Chapter 7
Managing Change and
Innovation
Change is a constant for organizations and thus for managers. Because change can’t be
eliminated, managers must learn how to manage it successfully. Because innovation is
often closely tied to an organization’s change efforts, managers must know how to
manage it as well. Focus on the following learning objectives as you read and study this
chapter.
LEARNING OBJECTIVES
2. Classify types of organizational change.
4. Discuss contemporary issues in managing change.
5. Describe techniques for stimulating innovation.
It’s Your Career
Be Change Ready: Overcoming Resistance
Change takes us out of our comfort zone. But to survive and thrive in your career,
you’re going to have to be change ready. As you’ll see throughout this chapter, change
is inevitable. So, the more easily you can adapt . . . the more successful, appreciated,
and happier you’ll be. Here are some suggestions for you to overcome your resistance
to change:
1. Evaluate your change readiness. Are you intimidated by change?
3. Develop your flexibility. Shift from focusing on the “change” to focusing on the
“new experiences.”
CHAPTER OUTLINE
INTRODUCTION
Change and change management are important aspects of the manager’s job.
Chapter 7 focuses on ways to manage change effectively and to promote
innovation in an organization.
7.1 THE CHANGE PROCESS
Exhibit 7-1 shows that both external and internal forces create the need for
change. External forces creating the need for change come from various
sources:
2. Government laws and regulations
4. Labor markets
5. The economy
Internal forces creating change usually originate from the internal operations of
the organization or from the impact of external changes. These internal forces
include:
2. Changes in the workforce
4. Changes in employee attitudes
A. Two Views of the Change Process. Two very different metaphors can
be used to describe the change process.
1. The calm waters metaphor characterizes the process of change
as being like a ship crossing a calm sea. The calm waters
metaphor can be illustrated by Lewin’s 3-step process for change
(see Exhibit 7-2).
a. Unfreezing the equilibrium is the first step. Unfreezing the
equilibrium can be accomplished in one of three ways:
1. Increasing driving forces, which are forces that direct
3. Combining the two approaches.
b. The next step is to implement the change itself.
c. The final step is to refreeze the situation.
B. The white-water rapids metaphor describes change that takes place in
uncertain and dynamic environments. To put the two views into
7.2 TYPES OF ORGANIZATIONAL CHANGE
A. What is organizational change? Organizational change is defined as
any alteration of people, structure, or technology in an organization.
B. Types of Change
What can a manager change? A manager may make changes in three
categories: structure, technology, and people. (See Exhibit 7-3)
1. Changing Structure
a. Managers can alter one or more structural components of
2. Changing Technology
a. Competitive factors or new innovations often require
3. Changing People
a. Organizational development (OD) is techniques or
FUTURE VISION: Life-Long Learning
When employees are busy doing their regular job tasks, how can innovation ever
flourish? When job performance is evaluated by what you get done, how you get it
done, and when you get it done, how can innovation ever happen? This has been the
challenge facing organizations wanting to be more innovative. One solution has been
to give employees mandated time to experiment with their own ideas on company-
related projects. Google has its “20% Time” initiative, which encourages employees
to spend 20 percent of their time at work on projects not related to their job
descriptions. Other companies—Facebook, Apple, LinkedIn, 3M, Hewlett-Packard,
among others—have similar initiatives.
However, such “company” initiatives do face tremendous obstacles, despite how
good they sound on paper. One challenge is that today’s employees face strict
ideas; perhaps allow employees more of an incentive to innovate (rights to design,
etc.); and last, but not least, don’t institutionalize it. Creativity and innovation, by their
very nature, involve risk and reward. Give creative individuals the space to try and to
fail and to try and to fail as needed.
The following discussion questions are posed:
Talk About It 2: What obstacles do these initiatives face and how can managers
overcome those obstacles?
Student answers to these questions will vary.
7.3 MANAGING RESISTANCE TO CHANGE
Managers are motivated to initiate change when they are committed to improving
organizational performance.
A. Why do People Resist Change?
B. Techniques for Reducing Resistance to Change
Organizations can build up inertia that actually motivates employees to
resist change. The techniques for Reducing Resistance are listed in
Exhibit 7-5. They are:
1. Education and communication
7.4 CONTEMPORARY ISSUES IN MANAGING CHANGE
Contemporary issues related to managing change include organizational culture,
employee stress, and successful change action.
A. Changing Organizational Culture
1. Culture is resistant to change because:
a. Culture consists of relatively stable and permanent
2. Understanding the Situational Factors
Some situations can facilitate culture change, including:
3. How Can Cultural Change Be Accomplished?
B. Employee Stress
1. What is Stress? Stress is the adverse reaction people have to
2. Causes of Stress. Research shows that stress may be related to
the organization or to personal factors. Important variables that
have been known to cause employee stress include:
a. Task demands
b. Role demands
1. Role Conflict: Work expectations that are hard to satisfy.
3. Role Ambiguity: When role expectations are not clearly
understood.
