W1D2 Change Happen Walden - Management
Cohesive response based on your analysis ...See attachment for detailed instructions
Cohesive response
No plagiarism
APA citing
3-4 paragraphs
** Due 48 hours or ASAP ****
Discussion 2: Change Happens
Some people enjoy the challenges and creativity provided by constantly changing circumstances. However, for many individuals, change has a negative connotation and is laden with risk and uncertainty. Yet in today’s workplace, change has become a standard component. As discussed in this week’s resources, having a process in place to address change, whether it is anticipated or unplanned, helps to ensure its success.
To prepare for this Discussion:
Take a moment to reflect on your own workplace experiences and think about the changes that you have witnessed. For this Discussion, you should conduct additional research on the change process using the Walden Library.
As you do so, contemplate the following:
· Consider the concept of change and how it occurs. Is it always a formal process, or often does it just happen? Why?
· Consider the various types of change—for example, transformational, planned, unwelcome, or unexpected.
· Think about your own organization or community and what types of change you have seen take place or believe needs to take place, and then think about the change process and the pitfalls that can occur.
Then, review this week’s Learning Resources, especially:
Mathur, A. Employee motivation, adjustment and values as correlates of organizational change. Review of HRM, 2, 35-60
Beer, M., & Nohria, N. (2000). Cracking the codes of change. Harvard Business Review, 78(3), 133-141.
Appelbaum, S. H., Profka, E., Depta, A.M., & Petrynski, B (2018).
Assignment – 3-4 paragraphs:
Post a cohesive response based on your analysis of the Learning Resources and your professional experience. Be sure to discuss the following:
· Briefly describe a change you have experienced in an organization or in your community. Based on your experience and observation, be sure to discuss what went well and any barriers or pitfalls you observed.
· Analyze the steps taken during the experienced change. What steps do you think contributed to what went well, and what do you think could have been done to improve the outcome of the change?
· Examine how the type of change impacts (e.g., transformational, planned, unwelcome, or unexpected) the change process.
· As a result of what you have learned from your example and other experiences, as well as the readings and your research, examine how you will both manage and lead change.
· Analyze the difference between managing and leading change.
· No plagiarism
· APA citing
Cracking
the Code
of
Until now, change in business has been
an either-or proposition: either quickly
create economic value for shareholders
or patiently develop an open, trusting
corporate culture long term. But new
research indicates that combining these
"hard"and "soft"approaches can radically
transform the way businesses change.
T \ HE NEW ECONOMY has ushered in great businessopportunities -and great turmoil. Not since the IndustrialRevolution have the stakes of dealing with change heen so
high. Most traditional organizations have accepted, in theory
at least, that they must either change or die. And even Internet
companies such as eBay, Amazon.com, and America Online
recognize that they need to manage the changes associated
with rapid entrepreneurial growth. Despite some individual
successes, however, change remains difficult to pull off, and
few companies manage the process as well as they would like.
Most of their initiatives-installing new technology, downsiz-
ing, restructuring, or trying to change corporate culture-have
had low success rates. The hrutal fact is that about 70% of all
change initiatives fail.
In our experience, the reason for most of those failures is
that in their rush to change their organizations, managers
end up immersing themselves in an alphabet soup of initia-
tives. They lose focus and become mesmerized by all the advice
available in print and on-line about why companies should
change, what they should try to accomplish, and how they
should do it. This proliferation of recommendations often
leads to muddle when change is attempted. The result is that
most change efforts exert a heavy toll, both human and eco-
nomic. To improve the odds of success, and to reduce the hu-
man carnage, it is imperative that executives understand the
nature and process of corporate change much hetter. But even
that is not enough. Leaders need to crack the code of change.
by Michael Beer
and Nit±i Nohria
HARVARD BUSINESS REVIEW May-func 2000 133
Cracking the Code of Change
For more than 40 years now, we've been studying
the nature of corporate change. And although every
busincss's change initiative is unique, our research
suggests there are two archetypes, or theories, of
change. These archetypes are based on very differ-
ent and often unconscious assumptions by senior
executives- and the consultants and academics
who advise them- about why and how changes
should be made. Theory E is change based on eco-
nomic value. Theory O is change based on organi-
zational capability. Both are valid models; each
theory of change achieves some of management's
goals, either explicitly or implicitly. But each the-
ory also has its costs -often unexpected ones.
Theory E change strategies are the ones that
make all the headlines. In this "hard" approach
to change, shareholder value is the only legiti-
mate measure of corporate success. Change usually
involves heavy use of economic in-
centives, drastic layoffs, downsizing,
and restructuring. E change strate-
gies are more common than O change
strategies among companies in the
United States, where financial markets push cor-
porate boards for rapid turnarounds. For instance,
when William A. Anders was brought in as CEO of
General Dynamics in 1991, his goal was to maxi-
mize economic value-however painful the reme-
dies might be. Over the next three years, Anders
reduced the workforce hy 71,000 people-44,000
through the divestiture of seven husinesses and
27,000 through layoffs and attrition. Anders em-
ployed common E strategies.
Managers who subscrihe to Theory O helieve
that if they were to focus exclusively on the price
of their stock, they might harm their organiza-
tions. In this "soft" approach to change, the goal is
to develop corporate culture and human capability
through individual and organizational learning-
the process of changing, obtaining feedback, reflect-
ing, and making further changes. U.S. companies
Theory E change strategies usually involve heavy
use of economic incentives, drastic layoffs, down-
sizing, and restructuring. Shareholder value is the
only legitinnate measure of corporate success.
that adopt O strategies, as Hewlett-Packard
did when its performance flagged in the
1980s, typically have strong, long-held, com-
mitment-hased psychological contracts with
their employees.
Managers at these companies are likely
to see the risks in breaking those contracts.
Because they place a high value on employee
commitment, Asian and European businesses
are also more likely to adopt an O strategy
to change.
Few companies subscribe to just one the-
ory. Most companies we have studied have
used a mix of hoth. But all too often, man-
agers try to apply theories E and O in tandem
without resolving the inherent tensions he-
tween them. This impulse to comhinc the
strategies is directionally correct, but theo-
ries E and O are so different that it's hard to
manage them simultaneously-employees
distrust leaders who alternate hetween nur-
turing and cutthroat corporate behavior. Our
research suggests, however, that there is a
way to resolve the tension so that husinesses
can satisfy their shareholders while building
viable institutions. Companies that effec-
tively comhine hard and soft approaches to
change can reap hig payoffs in profitahility
and productivity. Those companies are more
likely to achieve a sustainable competitive
134 HARVARD BUSINESS REVIEW May-Tune 2000
Cracking the Code of Change
advantage. They can also reduce the anxiety
that grips whole societies in the face of cor-
porate restructuring.
In this article^ we will explore how one
company successfully resolved the tensions
hetween E and O strategies. But before we
do that, we need to look at just how different
the two theories are.
A Tale of Two Theories
To understand how sharply theories E and O
differ, we can compare them along several
key dimensions of corporate change: goals,
leadership, focus, process, reward system,
and use of consultants. (For a side-by-side
comparison, see the exhibit "Comparing
Theories of Change.") We'll look at two com-
panies in similar businesses that adopted
almost pure forms of each archetype. Scott
Paper successfully used Theory E to en-
hance shareholder value, while Champion
International used Theory O to achieve a
complete cultural transformation that in-
creased its productivity and employee com-
mitment. But as we will soon observe, both
paper producers also discovered the limi-
tations of sticking with only one theory of
change. Let's compare the two companies'
initiatives.
Theory O change strategies are geared toward building
up the corporate culture: employee behaviors, attitudes.
champion's reform effort
couldn't have been more dif-
capabilities, and commitment.The organization's ability ferem. CEO Andrew sigler ac-
to learn from its experiences is a legitimate yardstick of knowiedged that enhanced eco-
corporate success.
Goals. When Al Dunlap assumed leadership of
Scott Paper in May 1994, he immediately fired
11,000 employees and sold off several businesses.
His determination to restructure the heleaguered
company was almost monomaniacal. As he said
in one of his speeches: "Shareholders are the num-
ber one constituency. Show me an annual report
that lists six or seven constituencies, and I'll show
you a mismanaged company." From a shareholder's
perspective, the results of Dunlap's actions were
stunning. In just 20 months, he managed to triple
shareholder returns as Scott Paper's market value
rose from about $3 biUion in 1994 to about $9 bil-
lion by the end of 1995. The fmancial community
applauded his efforts and hailed Scott Paper's ap-
proach to change as a model for improving share-
holder returns.
nomic value was an appropriate
target for management, but he
believed that goal would be best achieved hy trans-
forming the behaviors of management, unions, and
workers alike. In 1981, Sigler and other managers
launched a long-term effort to restructure corporate
culture around a new vision called the Champion
Michael Beer is the Cahners-Robb Professor of Business
Administration at Harvard Business School in Boston.
