PART FIVE – ORGANIZATIONAL PROCESSES AND
CHARACTERISTICS
Chapter Sixteen – Organization Change and Change Management
Chapter Overview
Companies that change appropriately can continue as viable businesses. Those that do not make the right
changes, like Kodak, lose their ability to compete, cease to exist by going out of business, or get gobbled
up by a more successful organization. This chapter is about how organizations need to face the prospect
of change and develop processes to ensure their viability in a complex, ever-changing global
environment. The chapter begins with a discussion of some of the forces that create pressures for change
followed by a detailed explanation of the complex change process. Then we describe organization
development and sources of resistance to change, finishing with a summary view of how to manage
change in organizations.
Learning Outcomes
After studying this chapter, students should be able to:
1. Summarize the dominant forces for change in organizations and describe the process of planned
organization change.
2. Discuss several approaches to organization development.
3. Explain resistance to change.
4. Identify the keys to managing successful organization change and development and describe
organizational learning.
Real World Challenge: Mismanaged Change at Kodak
Summary: As recently as 1994 Eastman Kodak was among the top 20 companies in the Fortune 500.
By 2015, Kodak was reporting revenues of $2.5 billion and its workforce had been reduced to 13,000.
What had happened to the onetime corporate giant? The so-called Digital Revolution—the widespread
transition from analog to digital.
Real World Challenge: A former Kodak executive now working for a different company has asked for
your thoughts on why Kodak failed to adapt.
Real World Response: According to Harvard’s John Kotter, “Kodak’s problem … is that it did not move
into the digital world well enough and fast enough.” It’s pretty much a consensus opinion. Kodak
pioneered digital technologies throughout the 1970s and 1980s, including innovations in color digital
cameras, digital print kiosks, and digital image compression. However, says Bill Fischer, CEO of the
private equity firm Manzanita Capital, Kodak “failed to take advantage of their unique perspective.
Kodak probably did not immediately imagine that it would be a ‘telephone’ that would ultimately be the
most damaging agent of disruption to its core film- and camera-making businesses. Even on the brink of
bankruptcy, Kodak managers failed—or refused—to acknowledge that many of the company’s products
had been marginalized by digital substitutions. Kotter agrees with the consensus opinion that Kodak’s
demise was a result of “strategic decisions either avoided or made poorly.” “The organization,” he
charges, “overflowed with complacency.” In particular, says Kotter, Kodak failed to recognize that digital
was a “huge opportunity” only if the company acted with equally “huge urgency.”
Chapter Outline
I. FORCES FOR CHANGE
The four areas in which the pressures for change appear most powerful involve people, technology,
information processing and communication, and competition.
Table 16.1 gives examples of each of these categories.
A. People
The special characteristics of baby boomers show up in distinct purchasing patterns that affect
product and service innovation, technological change, and marketing and promotional
activities.
Other population-related pressures for change involve the generations that sandwich the baby
boomers: the increasing numbers of senior citizens and those born after 1960.
The post-1960 generation of workers who entered the job market in the 1980s—often called
generation X—was different from the baby boom generation.
Sociologists and psychologists have identified another group, often called millennials, born
from roughly between 1980 and 2000, who seem to be experiencing a distinct and separate life
stage in between adolescence and adulthood in which young people may jump from job to job
and relationship to relationship, often living at home with few responsibilities and
experimenting with life.
On the job, millennials seem to prefer positive reinforcement, like clarity in job assignments,
want more flexibility in how to do their jobs, and want to be treated as different individuals
rather than everyone being treated the same.
The increasing diversity of the workforce in coming years will mean significant changes for
organizations.
In addition, employees are facing a different work environment in the twenty-first century. The
most descriptive word for this new work environment is “change.” Employees must be
prepared for constant change.
B. Technology
Not only is technology changing, but the rate of technological change is also increasing.
Many schools, from kindergarten to graduate schools, are now BYOT— “bring your own
technology”—and utilize online educational tools throughout the curriculum.
Technological development is increasing so rapidly in almost every field that it is quite difficult
to predict which products will dominate ten years from now.
Interestingly, organization change is self-perpetuating. With the advances in information
technology, organizations generate more information, and it circulates faster.
New technology will affect organizations in ways we cannot yet predict. As organizations react
more quickly to change, change occurs more rapidly, which in turn necessitates more rapid
responses.
C. Information Processing and Communication
Advances in information processing and communication have paralleled each other.
Social networking may be the most radical and fastest growing aspect of the advances in
information processing and communication so far.
Business uses of this phenomenon include advertising, marketing, market research and test
marketing, recruiting, and more.
Increasingly, people are working from home instead of going to the office every day.
Taking advantage of this trend, some companies are reconfiguring traditional space by
minimizing offices dedicated to one individual and creating communal spaces, unassigned
cubicles, and shared spaces.