1. Type A personality: People who have a chronic sense of
urgency and an excessive competitive drive.
3. Symptoms of Stress. Stress may be exhibited in a number of
ways. For example, an employee who is experiencing a high
4. Reducing Stress
Employee selection, RJP, MBO, and job redesign are methods of
reducing stress in an organization.
C. Making Change Happen Successfully
Managers can increase the likelihood that change will be successful in
their organization by:
1. Focusing on preparing the organization for change
2. Recognizing the important role they themselves play in the
change process
7.5 STIMULATING INNOVATION
Innovation is essential to organizational success in a dynamic marketplace.
Whether it’s Google, Facebook, or Apple, all companies rely on innovation to
deliver the products and services necessary for the marketplace.
A. Creativity versus Innovation.
1. Creativity is the ability to combine ideas in a unique way or to
make unusual associations between ideas.
2. Innovation is taking creative ideas and turning them into useful
products or work methods.
B. Stimulating and Nurturing Innovation
How can managers foster innovation? The systems model shows how to
1. Structural variables can be summarized as follows:
a. Organic structures positively influence innovation.
b. The easy availability of organizational resources provides a
2. Cultural variables show that an innovative culture is likely to have
the following characteristics:
a. Acceptance of ambiguity
b. Tolerance of the impractical
c. Low external controls
i. Exhibit empowering leadership
LEADER MAKING A DIFFERENCE
Satya Nadella was named CEO of Microsoft in February 2014. Nadella is a 22-year
veteran of Microsoft. His new “slogan” is innovation, innovation, innovation. When asked
what his plans are for the software giant, he answered with that one word, innovation.
How does he plan to make innovation part of the culture? By “ruthlessly removing any
obstacles that allow us to be innovative; every individual to innovate.”
What can you learn from this leader making a difference?
3. Human resource variables indicate the important role that people
play in innovative organizations.
a. Innovative organizations actively promote the training and
development of their employees so that their knowledge
will be current.
b. Innovative organizations offer employees high job security.
C. Innovation and Design Thinking
Design thinking can provide a process for coming up with things that don’t
ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
Student answers to these questions will vary.
7-1. Contrast the calm waters and white-water rapids metaphors of change.
According to the calm waters scenario, an occasional disruption (a “storm”) means
7-2. Explain Lewin’s three-step model of the change process.
In Lewin’s model, successful change usually occurs in three steps: unfreezing, change,
and refreezing. For unfreezing to occur, the organization must plan a move away from
7-3. Describe how managers might change structure, technology, and people.
To change structure, management can change structural components (i.e. jobs could be
combined or levels eliminated). More rules and procedures could be implemented to
increase standardization or employees could be empowered to make decisions so
7-4. Can a low-level employee be a change agent? Explain your answer.
7-5. How are opportunities, constraints, and demands related to stress? Give an
example of each.
7-6. Planned change is often thought to be the best approach to take in organizations.
Can unplanned change ever be effective? Explain.6.1 7.5
Student answers will likely vary. To generate discussion, you might ask students to think
about the plans they have for this evening, or this weekend. Then ask what would
happen if a friend called and suddenly offered them an opportunity to attend an event or
to go visit another location. Would they do it? How could this situation be compared with
7-7. Organizations typically have limits to how much change they can absorb. As a
manager, what signs would you look for that might suggest that your organization has
exceeded its capacity to change?
7-8. Innovation requires allowing people to make mistakes. However, being wrong too
many times can be disastrous to your career. Do you agree? Why or why not? What are
the implications for nurturing innovation?
This question offers an opportunity to set up a debate in class. Ask half of the students in
PERSONAL INVENTORY ASSESSMENTS
Student answers to these questions will vary.
ETHICS DILEMMA
Stress management and counseling can be an important aid for employees. In this
dilemma, students are asked to address why employees would not take advantage of
these benefits. The authors mention a paradox that exists; employees are experiencing
stress but they feel that they don’t want to admit to being stressed (which may make the
stress even worse). Students are encouraged to think of ways to change the perception
of stress management programs and to get employees to participate. Some companies
use EAP programs that keep employees’ names confidential. Another way to take away
the stigma of stress management programs may take the opposite approach and have
employees write testimonials of their benefits. These could be published in a company
newsletter (again with the names confidential).
This case also asks students to consider if organizations have an ethical responsibility to
help employees deal with stress? The simple answer to this question is yes. For many
to change, AACSB: Ethical understanding and reasoning abilities)
SKILLS EXERCISE: DEVELOPING YOUR
CHANGE MANAGEMENT SKILL
In this exercise, students are asked to work on personal skills that will help make them
better change agents. Change management is a necessary skill for two reasons, first
managers are always making changes and second employees almost always resist
WORKING TOGETHER: TEAM EXERCISE
In groups of three to four, have students create a plan for an accounting firm changing
from Generally Accepted Accounting Principles (GAAP) to the International Financial
Reporting Standards (IFRS). Students should use the following two topic areas to guide
the change: (1) using communication channels to engage and inform employees, and (2)
building needed skills and capabilities. Students should take into account that GAAP is
ingrained into the accounting profession and change will not be easy. To make the
MY TURN TO BE A MANAGER
• Take responsibility for your own future career path. Don’t depend on your
employer to provide you with career development and training opportunities.