He can be reached at [email protected] Nitin Nohria is
the Richard P. Chapman Professor of Business Admin-
istration at Harvard Business School and chairs the
school's Organizational Behavior Unit. He can be reached
at [email protected] The authors' book Breaking the
Code of Change will be published by Harvard Business
School Press in October 2000.
To discuss this article, join HBR's authors and readers in
the HBR Forum at www.hhr.org/forum.
HARVARD BUSINESS REVIEW May-June 2000 135
Cracking the Code of Change
Way, a set of values and principles designed to build
up the competencies of the workforce. By improv-
ing the organization's capabilities in areas such
as teamwork and communication, Sigler believed
he could hest increase employee productivity and
thereby improve the bottom line.
Leadership. Leaders who subscribe to Theory E
manage change the old-fashioned way: from the top
down. They set goals with little involvement from
their management teams and certainly without in-
put from lower levels or unions. Dunlap was clearly
the commander in chief at Scott Paper. The execu-
tives who survived his purges, for example, had to
agree with his philosophy that shareholder value
was now the company's primary objective. Nothing
made clear Dunlap's leadership style better than
the nickname he gloried in: "Chainsaw Al."
By contrast, participation (a Theory O trait) was
the hallmark of change at Champion. Every effort
was made to get all its employees emotionally
committed to improving the company's perfor-
mance. Teams drafted value statements, and even
the industry's unions were hrought into the dia-
logue. Employees were encouraged to identify and
solve prohlems themselves. Change at Champion
sprouted from the bottom up.
Focus. In E-type change, leaders typically focus
immediately on streamlining the "hardware" of the
organization-the structures and systems. These
are the elements that can most easily be changed
from the top down, yielding swift financial results.
For instance, Dunlap quickly decided to outsource
many of Scott Paper's corporate functions - hene-
fits and payroll administration, almost all of its man-
agement information systems, some of its tech-
nology research, medical services, telemarketing,
and security functions. An executive manager of a
Scott Paper's CEO trebled shareholder
returns but failed to build the capabilities
needed for sustained competitive
advantage -commitment, coordination,
communication, and creativity.
glohal merger explained the E rationale: "I have a
[profit] goal of $176 million this year, and there's no
time to involve others or develop organizational
capability."
By contrast. Theory O's initial focus is on huild-
ing up the "software" of an organization-the cul-
ture, behavior, and attitudes of employees. Through-
out a decade of reforms, no employees were laid off
at Champion. Rather, managers and employees
Comparing
Theories
of Change
Our research has shown
that all corporate
transformations can
be compared along
the six dimensions
shown here. The table
outlines the differences
between the E and
0 archetypes and
illustrates what an
integrated approach
might look like.
were encouraged to col-
lectively reexamine their
work practices and be-
haviors with a goal of in-
creasing productivity and
quality. Managers were
replaced if they did not
conform to the new phi-
losophy, but the overall
firing freeze helped to cre-
ate a culture of trust and
commitment. Structural
change followed once the
culture changed. Indeed,
hy the mid-1990s. Cham-
pion had completely reor-
ganized all its corporate
functions. Once a hierar-
chical, functionally orga-
nized company. Cham-
pion adopted a matrix
structure that empow-
ered employee teams to
focus more on customers.
Process. Theory E is ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
predicated on the view
that no battle can be won without a clear, compre-
hensive, common plan of action that encourages in-
ternal coordination and inspires confidence among
customers, suppliers, and investors. The plan lets
leaders quickly motivate and mohiiize their busi-
nesses,- it compels them to take tough, decisive ac-
tions they presumahly haven't taken in the past.
The changes at Scott Paper unfolded like a military
battle plan. Managers were instructed to achieve
specific targets by specific dates. If they didn't ad-
here to Dunlap's tightly choreographed marching
orders, they risked being fired.
Meanwhile, the changes at Champion were more
evolutionary and emergent than planned and pro-
grammatic. When the company's decade-long re-
form hegan in 1981, there was no master blueprint.
The idea was that iimovative work processes, val-
ues, and culture changes in one plant would he
adapted and used hy other plants on their way
through the corporate system. No single person,
not even Sigler, was seen as the driver of change. In-
stead, local leaders took responsibility. Top man-
agement simply encouraged experimentation from
the ground up, spread new ideas to other workers,
and transferred managers of innovative units to lag-
ging ones.
Reward System. The rewards for managers in
E-type change programs are primarily financial. Em-
ployee compensation, for example, is linked with
136 HARVARD BUSINESS REVIEW May-June 2000
Cracking the Code of Change
Dimensions
of Change
Goals
Leadership
Focus
Process
Reward System
Use of
Consuitants
Theory E
maximize
shareholder vaiue
manage change
from the top down
emphasize structure
and systems
pian and establish
programs
motivate through
financial incentives
consultants analyze
problems and shape
solutions
Theory 0
develop organizational
capabilities
encourage participation
from the bottom up
buiid up corporate
culture: employees'
behavior and attitudes
experiment and evolve
motivate through
commitment-use
pay as fair exchange
consultants support
management in shaping
their own solutions
Theories E and 0 Combined
explicitly embrace the paradox
between economic value and
organizational capability
set direction from the top
and engage the people below
focus simultaneously on the
hard (structures and systems)
and the soft (corporate culture)
pian for spontaneity
use incentives to reinforce
change but not to drive it
consultants are expert
resources who empower
empioyees
financial mcentives, mainly stock options. Dun-
lap's own compensation package-which ultimately
netted him more than $ioo million-was tightly
linked to shareholders' interests. Proponents of this
system argue that financial incentives guarantee
that employees' interests match stockholders' in-
terests. Financial rewards also help top executives
feel compensated for a difficult job-one in which
they are often reviled hy their onetime colleagues
and the larger community.
The O-style compensation systems at Champion
reinforced the goals of culture change, hut they
didn't drive those goals. A skills-hased pay system
and a corporatewide gains-sharing plan were in-
stalled to draw union workers and management
into a community of purpose. Financial incentives
were used only as a supplement to those systems
and not to push particular reforms. While Champion
did offer a companywide bonus to achieve husiness
goals in two separate years, this came late in the
change process and played a minor role in actually
fulfilling those goals.
Use of Consultants. Theory E change strategies
often rely heavily on external consultants. A SWAT
team of Ivy League-educated MBAs, armed with an
arsenal of state-of-the-art ideas, is brought in to find
new ways to look at the business and manage it.
The consultants can help CEOs get a fix on urgent
issues and priorities. They also offer much-needed
political and psychological support for CEOs who
are under fire from financial markets. At Scott Pa-
per, Dunlap engaged consultants to identify many
of the painful cost-savings initiatives that he subse-
quently implemented.
Theory O change programs rely far less on con-
sultants. The handful of consultants who were in-
troduced at Champion helped managers and work-
ers make their own husiness analyses and craft
their own solutions. And while the consultants had
their own ideas, they did not recommend any cor-
porate program, dictate any solutions, or whip any-
one into line. They simply led a process of discov-
ery and learning that was intended to change the
corporate culture in a way that could not be fore-
seen at the outset.
In their purest forms, hoth change theories clearly
have their limitations. CEOs who must make diffi-
cult E-style choices understandably distance them-
selves from their employees to ease their own pain
and guilt. Once removed from their people, these
CEOs begin to sec their employees as part of the
problem. As time goes on, these leaders become
less and less inclined to adopt O-style change
strategies. They fail to invest in building the com-
pany's human resources, which inevitably hollows
out the company and saps its capacity for sustained
performance. At Scott Paper, for example, Dunlap
trebled shareholder returns but failed to build the
HARVARD BUSINESS REVIEW May-June 2000 137
Cracking the Code of Change
capabilities needed for sustained competitive ad-
vantage-commitment, coordination, communica-
tion, and creativity. In 1995, Dunlap sold Scott Pa-
per to its longtime competitor Kimberly-Clark.
CEOs who embrace Theory O find that their
loyalty and commitment to their employees can
prevent them from making tough decisions. The
temptation is to postpone the bitter medicine in
the hopes that rising productivity will improve the
business situation. But productivity gains aren't
enough when fundamental structural change is re-
quired. That reality is underscored by today's global
financial system, which makes corporate perfor-
mance instantly transparent to large institutional
CEOs who embrace Theory O
find that their loyalty and commitment
to their employees can prevent them
from making tough decisions.
shareholders whose fund managers are under enor-
mous pressure to show good results. Consider
Champion. By 1997, it had become one of the lead-
ers in its industry based on most performance mea-
sures. Still, newly instated CEO Richard Olsen was
forced to admit a tough reality: Champion share-
holders had not seen a significant increase in the
economic value of the company in more than a
decade. Indeed, when Champion was sold recently
to Finland-based UPM-Kymmene, it was acquired
for a mere 1.5 times its original share value.
