Chapter Seventeen: Managing Organizational Change
Chapter Synopsis
This chapter presents “change” as being inevitable and an integral part of a manager’s job, not a
peripheral one. It discusses multiple change management approaches, such as managing change
through power, reason, and reeducation.
There is a significant discussion of how to diagnose a problem, select a change and development
method, implement the change, and then evaluate the results.
Learning Objectives
After completing this chapter, students should be able to:
• Identify the three stages of the general organizational change model.
• Discuss the advantages and disadvantages of internal versus external change agents.
Chapter 17 – Managing Organizational Change
Key Terms
change agent—A person who acts as the initiator for change activities. Can be internal members of
the firm or external consultants.
economic forces—Forces in the environment that can influence what occurs within a firm, such as
employment rates, customer buying habits, interest rates, and competitors’ strategies.
technology—Refers to actions, physical and mental, that an individual performs upon some object,
person, or problem in order to change it in some way.
management by objectives (MBO) —A process under which superiors and subordinates jointly set
goals for a specified time period and then meet again to evaluate the subordinates’ performance in
terms of those previously established goals.
leadership climate—The nature of the work environment in an organization that results from the
leadership style and administrative practices of managers.
formal organization—The recognized and sanctioned structure, policies, and rules of a unit or
institution.
Lecture Outline
The Chapter outline is organized to correspond with the PowerPoint slides.
The chapter title slide may be used as a background to introduce the class.
Learning objectives
Review the chapter learning objectives. These will be reviewed on the last slide of the pack.
Change
Popular literature and bestsellers warn managers that their organizations’ futures depend upon
responsibility rather than as a peripheral one.
Exhibit 17.1 A General Model of Organizational Change
To understand what motivates people to change, Kurt Lewin developed a three-stage model
which consists of unfreezing the old ways of doing things, moving employees to learn new
behaviors, and then refreezing and reinforcing the new behaviors. Exhibit 17-1 illustrates these
three stages and provides an example of each stage.
quality and workability of the relationship between the change agent and the key decision
makers within the organization.
Change Agent Types
External change agents are temporary employees (e.g., change consultants) of the organization
since they’re engaged only for the duration of the change process. They originate in a variety of
organizations including universities, consulting firms, and training agencies.
The internal change agent is an individual working for the organization who knows something
about its problems. The usual internal change agent is a recently appointed manager of an
organization that has a record of poor performance; often, the individual takes the job with the
programs. This approach attempts to use the resources and knowledge base of both external and
internal change agents. It involves designating an individual or small group within the
organization to serve with the external change agent to spearhead the change effort.
Resistance to Change
Significant change can lead to fear, anxiety, and resistance. Additional information
accompanies Exhibit 17.2.
EXHIBIT 17.2 Range of Individual Resistance Behaviors
While change agents are expected to help organizations implement positive improvements,
change agents themselves may create problems or issues. The actions of the change agents may
create resistance, which if not properly addressed may lead to the failure of the initiative. A
Proper understanding of the sources of resistance and the means to address them is critical for
successful change activities.
Even in situations in which change is clearly the best choice, there may be fear, anxiety, and
have been more specific in categorizing resistance to change that results from individuals and
organizational factors.
Exhibit 17.2 presents a graphical portrayal of a variety of individual responses to a change in
Reasons for Individual Resistance
Individuals resist change because they fear what will happen to them. A number of individual
impediments to change have been uncovered through research conducted in organizational
settings. Reasons for resistance are listed on the slide.
Organizational Barriers to Change
Strategies for Overcoming Resistance
The range of individual and organizational resistance factors involves fear, anxiety, team
behavior, politics, and uncertainty. Analyzing change and resistance involves a number of key
considerations.
Characteristics of a Learning Organization
In learning organizations, employees share ideas, make recommendations, and participate
voluntarily in change from the outset. Learning organizations have these characteristics.
EXHIBIT 17.3 A Model for Organizational Change and Development
In order to help an organization develop in a certain direction, managers and leaders need to
create meaningful and lasting change. One approach to this process of organizational
development is illustrated in Exhibit 17.3.
Allowing these forces to occur without reaction will allow competing organizations to seize an
advantage.
Diagnosis of Problem
Change agents facilitate the diagnostic stage of organizational change and development process.
Typically, they will work with top managers to gather information and opinions about the
problem(s) that are affecting organizational, group, or individual performance. Experience and
judgment are critical to this phase unless the problem is readily apparent to all observers.
