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Chapter 8 – Managing Change and Innovation
CHAPTER
8
MANAGING
CHANGE AND
INNOVATION
LEARNING OUTCOMES
After reading this chapter, students should be able to:
8-1. Define organizational change and compare and contrast views on the change process.
8-2. Explain how to manage resistance to change.
8-3. Describe what managers need to know about employee stress.
8-4. Discuss techniques for stimulating innovation.
Management Myth
Myth: There’s nothing managers can do to reduce the stress inherent in today’s jobs.
Truth: Astute managers are redesigning jobs, realigning schedules, and introducing employee
assistance programs to help employees cope.
Teaching Tips:
In this chapter, students will explore the concept of stress and how it can be both a positive and
negative force for individuals. As an introduction, it may be useful to ask students the following:
1. Have they ever experienced a lot of work related stress? Did they feel it negatively affected
their behavior away from work? Or even their health?
2. Are there cases where stress can be positive, pushing people to meet important deadlines or
to attain a difficult goal?
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Chapter 8 – Managing Change and Innovation
I. WHAT IS CHANGE AND HOW DO MANAGERS DEAL WITH IT?
A. Introduction
1. The chapter opens with the example of Eli Lilly’s CEO John Lechleiter:
a) By the end of 2016, Eli Lilly was losing $10 billion on other drugs no longer
under patent protection.
b) Eli Lilly will face a daunting task of making changes in the company.
2. Organizational change is an alteration of an organization’s environment, structure,
technology, or people.
3. If it weren’t for change, the manager’s job would be easy.
a) Planning would be simplified.
b) The issue of organization design would be solved.
c) Decision making would be dramatically simplified.
4. Change is an organizational reality.
a) Handling change is an integral part of every manager’s job.
b) A manager can change three things. (See Exhibit 8-1.)
(1) Changing structure includes any alteration in any authority relationships,
coordination mechanisms, degree of centralization, job design, or similar
organization structure variables.
(2) Changing technology encompasses modification in the way work is processed
or the methods and equipment used.
(3) Changes in people refer to changes in employee attitudes, expectations,
perceptions, or behaviors.
B. Why do Organizations Need to Change?
1. What External Forces Create a Need for Change?
a) They come from various sources.
(1) The marketplace.
(2) Government laws and regulations.
(3) Technology.
(4) Labor markets.
(5) Economics.
2. What Internal Forces Create a Need for Change?
a) Internal forces tend to originate primarily from the internal operations of the
organization or from the impact of external changes.
b) When management redefines or modifies its strategy, it often introduces a host
of changes.
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Chapter 8 – Managing Change and Innovation
c) Another internal force for change is that the composition of an organization’s
workforce changes in terms of age, education, gender, nationality, and so forth.
d) An organization’s work force is rarely static; its composition changes.
e) The compensation and benefits systems might also need to be reworked to
reflect the needs of a diverse work force and market forces in which certain
skills are in short supply.
f) Employee attitudes, such as increased job dissatisfaction, may lead to increased
absenteeism, resignations, and even strikes.
C. Who initiates Organizational Change?
1. Changes within an organization need a catalyst.
2. People who act as catalysts and assume the responsibility for managing the change
process are called change agents.
a) Any manager can be a change agent.
b) A nonmanager can also be a change agent.
3. For major systemwide changes, internal management will often hire outside
consultants to provide advice and assistance.
a) Outside consultants can offer an objective perspective.
b) But they may have an inadequate understanding of the organization’s history,
culture, operating procedures, and personnel.
c) They are also prone to initiate more drastic changes than insiders.
4. Internal managers who act as change agents may be more thoughtful and possibly
more cautious.
D. How Does Organizational Change Happen?
1. Two metaphors represent different approaches to understanding and responding to
change.
a) The “calm waters” metaphor envisions the organization as a large ship
crossing a calm sea.
(1) Change surfaces as the occasional storm, a brief distraction in an otherwise
calm and predictable trip.
b) In the “white-water rapids” metaphor, the organization is seen as a small raft
navigating a raging river with uninterrupted white-water rapids.
(1) Change is a natural state and managing change is a continual process.
2. What Is the “Calm Waters” Metaphor?
a) The calm waters metaphor dominated the thinking of practicing managers and
academics.
(1) The prevailing model for handling change in calm waters is illustrated in
Lewin’s three-step model. (See Exhibit 8-2.)
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Chapter 8 – Managing Change and Innovation
(2) According to Lewin, successful change requires unfreezing the status quo,
changing to a new state, and refreezing the new change to make it permanent.
(3) The status quo can be considered an equilibrium state.
(4) Unfreezing is necessary to move from this equilibrium. It can be achieved in
one of three ways:
(a) The driving forces can be increased (direct behavior away from the
status quo).
(b) The restraining forces can be decreased (hinder movement from the
existing equilibrium).
(c) The two approaches can be combined.
b) Once unfreezing has been accomplished, the change itself can be implemented.
c) The new situation needs to be refrozen so that it can be sustained over time.
(1) Unless this is done, there is a strong chance that the change will be short-lived.
(2) The objective of refreezing is to stabilize the new situation by balancing the
driving and restraining forces.
d) Lewin’s three-step process treats change as a break in the organization’s
equilibrium state.