Managing the Contradictions
clearly, if the objective is to build a company that
can adapt, survive, and prosper over the years. The-
ory E strategies must somehow be combined with
Theory O strategies. But unless they're carefully
handled, melding E and O is likely to bring the
worst of both theories and the benefits of neither.
Indeed, the corporate changes we've studied that
arbitrarily and haphazardly mixed E and O tech-
niques proved destabilizing to the organizations in
which they were imposed. Managers in those com-
panies would certainly have been better off to pick
either pure E or pure O strategies - with all their
costs. At least one set of stakeholders would have
benefited.
The obvious way to combine E and O is to se-
quence them. Some companies, notably General
Electric, have done this quite successfully. At GE,
CEO Jack Welch began his sequenced change by
imposing an E-type restructuring. He demanded
that all GE businesses be first or second in their in-
dustries. Any unit that failed that test would be
fixed, sold off, or closed. Welch followed that up
with a massive downsizing of the GE bureaucracy.
Between 1981 and 1985, total employment at the
corporation dropped from 412,000 to 299,000. Sixty
percent of the corporate staff, mostly in planning
and finance, was laid off. In this phase, GE people
began to call Welch "Neutron Jack," after the fa-
bled bomb that was designed to destroy people but
leave buildings intact. Once he had wrung out the
redundancies, however, Welch adopted an O strat-
egy. In 1985, he started a series of organizational
initiatives to change GE culture. He declared that
the company had to become "boundaryless," and
unit leaders across the corporation had to submit to
being challenged by their subordinates in open fo-
rum. Feedback and open communication eventually
eroded the hierarchy. Soon Welch applied the new
order to GE's global businesses.
Unfortunately for companies like Champion,
sequenced change is far easier if you begin, as
Welch did, with Theory E. Indeed, it is highly
unlikely that E would successfully follow O be-
cause of the sense of betrayal that would involve.
It is hard to imagine how a draconian program
of layoffs and downsizing can leave intact the psy-
chological contract and culture a company has so
patiently built up over the years. But whatever the
order, one sure problem with sequencing is that
it can take a very long time; at GE it has taken
almost two decades. A sequenced change may also
require two CEOs, carefully chosen for their con-
trasting styles and philosophies, which may create
its own set of problems. Most turnaround man-
agers don't survive restructuring-partly because
of their own inflexibility and partly because they
can't live down the distrust that their ruthlessness
has earned them. In most cases, even the best-
intentioned effort to rebuild trust and commitment
rarely overcomes a bloody past. Welch is tbe excep-
tion that proves the rule.
So what should you do? How can you achieve
rapid improvements in economic value while si-
multaneously developing an open, trusting corpo-
rate culture? Paradoxical as those goals may appear,
our research shows that it is possible to apply theo-
ries E and O together. It requires great will, s k i l l -
and wisdom. But precisely because it is more diffi-
cult than mere sequencing, the simultaneous use
of O and E strategies is more likely to be a source of
sustainable competitive advantage.
One company that exemplifies the reconciliation
of the hard and soft approaches is ASDA, the UK
grocery chain that CEO Archie Norman took over
138 HARVARD BUSINESS REVIEW May-June 2000
Cracking the Code of Change
in December 1991, when the retailer was nearly
bankrupt. Norman laid off employees, flattened the
organization, and sold off losing businesses-acts
that usually spawn distrust among employees and
distance executives from their people. Yet during
Norman's eight-year tenure as CEO, ASDA also
became famous for its atmosphere of trust and
openness. It has been described by executives at
Wal-Mart-itself famous for its
corporate culture-as being "more ^ ^ ^ ^ ^ H
like Wal-Mart than we are." Let's
look at how ASDA resolved the
conflicts of E and O along the six
main dimensions of change.
Explicitly confront the tension
between E and O goals. With his
opening speech to ASDA's execu-
tive team - none of whom he had
met-Norman indicated clearly
that he intended to apply both E
and O strategies in his change ef-
fort. It is doubtful that any of his
listeners fully understood him at
the time, but it was important that
he had no conflicts about recog-
nizing the paradox between the
two strategies for change. He said
as much in his maiden speech:
"Our number one objective is to
secure value for our shareholders
and secure the trading future of the
business. I am not coming in with
any magical solutions. I intend to
spend the next few weeks listen-
ing and forming ideas for our pre-
cise direction.... We need a culture
huilt around common ideas and
goals that include listening, learn-
ing, and speed of response, from
the stores upwards. iBut] there will
be management reorganization.
My objective is to establish a clear
focus on the stores, shorten lines
of communication, and build one
team." If there is a contradiction
between building a high-involve-
ment organization and restructur-
ing to enhance shareholder value,
Norman embraced it.
Set direction from the top and
engage people below. From day
one, Norman set strategy without
expecting any participation from
below. He said ASDA would adopt
an everyday-low-pricing strategy,
and Norman unilaterally determined that change
would begin by having two experimental store
formats up and running within six months. He de-
cided to shift power from the headquarters to the
stores, declaring: "I want everyone to be close to
the stores. We must love the stores to death; that
is our business." But even from the start, there
was an O quality to Norman's leadership style. As
Change Theories in
the New Economy Historically, the study of
change has been restricted
to mature, large companies that needed to reverse their competitive
declines. But the arguments we have advanced in this article also apply
to entrepreneurial companies that need to manage rapid growth. Here,
too, we believe that the most successful strategy for change will be one
that combines theories E and O.
Just as there are two ways of changing, so there are two kinds of
entrepreneurs. One group subscribes to an ideology akin to Theory E.
Their primary goal is to prepare for a cash-out, such as an IPO or an
acquisition by an established player. Maximizing market value before
the cash-out is their sole and abiding purpose.These entrepreneurs
emphasize shaping the firm's strategy, structure, and systems to build
a quick, strong market presence. Mercurial leaders who drive the
company using a strong top-down style are typically at the helm
of such companies.They lure others to join them using high-powered
incentives such as stock options.The goal is to get rich quick,
Other entrepreneurs, however, are driven by an ideology more akin
toTheoryO-the building of an institution. Accumulating wealth
is important, but it is secondary to creating a company that is based
on a deeply held set of values and that has a strong culture. These
entrepreneurs are likely to subscribe to an egalitarian style that invites
everyone's participation. They look to attract others who share their
passion about the cause-though they certainty provide generous
stock options as well.The goal in this case is to make a difference,
not just to make money.
Many peopie fault entrepreneurs who are driven by a Theory E view
of the world. But we can think of other entrepreneurs who have
destroyed businesses because they were overly wrapped up in the
Theory O pursuit of a higher ideal and didn't pay attention to the
pragmatics of the market. Steve Jobs's venture. Next, comes to mind.
Both types of entrepreneurs have to find some way of tapping the
qualities of theories E and Cjust as large companies do.
HARVARD BUSINESS REVIEW May-June 2000 139
Cracking the Code of Change
he put it in his first speech: "First,
I am forthright, and I like to argue.
Second, I want to discuss issues as
intelligence and business
acumen. Leighton, who is
warmer and more people
oriented, worked on em-
ployees' emotions with
the power of his person-
ality. As one employee
told us, "People respect
Archie, but they love Al-
lan." Norman was the
first to credit Leighton
with having helped to
create emotional com-
mitment to the new
ASDA. While it might be
possible for a single in-
dividual to embrace op-
posite leadership styles,
accepting an equal part-
ner with a very different
personality makes it eas-
ier to capitalize on those
styles. Leighton certainly
helped Norman reach
out to the organization.
Together they held quar-
terly meetings with store
managers to hear their
ideas, and they supple-
mented those meetings
with impromptu talks.
Focus simultaneously
on the hard and soft .sides
of the organization. Nor-
man's immediate actions
To thrive and adapt in the new economy, companies
must simultaneously build up their corporate cultures
and enhance shareholder value; the O and E theories
colleagues I am looking for your of business change must be in perfect step.
advice and your disagreement."
Norman encouraged dialogue with employees and
customers through colleague and customer circles.
He set up a "Tell Archie" program so that people
could voice their concerns and ideas.