Right now, sign up for things that will help you enhance your skills—workshops,
• Pay attention to how you handle change. Try to figure out why you resist certain
• Pay attention to how others around you handle change. When friends or family
members resist change, practice using different approaches to managing this
• When you find yourself experiencing dysfunctional stress, write down what’s
causing the stress, what stress symptoms you’re exhibiting, and how you’re
dealing with the stress. Keep this information in a journal and evaluate how well
your stress reducers are working and how you could handle stress better. Your
goal is to get to a point where you recognize that you’re stressed and can take
• Research information on how to be a more creative person. Write down
suggestions in a bulleted list format and be prepared to present your information
• Complete the skill building modules Managing Resistance to Change and Solving
• Choose two organizations that you’re familiar with and assess whether they face
calm waters or white-water rapids environments. Write a short report, describing
these organizations and your assessment of the change environment each faces.
• Steve’s and Mary’s recommended readings: Malcolm Gladwell, Blink (Little,
Brown, 2005); Peter Senge and others, Presence (Doubleday, 2004); Tom
Gladwell, The Tipping Point (Back Bay Books, 2002); Tom Kelley, The Art of
Innovation (Doubleday, 2001); and Ian Morrison, The Second Curve (Ballantine
Books, 1996). (LO: 1, Compare and contrast views on the change process,
AACSB: Analytical thinking) (LO: 2, Classify types of organizational change,
AACSB: Analytical thinking) (LO: 3, Explain how to manage resistance to
• Choose an organization with which you’re familiar (employer, student
organization, family business, etc.). Describe its culture (shared values and
• In your own words, write down three things you learned in this chapter about
being a good manager. (LO: 1, Compare and contrast views on the change
process, AACSB: Analytical thinking) (LO: 2, Classify types of organizational
change, AACSB: Analytical thinking) (LO: 3, Explain how to manage resistance
• Self-knowledge can be a powerful learning tool. Go to mymanagementlab and
complete these self-assessment exercises: How Well Do I Handle Ambiguity?
How Creative Am I? How Well Do I Respond to Turbulent Change? How
Stressful Is My Life? and Am I Burned Out? Using the results of your
assessments, identify personal strengths and weaknesses. What will you do to
ANSWERS TO CASE APPLICATION 1
QUESTIONS
Student answers to these questions will vary.
In Search of the Next Big Thing
7-13. What do you think of UA’s approach to innovation? Would you expect to see this
type of innovation in an athletic wear company? Explain.
Most students will see UA as a progressive company that is trying to stay on the cutting
edge of innovation in the apparel industry. With the introduction of a variety of new
product lines, UA is making a statement by competing against companies like Nike and
7-14. What do you think UA’s culture might be like in regards to innovation? (Hint: refer
to the list on page 198.)
UA would be considered both an innovative and a culture responsive culture. The
7-15. Could design thinking help UA improve its innovation efforts? Discuss.
7-16. What’s your interpretation of the company’s philosophy posted prominently over
the door of its design studio? What does it say about innovation?
7-17. What could other companies learn from the way UA innovates?
As a fairly new company, UA is an example of what an entrepreneur can accomplish
ANSWERS TO CASE APPLICATION 2
QUESTIONS
Student answers to these questions will vary.
Workplace Stress Can Kill
7-18. What is your reaction to the situation described in this case? What factors, both
inside the company and externally, appear to have contributed to this situation?
Students may take the side of employees, the organization, or they may see the
situation looking from both perspectives. From the employees’ perspective, they may
manage resistance to change, AACSB: Analytical thinking)
7-19. What appeared to be happening in the France Télécom’s workplace? What stress
symptoms might have alerted managers to a problem?
7-20. Should managers be free to make decisions that are in the best interests of the
company without worrying about employee reactions? Discuss. What are the
implications for managing change?
7-21. What are France Télécom’s executives doing to address the situation? Do you
think it’s enough? Are there other actions they might take? If so, describe those actions.
If not, why not?
According to the case, Télécom is working to rebuild the morale of staff and they have
halted the workplace practices identified as being particularly disruptive. The CEO has
7-22. What could other companies and managers learn from this situation?
What happened at Télécom is a sobering reminder about the negative effects of stress.
ADDITIONAL CHAPTER INFORMATION
“Trying to turn around a giant insurance company is like trying to parallel-park a
battleship.” Any change effort that requires more than a one-page manifesto to articulate
its goal is doomed to failure. If the point of the program is complex, people lose focus—
and eventually lose their way.” Tom Valerio, who was selected by Cigna Property and