3. What is the “White-Water Rapids” Metaphor?
a) The white-water metaphor takes into consideration that environments are both
uncertain and dynamic.
(1) For example, variable college curriculum.
b) In the white water rapids metaphor, change is the status quo and managing
change is a continual process.
4. Does Every Manager Face a World of Constant and Chaotic Change?
a) Not every manager faces a world of constant and chaotic change.
b) But the number of managers who don’t is dwindling rapidly.
c) Few organizations today can treat change as the occasional disturbance in an
otherwise peaceful world.
5. How Do Organizations Implement Planned Changes?
a) Most change in an organization does not happen by chance.
b) The effort to assist organizational members with a planned change is referred to
as organization development.
c) Organization development (OD) facilitates long-term organization-wide
changes.
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(1) Its focus is to constructively change the attitudes and values of organization
members so that they can more readily adapt to and be more effective in
achieving the new directions of the organization.
(2) The organization’s leaders are, in essence, attempting to change the
organization’s culture.
(3) Reliance on employee participation is fundamental to organizational
development.
d) Any organizational activity that assists with implementing planned change can
be viewed as an OD technique.
e) The more popular OD efforts rely heavily on group interactions and
cooperation.
f) Survey feedback efforts are designed to assess employee attitudes about and
perceptions of the change they are encountering.
(1) Employees are generally asked to respond to a set of specific questions
regarding how they view such organizational aspects as decision making,
leadership, communication effectiveness; and satisfaction with their jobs,
coworkers, and management.
(2) The data the change agent obtains are used to clarify problems.
g) In process consultation, outside consultants help managers to perceive,
understand, and act upon process events with which they must deal.
(1) These might include workflow, informal relationships among unit members,
and formal communications channels.
(2) Consultants are not there to solve these problems. Rather, they act as coaches
to help managers diagnose which interpersonal processes need improvement.
h) Team-building is generally an activity that helps work groups set goals,
develop positive interpersonal relationships, and clarify the roles and
responsibilities of each team member.
(1) The primary focus of team-building is to increase each group’s trust and
openness toward one another.
i) Intergroup development attempts to achieve the same results among different
work groups.
(1) Attempts to change attitudes, stereotypes, and perceptions that one group may
have toward another group to achieve better coordination among the various
groups.
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Chapter 8 – Managing Change and Innovation
From the Past to the Present
“If you want truly to understand something, try to change it.” Kurt Lewin, who’s often called the
father of modern social psychology (a discipline that uses scientific methods to “understand and
explain how the thought, feeling, and behavior of individuals are influenced by the actual,
imagined, or implied presence of other human beings”) made his name in management circles
through his studies of group dynamics. His approach was based on the belief that “group
behavior is an intricate set of symbolic interactions and forces that not only affect group structure
but also modify individual behavior.”
One of his research studies found that “changes were more easily introduced through group
decision making than through lectures and individual appeals.” His findings suggested that
changes would be more readily accepted when people felt they had an opportunity to be involved
in the change rather than when they were simply asked or told to change. Another of Lewin’s
major contributions was the idea of force field analysis, a framework for looking at the factors
(forces) that influenced a situation.
Discuss This:
Explain force field analysis and how it can be used in organizational change.
What advice do you see in this information about Lewin’s ideas that managers might use?
II. HOW DO MANAGERS MANAGE RESISTANCE TO CHANGE?
A. Introduction
1. Managers should be motivated to initiate change because they are concerned with
improving their organization’s effectiveness.
2. Change can be a threat to managers and to nonmanagerial personnel as well.
B. Why Do People Resist Organizational Change?
1. An individual is likely to resist change for four reasons: uncertainty, habit, concern
over personal loss, and the belief that the change is not in the organization’s best
interest.
a) Changes substitute ambiguity and uncertainty for the known.
(1) Employees in organizations often hold a dislike for uncertainty.
b) To reduce stress, we often rely on habit or programmed decisions.
c) We fear losing something already possessed.
(1) Change threatens the investment in the status quo.
(2) The more people have invested in the current system, the more they resist
change.
(a) They fear the loss of status, money, authority, friendships, personal
convenience, or other benefits that they value.
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d) A final cause of resistance is a person’s belief that the change is incompatible
with the goals and best interests of the organization.
e) If expressed positively, this form of resistance can be beneficial to the
organization.
C. What Are Some Techniques for Reducing Resistance to Organizational Change?
1. Dysfunctional resistance to change can be addressed with several strategies.
a) See Exhibit 8-4.
2. Education and communication help employees see the logic of the change effort.
a) Assumes that much of the resistance lies in misinformation or poor
communication.
3. Participation involves bringing those individuals directly affected by the proposed
change into the decision-making process.
a) Allows expression of feelings, increases the quality of the process, and
increases employee commitment to the final decision.
4. Facilitation and support involve helping employees deal with the fear and anxiety
associated with the change effort.
a) May include employee counseling, therapy, new skills training, or a short paid
leave of absence.
5. Negotiation involves a bargain: exchanging something of value for an agreement to
lessen the resistance to the change effort.
a) This technique may be quite useful when the resistance comes from a powerful
source.
6. Manipulation and co-optation refers to covert attempts to influence others about the
change.
a) May involve twisting or distorting facts to make the change appear more
attractive.
7. Coercion involves the use of direct threats or force against the resisters.
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