Making way for opposite leadership styles was
also an essential ingredient to Norman's-and
ASDA's-success. This was most clear in Norman's
willingness to hire Allan Leighton shortly after he
took over. Leighton eventually hecame deputy chief
executive. Norman and Leighton shared the same
E and O values, but they had completely different
personalities and styles. Norman, cool and reserved,
impressed people with the power of his mind-his
followed both the H goal of increasing economic
value and the O goal of transforming culture. On
the E side, Norman focused on structure. He re-
moved layers of hierarchy at the top of the organiza-
tion, fired the financial officer who had been part of
ASDA's disastrous policies, and decreed a wage
freeze for everyone - management and workers
alike. But from the start, the O strategy was an
equal part of Norman's plan. He hought time for all
this change by warning the markets that financial
recovery would take three years. Norman later said
that he spent 75% of his early months at ASDA
as the company's human resource director, mak-
140 HARVARD BUSINESS REVIEW May-|une 201X)
Cracking the Code of Change
ing the …
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Employee Motivation, Adjustment and Values
as Correlates of Organizational Change
Anurakti Mathur
Amity Institute of Psychology and Allied Sciences, Amity University, Noida
E-mail: [email protected]
Abstract
Change is inevitable in any organization. Every one fears the unknown before the change
takes place, however after the change event there is a severe problems that the
employees may face with regards to adjustment to the disturbances that the change has
created. The present research sets out with an aim to understand the effect of
organizational change on Employee Motivation, Adjustment and Values in an organization
that has recently undergone massive organizational change. This research was conducted
on a sample of 50 employees who are working in an organization which has experienced a
major change in the recent past. Data was obtained through questionnaires devised for
the purpose of this research keeping in mind the above mentioned variables. The findings
show that the respondents have revealed the tendency to try and maintain moderate
levels of motivation after the change. They also try to make the desired adjustments that
are required in order to cope with the multiple roles in the organization. The values shift
from achievement to personal survival ones to maintain ones existence in the
organization and to function as a well-balanced individual.
Keywords: Motivation, Values, Organizational Change
Introduction
Changing organisations involves building a network of relationships between
organisational entities that are defined and shaped (against various resistances) to
contribute towards some particular goal of change (Law, 2000). Or, as Brunsson and
Sahlin-Andersson (2000) suggest, the construction of entities so that they come to
resemble some general or abstract concept of organisation – perhaps one that is
perceived to be somehow more “complete”. In the context of recent public sector reform
in a number of Western countries, much organisational change can be seen as
representing attempts to reconstruct public sector organisations as more consistent with
popular notions of “modern management” taken from the private sector.
mailto:[email protected]
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An operational definition of ‘organisational change’
While the phrase ‘organisational change’ is much used in management discourse it is a
phrase, like the word ‘management’, that is rarely defined at a conceptual level. It is
clearly not a unitary concept as organisational change can be implemented using a variety
of instruments either in series or, as our data show, more often in parallel. Change may
be further explained in terms of its various types that the researchers have divided it into.
Planned versus emergent change
Sometimes change is deliberate, a product of conscious reasoning and actions. This type
of change is called planned change. In contrast, change sometimes unfolds in an
apparently spontaneous and unplanned way. This type of change is known as emergent
change. An important (arguably the central) message of recent high-quality management
of change literature is that organisation-level change is not fixed or linear in nature but
contains an important emergent element.
Episodic versus continuous change
Another distinction is between episodic and continuous change. Episodic change,
according to Weick and Quinn (1999), is ‘infrequent, discontinuous and intentional’.
Sometimes termed ‘radical’ or ‘second order’ change, episodic change often involves
replacement of one strategy or programme with another.
Continuous change, in contrast, is ‘ongoing, evolving and cumulative’ (Weick and Quinn,
1999). Also referred to as ‘first order’ or ‘incremental’ change, continuous change is
characterised by people constantly adapting and editing ideas they acquire from different
sources. At a collective level these continuous adjustments made simultaneously across
units can create substantial change.
The distinction between episodic and continuous change helps clarify thinking about an
organisation’s future development and evolution in relation to its long-term goals. Few
organisations are in a position to decide unilaterally that they will adopt an exclusively
continuous change approach. They can, however, capitalise upon many of the principles
of continuous change by engendering the flexibility to accommodate and experiment with
everyday contingencies, breakdowns, exceptions, opportunities and unintended
consequences that punctuate organisational life (Orlikowski, 1996).
Developmental, transitional and transformational change
Change can also be understood in relation to its extent and scope. Ackerman (1997) has
distinguished between three types of change: developmental, transitional and
transformational.
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1. Developmental change may be either planned or emergent; it is first order, or
incremental. It is change that enhances or corrects existing aspects of an organisation,
often focusing on the improvement of a skill or process.
2. Transitional change seeks to achieve a known desired state that is different from the
existing one. It is episodic, planned and second order, or radical. The model of transitional
change is the basis of much of the organizational change literature (see for example
Kanter, 1983; Beckhard and Harris, 1987; Nadler and Tushman, 1989). It has its
foundations in the work of Lewin (1951) who conceptualised change as a three-stage
process involving:
• unfreezing the existing organisational equilibrium
• moving to a new position
• refreezing in a new equilibrium position.
3. Transformational change is radical or second order in nature. It requires a shift in
assumptions made by the organisation and its members. Transformation can result in an
organisation that differs significantly in terms of structure, processes, culture and
strategy. It may, therefore, result in the creation of an organisation that operates in
developmental mode – one that continuously learns, adapts and improves.
Systems thinking and change
Many of the approaches to organisational change found in the literature give the
impression that change is (or can be) a rational, controlled, and orderly process. In
practice, however, organisational change is chaotic, often involving shifting goals,
discontinuous activities, surprising events, and unexpected combinations of changes and
outcomes (Cummings et al., 1985; Dawson, 1996). Accordingly, change can be understood
in relation to the complex dynamic systems within which change takes place.
Systems are described as closed or open. Closed systems are completely autonomous and
independent of what is going on around them. Open systems exchange materials, energy
and information with their environment. The systems of interest in managing change can
all be characterised as open systems. In terms of understanding organisations, systems
thinking suggest that issues, events, forces and incidents should not be viewed as isolated
phenomena but seen as interconnected, interdependent components of a complex entity.
Areas of Change
Organizations typically respond to the challenges of new technologies, new competitors,
new markets, and demands for greater performance with various programs, each
designed to overcome obstacles and enhance business performance. Generally, these
programs fall into one of the following categories:
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• Structural change.–These programs treat the organization as a set of functional parts—
the “machine” model. During structural change, top management, aided by consultants,
attempts to reconfigure these parts to achieve greater overall performance. Mergers,
acquisitions, consolidations, and divestiture of operating units are all examples of
attempts at structural change.
• Cost cutting.–Programs such as these focuses on the elimination of nonessential
activities or on other methods for squeezing costs out of operations. Activities and
operations that get little scrutiny during profitable years draw the attention of cost
cutters when times are tough.
• Process change.–These programs focus on altering how things get done. Examples
include reengineering a loan approval process, the company’s approach to handling
customer warranty claims, or even how decisions are made. Process change typically aims
to make processes faster, more effective, more reliable, and/or less costly.
• Cultural change.–These programs focus on the “human” side of the organization, such
as a company’s general approach to doing business or the relationship between its
management and employees. A shift from command-and-control management to
participative management is an example of cultural change.
Two Different Approaches to Change
While there are many types of change programs, two very different goals typically drive a
change initiative: near-term economic improvement or an improvement in organizational
capabilities. Harvard Business School professors Michael Beer and Nitin Nohria coined the
terms “Theory E” and “Theory O” to describe these two basic goals.
Theory E: An Economic Approach
The explicit goal of Theory E change is to dramatically and rapidly increase shareholder
value, as measured by improved cash flow and share price. Popular notions of employee
participation and the “learning organization” take a back seat to this overarching goal.
Financial crisis is usually the trigger for this approach to change. Driven to increase
shareholder value, Theory E proponents rely heavily on mechanisms likely to increase
short-term cash flow and share price: performance bonuses, headcount reductions, asset
sales, and strategic reordering of business units. According to Theory E, all implicit
contracts between the company and its employees, such as lifetime employment, are
suspended during the change effort. Individuals and units whose activities fail to
demonstrate tangible value creation The CEO and the executive team drive Theory E
change from the top
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Theory O: An Organizational Capabilities Approach
The goal of Theory O change is to develop an organizational culture that supports learning
and a high performance employee base. Companies that follow this approach attempt to
invigorate their cultures and capabilities through individual and organizational learning.
