing
factor to the following:
(a)
Flexibility to adapt to the changing environment;
(b)
Innovation and creativity for new product development;
(c)
Organisational learning;
(d)
Effectiveness and efficiency in both management and work systems;
(e)
Competitiveness;
(f)
High-performing organisations;
(g)
Sustainable growth; and
(h)
Ultimate survival.
SELF-CHECK 1.3
Why is change important for your organisation? Give an example to
support your answer.

Organisations come in all shapes and sizes and offer a wide variety of
products and services, but also face a host of challenges. Perhaps the only
factor common to all organisations is change.

Organisations experience different types of change, and the speed and
magnitude of change vary from one organisation to another over time.

Changes range from small-scale and incremental to large-scale and
transformational.

It is widely recognised that the ability of an organisation to manage change
effectively is crucial for its success.

Changing an organisation is the process of modifying an existing
organisation to increase organisational effectiveness.

Forces in the external environment are the major causes of change in
organisations.
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NATURE OF CHANGE 
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
The focus of organisational change can be people, structure and technology.

Managers must be able to determine the appropriate changes and then
implement such changes successfully to enable their organisations to be more
flexible, innovative and effective.
External forces of change
People change
Incremental change
Quantum/Transformational change
Internal forces of change
Structural change
Organisational change
Technological change
Burnes, B. (2004). Managing change (4th ed.). Harlow, England: Financial Times
Prentice Hall.
Certo, S. C., & Certo, S. T. (2009). Modern management: Concepts and skills (11th
ed.). Upper Saddle River, NJ: Merrill Prentice Hall.
Paton, R. A., & McCalman, J. (2008). Change management: A guide to effective
implementation (3rd ed.). London, England: Sage Publications.
Robbins, S. P., & Coulter, M. (2009). Management (10th ed.). Upper Saddle River,
NJ: Merrill Prentice Hall.
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