Chapter 4
What Changes in Organizations
Scale of Change
Scale of
Change:
-1st order
-2nd order

◦ Incremental
◦ Maintains and develops the organization
– adjusting systems, processes,
structures, but not strategies and values
◦ E.g. continuous and smaller changes to
the structure of an organisation
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges
First-order change:

Second-order change:
◦ Transformational
◦ Fundamentally changes the way an
organization functions
◦ E.g. downsizing
4-2
Scale of Change
Scale of
Change:
-1st order
-2nd order
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges

First-order change:
◦ Taking of individual initiatives
◦ Development of local routines

Second-order change:
◦ Move from entrepreneurial to
professional management structure
◦ Revitalization of already-established
company
◦ Visionary change in the business
4-3
Beyond 1st & 2nd Order Change
Scale of
Change:
-1st order
-2nd order

Mid-range changes

Punctuated equilibrium

Robust transformation
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges
◦ Overcomes inertia but is not
revolutionary
◦ Avoids the alarming implications of
large scale change
◦ Long periods of stability followed by
short bursts of change and instability
◦ Considers environmental conditions
as being temporary and requiring
robust responses including the
enactment of new capabilities.
4-4
Types of Change
Scale of
Change:
-1st order
-2nd order
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges
DOWNSIZING
 Approaches to downsizing:
◦ Retrenchment
◦ Downscaling
◦ Downscoping
Does not necessarily lead to
increased productivity
 Can be an excessively costly
exercise

4-5
Types of Change
Scale of
Change:
-1st order
-2nd order
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges
TECHNOLOGICAL CHANGE
 There are a variety of new
technologies being used, for
example:
◦ Customer relationship management
(CRM) systems
◦ Enterprise resource planning (ERP)
◦ Wireless technology
◦ Business process reengineering
(BPR)
◦ Six Sigma
4-6
Types of Change
Scale of
Change:
-1st order
-2nd order
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges
MERGERS AND ACQUISITIONS
 Enable organizational growth at
an accelerated rate
 Types of mergers and
acquisitions:
◦
◦
◦
◦
◦
Excessive capacity
Neighbouring market expansion
New product or market investment
Research and development
Leveraging to create industries
4-7
Key Change Challenges
Scale of
Change:
-1st order
-2nd order
Between 1st &
2nd Order
Change
Types of
Change:
-Downsizing
-Technological
-Mergers
-Key Change
Challenges
This table outlines the key change challenges for the three
types of change. These issues need to be addressed when
managing change:
Downsizing
New Technologies
Mergers &
Acquisitions
Employee retention.
Goal synthesis.
Cost savings.
Avoiding “hard
landings”.
Choice of technology
Cultural adjustment.
Minimizing political
behavior and loss of
teamwork.
Identifying political
barriers.
Balancing change and
continuity.
Survivor syndrome
The IT team.
Due diligence.
Communication
Communication
Employee retention
Due diligence
Time frame.
Contingency planning.
Cultural adjustment.
Contingency planning
Power structure.
Choice of restructuring
technique
Communication
4-8
Chapter 5
Diagnosis for Change
Advantages of Diagnostic Tools
Advantages
of diagnostic
tools