And that requires high levels of employee participation, flatter organizational structure,
and strong bonds between the organization and its people. Because employee
commitment to change and improvement are vital for Theory O change to work, implicit
contracts with employees are considered too important to break. The leaders of Theory O
change are less interested in driving the success themselves than in encouraging
participation within the ranks, and in fostering employee behaviors and attitudes that will
sustain such change.
Employee Psychological Dynamics during Organisational Change
A debate exists over the reactions that individual employees have towards change. While
there has been a long tradition of researchers who argue that employees tend to resist
organisational change in general (e.g. Judson 1991; Odiorne 1981; Strebel 1996), Dent
and Goldberg (1999) argue that the term ‘resistance’ should be removed from the
literature as it does not reflect the complex interactions that occur during change. Piderit
(2000) takes a more conciliatory view suggesting that the ambivalence that employees
feel towards change does not always produce resistance, but generally produces
confusion. Regardless of what term is used, there is a wealth of literature that shows that
employee ambivalence to management change initiatives is often linked to dysfunctional
conflict during organizational change and associated with negative outcomes such as job
dissatisfaction and expressed grievances (Kirkman, Jones & Shapiro 2000). Employees
who are expending their energy on these types of reactions to change have less energy
for participating or contributing to that change. Therefore, identifying factors that
moderate this change resistance would be beneficial to both the individuals involved in
the change process and the organisation. Examining organisational behaviour,
researchers have identified change as having the potential to elicit a broad range of
emotion whether the transformation is a major restructure or minor re-organisation
(Mossholder et al., 2000).
Change can be perceived as a challenge or an opportunity and triggers positive emotions
such as excitement, enthusiasm and creativity (Goleman, Boyatzis & McKee 2002).
Change can also, however, be threatening and create negative emotions such as anger,
fear, anxiety, cynicism, resentment, and withdrawal (French 2001). Clearly change poses
significant challenges, both to those who implement and those who are affected by the
change (O’Neill & Lenn 1995). Management theory, however, tends to focus on cognitive
issues such as cognitive dissonance during change (Bacharach, Bamberger & Sonnenstuhl
1996). The result of this focus is consideration of solutions in dealing with attitudes to
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change, rather than emotional reactions (e.g. Brockner 1988; Brockner, Grover, Reed &
DeWitt 1992). A small body of research that has examined the role of emotion during
organisational change has largely focused on emotional responses such as stress (Terry &
Jimmieson 2003), and behaviours such as withdrawal and low organisational commitment
(Begley & Czajka 1993), thereby ignoring the emotive/cognitive processes that engender
such outcomes (O’Neill & Lenn 1995).
Work Motivation
Work motivation may be defined as the internal or external force that compels an
individual to perform optimally in the organization where he is employed. Work
motivation has been found to be positively related to job satisfaction, performance and
organizational commitment. The motives may be extrinsic or intrinsic in nature.
Extrinsic motives are tangible or visible to others. They are distributed by other people. In
the workplace extrinsic motives include pay, benefits, promotions etc. extrinsic motives
also include the drive to avoid punishment, such as termination or being transferred. In
each situation an external agent distributes these items. Furthermore, extrinsic rewards
are usually contingency based. That is, the extrinsic motivator is contingent on improved
performance, or performance that is superior to others in the same workplace. Extrinsic
motivators are necessary to attract people into the organization and keep them on the
job. They are also used to inspire workers to achieve at higher levels or to reach new
goals, as additional payoffs are contingent on improved performance. They do not,
however, explain every effort made by an individual employee.
Intrinsic motives are internally generated. In other words, they are motivators that the
person associates with the task or job itself. Intrinsic reward include feeling of
responsibility, achievement, accomplishment, that something was learned from
experience, feeling of being challenged or competitive, or that something was an
engaging task or goal. Performing meaningful work has also been associated with intrinsic
motivation.
The two types of motivators are not completely distinct from one another. Many
motivators have both extrinsic and intrinsic components. Cognitive Evaluation Theory
suggests a more complicated relationship. This theory says that a task may be intrinsically
motivating, but when an extrinsic motivator becomes associated with that task, the actual
level of motivation may decrease. In other words, extrinsic motivation may actually
undermine intrinsic motivation. But there is considerable research evidence that extrinsic
reward may not detract from intrinsic motivation and at least for interesting, challenging
tasks, extrinsic reward may increase the level of intrinsic motivation.
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According to David McClelland there are three major types work motivators need for
achievement (n-ach), need for power (n power) and the need for affiliation (n aff). These
set of needs are said to guide and direct employee motivation in the organizational
setting.
The Power Motive: Winter (1973) has defined social power as “the ability or capacity of a
person to produce (consciously or unconsciously) intended effects on the behaviour and
emotions of another person”. The goal of power motivation are to influence, control,
cajole, persuade, lead, charm others and to enhance ones own reputation in the eyes of
other people. People with strong power motivation derive satisfaction from achieving
these goals.
The leading advocate of the power motive was the psychologist, Alfred Adler. To explain
the need for power- the need to manipulate others or drive for being in charge of others-
Adler developed the concept of inferiority complex and compensation. He felt that every
small child experiences a sense of inferiority. When this feeling of inferiority is combined
with what he sensed as an innate need for superiority, the two rule all behaviour. The
person’s lifestyle is characterized by striving for compensation for the feeling of
inferiority, which are combined with the innate need for power.
Power motivation varies in strength from person to person and situation to situation in
the same person. It may be expressed in many ways; the manner of expression depends
greatly on the person’s socioeconomic status, sex, level of maturity, and the degree to
which the individual fears his or her own power motivation.
There are five categories of power:
Reward Power: This source of power is based on a person’s ability to control
resources and reward others. In addition, the target of this power must value
these rewards. If the managers offer their people what they think are rewards, but
the people do not value them, then managers do not really have reward power. By
the same token, the managers may not think that they are giving rewards to their
people, but if they perceive this to be rewarding, the managers nevertheless have
reward power. Also managers may not really have the rewards to dispense, but as
long as people think they have it, they do indeed have reward power.
Coercive Power: This source of power depends on fear. The person with coercive
power has the ability to inflict punishment or aversive consequences on another
person or, at least make threats that the other person believes will result in
punishment or undesirable outcomes. Managers frequently have coercive power
in that they can fire or demote people who work for them or dock their pay. A
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manager can also directly or indirectly threaten an employee with these punishing
consequences.
Legitimate Power: This power source, identified by French and Raven, stems from
the internalized values of the other person that give the legitimate right to the
agent to influence them. The others feel that they have the obligation to accept
this power. It is closely aligned with both reward and coercive power because the
person with legitimacy is also in a position to reward and punish. But unlike
reward and coercive power it does not depend on the relationships with others
rather on the position or role that the person holds. Managers generally have
legitimate power because employees believe in the value of private property laws
and in the hierarchy where higher positions have been designated to have power
over lower positions. People can obtain legitimate power from accepted social
structure or from being designated as the agent or representative of a powerful
person or a group.
Referent Power: This type of power comes from the desire on the part of the
other person to identify with the agent wielding power. They want to identify with
the powerful person, regardless of the outcome. The others grant the person
power because he or she is attractive and has desirable resources or personal
characteristics. Managers with referent power must be attractive to their people
so that they will want to identify with them, regardless of whether the managers
later have the ability to reward or punish or whether they have legitimacy. The
manager who depends on referent power must be personally attractive to the
subordinates.
Expert Power: This source of power is based on the extent to which others attribute
knowledge and expertise to the power holder. Experts are perceived to have knowledge
or understanding only in certain well defined areas. The target must perceive the agent to
be credible, trustworthy, and relevant before expert power is granted. Staff specialists
have expert power in their functional areas but not outside them. Expert power is highly
selective, and, besides credibility the agent must also have trustworthiness and relevance.
Managers and staff specialists, who seldom have the other sources of power available to
them, often have to depend on their expertise as their only source of power. As
organizations become increasingly technologically complex and specialized, the expert
power of the organization members at all levels has become more and more important.
This is formally recognized by some companies that deliberately include lower level staff
members with expert power in top level decision making
Research Objectives
The research has been conducted with an objective of understanding the psychological
after-effects of organisational change on the employees of that organisation. For this
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purpose few aspects of the human psyche such as motivation (extrinsic and intrinsic),
adjustment(personal and professional), and values have been incorporated, though many
other aspects have been left out due to the constraints faced by the researcher and in
order to narrow down the scope of the study.
Thus the research has been carried out keeping the following aims in mind:
To study the level of professional adjustment of employees after a change event.
To study the personal adjustments that the employees make to fit into their
organisations after change has occurred.
To study the level of motivation in employees after a change event with respect
to need for power, affiliation and achievement.
