Chapter 18
Organizational Change
and Stress Management
LEARNING OBJECTIVES
After studying this chapter, students should be able to:
18-1. Contrast the forces for change and planned change.
18-2. Describe ways to overcome resistance to change.
18-3. Compare the four main approaches to managing organizational change.
18-4. Demonstrate three ways of creating a culture for change.
18-5. Identify the potential environmental, organizational, and personal sources of stress
at work and the role of individual and cultural differences.
18-6. Identify the physiological, psychological, and behavioral symptoms of stress at
work.
18-7. Describe individual and organizational approaches to managing stress at work.
INSTRUCTOR’S RESOURCES
Instructors may wish to use the following resources when presenting this chapter.
Text Exercises
Career OBjectives: How Can I Bring My Team’s Overall Stress Level Down?
Myth or Science?: “When You’re Working Hard, Sleep Is Optional”
An Ethical Choice: Manager and Employee Stress During Organizational Change
Personal Inventory Assessments: Tolerance of Ambiguity Scale
Point/Counterpoint: Companies Should Encourage Stress Reduction
Questions for Review
Experiential Exercise: Mindfulness at Work
Ethical Dilemma: All Present and Accounted For
Text Cases
Case Incident 1: Sprucing Up Walmart
Case Incident 2: When Companies Fail to Change
Instructor’s Choice
This section presents an exercise that is NOT found in the student’s textbook. Instructor’s Choice
reinforces the text’s emphasis through various activities. Some Instructor’s Choice activities are
centered on debates, group exercises, Internet research, and student experiences. Some can be
used in class in their entirety, while others require some additional work on the student’s part.
The course instructor may choose to use these at any time throughout the class—some may be
more effective as icebreakers, while some may be used to pull together various concepts covered
in the chapter.
Web Exercises
At the end of each chapter of this Instructor’s Manual, you will find suggested exercises and
ideas for researching OB topics on the Internet. The exercises “Exploring OB Topics on the
Web” are set up so that you can simply photocopy the pages, distribute them to your class, and
make assignments accordingly. You may want to assign the exercises as an out-of-class activity
or as lab activities with your class.
Summary and Implications for Managers
The need for change has been implied throughout this text. For instance, think about attitudes,
motivation, work teams, communication, leadership, organizational structures, human resource
practices, and organizational cultures. Change was an integral part in our discussion of each. If
environments were perfectly static, if employees’ skills and abilities were always up to date and
incapable of deteriorating, and if tomorrow were always exactly the same as today,
organizational change would have little or no relevance to managers. But the real world is
turbulent, requiring organizations and their members to undergo dynamic change if they are to
perform at competitive levels. Coping with all these changes can be a source of stress, but with
effective management, challenge can enhance engagement and fulfillment, leading to the high
performance that, as you’ve discovered in this text, is one major goal of the study of
organizational behavior (OB). Specific implications for managers are below:
Consider that, as a manager, you are a change agent in your organization. The
decisions you make and your role-modeling behaviors will help shape the
organization’s change culture.
Your management policies and practices will determine the degree to which the
organization learns and adapts to changing environmental factors.
Some stress is good. Low to moderate amounts of stress enable many people to
perform their jobs better by increasing their work intensity, alertness, and ability to
react. This is especially true if stress arises due to challenges on the job rather than
hindrances that prevent employees from doing their jobs effectively.
You can help alleviate harmful workplace stress for your employees by accurately
matching work-loads to employees, providing employees with stress-coping
resources, and responding to their concerns.
You can identify extreme stress in your employees when performance declines,
turnover increases, health-related absenteeism increases, and engagement declines.
However, by the time these symptoms are visible, it may be too late to be helpful, so
stay alert for early indicators and be proactive.
This chapter begins with a discussion of change at Hyatt Hotels. While changes can be good, such as finishing
school or responding to considerable organizational growth like Hyatt has, many changes bring stress to everyone
involved. This chapter is about change and stress. We describe environmental forces that require firms to change,
the reasons people and organizations often resist change, and the way this resistance can be overcome. We review
processes for managing organizational change. Then we move to the topic of stress and its sources and
consequences. In closing, we discuss what individuals and organizations can do to better manage stress levels and
realize positive outcomes for organizational behavior (OB), which after all is the purpose of this text in its entirety.