Diagnostic
Models:
-Organization
-Components
Readiness for
Change





Help understand what to change, how and
why.
Simplify a complex situation.
Identify priorities for attention.
Highlight various organizational properties
(e.g. strategy and structure) and their
interconnectedness.
Provide a common “language” with which
to discuss organizational characteristics.
Provide a guide to the sequence of actions
to take in a change situation.
Help us be more efficient and rational as
we attempt to understand and change an
organization.
5-10
Diagnostic Models: Organization
Advantages
of diagnostic
tools
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
• Six-box organizational model:
– The key focus here is on six variables – purpose,
structure, rewards, helpful mechanisms,
relationship and leadership. This model is useful
to maintain awareness of all areas for
consideration even though one variable may be
identified as the main area for attention.
• 7-S framework:
– The 7-S framework: this focuses on seven key
components that affect organizational
effectiveness – structure, systems, style, staff,
skills, strategy and superordinate goals. The
interconnectedness of these variables is vital to
the success of change.
• Star model:
– An organization is effective when the five
components of organizational design – strategy,
structure, processes and later capability, reward
systems and people practices – are in alignment.
5-11
Diagnostic Models: Organization
Advantages
of diagnostic
tools
Six-box
organizational
model
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
5-12
Diagnostic Models: Organization
Advantages
of diagnostic
tools
7-S framework
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
5-13
Diagnostic Models: Organization
Advantages
of diagnostic
tools
Star model
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
5-14
Diagnostic Models: Organization
Advantages
of diagnostic
tools
Diagnostic
Models:
-Organization
-Components

Congruence model:

Burke-Litwin model:

Four frame model:

Diagnosis by image:
Readiness for
Change
◦ The organization is broken down into four
components – task, individuals, formal
organizational arrangements and informal
organisation. This is influenced by the context
where the strategy is formulated and the output
is then the performance of the organization.
◦ This model identifies the transformational –
external environment, mission and strategy,
leadership and organizational culture - and
transactional sources of change.
◦ This offers four frames for the managers to
conceptualize how the organization operates.
These frames are structural, human resource,
political and symbolic frames.
◦ This technique allows organizational members to
use images to describe the organizations and this
can be used as a basis for discussion.
5-15
Diagnostic Models: Organization
Advantages
of diagnostic
tools
Congruence model
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
5-16
Diagnostic Models: Organization
Advantages
of diagnostic
tools
Burke-Litwin
model
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
5-17
Diagnostic Models: Components
Advantages
of diagnostic
tools
Diagnostic
Models:
-Organization
-Components
Readiness for
Change

PESTEL Framework

Scenario analysis

Gap analysis

Elements of strategy

Strategic inventory
◦ This analyses the external environment in terms of six
factors – political, economic, social, technological,
environmental and legal.
◦ Creates stories of possible future scenarios that are
considered to be vital to the future of the organization.
◦ This is a tool used for reviewing the organization’s
position based on where they are and where they want
to get to.
◦ These are five elements of strategy that are considered
mutually reinforcing – arenas, vehicles, differentiators,
staging and lowest costs through scale advantage. Any
misalignment of these signifies the need for change.
◦ This aims to identify the strategic assumptions of
managers and determine their consistency with the
business environment. This determines whether the
strategy should be a focal point for change.
5-18
Diagnostic Models: Components
Advantages
of diagnostic
tools

Newsflash exercise:
Diagnostic
Models:
-Organization
-Components

Cultural web:

Structural dilemmas:

The Boundaryless Organization:
Readiness for
Change
◦ This is an exercise that encourages managers to
be very specific and succinct about change and
clearer about the intended outcomes.
◦ This provides a way of mapping the
organizational culture through seven elements –
paradigm, rituals and routines, stories, symbols,
control systems, power structures and
organizational structure.
◦ Six possible structural dilemmas that can be
encountered during change are diagnosed so
areas that have been “traded-off” during the
change process can be identified
◦ Success is arguably achieved only if four types of
organizational boundaries are diagnosed and
reduced. These are vertical, horizontal, external
and geographical boundaries.
5-19
Readiness for Change
Advantages
of diagnostic
tools
Diagnostic
Models:
-Organization
-Components
Readiness for
Change
Assessing the organization's readiness
to change can be a mediating variable
between change management
strategies and the outcomes of desired
strategies.
 A perchance audit of the readiness of
an organization for change can provide
an indication of the likely outcome of a
change initiative at a particular point in
time. Some ways of doing this include:

◦ Questionnaires
◦ Stakeholder analysis: This focuses on the
position of stakeholders in the change
process and allows the manager to be better
informed of how to confront potential issues.
◦ Force-field analysis: This identifies factors
that are driving forces for change as well as
restraining forces.
5-20