To study the job related value system in-place in the employees after the change
process.
Review of Literature
The present research is aimed to develop a theoretical understanding of psychological
dynamics of the employee during the organisational change, informed by a perspective
on employee work values, motivation and adjustment. This chapter provides a literature
review that introduces the issue of employee’s psychological aspect during organisational
change. The review draws primarily on the psychological literature focusing on aspects of
the human psyche like motivation, values and adjustment.
Research on Nature of Organisational Change
The increasing pace of global, economic and technological development makes change an
inevitable feature of organisational life (Cummings & Worley, 1997). Organisations are
often ineffective at managing the psychological components of organisational change
(Bennett & Durkin, 2000) and it has been noted that there is considerable room for
improving the effectiveness of change efforts (Porras & Robertson, 1992). Kotter (1995)
noted that as many as 90% of initiatives fail to achieve their strategic objectives mainly
due to human factors such as change related responses, attitudes and behaviours.
Organisations cannot achieve their strategic change objective until a critical mass of
employees has successfully completed their individual transitions (St Amour, 2001).
Armenakis, Harris and Mossholder (1993) argued that employee attitude towards
organisational change affect not only the success of the change process but other
important organisational outcomes such as job satisfaction, productivity, morale,
absenteeism and turnover (Eby, Adams, Russell & Gaby, 2000). The costs involved with
such consequences may be directly attributable to the distress that is created when an
organisation’s employees encounter constant change (Mack, Nelson & Quick, 1998).
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Large scale organisational change is defined as change that encompasses the entire
organisation, has occurred over a number of years, and involves fundamental
modifications in ways of thinking about the business, the organisation, and how the
organisation is managed (Nadler, 1988). This type of change has important and often
underestimated psychological implications for the employees. The necessary adjustments
can foster enthusiasm and opportunities for learning and growth or, alternatively, can
lead to frustration and alienation (Thompson & Van de Ven, 2001).
Judge, Thoresen and Welbourne (1999) argued that organisational change research has
been dominated largely by macro systems oriented focus and that a limited number of
studies of organisational have taken a micro level, psychological approach. Hence
assessing the impact of organisational change on employee attitudes and behaviours is
identified as an important research direction.
Despite widespread research on why and how organisations change, what constitutes
change is often taken for granted. Its definition is avoided. Studies based on individuals'
rational choice imply that change flows from purposive actions in accordance with an
objective, external reality whereas contextualism argues that change results from
institutional pressures, isomorphism, and routines. But both depict change as the passage
of an entity, whether an organisation or accounting practices, from one identifiable and
unique status to another. Despite their differences over whether reality is independent,
concrete and external, or socially constructed, both assume that actors (or researchers)
can identify a reality to trace the scale and direction of changes. This reflects modernist
beliefs that organisational space and time are unique and linear.
Many organisations are implementing major changes in the way they do business in
response to growing international competition, a significantly changing workforce,
increasingly complex and changing work environments, and other pressures (Lawler,
1986, Manz, 1992). As an organisation strives to maintain their competitive edge they are
reorganising, downsizing and implementing new technology. Ultimately, new and
additional job demands are placed on individuals within these organisations. These
changes are inevitable inn today’s work environment. Also inevitable is the fact that
employees must adapt to these constantly changing environments in order to survive and
prosper. Development of a body of knowledge about managing change is an important
body of knowledge for both academics and for general managers (Beer, 1987). The need
for adaptive workers has become increasingly important due to the fact that today’s
organisations are characterised by changing, dynamic environments (Pulakos, Arad,
Donovan, & Palmondon, 2000, Ilgen &Pulakos, 1999). In a recent article stressing the
attributes graduates need to enter the workforce, adaptability to the changing work
environment was at the top of the list (Gow & Mc Donald, 2000).
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In today's turbulent, often chaotic, environment, commercial success depends on
employees using their full talents. Yet in spite of the myriad of available theories and
practices, managers often view motivation as something of a mystery. In part this is
because individuals are motivated by different things and in different ways. In addition,
these are times when delayering and the flattening of hierarchies can create insecurity
and lower staff morale. Moreover, more staff than ever …
Impact of business model change on
organizational success
Steven H. Appelbaum, Edmiela Profka, Aleksandra Monika Depta and Bartosz Petrynski
Abstract
Purpose – The purpose of this paper is to investigate the impact of organizational change, more specifically
business model change, on corporate employees’ motivation and, consequently, performance.
Design/methodology/approach – The main approaches and managerial frameworks on organization
change implementation, as well as the assessment methods on whether the company is ready to implement
the change, were identified by reviewing the current literature on the subject between 1940 and 2016.
Findings – Reviewed individual behavioral reactions and provided steps to encourage favorable individual
employee perceptions.
Research limitations/implications – Existing gaps in supporting empirical data on the subject and a
limited number of direct case studies and real-life scenarios. The research was primarily focused on employee
motivation during the initial planning phase of organizational change, with lesser focus on motivation
throughout and especially after the change process.
Practical implications – To benefit from the change, organizations must avoid improvising and should
follow specific and formal change management procedures which take employee motivation and individual
response towards change under consideration.
Social implications – By providing real-life illustrations of successful business model change
implementations, current and future companies facing this type of change in the future can learn from
these specific scenarios.
Originality/value – The distinction of business model change as a sub-type of organizational change and the
study of employee motivation under a business model change specifically is the novel contribution of the paper.
Keywords Performance, Change management, Business model change, Employee motivation,
Organizational change
Paper type General review
Background and objective
To survive and grow in today’s economic climate, organizations need to react quickly to changes
occurring on a national or global level. They are forced to make changes by updating their
technology, remodeling strategies or, in certain cases, even changing their business model. Per
Womack et al. (1990), the demands for organizational change grow mainly due to the increasing
speed of technological development and international competition (Antoni, 2004).
Edmonds (2011) states that change takes time and effort, leaving employees and managers
unsure on how to adapt to new working practices. Adapting to change is not an easy transition;
moreover, organizations failing to meet their stated objectives can pay a high price. “Failure can
lead to loss of market position and credibility with stakeholders as well as decreased morale
among management and staff resulting in a demotivated workforce, or worse still, the loss of key
employees” (Edmonds, 2011).
Porras and Robertson (1992) recognized the organizational member involvement as the most
commonly mentioned factor for successful change (Antoni, 2004). Employees are more likely to
support change if they tend to agree with the objectives set and the anticipated outcome, which
should be clearly defined to rightly emphasize the impact on those involved. Even though most
aspects of the foreseen change can be managed, the capability for change can only be fully
developed once a strategy is in place. As Edmonds (2011) states, “A conscious approach to
Steven H. Appelbaum is a
Professor of Management at
the John Molson School of
Business, Department of
Management, Concordia
University, Montreal, Canada.
Edmiela Profka is based at the
John Molson School of
Business, Department of
Management, Concordia
University, Montreal, Canada.
Aleksandra Monika Depta is
based at the Reckitt Benckiser,
Lublin, Poland.
Bartosz Petrynski is an
Entrepreneur at the Institute of
Enterprise, Warsaw School of
Economics, Warsaw, Poland.
DOI 10.1108/ICT-07-2017-0058 VOL. 50 NO. 2 2018, pp. 41-54, © Emerald Publishing Limited, ISSN 0019-7858 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 41
getting ready for change leads to a greater probability of success, so planning needs to start long
before the change is going to take place.”
A change in business model, a more fundamental type of organizational change, is “one of the
most arduous and risky changes an organization can undergo” (van den Oever and Martin,
2015). In this paper, we will pay particular attention to the relationship between employee
motivation and business model change specifically.
There are many factors, such as internal revisions or trend changes in the industry, which result in
organizational change. The research will be focused on how this drastic change affects
motivation. Companies need to embrace change and see it as an opportunity to advance – how
should they motivate their employees in order to develop and benefit from the change.
Literature review and analysis
Organizational change
Defining organizational change. Over the years, there were many definition attempts, but the one
that most clearly conceptualizes the phenomenon was coined by Struckman and Yammarino
(2003): “Organizational change is a managed system, process, and/or behavioural response over
time to a trigger event.” This definition, based on extensive and interdisciplinary literature review,
provides a comprehensive approach to the subject. In general, organizational change can apply
to a wide variety of processes in the organization, including, among others, technology
improvements, mergers and acquisitions, structural changes, top management changes, cultural
changes or downsizing (Struckman and Yammarino, 2003; Gilley et al., 2009).