BRIEF CHAPTER OUTLINE
I. Change
A. Forces for Change
1. Organizations face a dynamic and changing environment. This requires adaptation.
Exhibit 18-1 summarizes six specific forces that are acting as stimulants for change.
2. Nature of The Workforce
a. Almost every organization must adjust to a multicultural environment,
demographic changes, immigration, and outsourcing.
3. Technology is changing jobs and organizations.
a. It is not hard to imagine the very idea of an office becoming an antiquated concept
in the near future.
4. Economic Shocks
a. Led to the elimination, bankruptcy, or acquisition of some of the best-known U.S.
companies, including Merrill Lynch, Lehman Brothers, Countrywide Financial,
Washington Mutual, and Ameriquest.
b. Millions of jobs were lost worldwide.
5. Competition is Changing
a. Competitors are as likely to come from across the ocean as from across town.
b. Successful organizations will be fast on their feet, capable of developing new
products rapidly and getting them to market quickly.
6. Social trends don’t remain static either.
a. Consumers who are otherwise strangers now meet and share product information
in chat rooms and blogs.
b. Consumers, employees, and organizational leaders are more sensitive to
environmental concerns. “Green” practices are quickly becoming expected rather
than optional.
7. World Politics
a. A global context for OB is required. No one could have imagined how world
politics would change in recent years.
b. We’ve seen a major set of financial crises that have rocked global markets, a
dramatic rise in the power and influence of China, and dramatic shakeups in
government across the Arab world.
B. Planned Change
1. Some organizations treat all change as an accidental occurrence; however, change as
an intentional, goal-oriented activity is planned change.
2. There are two goals of planned change:
a. Improve the ability of the organization to adapt to changes in its environment.
b. Change employee behavior.
3. Change agents can be managers, employees of the organization, or outside
consultants.
4. Many change agents fail because of organizational resistance to change.
II. Resistance to Change
A. Introduction
1. Our egos are fragile, and we often see change as threatening.
2. These reactions can sap the organization of vital energy when it is most needed.
3. Resistance to change can be positive if it leads to open discussion and debate.
4. Resistance to change does not necessarily surface in standardized ways.
5. Resistance can be overt, implicit, immediate, or deferred.
6. Exhibit 18-2 summarizes the major forces for resistance to change categorized by
their sources.
7. It’s worth noting that not all change is good.
B. Overcoming Resistance to Change
1. Communication
a. Resistance can be reduced on two levels through communicating to help
employees see the logic of a change.
2. Participation
a. It is difficult for individuals to resist a change decision in which they participated.
b. Prior to making a change, those opposed can be brought into the decision process,
assuming they have the expertise to make a meaningful contribution.
c. The negatives—potential for a poor solution and great time consumption.
3. Building support and commitment
a. When employees’ fear and anxiety are high, counseling and therapy, new-skills
training, or a short paid leave of absence may facilitate adjustment.
b. When managers or employees have low emotional commitment to change, they
favor the status quo and resist it.
c. So firing up employees can also help them emotionally commit to the change
rather than embrace the status quo.
4. Develop positive relationships
a. People are more willing to accept changes if they trust the managers
implementing them.
5. Implementing changes fairly
a. One way organizations can minimize negative impact is to make sure change is
implemented fairly.
6. Manipulation and cooptation
a. Manipulation refers to covert influence attempts.
b. Cooptation is a form of both manipulation and participation.
i. It seeks to “buy off” the leaders of a resistance group by giving them a key
role in the change decision.
c. Both manipulation and cooptation are relatively inexpensive and easy ways to
gain support.
i. The tactics can backfire if the targets become aware that they are being
tricked or used.
7. Selecting people who accept change
a. Research suggests the ability to easily accept and adapt to change is related to
personality—some people simply have more positive attitudes about change than
others.
b. Individuals higher in general mental ability are also better able to learn and adapt
to changes in the workplace.
c. In sum, an impressive body of evidence shows organizations can facilitate change
by selecting people predisposed to accept it.
d. Studies have shown that teams that are strongly motivated by learning about and
mastering tasks are better able to adapt to changing environments.
8. Coercion
a. Coercion is the application of direct threats or force upon the resisters.
b. Examples of coercion are threats of transfer, loss of promotions, negative
performance evaluations, and a poor letter of recommendation.