Ordinarily, however, managers can disagree on the nature of the problem. There’s no formula
for accurate diagnosis, but these questions point the manager in the right direction.
difficult than identifying organizational problems.
Thus, the diagnostic process must stress the use of precise and reliable information. To
summarize, the data collection process can tap information in several ways. Five different
approaches are useful for assorted purposes are shown on the slide.
Choosing a Development Method
Managers have a variety of change and development methods to select from, depending on the
objectives they hope to accomplish. One way of viewing objectives is from the perspective of
the depth of the intended change. The depth of intended change refers to the scope and intensity
of the change efforts. A useful distinction here is between the formal and informal aspects of
organizations. Formal organizational components are observable, rational, and oriented toward
structural factors. The informal components are not observable to all people; they are affective
and oriented to process and behavioral factors
technological, and human capital or people.
Structural Approaches to Change
Structural approaches to organizational change refer to managerial actions that attempt to
improve effectiveness by introducing change through formal policies and procedures. Actual
structural reorganization is the most direct example of this approach. Mergers and acquisitions,
as well as the recent interest in downsizing, may set the stage for a variety of structural
reorganizations. Generally, restructuring tends to focus on creating flatter, more organic
organizations. Not all structural approaches necessarily involve making actual changes in the
organizational structure, however. Introduction of a zero-based budgeting system, for example,
may represent a significant change in both policy and procedure, without altering the existing
structure. Many organizations are revising their reward systems, emphasizing pay for
Chapter 17 – Managing Organizational Change
performance. In such systems, pay is determined by achieved levels of either individual or team
performance. Reward systems such as these also represent a structural approach to
organizational change. One method representing a structural approach to organizational change
that has demonstrated effectiveness is management by objectives (MBO). Another structural
approach is referred to as business process reengineering.
Task and Technological Approaches
Task and technological approaches to organizational change focus directly on the work itself
that is performed in the organization. A task focus emphasizes job design changes, a topic
Human Capital Approaches
Directly or indirectly, all organizational change efforts involve the human assets of the
organization. MBO programs, for example, are designed to help individuals set realistic
performance goals and objectives, and a variety of job training programs are aimed at
increasing skills and knowledge needed to perform tasks. Thus, both the structural approaches
and the task and technological approaches typically involve changes related to achieving fairly
specific and narrow outcomes. What we are calling human capital or people approaches,
however, are a category of change methods designed to result in a far less specific and much
broader outcome of helping individuals learn and grow professionally, and perhaps personally.
Introspection Development Goals
Dealing with constant change, both planned and unplanned, is a significant facet in a growing
number of work situations. Companies are learning that taking time for reflection can be an
invaluable activity for many organizational members. Major companies are incorporating
various forms of introspection training into their management change programs.
TQM: A Multifaceted Approach
Not all organizational change interventions fit neatly into one category or approach. Sometimes
techniques from different categories may be used together in a multifaceted approach to
development. As an example, a silver-mining company combined team building (a human asset
approach) and MBO (a structural approach). The program was aimed at improving productivity
and safety in the mine. Other OD interventions may be considered multifaceted because the
technique used is itself so broad-based that it cuts across two or even all three categories.
Currently, one such program is total quality management or TQM. TQM is both a philosophy
and system of management that, using statistical process control and group problem-solving
processes, places the greatest priority on attaining high standards for quality and continuous
improvement.
emphasis on identifying problems, shortfalls, or deficiencies, such as sexual harassment
problems, excessive costs or resource limits, and not meeting a previously established
performance goal. This “deficit thinking” may cause organizations to overlook opportunities.
Appreciative inquiry (AI) is a method of focusing on positive aspects or potential opportunities.
EXHIBIT 17.4 4-D Framework for Appreciative Inquiry
Exhibit 17.4 outlines what is referred to as the 4-D framework of appreciative inquiry.
Pioneering work on refining this framework was conducted by consulting firm Marge Schiller
and Associates in Avon Corporation in Mexico.
culture.
Implementing the Method
The implementation of the change method has two dimensions: timing and scope. Timing refers
to the selection of the appropriate time at which to initiate the intervention. Scope refers to the
selection of the appropriate scale. Timing depends on a number of factors, particularly the
organization’s operating cycle and the groundwork preceding the program. The scope of the
program depends on the strategy. The program may be implemented throughout the
organization. Or it may be phased into the organization level by level or department by
department. The optimum strategy uses a phased approach, which limits the scope but provides
feedback for each subsequent implementation.