Flexible work stations, both inside and outside of offices, are more electronic than paper and
pencil.
Orders used to take a week; now they are placed instantaneously, and companies can and must
be able to respond immediately, all because of changes in information processing and
communication.
D. Competition
Although competition is not a new force for change, competition today has some significant
new twists.
First, most markets are global because of decreasing transportation and communication costs
and the increasing export orientation of business.
The adoption of trade agreements have changed the way business operates. The Internet is
creating new competitors overnight in ways that could not have been imagined five years ago.
Consider, for example, the market for cell phones or smartphones. For consumers the choices
are seemingly endless and extremely confusing.
Manufacturers have to develop new equipment and software combinations to work on various
platforms for a variety of carriers. Carriers must decide which instruments and platform
combinations to offer to subscribers. And platform developers must show their platform can do
more things, simpler and with fewer errors, with maximum flexibility.
Global Issues: The Added Complexity of Global Change
Summary: Making changes in a multinational corporation is very complex. Consider just a few points
of change, for instance, related to organization design, leadership and motivation, and organizational
control.
Managers in an international business must address the basic issues of organization structure and design,
and dealing with human resources. Strategically, organizing decisions can be used to help promote
everything from organizational flexibility to the development of expatriate managers.
Managers must understand how cultural factors affect individuals, how motivational processes vary
across cultures, how the role of leadership changes in different cultures, how communication varies across
cultures, and how interpersonal and group processes depend on cultural background.
Managers in international organizations must also be concerned with control. Distances, time zone
differences, and cultural factors also play a role in control. Basic control issues for the international
manager revolve around operations management, productivity, quality, technology, and information
systems. Clearly, managing change in a multinational organization is no small task.
II. PROCESSES FOR PLANNED ORGANIZATION CHANGE
External forces may impose change on an organization. Ideally, however, the organization will not
only respond to change but will also anticipate it, prepare for it through planning, and incorporate it
in the organization strategy.
Organization change can be viewed from a static point of view, such as that of Lewin, or from a
dynamic perspective.
A. Lewin’s Process Model
Kurt Lewin suggested that efforts to bring about planned change in organizations should
approach change as a multistage process.
His model of planned change is made up of three steps—unfreezing, change, and refreezing—
as shown in Figure 16.1.
Unfreezing is the process by which people become aware of the need for change.
The key factor in unfreezing is making employees understand the importance of a change and
how their jobs will be affected by it.
Creating in employees the awareness of the need for change is the responsibility of the
leadership of the organization.
Change itself is the movement from the old way of doing things to a new way.
Change may entail installing new equipment, restructuring the organization, or implementing a
new performance appraisal system—anything that alters existing relationships or activities.
Refreezing makes new behaviors relatively permanent and resistant to further change.
Refreezing is necessary because without it, the old ways of doing things might soon reassert
themselves while the new ways are forgotten.
B. The Continuous Change Process Model
A more complex, and more helpful, approach is illustrated in Figure 16.2.
This approach treats planned change from the perspective of top management and indicates that
change is continuous.
It is important to note that as change becomes continuous in organizations, different steps are
probably occurring simultaneously throughout the organization.
In this approach, top management perceives that certain forces or trends call for change, and the
issue is subjected to the organization’s usual problem-solving and decision-making processes.
Early in the process, the organization may seek the assistance of a change agent—a person
who will be responsible for managing the change effort.
The change agent may be a member of the organization, an outsider such as a consultant, or
even someone from headquarters whom employees view as an outsider.
Under the direction and management of the change agent, the organization implements the
change through Lewin’s unfreeze, change, and refreeze process.
The final step is measurement, evaluation, and control. The change agent and the top
management group assess the degree to which the change is having the desired effect; that is,
they measure progress toward the goals of the change and make appropriate changes if
necessary.
Throughout the process, however, the change agent brings in new ideas and viewpoints that
help members look at old problems in new ways.
Transition management is the process of systematically planning, organizing, and
implementing change, from the disassembly of the current state to the realization of a fully
functional future state within an organization.
One key role of transition management is to deal with unintended consequences.
Transition management also ensures that business continues while the change is occurring;
therefore, it must begin before the change occurs.
Communication about the changes to all involved, from employees to customers and suppliers,
plays a key role in transition management.
CASE STUDY: Flexibility at KPMG
Summary: Accounting firm KPMG wanted to decrease payroll costs while maintaining its commitment
to employees. KPMG gave employees the choice of a four-day workweek at 90 percent of their salary; a
sabbatical at 30 percent of their base pay; either or both; or neither. To educate employees about their
options, KPMG held conference calls, trained managers, and posted questions and answers on its intranet.
1. How does this program help KPMG?
2. How does this program help KPMG’s employees?
3. If you were employed by KPMG, would this program appeal to you? Why or why not?