C. The Politics of Change
1. Change threatens the status quo, making it an inherently political activity.
2. Politics suggests the impetus for change is more likely to come from outside change
agents, employees new to the organization (who have less invested in the status quo),
or managers slightly removed from the main power structure.
3. Managers who have spent their entire careers with a single organization and
eventually achieve a senior position in the hierarchy are often major impediments to
change.
a. It is a very real threat to their status and position, yet, they may be expected to
implement changes.
4. By acting as change agents, they can convey to stockholders, suppliers, employees,
and customers that they are addressing problems and adapting to a dynamic
environment.
III. Approaches to Managing Organizational Change
A. Lewin’s Three-Step Model (Exhibit 18-3)
1. Kurt Lewin argued that successful change in organizations should follow three steps:
a. Unfreezing the status quo.
b. Movement to a new state.
c. Refreezing the new change to make it permanent.
2. The status quo can be considered to be an equilibrium state.
a. To move from this equilibrium—to overcome the pressures of both individual
resistance and group conformity—unfreezing is necessary. (Exhibit 18-4)
b. Companies that have been successful in the past are likely to encounter restraining
forces because people question the need for change.
c. Once the change has been implemented, the new situation needs to be refrozen so
that it can be sustained over time.
B. Kotter’s Eight-Step Plan for Implementing Change (Exhibit 18-5)
1. John Kotter of the Harvard Business School built on Lewin’s three-step model to
create a more detailed approach for implementing change.
2. Kotter began by listing common mistakes managers make when trying to initiate
change.
a. They may fail:
i. To create a sense of urgency about the need for change.
ii. To create a coalition for managing the change process.
iii. To have a vision for change and effectively communicate it.
iv. To remove obstacles that could impede the vision’s achievement.
v. To provide short-term and achievable goals, and to anchor the changes into
the organization’s culture.
vi. They may also declare victory too soon.
b. Kotter then established eight sequential steps to overcome these problems.
i. They’re listed in Exhibit 18-5. Notice how Kotter’s first four steps essentially
extrapolate Lewin’s “unfreezing” stage.
ii. Steps 5, 6, and 7 represent “movement,” and the final step works on
“refreezing.”
iii. So Kotter’s contribution lies in providing managers and change agents with a
more detailed guide for successfully implementing change.
C. Action Research
1. Action research is a change process based on the systematic collection of data and
then selection of a change action based on what the analyzed data indicate.
2. The process consists of five steps: diagnosis, analysis, feedback, action, and
evaluation. These steps closely parallel the scientific method.
a. Diagnosis begins by gathering information about problems, concerns, and needed
changes from members of the organization.
b. Analysis of information is synthesized into primary concerns, problem areas, and
possible actions.
c. Action research includes extensive involvement of the people who will be
involved in the change program.
d. Feedback requires sharing with employees what has been found from steps one
and two and the development of a plan for the change.
e. Evaluation is the final step to assess the action plan’s effectiveness. Using the
initial data gathered as a benchmark, any subsequent changes can be compared
and evaluated.
3. Action research provides at least two specific benefits for an organization.
a. First, it is problem-focused. The change agent objectively looks for problems and
the type of problem determines the type of change of action.
b. Second, resistance to change is reduced. Once employees have actively
participated in the feedback stage, the change process typically takes on a
momentum of its own.
D. Organizational Development
1. Introduction
a. Organizational development (OD) is a collection of change methods that try to
improve organizational effectiveness and employee well-being.
b. The OD methods value human and organizational growth, collaborative and
participative processes, and a spirit of inquiry.
c. Contemporary OD borrows heavily from postmodern philosophy in placing heavy
emphasis on the subjective ways in which people see their environment.