Six Steps of Evaluative Research
In a practical sense, a program’s effectiveness can’t be evaluated if objectives haven’t been
established before it’s implemented. A program undertaken to make the organization “a better
place to work” or to develop the “full potential of the employees” can’t be evaluated. If, on the
other hand, measurable criteria that are valid indicators of “better places to work” and “full
employee potential” are collected during the diagnostic phase and subsequently tracked as the
program is undertaken, bases for evaluation exist. A considerable body of literature describes
methods of evaluation, and managers of change programs should consult it for guidance in
program evaluation. Generally, an evaluation model would follow a six steps of evaluative
research.
How Effective are Change Interventions
The critical test of alternative change interventions is whether they help to improve
organizational effectiveness. This can be determined only through research. There’s a rather
long history of such research. The current practice appears to have shifted the focus from
interventions directed at informal components to those directed at formal components. In
particular, structural interventions have been the most widely used method as reported in the
literature.
occur when several methods combine. One such combination includes three discrete steps
involving all levels of the organization.
Steps to Take When Managing Change
What then can managers do when they recognize the need to change their organization?
Although no absolute guarantees can ensure success in every case, the accumulated experience
of people involved with organizational change offers some guidelines. The Information You
can use feature in the text, “Steps to Take When Managing Change,” identifies the important
points a manager should consider when contemplating a major organizational change.
The 9 steps are split between two slides.
The 9 steps are split between two slides.
Guidelines for Managing Change
Organizational change is a significant undertaking that managers should go about in a
systematic way. The model for managing change offers a systematic process for bringing about
organizational effectiveness.
In Review, Did We…
Instructors may wish to refer to the learning objectives to facilitate a review of the chapter
concepts.
Summary of Key Points
❑ The diagnosis of present and potential problems involves the collection of information that
reflects the level of organizational effectiveness. Data that measure the current state of
❑ To diagnose the problem, managers can consider these analytical questions:
1. What is the problem as distinct from its symptoms?
2. What must be changed to resolve the problem?
3. What outcomes are expected, and how will these outcomes be measured?
The managerial response to these questions should be stated in terms of criteria that reflect
organizational effectiveness. Measurable outcomes, such as production, efficiency,
satisfaction, adaptiveness, and flexibility must be linked to skill, structural, task and
technological, and human resource changes necessitated by problem identification.
❑ Through diagnosis, management associates the problem with structural, task and
❑ The last step of the process is the evaluation procedure. The ideal situation would be to
structure the procedure in the manner of an experimental design. That is, the end results
should be operationally defined, and measurements should be taken, before and after, both in
Review and Discussion Questions
1. Discuss the 4-D framework used in conducting appreciative inquiry. How is it different
from a traditional diagnosis approach used in organizational change?
Ans: The 4-D framework for appreciate inquiry has four phases: Discovering, which involves
identifying everything that is the best; Dreaming, which involves thinking about what the
2. Newly formed organizational units, project teams, or task forces often have problems or
characteristics that must be overcome if the groups are to perform effectively. What are they?
Ans: These problems are often common to newly formed groups:
1. Confusion exists as to roles and relationships.
3. Why do some managers sometimes misdiagnose a problem or situation?
Ans: The simple answer is that diagnosing a situation before making and implementing a change
appears to be simple, but it is not. One must ask questions, study history and archival information,
4. Explain why programs to bring about significant change often must use more than one
form of intervention.
Ans: The multi-method approach to interventions has a greater chance for success because the many
5. As a manager, what ethical dilemmas might you face when instructed to downsize your
department by one-third in order to increase the organization’s long-run change of survival?
1) Is downsizing really necessary? Does the company really face a financial crisis, or is upper
management just trying to reduce expenses in order to boost profit margins and stock prices?
2) Were alternatives take into consideration, such as having all employees take a small pay cut, or
reducing the perks of upper management?
3) Will laid off employees be replaced with contractors who will not receive benefits?
4) Will the organization help its laid-off employees find new jobs?
6. Describe the relationship among the steps of the general change model depicted in this
chapter and the process of unfreezing—movement—refreezing.