Aspects of organizational change. Due to the magnitude of the subject, many authors attempted
to categorize characteristics of organizational change and consequently a wide variety of models
emerged. In essence, the following six dimensions of categorization were most widely used in the
reviewed literature:
■ Type of the change activity, e.g., peripheral vs core (Struckman and Yammarino, 2003);
■ Process in which the change and implementation occur, e.g., planned and programmatic in
theory E vs emergent, less planned and programmatic in theory O (Beer and Nohria, 2000) or
grow vs drive vs hybrid approach (Sugarman, 2007);
■ Inertia, describing barriers in the organization, e.g., organizational resistance (Dent and
Goldberg, 1999);
■ Time in which the change occurs and how long it lasts, e.g., continuous vs discontinuous
(Struckman and Yammarino, 2003);
■ Depth to describe to what degree the organization changes, e.g., transitional: minor and
incremental adjustments, transformational: fundamental and multilevel, developmental:
growth based (Gilley et al., 2009); and
■ Readiness of the organization undergoing change (Palmer, 2004).
Armenakis and Bedeian (1999), in their attempt to review literature of organizational change,
distinguished five other research themes on the subject:
■ content issues, which treat the substance and nature of a change;
■ contextual issues, which focus on forces and conditions in the organization’s environment;
■ process issues, which treat implementation actions;
■ criterion issues, which treat outcomes of organizational change; and
■ affective and behavioral reactions to change.
Of the above-mentioned research themes, for the substance of this study (employee motivation
throughout a business model change) we will focus specifically on the theme on affective and
behavioral reactions, although it can be considered as a specific type of criterion issues as well.
PAGE 42 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 50 NO. 2 2018
The research on monitoring affective and behavioral reactions to organizational change has led to
various conclusions. “In addition to traditional affective criteria (e.g. organizational commitment,
job satisfaction, and cynicism), less-used criteria (e.g. depression, anxiety, and exhaustion)
offer alternative insights into affective reactions to change. […] research employing a situated
perspective casts doubt on the notion that radical change should always occur rapidly and
discontinuously” (Armenakis and Bedeian, 1999).
Foster (2010) points to another aspect, i.e. the organizational change models. He fittingly argues
that “many change models have roots in Lewin’s three-phase conceptualization of change.
Lewin’s (1951) conceptualization includes unfreezing, moving, and refreezing. […] resistance to
change is typically included as part of the unfreezing phase, justice is typically a component of the
unfreezing or moving phases, and commitment is typically a component of the refreezing phase.”
This study will relate to the first two Lewin’s stages of implementation.
Business model vs organizational change. Before we move on, it is important that we specify the
difference between an organizational change and a business model change. A change in
business models, as an example of organizational change with transformational depth, is
strategic and fundamental to the company’s core business operations, often rejecting current
paradigms or questioning underlying assumptions (Gilley et al., 2009). According to van den
Oever and Martin (2015), there are three main aspects in which business model changes may
differ from “ordinary” organizational changes.
First, changes in the business model are assumed to be more fundamental in economic terms
than most other types of changes. Teece (2010) recognized that “changing the business model
unsettles a whole series of elements within and across the firm’s external boundaries that are
foundational to its economic logic, which follows plainly from the fact that business models
pertain to the very logic of how organizations create, deliver, and capture value” (van den Oever
and Martin, 2015).
Second, the number and diversity of critical economic partners engaged in the change effort is
likely to be greater for the business model change than for other types of change (van den Oever
and Martin, 2015). Third, the complexity of the process is expected to be higher in a business
model change. As it is described by Salomon and Martin (2008), the level of complexity is higher
due to an increase both in number of system’s components and in unpredictability of the
interactions between them. “Business models encompass an unusually large number and
diversity of organizational elements and interfaces (e.g. a value proposition, revenue model, and
distribution channels)” (van den Oever and Martin, 2015).
Based on these three characteristics – fundamental economic impact, the number of
components involved, and complexity of their interactions – van den Oever and Martin (2015)
deem “business model change to be one of the most arduous and risky changes an organization
can undergo.”
Based on this, we will review aspects of how business model change affects employees, focusing
specifically on employee motivation in the organization.
Motivation
Employee motivation in organization
Motivation is a widely explored subject. Various articles have been written and a wide array of
studies have been done in order to determine motivation significance and implementation
(Conrad et al., 2015). Therefore, it is important to define what the motivation is and how it is
applied in the workplace. Lewis et al. (2001) define motivation as, “the forces and expenditure
of effort acting on or within a person that cause that person to behave in a specific,
goal-directed manner.” Daft et al. (2003) adds “the dimension of “enthusiasm” to the definition
of motivation by referring to motivation as the forces either within or external to a person that
stimulates enthusiasm and causes a person to persist in the pursuit of a particular course of
action” (Conrad et al., 2015).
VOL. 50 NO. 2 2018 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 43
Theories of motivation
Theories of motivation are generally divided into two categories: needs theories and process
theories, and whereas needs theories describe the types of needs that must be met to motivate
individuals, process theories help understand the actual ways in which we and the others can be
motivated (Langton et al., 2010).
According to Conrad et al. (2015), the leading motivation theories come from the work of
Herzberg (1966), Maslow (1954) and McClelland (1985), who “discuss the basic needs model of
motivation, referred to as content theory of motivation, highlighting the specific factors that
motivate an individual.” Herzberg’s et al. (1959) work categorized motivation into two factors:
motivators and hygienes. Motivator or intrinsic factors, such as achievement and recognition,
produce job satisfaction. Hygiene or extrinsic factors, such as pay and job security, produce job
dissatisfaction and become demotivators if not met to the expectations of workers. As stated by
Maslow (1943), employees have five levels of needs: physiological, safety, social, ego, and
self-actualizing. Maslow (1943) suggested that lower-level needs had to be satisfied before the
next higher-level need motivated employees (Conrad et al., 2015).
Impact of motivation on employee performance
Kappelman and Richards (1996) describe motivated and satisfied employees as more productive
employees, since “organizational research shows there are positive relationships between
employee satisfaction and such productivity measures as performance, turnover, and
absenteeism. Even small improvements in employee attitudes like motivation and satisfaction
can produce meaningful economic benefits.” This statement is supported by Clark (2003) who
explained that the many gaps between current performance and the levels required to fulfill
business objectives are created by a lack of motivation, not a lack of knowledge or skills as
“motivation leads us to invest more or less cognitive effort to enhance both the quality and
quantity of our work performance.”
Therefore, in order for the transitioning company to achieve successful performance throughout
and following the organizational change, employee motivation needs to be a main consideration.
We will discuss how to best manage organizational change in the following section.
Managing organizational change
Risk in organizational change
Gilley et al. (2009) suggest that “although transformational change is disruptive in nature, its
successful execution has been identified as leading to increased competitiveness, to the extent
that an organization can clearly differentiate itself in the market” (Denning, 2005). Nevertheless,
research and empirical results underline how rare it is for the organizations to implement
successful transformational change (Gilley et al., 2009).
Studies suggest that many of the organizational change initiatives fail to be implemented or are
not sustainable in the long term. There are no official statistics available on the subject, but Beer
and Nohria (2000) estimate that about two-thirds of change initiatives fail. Gilley et al. (2009)
referred to other authors (Burnes, 2004; Cope, 2003) who suggest that the rate may reach even
80-90 percent. They reveal that it is a resistance by change agents themselves that
considerably contributes to the inability of organizations to successfully exercise a change
project (Ford et al., 2008).
One of the reasons why that happens is that “practitioners who always follow specific and formal
change management procedures had a 52 percent project success rate, compared to a
36 percent success rate for practitioners who improvise according to the situation” (Jørgensen
et al., 2009). This is an approach supported by Davenport (1992), who believed that successful
implementation of business process transformation requires a fundamental organizational change
not only in terms of management processes but also organizational structure and culture.
These changes in management processes and organizational structure decidedly affect the human
aspect of management as they require a reconstruction of employees’ work and relationships.
PAGE 44 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 50 NO. 2 2018
Keeping these studies in mind, in the next sections of this paper we investigate ways to mitigate
risks, ameliorate chances of successful organizational change implementation by positively
affecting employee motivation and helping managers make more tailored decisions on planning,
strategies, and tactics so that employees remain enthusiastic about organizational change.
Role of employees in organizational change
[…] the inherent conundrum of organizational change: that people, the human resources of
organizations, are both an essential factor in organizational change and, at times, the biggest
obstacles to achieving change. (Smith, 2005)
The success of any change is contingent on the willingness of employees to welcome it. Reis and
Peña (2001) emphasize that business changes at times are introduced without understanding how
the human element influences the success or failure of a project as too often, management neglects
human resistance issues and the need to consider them in the implementation plan. This is an idea
supported in “Business process re-engineering”: “without new leadership skills, involvement,
systems alignment and the right people with the right skills in the right jobs, even the best technically
re-engineered process is doomed to failure. The processes are only as good as the people who
make them work and the environment in which they work” (Business process re-engineering, 1995).