2. There are six interventions that change agents might consider using. They are:
sensitivity training, survey feedback, process consultation, team building, intergroup
development, and appreciative inquiry.
a. Sensitivity Training
i. It can go by a variety of names—laboratory training, groups, or T-groups
(training groups)—but all refer to a thorough, unstructured group interaction.
b. Survey Feedback
i. Everyone can participate in survey feedback.
c. Process Consultation
i. An outside consultant works with clients to understand the process events
managers must deal with.
d. Team Building
i. Team building uses high-interaction group activities to increase trust and
openness among team members, improve coordinative efforts, and increase
team performance.
e. Intergroup Development
i. A major area of concern in OD is dysfunctional conflict among groups.
ii. Intergroup development seeks to change groups’ attitudes, stereotypes, and
perceptions about each other.
f. Appreciative Inquiry
i. This type of OD brings to light the positive, rather than the conflict.
ii. Appreciative Inquiry (AI) asks participants to look forward and project the
future based on the positive components of an organization.
iii. AI is done in 4 steps
(a) Discovery
(i) Discovery sets out to identify what people think are the organization’s
strengths.
(b) Dreaming
(i) Employees use information from the discovery phase to speculate on
possible futures, such as what the organization will be like in 5 years.
(c) Design
(i) Participants find a common vision of how the organization will look in
the future and agree on its unique qualities.
(d) Destiny
(i) Participants seek to define the organization’s destiny or how to fulfill
their dream, and they typically write action plans and develop
implementation strategies.
(e) AI has proven to be an effective change strategy in organizations such as
GTE, Roadway Express, and the U.S. Navy.
(f) The end result of AI was a renewed culture focused on winning attitudes
and behaviors.
IV. Creating a Culture for Change
A. Introduction
1. We’ve considered how organizations can adapt to change.
2. But recently, some OB scholars have focused on a more proactive approach—how
organizations can embrace change by transforming their cultures. In this section, we
review two such approaches: stimulating an innovative culture and creating a learning
organization.
B. Managing a Paradox
1. In a paradox situation, we are required to balance tensions across various courses of
action. There is a constant process of finding a balancing point, a dynamic
equilibrium, among shifting priorities over time.
2. From this perspective, there is no such thing as a separate discipline of “change
management” because all management is dealing with constant change and
adaptation.
C. The idea of paradox sounds abstract, but more specific concepts have begun to emerge
from a growing body of research.
D. Several key paradoxes have been identified.
1. Learning is a paradox because it requires building on the past while rejecting it at the
same time.
2. Organizing is a paradox because it calls for setting direction and leading while
requiring empowerment and flexibility.
3. Performing is a paradox between creating organization-wide goals to concentrate
effort and recognizing the diverse goals of stakeholders inside and outside the
organization.
4. And finally, belonging is a paradox between establishing a sense of collective identity
and acknowledging our desire to be recognized and accepted as unique individuals.
E. Managers can learn a few lessons from paradox theory, which states the key paradox in
management is that there is no final optimal status for an organization.
1. The first lesson is that as the environment and members of the organization change,
different elements take on more or less importance.
2. There is some evidence that managers who think holistically and recognize the
importance of balancing paradoxical factors are more effective, especially in
generating adaptive and creative behavior in those they are managing.
F. Simulating a Culture of Innovation
1. Definition of innovation
a. Innovation, a more specialized kind of change, is a new idea applied to initiating
or improving a product, process, or services.
b. Innovations can range from small incremental improvements, such as netbook
computers, to radical breakthroughs, such as Nissan’s electric Leaf car.
2. Sources of innovation
a. Structural variables are the most studied potential source of innovation.
i. First, organic structures positively influence innovation because they facilitate
flexibility, adaptation, and cross-fertilization.
ii. Second, long tenure in management is associated with innovation. Managerial
tenure apparently provides legitimacy and knowledge of how to accomplish
tasks and obtain desired outcomes.
iii. Third, innovation is nurtured where there are slack resources.
iv. Finally, inter-unit communication is high in innovative organizations. There is
a high use of committee, task forces, cross-functional teams, and other
mechanisms that facilitate interaction.
b. Context and Innovation. Innovative organizations tend to have similar cultures.
i. Within the human resources category, innovative organizations actively
promote the training and development of their members so they keep current,
offer high job security so employees don’t fear getting fired for making
mistakes, and encourage individuals to become champions of change.
c. Idea Champions and Innovation. Once a new idea is developed, idea champions
actively and enthusiastically promote it, build support, overcome resistance, and
ensure it’s implemented.
d. Champions have common personality characteristics: extremely high
self-confidence, persistence, energy, and a tendency to take risks.
e. Idea champions have jobs that provide considerable decision-making discretion;
this autonomy helps them introduce and implement innovations.
f. People in collectivist cultures prefer appeals for cross-functional support for
innovation efforts; people in high power distance cultures prefer champions to
work closely with those in authority to approve innovative activities before work
is begun; and the higher the uncertainty avoidance of a society, the more
champions should work within the organization’s rules and procedures to develop
the innovation.
g. These findings suggest that effective managers will alter their organization’s
championing strategies to reflect cultural values.