Ans:
Relearning Process
Change Model
Unfreezing Old Learning
1. Establishing a Sense of Urgency
b. Individuals may not accept that change is
necessary
c. The manager must motivate individuals to
accept and implement change
3a. Creating a Vision
Movement to New Learning
a. Requires training, demonstration and
empowerment
employees take on behaviors they would not
in the past.
a. Requires the application of reinforcement
and feedback
7. Consolidating Improvements and
3b. Creating a Vision
4. Communicating the Vision
5. Empowering Others to Act on the Vision
7. How would you go about designing a training program that would cause managers in a
small firm to recognize the need to change the way they manage if their industry has been
more competitive in recent years?
Ans: Student answers will vary, but should include activities to reduce resistance to change, such as
advance planning, disseminating information about the change, making sure that change satisfies one
or more important needs, letting people choose to experience the change, and creating an atmosphere
8. How do employees resist change and what can managers to overcome resistance?
Ans: Individuals who resist change have been known to show resentment, anger, and withdrawal.
They may slow down production, sabotage operations, and/or exhibit unethical behaviors. Managers
9. When was the last time you changed a specific behavior (e.g., began to exercise, went on a
diet, studied a new subject)? How successful were you in achieving and sustaining the change?
Explain.
Ans: Student answers will vary. In probing in-class responses, determine if students state that they
10. Explain why organizational and individual change programs should be evaluated and why
such an evaluation is so difficult to do.
Ans: Change efforts must be evaluated to determine the degree and type of change outcomes
(measuring actual vs. planned results), to identify any unintended problems produced by the change,
Exercise 17-1: Organization Development at J. P. Hunt
Purpose
To let students experience an on technique-survey feedback-to diagnose strengths and weaknesses
and develop an action plan.
The Exercise in Class
This exercise may take a significant portion of class time. It is helpful to assign the exercise to
Some questions to ask the class to consider, individually and in groups:
1. Which variables seem most out of step with industry norms?
2. Where do the greatest differences on individual variables lie within the firm?
3. Overall, how do the managers compare to the supervisors in their responses to
this survey? To the non-supervisors? How do supervisors compare to the non-
supervisors?
CASE 17.1: Nucor Corporation: Innovation, Change, and Motivation
1. How would you describe the culture of Nucor?
Ans: The culture of Nucor is one of teamwork and empowerment. There is a flattened hierarchy and
2. Why is the type of executive pay practice at Nucor not found in many other companies?
Ans: Student answers will vary, depending on their viewpoint. The case does not explain why the
3. If innovative solutions to problems are needed at Nucor, how do you think they will
emerge? That is, will internal or external forces bring about the needed innovations? Explain.
Ans: At this company, most changes will come from within the organization itself. The employees
Teaching Hints and Tips
Lecture Ideas
1. Introduce the idea of “paradigms” and their ability to influence the way that we face change.
Futurist, Joel Barker, has applied Thomas Khun’s idea to business and suggests that one way
we can understand change, and resistance to change, is to recognize the power of paradigms to
order our thinking. To paraphrase Barker, paradigms operate as a set of rules and boundaries,
of very basic assumptions, that guide “how we do it here,” and that help us interpret the
2. Facilitate student understanding of the covered OD methods by having them assess the
strengths and limitations of each method within its category (e.g., assessing Management by
Objectives methods). Have them compare each method to the other within its category and
consider which is more effective, given its proposed objectives. Which is more difficult to
implement?
4. One way to speculate about change and understand change is to have students think back to
what their great grandparent’s lives were like, then their grandparents, then the parents, then
Project Ideas and Suggested Class Speakers
1. Keying off the text description of ethics training, ask students to imagine themselves as top
managers in a business that may introduce an ethics training program. Using the devil’s
advocate approach, designate a handful of students to assume that role. The rest should be
2. To illustrate the impact of technological change, ask students (groups of 4 or 5) to identify a
local business that has recently undergone substantial technological change (e.g., the
introduction of robotics, computerization, etc.). Have them prepare a written report on the
effects of the change on the organization. Students can gather information by interviewing a
3. Invite a member of the psychology faculty to speak to the class about why people fear and
resist change. A psychological perspective should add much to students’ understanding of the
issue.
5. Class question: What are the ethics of change and what should they be, competitive
environment or not?
Term Paper Topics
1. Ethics Training: Can People Be Trained To Be Ethical?
2. Paradigms: What Are They and How Do They Influence Change?
3. External Forces of Organizational Change—What Worldwide Forces Will Change the Way
Americans Do Business?
4. (Selected example): Profile of a Team Building Effort
5. An OD Program at (selected company)