Church et al. (1996) recognized that in relation to the process of change, the focus should be on
two important areas: the fundamental aspects of change that concentrate on the general nature
of change, and human aspects of the change process that include individual responses to
change and managing the people side of change.
Implementation practices on employees’ motivation management
Excellent implementation of organizational change is crucial, because, as Guimaraes and
Armstrong (1998) prove in their empirical study, there is a strong direct correlation between the
effectiveness in implementing business change and business success. However, “it is interesting
to note that above average focus on the change process is no guarantee of effective
implementation of change” (Guimaraes and Armstrong, 1998). Nonetheless, awareness of the
following determinants could be helpful for change agents, managers, and academic researchers
to better understand the organization and employee readiness for the change process.
According to Smith (2005), with regard to successful management of organizational change
“these key steps are salient”:
■ creating a sense of need and urgency for change;
■ communicating the change message and ensuring participation and involvement in the
change process; and
■ providing anchoring points and a base for the achievement of change.”
Other steps discussed here are employee engagement and empowerment (Jørgensen et al.,
2009), and filling the gap between hard and soft factors (Sikdar and Payyazhi, 2014).
Creating a sense of need and urgency for change
The first step – creating a felt need for change – is crucial. Harvard Business School Professor
J.P. Kotter (1995) argued that in order to overcome an organizational tendency towards stability,
the organization needs to create destabilisation and a certain deliberate unsettlement. This move
must be handled delicately, as there needs to be “sufficient disequilibrium to create dynamism for
change, while not exceeding the capacity of organizations, and the people in them, to handle the
stress so engendered” (Smith, 2005). It is important to find a balance in the introduced
unsettlement so that it does not cause adverse consequences to the organization. The right
balanced dissatisfaction will facilitate the exhibition of differences between the current situation
and the intended state, injecting a motivation for change to employees. This is a subject
supported by Edmonds (2011), who argued that “you need to create a buzz, engender a sense of
urgency around the need for change by talking to the whole company, explain your position in the
VOL. 50 NO. 2 2018 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 45
marketplace, your competition and why ‘now is the right time’. Get people talking about the
reason for change, allow them the opportunity to express their views and ask questions about the
company’s vision.”
Communicating change messages
The second step to successfully managing organizational change – communicating change
messages and ensuring participation and involvement – helps create a positive social energy in
the organization, which is a “major factor in the success or failure of many organizational renewal
initiatives” (Smith, 2005). A variety of perceptions and emotions will be displayed by employees
before the change period, and it is important to create an inclination towards excitement and
enthusiasm. This positive social environment will affect the degree of employee involvement,
confidence in the process, and willingness to change, hence it is crucial that the message
communicated to the company is honest and genuine (Smith, 2005). Such a message and
attitude will create a foundation of mutual trust, and the leaders should work on creating and
solidifying that foundation. Appelbaum et al. (1998) point out another important consideration is
leaders’ communication coherence, by advising that “management should avoid giving mixed
signals to the organization by promoting managers who do not support the change effort.”
Providing anchoring points
Providing anchoring points in order to build a base for change entails the process of assisting
employees clearly perceive their role after the change. According to Smith (2005), if employees
understand “the nature and reasons for change in the early stages of such an initiative can
provide a sound base for subsequent changes and a greater willingness to take risks and extend
beyond current boundaries.” Examples of anchoring points would be employee training, team
buildings, as well as role modeling.
Nurturing employee engagement, empowerment and commitment
As Jørgensen et al. (2009) argue on the topic of employee engagement and empowerment,
“engaging employees through involvement and two-way communication is a powerful
combination: 72 percent of practitioners believe employee involvement is crucial and
70 percent believe honest and timely communication is important. Better communications and
employee involvement enable and empower people, and then change happens through them –
not just to them.” “Empowered employees are more able to adapt to change and less likely to
resist it, because their need for control is being met through their empowerment, rather than by
their resistance. In these times of continuous changes in the world around us, an organization
which fosters empowered employees is an organization ready to handle change, planned or not.
The ability to cope with change is a survival skill no organization can do without” (Kappelman and
Richards, 1996).
On the topic of employee engagement, an empirical study conducted by Shaha et al. (2016) on
more than 500 academic staff in public organizations undergoing a major restructuring process
suggests that “salary and promotion benefits (i.e. extrinsic motivators) may lead to a greater initial
attachment with the organization change process – but that longer term engagement with
change efforts continue to be based upon attitudinal behaviors in terms of job satisfaction
(i.e. intrinsic motivators).” For example, in successful organizations managers engage workers by
creating work-group environment to set mutually agreeable performance goals (Vecchio and
Appelbaum, 1995).
When it comes to commitment, in a study done on 463 managers and employees from three
telecom companies in China that were undergoing large-scale organizational change, Ning and
Jing (2012) demonstrated that expectation on the change’s outcome was positively correlated
with some type of commitment. Thus, it is important to understand the complex nature of
commitment to change, as only affective and normative commitments to change can mitigate the
emotional exhaustion caused by organizational change, while continuance commitment can
enforce the emotional exhaustion.
PAGE 46 j INDUSTRIAL AND COMMERCIAL TRAINING j VOL. 50 NO. 2 2018
Filling the gap between hard and soft factors
Finally, when it comes to aligning technical aspects of business model change with the changes in
human resources management, Sikdar and Payyazhi (2014) argued that “there exists a distinct
knowledge gap in how to integrate the technical perspective of process redesign with the human
and strategic perspective of managing organizational change,” therefore most of the failures in
organizational change implementation are a result of no linkage between hard and soft factors.
In order to avoid these failures Sikdar and Payyazhi (2014) suggest addressing these fundamental
questions: “How to institute organizational change to support the business process? How should
the organizational change be managed? How to create and manage the alignment? How the
business process work flow is aligned with the organizational elements – structure, HR, culture,
etc.? How to link the organizational factors with the process work flow? How should
the organizational factors be implemented?”
Following the implementation of the suggested practices above to manage employees’ motivation,
the company shall assess how successful the implementation has been and whether employees
are prepared for the change. We will discuss assessment of readiness for change below.
Assessment of readiness for change
After taking into consideration the above-mentioned steps, an assessment of whether the
company is ready for change is crucial. How can we assess readiness? Palmer (2004) suggests a
simple assessment method with three basic steps. “The first step is a compilation of a list of all the
major activities that are underway and which compete for budget, staff time and attention.
Second, comes an estimation of the level of effort which each of these activities will require; this
compared with an estimation of the level of effort that will be required by the particular change
project which is under consideration. Finally, these factors are put together to enable
consideration of the overall load on the organization and its capability to take on the additional
effort imposed by any planned changes” (Smith, 2005).
Armenakis and Harris (2002) suggest a more structured method, which includes “auditing the
thoroughness of communication about the why, when, and how of change; observing the
behaviour of employees in order to gain indications of likely reactions to change; directly soliciting
employee reaction via interviews and group discussions; and applying structured survey
methods” (Smith, 2005).
The company can choose to implement one strategy over the other or a combination of both,
however, whichever assessment approach is selected will help evaluate the company’s capacity
to achieve a successful organizational change. It is critical that an assessment is made before
implementing the change as it can reveal any possible upcoming problems or the right path
towards success (Smith, 2005).
Resistance to change
The concept of resistance to change is used often in the research and practitioner literature on
organizational change as an explanation as to why efforts to introduce large-scale changes in
production methods, management practices, and technology fall short of expectations or fail
altogether (Oreg, 2006). Piderit (2000) defines resistance as “a tridimensional (negative) attitude
towards change, which includes affective, behavioural, and cognitive components.” These
components reflect three different explanations of people’s interpretations of an object or
situation. “The affective component regards how one feels about the change (e.g. angry,
anxious); the cognitive component involves what one thinks about the change (e.g. Is it
necessary? Will it be beneficial?); and the behavioral component involves actions or intention to
act in response to the change (e.g. complaining about the change, trying to convince others that
the change is bad)” (Oreg, 2006). Moreover, it is stressed by Oreg (2006) that these three
components are not independent of one another as what people feel about the change will often
correspond with their thoughts as well as with their behavioral intentions.
How do we determine whether employees are prone to change? According to Oreg (2006),
“one of the first determinants of whether employees will accept or resist change is the extent to
which the change is perceived as beneficial vs detrimental to them”, therefore the factors which
VOL. 50 NO. 2 2018 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 47
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