G. Creating a Learning Organization
1. What is a learning organization? (Exhibit 18-6)
a. A learning organization is an organization that has developed the continuous
capacity to adapt and change.
b. All organizations learn—whether they consciously choose to or not; it is a
fundamental requirement for their sustained existence.
c. Exhibit 18-6 summarizes the five basic characteristics of a learning organization.
d. Proponents of the learning organization envision it as a remedy for three
fundamental problems of traditional organizations: fragmentation, competition,
and reactiveness.
i. First, fragmentation based on specialization creates “walls” and “chimneys”
that separate different functions into independent and often warring fiefdoms.
ii. Second, an overemphasis on competition often undermines collaboration.
iii. And third, reactiveness misdirects management’s attention to problem solving
rather than creation.
2. Managing learning
a. What can managers do to make their firms learning organizations?
i. Establish a strategy.
ii. Redesign the organization’s structure.
iii. Reshape the organization’s culture.
H. Organizational Change and Stress
1. Researchers are increasingly studying the effects of organizational change on
employees.
a. We are interested in determining the specific causes and mitigating factors of
stress in order to learn how to manage organizational change effectively.
2. The overall findings are that organizational changes incorporating OB knowledge of
how people react to stressors may yield more effective results than organizational
changes that are only objectively managed through goal-setting.
3. Not surprisingly, the role of leadership is critical.
a. A recent study found that transformational leaders can help shape employee affect
so employees stay committed to the change and do not perceive it as stressful.
b. Another study indicated that a positive orientation toward change before specific
changes are planned will predict how employees deal with new initiatives.
4. Often, organizational changes are stressful because employees perceive aspects of the
changes as threatening.
a. These employees are more likely to quit, partially in reaction to their stress.
5. To reduce the perception of threat, employees need to see the organizational changes
as fair.
a. Research indicates that those who have a positive change orientation before
changes are planned are less likely to perceive changes as unfair or threatening.
V. Stress at Work
A. Introduction
1. Exhibit 18-7 shows work is, for most people, the most important source of stress in
life.
B. What Is Stress?
1. Stress is a dynamic condition in which an individual is confronted with an
opportunity, constraint, or demand related to what he/she desires and for which the
outcome is perceived to be both uncertain and important.
2. Stress is not necessarily bad in and of itself.
3. Recently, researchers have argued that challenge stressors—or stressors associated
with workload, pressure to complete tasks, and time urgency—operate quite
differently from hindrance stressors—or stressors that keep you from reaching your
goals (for example, red tape, office politics, confusion over job responsibilities).
4. Typically, stress is associated with resources and demands.
a. Demands are responsibilities, pressures, obligations, and uncertainties individuals
face in the workplace.
5. Allostasis. All this may give you the impression that individuals are seeking a steady
state in which demands perfectly match resources. While early research tended to
emphasize such a homeostatic, or balanced equilibrium, perspective, it has now
become clear that no single ideal state exists.
a. Instead, it’s more accurate to talk about allostatic models in which demands shift,
resources shift, and systems of addressing imbalances shift. By allostasis, we
work to find stability by changing our behaviors and attitudes.
b. It all depends on the allostatic load, or the cumulative effect of stressors on us
given the resources we draw upon.
6. So, much like organizations are in a constant state of change and flux, we respond to
stress processes by continually adapting to both internal and external sources, and our
stability is constantly redefined.
C. Potential Sources of Stress
1. As the model in Exhibit 18-8 shows, there are three categories of potential stressors:
environmental, organizational, and personal.
2. Environmental factors
a. Environmental uncertainty influences stress levels among employees in an
organization.
b. Changes in the business cycle create economic uncertainties.
c. Political uncertainties in some countries can be stress inducing.
d. Technological uncertainty can cause stress because new innovations can make an
employee’s skills and experience obsolete in a very short period of time.